Autodesk 2014 Annual Report Download - page 109

2013 Annual Report
2014 Form 10-K 35
(STEAM) education initiatives. With an extensive global community of students who are experienced with our software and
poised to become the next generation of professional users, our goal is to reduce the cost of training and education of new talent
for our customers.
Our strategy includes improving our product functionality and expanding our product offerings through internal
development as well as through the acquisition of products, technology and businesses. Acquisitions often increase the speed at
which we can deliver product functionality to our customers; however, they entail cost and integration challenges and may, in
certain instances, negatively impact our operating margins. We continually review these trade-offs in making decisions
regarding acquisitions. We currently anticipate that we will continue to acquire products, technology and businesses as
compelling opportunities become available.
Our strategy depends upon a number of assumptions, including that we will be able to continue making our technology
available to mainstream markets; leverage our large global network of distributors, resellers, third-party developers, customers,
educational institutions, and students; improve the performance and functionality of our products; and adequately protect our
intellectual property. If the outcome of any of these assumptions differs from our expectations, we may not be able to
implement our strategy, which could potentially adversely affect our business. For further discussion regarding these and related
risks see Part I, Item 1A, “Risk Factors.”
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles. In
preparing our Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant
impact on amounts reported in our Consolidated Financial Statements. We base our assumptions, judgments and estimates on
historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could
differ materially from these estimates under different assumptions or conditions. We regularly reevaluate our assumptions,
judgments and estimates. Our significant accounting policies are described in Note 1, “Business and Summary of Significant
Accounting Policies,” in the Notes to Consolidated Financial Statements. We believe that of all our significant accounting
policies, the following policies involve a higher degree of judgment and complexity. Accordingly, these are the policies we
believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred
or services have been rendered, the price is fixed or determinable and collection is probable. However, determining whether and
when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on
the timing and amount of revenue we report.
For multiple element arrangements containing only software and software-related elements, we allocate the sales price
among each of the deliverables using the residual method, under which revenue is allocated to undelivered elements based on
our vendor-specific objective evidence (“VSOE”) of fair value. VSOE is the price charged when an element is sold separately
or a price set by management with the relevant authority. If we do not have VSOE of an undelivered software license, we defer
revenue recognition on the entire sales arrangement until all elements for which we do not have VSOE are delivered. If we do
not have VSOE for undelivered maintenance or services, the revenue for the arrangement is recognized over the longest
contractual service period in the arrangement. We are required to exercise judgment in determining whether VSOE exists for
each undelivered element based on whether our pricing for these elements is sufficiently consistent.
For multiple elements arrangements involving non-software elements, including cloud subscription services, our revenue
recognition policy is based upon the accounting guidance contained in ASC 605, Revenue Recognition. For these
arrangements, we first allocate the total arrangement consideration based on the relative selling prices of the software group of
elements as a whole and to the non-software elements. We then further allocate consideration within the software group to the
respective elements within that group using the residual method as described above. We exercise judgment and use estimates in
connection with the determination of the amount of revenue to be recognized in each accounting period.
Our assessment of likelihood of collection is also a critical factor in determining the timing of revenue recognition. If we
do not believe that collection is probable, the revenue will be deferred until the earlier of when collection is deemed probable or
payment is received.
Our indirect channel model includes both a two-tiered distribution structure, where distributors sell to resellers, and a
one-tiered structure where Autodesk sells directly to resellers. Our product license revenue from distributors and resellers are
generally recognized at the time title to our product passes to the distributor, in a two-tiered structure, or reseller, in a one-tiered