Autodesk 2014 Annual Report Download - page 112

2013 Annual Report
2014 Form 10-K 38
We assess recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the
assets are expected to generate. If impairment indicators were present based on our undiscounted cash flow models, which
include assumptions regarding projected cash flows, we would perform a discounted cash flow analysis to assess impairments
on long-lived assets. Variances in these assumptions could have a significant impact on our conclusion as to whether an asset is
impaired or the amount of any impairment charge. Impairment charges, if any, result in situations where any fair values of these
assets are less than their carrying values.
In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of our long-lived
assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter
when such determinations are made, as well as in subsequent quarters.
We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting rules. As
changes in business conditions and our assumptions occur, we may be required to record impairment charges.
Income Taxes. We currently have $187.9 million of net deferred tax assets, primarily a result of tax credits, net
operating losses, and timing differences for reserves, accrued liabilities, stock options, deferred revenue, purchased
technologies and capitalized intangibles, partially offset by the establishment of U.S. deferred tax liabilities on unremitted
earnings from certain foreign subsidiaries, deferred tax liabilities associated with tax method changes on advanced payments
and valuation allowances against U.S. and Canadian deferred tax assets. We perform a quarterly assessment of the
recoverability of these net deferred tax assets and believe that we will generate sufficient future taxable income in appropriate
tax jurisdictions to realize the net deferred tax assets. Our judgments regarding future profitability may change due to future
market conditions and other factors, including intercompany transfer pricing adjustments. Any change in future profitability
may require material adjustments to these net deferred tax assets, resulting in a reduction in net income in the period when such
determination is made. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the
tax laws in the jurisdictions in which we conduct our business. It is possible that these positions may be challenged by
jurisdictional tax authorities and may have a significant impact on our effective tax rate.
Stock-Based Compensation. We measure stock-based compensation cost at the grant date fair value of the award, and
recognize expense on a straight-line basis over the requisite service period, which is generally the vesting period. We estimate
the fair value of certain stock-based payment awards (including grants of stock options and employee stock purchases related to
the employee stock purchase plan) using either the Black-Scholes-Merton option-pricing model or a binomial-lattice model
(e.g., Monte Carlo simulation model). To determine the grant-date fair value of our stock-based payment awards, we use a
Black-Scholes model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which
case we use the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate
the probability that market conditions will be achieved. These variables include our expected stock price volatility over the
expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the
expected term of the award and expected dividends. The variables used in these models are reviewed on a quarterly basis and
adjusted, as needed. Share-based compensation cost for restricted stock is measured on the closing fair market value of our
common stock on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as
expense in our Consolidated Statements of Operations.
Legal Contingencies. As described in Part I, Item 3, “Legal Proceedings” and Part II, Item 8, Note 8, “Commitments
and Contingencies,” in the Notes to Consolidated Financial Statements, we are periodically involved in various legal claims and
proceedings. We routinely review the status of each significant matter and assess our potential financial exposure. If the
potential loss from any matter is considered probable and the amount can be reasonably estimated, we record a liability for the
estimated loss. Because of inherent uncertainties related to these legal matters, we base our loss accruals on the best information
available at the time. As additional information becomes available, we reassess our potential liability and may revise our
estimates. Such revisions could have a material impact on future quarterly or annual results of operations.
Recently Issued Accounting Standards
See Part II, Item 8, Note 1, “Business and Summary of Significant Accounting Policies,” in the Notes to Consolidated
Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and
estimated effects on results of operations and financial condition, which is incorporated herein by reference.