Autodesk 2014 Annual Report Download - page 137

2013 Annual Report
2014 Form 10-K 63
Foreign Currency Translation and Transactions
The assets and liabilities of Autodesk’s foreign subsidiaries are translated from their respective functional currencies into
U.S. dollars at the rates in effect at the balance sheet date, and revenue and expense amounts are translated at exchange rates
that approximate those rates in effect during the period in which the underlying transactions occur. Foreign currency translation
adjustments are recorded as other comprehensive income (loss).
Gains and losses realized from foreign currency transactions, those transactions denominated in currencies other than the
foreign subsidiary’s functional currency, are included in interest and other income, net. Monetary assets and liabilities are
remeasured using foreign currency exchange rates at the end of the period, and non-monetary assets are remeasured based on
historical exchange rates.
Derivative Financial Instruments
Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term exposures to
fluctuations in foreign currency exchange rates which exist as part of ongoing business operations. Autodesk’s general practice
is to hedge a majority of transaction exposures denominated in euros, Japanese yen, Swiss francs, British pounds, Canadian
dollars, and Australian dollars. These instruments have maturities between one to 12 months in the future. Autodesk does not
enter into any derivative instruments for trading or speculative purposes.
The bank counterparties in all contracts expose Autodesk to credit-related losses in the event of their nonperformance.
However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company’s minimum requirements
under its counterparty risk assessment process. Autodesk monitors ratings, credit spreads and potential downgrades on at least a
quarterly basis. Based on Autodesk’s on-going assessment of counterparty risk, the Company will adjust its exposure to various
counterparties. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net
settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in
place with collateral features.
Autodesk accounts for its derivative instruments as either assets or liabilities on the balance sheet and carries them at fair
value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether
it is designated and qualifies for hedge accounting. Derivatives that do not qualify for hedge accounting are adjusted to fair value
through earnings. See Note 2, "Financial Instruments" for information regarding Autodesk's hedging activities.
Cash and Cash Equivalents
Autodesk considers all highly liquid investments with insignificant interest rate risk and remaining maturities of three
months or less at the date of purchase to be cash equivalents. Cash equivalents are recorded at cost, which approximates fair
value.
Marketable Securities
Marketable securities are stated at fair value. Marketable securities maturing within one year that are not restricted are
classified as current assets.
Autodesk determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates
such classification as of each balance sheet date. Autodesk carries all “available-for-sale securities” at fair value, with
unrealized gains and losses, net of tax, reported in stockholders’ equity until disposition or maturity. Autodesk carries all
“trading securities” at fair value, with unrealized gains and losses, recorded in “Interest and other income, net” in the
Company’s Consolidated Statements of Operations.
All of Autodesk’s marketable securities are subject to a periodic impairment review. The Company recognizes an
impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary.
Autodesk considers various factors in determining whether to recognize an impairment charge, including the length of time and
extent to which the fair value has been less than Autodesk’s cost basis, the financial condition and near-term prospects of the
investee, and Autodesk’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated
recovery in the market value. Autodesk did not record any other-than temporary impairment charges during fiscal years ended
2014, 2013 and 2012. For additional information, see “Concentration of Credit Risk” within this Note 1 and Note 2, “Financial
Instruments.”