Autodesk 2015 Annual Report Download - page 128

2015 Form 10-K 36
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 to successfully make the transition toward new cloud and mobile
platforms, including the related technology and business model shifts; making our technology available to mainstream markets;
leveraging our large global network of distributors, resellers, third-party developers, customers, educational institutions, and
students; improving the performance and functionality of our products; and adequately protecting 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.
We allocate the total arrangement consideration among the various elements based on a selling price hierarchy. The selling
price for a deliverable is based on its VSOE if available, third-party evidence ("TPE") if VSOE is not available, or the best
estimated selling price ("BESP") if neither VSOE nor TPE is available. BESP represents the price at which Autodesk would
transact for the deliverable if it were sold regularly on a standalone basis. To establish BESP for those elements for which
neither VSOE nor TPE are available, we perform a quantitative analysis of pricing data points for historical standalone
transactions involving such elements for a twelve-month period. As part of this analysis, we monitor and evaluate the BESP
against actual pricing to ensure that it continues to represent a reasonable estimate of the standalone selling price, considering
several other external and internal factors including, but not limited to, pricing and discounting practices, contractually stated
prices, the geographies in which we offer our products and services, and the type of customer (i.e. distributor, value-added
reseller, and direct end user, among others). We analyze BESP at least annually or on a more frequent basis if a significant
change in our business necessitates a more timely analysis or if we experience significant variances in our selling prices.
2015 Annual Report