Autodesk 2015 Annual Report Download - page 130

2015 Form 10-K 38
Business Combinations. We allocate the fair value of the consideration transferred to the assets and liabilities acquired,
as well as to in-process research and development based on their estimated fair values at the acquisition date. Any residual
purchase price is recorded as goodwill. The purchase price allocation requires us to make significant estimates and assumptions,
especially at the acquisition date with respect to intangible assets and deferred revenue obligations.
Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical
experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples
of critical estimates used in valuing certain of the intangible assets we have acquired or may acquire in the future include but
are not limited to:
• future expected cash flows from sales, maintenance agreements, and acquired developed technologies;
• the acquired company’s trade name and customer relationships as well as assumptions about the period of time the
acquired trade name and customer relationships will continue to be used in the combined company’s product portfolio;
• expected costs to develop the in-process research and development into commercially viable products and estimated
cash flows from the projects when completed; and
• discount rates used to determine the present value of estimated future cash flows.
These estimates are inherently uncertain and unpredictable, and if different estimates were used the purchase price for the
acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In
addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates, and if
such events occur we may be required to record a charge against the value ascribed to an acquired asset or an increase in the
amounts recorded for assumed liabilities.
Goodwill. When we acquire a business, a portion of the consideration transferred is typically allocated to acquired
technology and other identifiable intangible assets, such as customer relationships and developed technology. The excess of the
consideration transferred over the net of the acquisition-date fair value of identifiable assets acquired and liabilities assumed is
recorded as goodwill. The amounts allocated to acquired technology and other intangible assets represent our estimates of their
fair values at the acquisition date. We amortize the acquired technology and other intangible assets with finite lives over their
estimated useful lives. The estimation of acquisition-date fair values of intangible assets and their useful lives requires us to
make assumptions and judgments, including but not limited to an evaluation of macroeconomic conditions as they relate to our
business, industry and market trends, projections of future cash flows, and appropriate discount rates.
We test goodwill for impairment annually in our fourth fiscal quarter or sooner should events or changes in circumstances
indicate potential impairment. An optional assessment of qualitative factors of impairment (“optional assessment”) can be
utilized prior to necessitating a two-step quantitative impairment test. Should the optional assessment be utilized for any given
fiscal year, qualitative factors to consider include cost factors; financial performance; legal, regulatory, contractual, political,
business, or other factors; entity specific factors; industry and market considerations, macroeconomic conditions, and other
relevant events and factors affecting the reporting unit. If, after assessing the totality of events or circumstances, it is more
likely than not that the fair value of the reporting unit is greater than its carrying value, then performing the two-step
impairment test is unnecessary.
Under the two-step quantitative impairment test, we use discounted cash flow models that include assumptions regarding
projected cash flows. Variances in these assumptions could have a significant impact on our conclusion as to whether goodwill
is impaired, or the amount of any impairment charge. Impairment charges, if any, result from instances where the fair values of
net assets associated with goodwill are less than their carrying values. As changes in business conditions and our assumptions
occur, we may be required to record impairment charges.
For our annual impairment assessment in fiscal 2015, we utilized the optional assessment for Delcam, which has been
deemed a separate reporting unit within our Manufacturing ("MFG") operating segment. Based on a review of the qualitative
factors described above, we determined that for our Delcam reporting unit it was more likely than not that the fair value of the
reporting unit exceeded the carrying value. As a result, we concluded that performing the two-step impairment test was not
necessary for Delcam.
We used the quantitative two-step impairment test for each of our remaining reporting units: Platform Solutions and
Emerging Business (“PSEB”), MFG, Architecture, Engineering, and Construction ("AEC"), and Media and Entertainment
2015 Annual Report