Autodesk 2015 Annual Report Download - page 156

2015 Form 10-K 64
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in Autodesk’s consolidated financial
statements and notes thereto. These estimates are based on information available as of the date of the consolidated financial
statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ materially
from these estimates.
Examples of significant estimates and assumptions made by management involve the determination of the fair value of
acquired assets and liabilities, goodwill, financial instruments, long-lived assets and other intangible assets, the realizability of
deferred tax assets, and the fair value of stock awards. The Company also makes assumptions, judgments, and estimates in
determining the accruals for uncertain tax positions, variable compensation, partner incentive programs, product returns
reserves, allowances for doubtful accounts, asset retirement obligations, and legal contingencies.
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.
2015 Annual Report