Autodesk 2016 Annual Report Download - page 136

2016 Form 10-K 64
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
Our revenue, earnings, cash flows, receivables, and payables are subject to fluctuations due to changes in foreign
currency exchange rates. Our risk management strategy utilizes foreign currency contracts to manage our exposure to foreign
currency volatility that exists as part of our ongoing business operations. We utilize cash flow hedge contracts to reduce the
exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. In addition, we
use balance sheet hedge contracts to reduce the exchange rate risk associated primarily with foreign currency denominated
receivables and payables. As of January 31, 2016 and 2015, we had open cash flow and balance sheet hedge contracts with
future settlements within one to twelve months. Contracts were primarily denominated in euros, Japanese yen, Swiss francs,
British pounds, Canadian dollars, and Australian dollars. We do not enter into any foreign exchange derivative instruments for
trading or speculative purposes. The notional amount of our option and forward contracts was $374.0 million and $381.2
million at January 31, 2016 and 2015, respectively.
We use foreign currency contracts to reduce the exchange rate impact on the net revenue and operating expenses of
certain anticipated transactions. A sensitivity analysis performed on our hedging portfolio as of January 31, 2016 indicated that
a hypothetical 10% appreciation of the U.S. dollar from its value at January 31, 2016 and 2015 would increase the fair value of
our foreign currency contracts by $33.3 million and $35.1 million, respectively. A hypothetical 10% depreciation of the dollar
from its value at January 31, 2016 and 2015 would decrease the fair value of our foreign currency contracts by $25.6 million
and $16.5 million, respectively.
Interest rate risk
Interest rate movements affect both the interest income we earn on our short term investments and the market value of
certain longer term securities. At January 31, 2016, we had $2,305.4 million of cash equivalents and marketable securities,
including $897.9 million classified as short-term marketable securities and $532.3 million classified as long-term marketable
securities. If interest rates were to move up by 50 or 100 basis points over a twelve month period, the potential decline in fair
value on our marketable securities would be $5.5 million or $9.8 million, respectively.
Other Market Risk
From time to time we make direct investments in privately held companies. The privately held companies in which we
invest are considered inherently risky. The technologies and products these companies have under development are typically in
the early stages and may never materialize, which could result in a loss of all or a substantial part of our initial investment in
these companies. The evaluation of privately held companies is based on information that we request from these companies,
which is not subject to the same disclosure regulations as U.S. publicly traded companies, and as such, the basis for these
evaluations is subject to the timing and accuracy of the data received from these companies. See Note 2, "Financial
Instruments" for further discussion regarding our privately held investments.
2016 Annual Report