Autodesk 2016 Annual Report Download - page 149

2016 Form 10-K 77
Revenue Recognition
Autodesk recognizes 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.
For multiple element arrangements containing only software and software-related elements, Autodesk allocates the sales
price among each of the deliverables using the residual method, under which revenue is allocated to undelivered elements based
on their 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 Autodesk does not have VSOE of an undelivered
element, revenue recognition is deferred on the entire sales arrangement until all elements for which Autodesk does not have
VSOE are delivered. If Autodesk does not have VSOE for undelivered maintenance or services, the revenue for the
arrangement is recognized over the longest contractual service period in the arrangement. Revenue recognition for significant
lines of business is discussed further below.
For multiple element 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,
Autodesk first allocates the total arrangement consideration based on the relative selling prices of the software group of
elements as a whole and the non-software elements. Autodesk then further allocates consideration within the software group to
the respective elements within that group using the residual method as described above. Autodesk exercises judgment and uses
estimates in connection with the determination of the amount of revenue to be recognized in each accounting period.
Autodesk allocates 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, Autodesk performs a quantitative analysis of pricing data points for historical
standalone transactions involving such elements for a twelve-month period. As part of this analysis, Autodesk monitors and
evaluates 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 Autodesk offers products and services, and the type of customer (i.e.
distributor, value-added reseller, and direct end user, among others). Autodesk analyzes BESP at least annually or on a more
frequent basis if a significant change in our business necessitates a more timely analysis, or if significant selling price variances
are experienced.
In situations when Autodesk has multiple contracts with a single counterparty, Autodesk uses the guidance in ASC
985-605 to evaluate both the form and the substance of the arrangements to determine if they should be combined and
accounted for as one arrangement or as separate arrangements.
Autodesk’s assessment of likelihood of collection is also a critical element in determining the timing of revenue
recognition. If collection is not probable, the revenue will be deferred until cash is received.
License and other revenue consists of two components: product license revenue and other revenue. Product license
revenue includes software license revenue from the sale of perpetual licenses, term-based licenses from our desktop
subscription and enterprise offerings, and product revenue for Creative Finishing. Other revenue includes revenue from
consulting, training, Autodesk Developers Network and Creative Finishing customer support, and is recognized over time, as
the services are performed.
Autodesk's Subscription revenue consists of two components: maintenance revenue for our software products and
revenue for our cloud service offerings, including Autodesk 360. Autodesk's maintenance program provides our commercial
and educational customers of perpetual products with a cost effective and predictable budgetary option to obtain the
productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under
Autodesk's maintenance program, customers are eligible to receive unspecified upgrades when and if available, downloadable
training courses, and online support. Autodesk recognizes maintenance revenue ratably over the term of the maintenance
agreement, which is generally between one and three years but can occasionally be as long as five years. Revenue for
Autodesk's cloud service offerings is recognized ratably over the contract term commencing with the date Autodesk's service is
made available to customers and all other revenue recognition criteria have been satisfied.
2016 Annual Report