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Business and Summary of Significant Accounting Policies | 12 Months Ended
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Jan. 31, 2016
Accounting Policies [Abstract] |
Business and Summary Of Significant Accounting Policies | Business and Summary of Significant Accounting Policies Business Autodesk, Inc. (“Autodesk” or the “Company”) is a world leading design software and services company, offering customers productive business solutions through powerful technology products and services. The Company serves customers in the architecture, engineering, and construction; manufacturing; and digital media, consumer, and entertainment industries. The Company’s sophisticated software products enable its customers to experience their ideas before they are real by allowing them to imagine, design, and create their ideas and to visualize, simulate, and analyze real-world performance early in the design process by creating digital prototypes. These capabilities allow Autodesk’s customers to foster innovation, optimize and improve their designs, help save time and money, improve quality, and collaborate with others. Autodesk software products are sold globally, both directly to customers and through a network of resellers and distributors. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Autodesk and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Current Period Adjustments Subsequent to furnishing preliminary financial statements on Form 8-K on February 25, 2016 for the three and twelve months ended January 31, 2016, Autodesk identified a $4.5 million tax adjustment associated with deemed foreign withholding taxes related to non-permanently reinvested earnings in foreign jurisdictions which have not yet repatriated resulting in changes to the Consolidated Financial Statements as reflected in this Annual Report on Form 10-K. This non-cash adjustment resulted in an increase to GAAP diluted loss per share from $(1.44) to $(1.46) for the full fiscal year. Prior Period Adjustments Autodesk previously established a valuation allowance against the Company’s deferred tax assets during the three months ended July 31, 2015. In the course of preparing the Condensed Consolidated Financial Statements for the three and nine months ended October 31, 2015, Autodesk determined that it had understated income tax expense by $33.1 million for the three and six months ended July 31, 2015, primarily related to an error in the establishment of the valuation allowance, which had been understated at July 31, 2015. Autodesk performed the analysis required by Staff Accounting Bulletin 99, Materiality, to evaluate the materiality of the error, quantitatively and qualitatively, and concluded it was not material to the Company’s Condensed Consolidated Financial Statements as of July 31, 2015 and for the three and six month periods ended July 31, 2015. However, in light of the significance of a correction of the error to the results for the three months ended October 31, 2015, Autodesk chose to correct the error by revising the previously reported results for the three and six months ended July 31, 2015, to include the additional $33.1 million of non-cash income tax expense associated with the establishment of the valuation allowance. See Note 16, "Selected Quarterly Financial Information (Unaudited)," in the Notes to the Condensed Consolidated Financial Statements for further discussion. During the quarter ended April 30, 2015, Autodesk determined that it had not correctly accounted for certain liabilities primarily related to employee benefits and unclaimed property. As a result, we recorded $5.7 million of additional operating expenses related to prior periods. As these adjustments were related to the correction of errors, Autodesk performed the analysis required by Staff Accounting Bulletin 99, Materiality, and Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. Based on this analysis, Autodesk concluded that the effect of the errors was not material to the financial position, results of operations or cash flows of any prior fiscal year from both a quantitative and qualitative perspective and is not material to the full fiscal year 2016. Reclassifications During the second quarter of fiscal 2015, Autodesk elected to present amortization of purchased customer relationships, trade names, patents, and user lists as a separate line item within operating expenses. As a result, amortization previously reflected in “General and Administrative” expense was reclassified to “Amortization of Purchased Intangibles" within Operating Expenses. These expenses have been reclassified in the Consolidated Statements of Operations for fiscal years 2015 and 2014 to conform to the current period presentation as follows:
| Fiscal year ended January 31,
| 2015 |  | 2014
Reclassifications within operating expenses: |  |  |
(Decrease) to general and administrative | $ | (10.9 | ) |  | $ | (36.5 | )
Increase to amortization of purchased intangibles | 10.9 |  |  | 36.5 |
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 (loss) income. 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. Autodesk determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates such classification as of each balance sheet date. Autodesk carries all “available-for-sale securities” at fair value, with unrealized gains and losses, net of tax, reported in stockholders’ equity until disposition or maturity. Autodesk carries all “trading securities” at fair value, with unrealized gains and losses, recorded in “Interest and other income, net” in the Company’s Consolidated Statements of Operations. The cost of securities sold is based on the specific-identification method. All of Autodesk’s marketable securities are subject to a periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Autodesk considers various factors in determining whether to recognize an impairment charge, including the length of time and extent to which the fair value has been less than Autodesk’s cost basis, the financial condition and near-term prospects of the investee, and Autodesk’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. For additional information, see “Concentration of Credit Risk” within this Note 1 and Note 2, “Financial Instruments.” Accounts Receivable, Net Accounts receivable, net, consisted of the following as of January 31:
| 2016 |  | 2015
Trade accounts receivable | $ | 700.1 |  |  | $ | 495.4 |
Less: Allowance for doubtful accounts | (7.6 | ) |  | (6.3 | )
Product returns reserve | (1.6 | ) |  | (2.6 | )
Partner programs and other obligations | (37.3 | ) |  | (27.6 | )
Accounts receivable, net | $ | 653.6 |  |  | $ | 458.9 |
Allowances for uncollectible trade receivables are based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with problem accounts. The product returns reserves are based on historical experience of actual product returns, estimated channel inventory levels, the timing of new product introductions, channel sell-in for applicable markets, and other factors. As part of the indirect channel model, Autodesk has a partner incentive program that uses quarterly attainment of monetary rewards to motivate distributors and resellers to achieve mutually agreed upon business goals in a specified time period. A portion of these incentives reduce license and other revenue in the current period. The remainder, which relates to incentives on our Subscription Program, is recorded as a reduction to deferred revenue in the period the subscription transaction is billed and subsequently recognized as a reduction to subscription revenue over the contract period. These incentive balances do not require significant assumptions or judgments. The reserves associated with the partner incentive program are treated on the balance sheet as either contra account receivable (when due to distributors and direct resellers) or accounts payable (when due to indirect resellers). Concentration of Credit Risk Autodesk places its cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, diversified financial institutions globally with high credit ratings and limits the amounts invested with any one institution, type of security, and issuer. Geographical concentrations of consolidated cash, cash equivalents, and marketable securities held by Autodesk as of January 31:
| 2016 |  | 2015
United States | 26 | % |  | 19 | %
Other Americas | 1 | % |  | 1 | %
Europe, Middle East, and Africa (“EMEA”) | 50 | % |  | 56 | %
Asia Pacific (“APAC”) | 23 | % |  | 24 | %
Autodesk’s primary commercial banking relationship is with Citigroup Inc. and its global affiliates. Citibank, N.A., an affiliate of Citigroup, is one of the lead lenders and an agent in the syndicate of Autodesk’s $400.0 million line of credit facility. It is Autodesk’s policy to limit the amounts invested with any one institution by type of security and issuer. Autodesk’s accounts receivable are derived from sales to a large number of resellers, distributors, and direct customers in the Americas; EMEA; and APAC geographies. Autodesk performs ongoing evaluations of these partners' financial condition and limits the amount of credit extended when deemed necessary, but generally does not require collateral from such parties. Total sales to the Company's largest distributor Tech Data Corporation, and its global affiliates (“Tech Data”), accounted for 25%, 25%, and 24% of Autodesk's net revenue for fiscal years ended January 31, 2016, 2015, and 2014, respectively. The majority of the net revenue from sales to Tech Data relates to Autodesk's Platform Solutions and Emerging Business ("PSEB") segment and is for sales made outside of the United States. In addition, Tech Data accounted for 22% of trade accounts receivable at both January 31, 2016 and 2015, respectively. Computer Equipment, Software, Furniture, and Leasehold Improvements, Net Computer equipment, software, and furniture are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. Depreciation expense was $60.6 million in fiscal 2016, $52.1 million in fiscal 2015, and $47.2 million in fiscal 2014. Computer equipment, software, furniture, leasehold improvements and the related accumulated depreciation at January 31 were as follows:
| 2016 |  | 2015
Computer hardware, at cost | $ | 202.7 |  |  | $ | 194.0 |
Computer software, at cost | 85.6 |  |  | 84.9 |
Leasehold improvements, land, and buildings, at cost | 202.9 |  |  | 176.3 |
Furniture and equipment, at cost | 59.0 |  |  | 53.0 |
Computer software, hardware, leasehold improvements, furniture, and equipment, at cost | 550.2 |  |  | 508.2 |
Less: Accumulated depreciation | (380.9 | ) |  | (349.0 | )
Computer software, hardware, leasehold improvements, furniture, and equipment, net | $ | 169.3 |  |  | $ | 159.2 |
Costs incurred for computer software developed or obtained for internal use are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. These capitalized costs are amortized over the software’s expected useful life, which is generally three years. Software Development Costs Software development costs incurred prior to the establishment of technological feasibility are included in research and development expenses. Autodesk defines establishment of technological feasibility as the completion of a working model. Software development costs incurred subsequent to the establishment of technological feasibility through the period of general market availability of the products are capitalized and generally amortized over a three year period, if material. Autodesk had no material capitalized software development costs at January 31, 2016 and January 31, 2015. Other Intangible Assets, Net Other intangible assets include developed technologies, customer relationships, trade names, patents, user lists, and the related accumulated amortization. These assets are shown as “Developed technologies, net” and as part of “Other assets” in the Consolidated Balance Sheet. The majority of Autodesk’s other intangible assets are amortized to expense over the estimated economic life of the product, which ranges from one to ten years. Amortization expense for developed technologies, customer relationships, trade names, patents, and user lists was $82.6 million in fiscal 2016, $92.9 million in fiscal 2015 and $80.7 million in fiscal 2014. Other intangible assets and related accumulated amortization at January 31 were as follows:
| 2016 |  | 2015
Developed technologies, at cost | $ | 571.4 |  |  | $ | 538.4 |
Customer relationships, trade names, patents, and user lists, at cost (1) | 371.6 |  |  | 348.9 |
Other intangible assets, at cost (2) | 943.0 |  |  | 887.3 |
Less: Accumulated amortization | (796.2 | ) |  | (715.4 | )
Other intangible assets, net | $ | 146.8 |  |  | $ | 171.9 |
_______________
(1) | Included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets.
(2) | Includes the effects of foreign currency translation.
The weighted average amortization period for developed technologies, customer relationships, and trade names during fiscal 2016 was 4.2 years. Expected future amortization expense for developed technologies, customer relationships, trade names, patents, and user lists for each of the fiscal years ended thereafter is as follows:
| Fiscal Year ended January 31,
2017 | $ | 63.1 |
2018 | 33.8 |
2019 | 24.6 |
2020 | 13.4 |
2021 | 7.4 |
Thereafter | 4.5 |
Total | $ | 146.8 |
Goodwill Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Autodesk assigns goodwill to the reporting unit associated with each business combination, and tests goodwill for impairment annually in its fourth fiscal quarter or more often if circumstances indicate a potential impairment. For purposes of the goodwill impairment test, a reporting unit is an operating segment or one level below. Autodesk has the option to perform an assessment of qualitative factors of impairment (“optional assessment”) 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. Therefore, the two-step quantitative impairment test is necessary when either Autodesk does not utilize the optional assessment or, as a result of the optional assessment, it is not more likely than not that the fair value of the reporting unit is greater than its carrying value. In performing the two-step impairment test, Autodesk uses discounted cash flow models which include assumptions regarding projected cash flows. Variances in these assumptions could have a significant impact on Autodesk's 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 assumptions occur, Autodesk may be required to record impairment charges. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. The value of Autodesk’s goodwill could also be impacted by future adverse changes such as: (i) declines in Autodesk’s actual financial results, (ii) a sustained decline in Autodesk’s market capitalization, (iii) significant slowdown in the worldwide economy or the industries Autodesk serves, or (iv) changes in Autodesk’s business strategy or internal financial forecast results. For the annual impairment assessment in fiscal 2016, Autodesk utilized the optional assessment for the following reporting units: Platform Solutions and Emerging Business (“PSEB”), Manufacturing ("MFG"), Architecture, Engineering, and Construction ("AEC"), and Media and Entertainment (“M&E”). Based on a review of the qualitative factors described above, Autodesk determined that it was more likely than not that the fair value of each of the reporting units exceeded the carrying value. As a result, Autodesk concluded that performing the two-step impairment test was not necessary, and therefore the goodwill of the PSEB, MFG, AEC, and M&E reporting units were not impaired during the fiscal year ended January 31, 2016. For the Delcam reporting unit, Autodesk deemed the two-step impairment test was necessary and used a discounted cash flow model which included assumptions regarding projected cash flows. Based on this testing, Autodesk estimated fair value was 16% in excess of the carrying value for the Delcam reporting unit and determined there was no impairment of goodwill during the year ended January 31, 2016. In addition, Autodesk did not recognize any goodwill impairment losses in fiscal 2015 or 2014. Estimating the fair value of the reporting units requires the use of estimates and significant judgments regarding future cash flows that are based on a number of factors including actual operating results, forecasted billings, revenue, and spend targets, discount rate assumptions, and long-term growth rate assumptions. The estimates and judgments described above could adversely change in future periods and Autodesk cannot provide absolute assurance that all of the targets will be achieved, which could lead to future impairment charges. The change in the carrying amount of goodwill during the fiscal year ended January 31, 2016 is as follows:
| Platform Solutions and Emerging Business |  | Architecture, Engineering, and Construction |  | Manufacturing |  | Media and Entertainment |  | Delcam (1) |  | Total
Balance as of January 31, 2015 |  |  |  |  |  |  |  |  |  |  |
Goodwill | $ | 327.5 |  |  | $ | 427.0 |  |  | $ | 422.7 |  |  | $ | 245.2 |  |  | $ | 183.0 |  |  | $ | 1,605.4 |
Accumulated impairment losses | — |  |  | — |  |  | — |  |  | (149.2 | ) |  | — |  |  | (149.2 | )
| 327.5 |  |  | 427.0 |  |  | 422.7 |  |  | 96.0 |  |  | 183.0 |  |  | 1,456.2 |
netfabb GmbH | 32.8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 32.8 |
Goodwill acquired from other acquisitions | 33.4 |  |  | 4.1 |  |  | 16.6 |  |  | 10.4 |  |  | — |  |  | 64.5 |
Effect of foreign currency translation, purchase accounting adjustments, and other | (6.8 | ) |  | (3.9 | ) |  | (1.9 | ) |  | 0.6 |  |  | (6.5 | ) |  | (18.5 | )
Balance as of January 31, 2016 |  |  |  |  |  |  |  |  |  |  |
Goodwill | 386.9 |  |  | 427.2 |  |  | 437.4 |  |  | 256.2 |  |  | 176.5 |  |  | 1,684.2 |
Accumulated impairment losses | — |  |  | — |  |  | — |  |  | (149.2 | ) |  | — |  |  | (149.2 | )
| $ | 386.9 |  |  | $ | 427.2 |  |  | $ | 437.4 |  |  | $ | 107.0 |  |  | $ | 176.5 |  |  | $ | 1,535.0 |
_______________
(1) | Delcam is a separate reporting unit within the Manufacturing ("MFG") reporting segment.
The change in the carrying amount of goodwill during the fiscal year ended January 31, 2015 is as follows:
| Platform Solutions and Emerging Business |  | Architecture, Engineering, and Construction |  | Manufacturing |  | Media and Entertainment |  | Delcam (1) |  | Total
Balance as of January 31, 2014 |  |  |  |  |  |  |  |  |  |  |
Goodwill | $ | 142.3 |  |  | $ | 415.2 |  |  | $ | 411.6 |  |  | $ | 190.0 |  |  | $ | — |  |  | $ | 1,159.1 |
Accumulated impairment losses | — |  |  | — |  |  | — |  |  | (149.2 | ) |  | — |  |  | (149.2 | )
| 142.3 |  |  | 415.2 |  |  | 411.6 |  |  | 40.8 |  |  | — |  |  | 1,009.9 |
Delcam plc | — |  |  | — |  |  | — |  |  | — |  |  | 196.1 |  |  | 196.1 |
Within Technologies Limited | 80.6 |  |  | — |  |  | — |  |  | — |  |  |  |  |  | 80.6 |
Shotgun Software Inc. | — |  |  | — |  |  | — |  |  | 43.2 |  |  |  |  |  | 43.2 |
Goodwill acquired from other acquisitions | 117.8 |  |  | 28.1 |  |  | 20.1 |  |  | 15.3 |  |  |  |  |  | 181.3 |
Effect of foreign currency translation, purchase accounting adjustments, and other | (13.2 | ) |  | (16.3 | ) |  | (9.0 | ) |  | (3.3 | ) |  | (13.1 | ) |  | (54.9 | )
Balance as of January 31, 2015 |  |  |  |  |  |  |  |  |  |  |
Goodwill | 327.5 |  |  | 427.0 |  |  | 422.7 |  |  | 245.2 |  |  | 183.0 |  |  | 1,605.4 |
Accumulated impairment losses | — |  |  | — |  |  | — |  |  | (149.2 | ) |  | — |  |  | (149.2 | )
| $ | 327.5 |  |  | $ | 427.0 |  |  | $ | 422.7 |  |  | $ | 96.0 |  |  | $ | 183.0 |  |  | $ | 1,456.2 |
_______________
(1) | Delcam is a separate reporting unit within the Manufacturing ("MFG") reporting segment.
Purchase accounting adjustments reflect revisions made to the Company’s preliminary purchase price allocations during fiscal 2016 and 2015. Impairment of Long-Lived Assets At least annually or more frequently as circumstances dictate, Autodesk reviews its long-lived assets for impairment whenever impairment indicators exist. Autodesk continually monitors events and changes in circumstances that could indicate the carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, Autodesk assesses recoverability of these assets. Recoverability is measured by comparison of the carrying amounts of the assets to the future undiscounted cash flows the assets are expected to generate. If the long-lived assets are considered to be impaired, the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds its fair market value. Autodesk did not recognize any material impairments of long-lived assets during the fiscal years ended January 31, 2016, 2015, and 2014, respectively. In addition to the recoverability assessments, Autodesk routinely reviews the remaining estimated useful lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter when such determinations are made, as well as in subsequent quarters. Deferred Tax Assets Deferred tax assets arise primarily from tax credits, net operating losses, and timing differences for reserves, accrued liabilities, stock options, deferred revenue, purchased technologies, and capitalized intangibles, partially offset by U.S. deferred tax liabilities on unremitted earnings from certain foreign subsidiaries, acquired intangibles, and valuation allowances against U.S. and foreign deferred tax assets. Autodesk performed a quarterly assessment of the recoverability of these net deferred tax assets and believe that we will generate sufficient future taxable income in appropriate tax jurisdictions to realize the net deferred tax assets. They are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce gross deferred tax assets to the amount that is "more likely than not" to be realized. 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. Taxes Collected from Customers Autodesk nets taxes collected from customers against those remitted to government authorities in the consolidated financial statements. Accordingly, taxes collected from customers are not reported as revenue. Shipping and Handling Costs Shipping and handling costs are included in cost of revenue for all periods presented. Stock-based Compensation Expense The following table summarizes stock-based compensation expense for fiscal 2016, 2015, and 2014, respectively, as follows:
| Fiscal Year Ended January 31,
| 2016 |  | 2015 |  | 2014
Cost of license and other revenue | $ | 6.1 |  |  | $ | 4.6 |  |  | $ | 3.8 |
Cost of subscription | 5.7 |  |  | 4.3 |  |  | 2.2 |
Marketing and sales | 85.2 |  |  | 72.4 |  |  | 58.6 |
Research and development | 70.4 |  |  | 56.0 |  |  | 43.7 |
General and administrative | 29.8 |  |  | 28.3 |  |  | 23.9 |
Stock-based compensation expense related to stock awards and ESP Plan purchases | 197.2 |  |  | 165.6 |  |  | 132.2 |
Tax benefit | (1.6 | ) |  | (45.2 | ) |  | (36.4 | )
Stock-based compensation expense related to stock awards and ESP Plan purchases, net | $ | 195.6 |  |  | $ | 120.4 |  |  | $ | 95.8 |
Autodesk determines the grant-date fair value of its share-based payment awards using a Black-Scholes Merton ("BSM") option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses a binomial-lattice model (e.g., Monte Carlo simulation model). The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
|  | Fiscal Year Ended |  | Fiscal Year Ended |  | Fiscal Year Ended
|  | January 31, 2016 |  | January 31, 2015 |  | January 31, 2014
|  | Performance Stock Unit |  | ESP Plan |  | Performance Stock Unit |  | ESP Plan |  | Performance Stock Unit |  | ESP Plan
Range of expected volatilities |  | 27% |  | 28 -29% |  | 30% |  | 29 - 33% |  | 34% |  | 27 - 36%
Range of expected lives (in years) |  | N/A |  | 0.5 - 2.0 |  | N/A |  | 0.5 - 2.0 |  | N/A |  | 0.5 - 2.0
Expected dividends |  | —% |  | —% |  | —% |  | —% |  | —% |  | —%
Range of risk-free interest rates |  | 0.2% |  | 0.1 - 0.7% |  | 0.1% |  | 0.0 - 0.6% |  | 0.1% |  | 0.1 - 0.4%
Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures. The first is a measure of historical volatility in the trading market for the Company’s common stock, and the second is the implied volatility of traded forward call options to purchase shares of the Company’s common stock. The expected volatility for PSUs subject to market conditions includes the expected volatility of Autodesk's peer companies within the S&P Computer Software Select Index. Autodesk estimates the expected life of stock-based awards using both exercise behavior and post-vesting termination behavior as well as consideration of outstanding options. Autodesk did not pay cash dividends in fiscal 2016, 2015, or 2014 and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the BSM option pricing model and the Monte Carlo simulation model. The risk-free interest rate used in the BSM option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives. Autodesk recognizes expense only for the stock-based awards that are ultimately expected to vest. Therefore, Autodesk has developed an estimate of the number of awards expected to cancel prior to vesting (“forfeiture rate”). The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all stock-based awards. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. Advertising Expenses Advertising costs are expensed as incurred. Total advertising expenses incurred were $29.8 million in fiscal 2016, $23.9 million in fiscal 2015, and $15.6 million in fiscal 2014. Net (Loss) Income Per Share Basic net (loss) income per share is computed based on the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock units. Diluted net (loss) income per share is computed based upon the weighted average shares of common shares outstanding for the period and potentially dilutive common shares, including the effect of stock options and restricted stock units under the treasury stock method. Defined Benefit Pension Plans The funded status of Autodesk's defined benefit pension plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation for the fiscal years presented. The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future compensation levels. The fair value of plan assets represents the current market value of Autodesk's cumulative company and participant contributions made to the various plans in effect. Net periodic benefit cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs, and gains or losses previously recognized as a component of other comprehensive income. Certain events, such as changes in the employee base, plan amendments, and changes in actuarial assumptions may result in a change in the defined benefit obligation and the corresponding change to other comprehensive income. Gains and losses and prior service costs not recognized as a component of net periodic benefit cost in the Consolidated Statements of Operations as they arise are recognized as a component of other comprehensive (loss) income in the Consolidated Statements of Comprehensive (Loss) Income. Those gains and losses and prior service costs are subsequently amortized as a component of net periodic benefit cost over the average remaining service lives of the plan participants using a corridor approach to determine the portion of gain or loss subject to amortization. The measurement of projected benefit obligations and net periodic benefit cost is based on estimates and assumptions that reflect the terms of the plans and use participant-specific information such as compensation, age and years of services, as well as certain assumptions, including estimates of discount rates, expected return of plan assets, rate of compensation increases, interest rates, and mortality rates. Accounting Standards in Fiscal 2016 With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the FASB or adopted by the Company during the fiscal year ended January 31, 2016, that are of significance, or potential significance, to the Company. Accounting Standards Adopted Effective in the fourth quarter of fiscal 2016, Autodesk elected to early adopt FASB's Accounting Standards Update No. 2015-17 ("ASU 2015-17") regarding ASC Topic 470 "Income Taxes: Balance Sheet Classification of Deferred Taxes." The amendments in ASU 2015-17 require deferred tax assets and liabilities, along with any related valuation allowances, to be classified as noncurrent on the consolidated balance sheet. The amendments for ASU-2015-17 were prospectively applied. Prior periods were not retrospectively adjusted and remain presented as current or non-current in accordance with the previous accounting guidance. Adoption of ASU 2015-17 did not have a material impact on Autodesk's consolidated financial statements. Effective in the third quarter of fiscal 2016, Autodesk elected to early adopt FABS's Accounting Standards Update No. 2015-16 ("ASU 2015-16") regarding ASC Topic 805 "Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments." The amendments in ASU 2015-16 eliminate the requirement to restate prior period financial statements for measurement period adjustments. The amendments also require that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The amendments for ASU-2015-16 were prospectively applied and did not have a material impact on Autodesk's consolidated financial statements. Effective in the second quarter of fiscal 2016, Autodesk elected to early adopt FASB's Accounting Standards Update 2015-03 (“ASU 2015-03”) regarding Subtopic 835-30 “Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard requires retrospective application and represents a change in accounting principle. The adoption of ASU 2015-03 resulted in a $4.1 million retrospective reduction of both our other assets and long term notes payable, net, as of January 31, 2015. Recently Issued Accounting Standards In February 2016, the FASB issued Accounting Standards Update No. 2016-02 ("ASU 2016-02") regarding ASC Topic 842 "Leases." The amendments in this ASU require balance sheet recognition of lease assets and lease liabilities by lessees for leases classified as operating leases, with an optional policy election to not recognize lease assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures, including qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. ASU 2016-02 will be effective for Autodesk’s fiscal year beginning February 1, 2019 unless Autodesk elects early adoption. The amendments require a modified retrospective approach with optional practical expedients. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In January 2016, the FASB issued Accounting Standards Update No. 2016-01 ("ASU 2016-01") regarding ASC Topic 825-10 "Financial Instruments - Overall." The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments, and require equity securities to be measured at fair value with changes in fair value recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment for impairment quarterly at each reporting period. The amendments in ASU 2016-01 are effective for annual and interim periods beginning after December 15, 2017. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with prospective adoption of the amendments related to equity securities without readily determinable fair values existing as of the date of adoption. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In May 2015, the FASB issued Accounting Standards Update No. 2015-07 ("ASU 2015-07") regarding ASC Topic 820 "Fair Value Measurement: Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." The amendments in ASU 2015-07 remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also limit certain disclosures to investments for which the entity has elected to measure at fair value using the net asset value per share practical expedient. The amendments in ASU 2015-07 are effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The amendments should be applied retrospectively by removing from the fair value hierarchy any investments for which fair value is measured using the net asset value per share practical expedient. Autodesk does not expect ASU 2015-07 to have a material impact on its consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update No. 2015-05 ("ASU 2015-05") regarding Subtopic 350-40, “Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this ASU provide guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in ASU 2015-05 are effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The amendments in ASU 2015-05 may be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. Autodesk does not expect ASU 2015-05 to have a material impact on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update 2014-09 ("ASU 2014-09") regarding ASC Topic 606 “Revenue from Contracts with Customers.” ASU 2014-09 provides principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 to defer the effective date by one year with early adoption permitted as of the original effective date. ASU 2014-09 will be effective for Autodesk’s fiscal year beginning February 1, 2018 unless we elect the earlier date of February 1, 2017. In addition, the FASB issued ASU 2016-08 in March 2016, to help provide interpretive clarifications on the new guidance in ASC Topic 606. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

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