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Recently Issued Accounting Standards | 6 Months Ended
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Jul. 31, 2018
Accounting Changes and Error Corrections [Abstract] |
Recently Issued Accounting Standards | Recently Issued Accounting Standards With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or adopted by the Company during the six months ended July 31, 2018, that are of significance, or potential significance, to the Company. Accounting standards adopted Effective in the first quarter of fiscal 2019, Autodesk adopted FASB Accounting Standards Update ("ASU") No. 2017-05, "Other Income– Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." The ASU, among other things, clarifies the scope of the derecognition of nonfinancial assets, the definition of in-substance financial assets, and impacts the accounting for partial sales of nonfinancial assets by requiring full gain recognition upon the sale. The new guidance was adopted prospectively as there was no impact on the Company's prior periods consolidated statements of financial position and results of operations which would be reflected in either the full or modified retrospective transition approach. The future effect of the adoption will depend upon the nature of the Company's future dispositions, if any. Effective in the first quarter of fiscal 2019, Autodesk adopted FASB ASU No. 2017-01, "Business Combinations: Clarifying the Definition of a Business" which provides a more robust framework to use in determining when a set of assets and activities is considered a business. The new guidance was applied on a prospective basis and the adoption did not have any impact on Autodesk's consolidated financial statements. Any future effect of the adoption will depend upon the nature of the Company's future acquisitions, if any. Effective in the first quarter of fiscal 2019, Autodesk adopted FASB ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other than Inventory” which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The new guidance was applied on a modified retrospective basis with a cumulative increase of $1.9 million to the opening balance of "Accumulated deficit" at February 1, 2018. The ASU did not have any other material impacts on Autodesk's Condensed Consolidated Financial Statements. Effective in the first quarter of fiscal 2019, Autodesk adopted FASB ASU No. 2016-01 regarding Accounting Standards Codification ("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, unless the measurement alternative method has been elected for equity investments without readily determinable fair values ("non-marketable equity securities"), 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. Under the measurement alternative method, the non-marketable equity securities will be measured at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, which will be recorded within the Condensed Consolidated Statement of Operations. The determination of whether a transaction is for a similar investment will require significant management judgment including consideration of the rights and obligations between the investments and the extent to which those differences would affect the fair values of those investments with additional consideration for the stage of development of the investee company. Autodesk prospectively adopted the amendments related to non-marketable equity securities existing as of the date of adoption. The new standard may add volatility to the Company's statements of operations in future periods, due to changes in market prices of the Company's investments in publicly held equity investments and the valuation and timing of observable price changes and impairments of its investments in non-marketable securities. See Note 5, "Financial Instruments" for more information. Revenue from contracts with customers Effective in the first quarter of fiscal 2019, Autodesk adopted ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and the subsequent and related ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20. Under ASC Topic 606, the Company has concluded that the desktop software and related substantial cloud functionality that are included in the majority of its product subscription offerings and enterprise arrangements are not distinct in the context of the contract as they are considered highly interrelated and represent a single combined performance obligation that should be recognized over time. Therefore, the adoption of ASC Topic 606 has not resulted in a material change in the timing and amount of the recognition of revenue for the majority of the Company's product subscription offerings and enterprise arrangements. One impact of the new standard relates to product subscriptions that do not incorporate substantial cloud functionality. A limited number of Autodesk's product subscriptions do not incorporate substantial cloud functionality, and therefore are not considered highly interrelated. Under ASU 2014-09, these limited number of product subscriptions are recognized as separate and distinct license and service performance obligations. Under ASC Topic 605, licenses sold with undelivered elements without vendor-specific objective evidence ("VSOE") are recognized ratably over the term of the undelivered elements. Under ASC Topic 606, Autodesk is no longer required to establish VSOE to recognize software license revenue separately from the other elements and recognizes software licenses once the customer obtains control of the license, which is generally upon delivery of the license. Therefore, revenue allocated to the licenses in these offerings under ASC Topic 606 is recognized at a point in time instead of over the contract term. Autodesk adopted ASC Topic 606 using the modified retrospective method, with a cumulative decrease of $89.0 million to the opening balance of "Accumulated deficit" at February 1, 2018. Autodesk applied the standard only to contracts that are not completed as of the date of initial application. The comparative information has not been adjusted and continues to be reported under ASC Topic 605. The details of the quantitative impact of the adoption on the three and six months ended July 31, 2018, are shown below. See Note 3, "Revenue Recognition" for disclosures under the new standard. Costs to acquire a contract from a customer With the adoption of ASC Topic 606, Autodesk also adopted ASC Topic 340-40, "Other Assets and Deferred Costs—Contracts with Customers." Prior to the adoption of ASC Topic 340-40, Autodesk previously recognized compensation paid to sales employees and certain resellers related to obtaining customer contracts in marketing and sales expense in the Consolidated Statements of Operations when incurred. Under ASC Topic 340-40, Autodesk capitalizes this sales compensation as contract costs when they are incremental, directly incurred to obtain a contract with a customer and expected to be recoverable. The contract costs are amortized based on the transfer of goods or services to which the contract costs relate. Under the modified retrospective method, Autodesk booked a cumulative decrease of $90.4 million to the opening balance of "Accumulated deficit" at February 1, 2018. The comparative information has not been adjusted and continues to be reported as incurred. The details of the quantitative impact of the adoption on the three and six months ended July 31, 2018, are shown below. See Note 11, "Deferred Compensation" for disclosures under the new standard. Quantitative effect of ASC Topic 606 and 340-40 adoption The following table shows select line items that were materially impacted by the adoption of ASC Topics 606 and 340-40 on Autodesk’s unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 31, 2018:
| For the Three Months Ended July 31, 2018 |  | For the Six Months Ended July 31, 2018
| As Reported |  | Impact from the adoption of ASC 606 and 340-40 |  | As Adjusted |  | As Reported |  | Impact from the adoption of ASC 606 and 340-40 |  | As Adjusted
Net revenue (1) |  |  |  |  |  |  |  |  |  |  |
Subscription | $ | 420.6 |  |  | $ | (4.6 | ) |  | $ | 416.0 |  |  | $ | 771.0 |  |  | $ | 1.7 |  |  | $ | 772.7 |
Maintenance | 166.4 |  |  | (1.1 | ) |  | 165.3 |  |  | 347.6 |  |  | 4.3 |  |  | 351.9 |
Other | 24.7 |  |  | 4.5 |  |  | 29.2 |  |  | 53.0 |  |  | 6.4 |  |  | 59.4 |
Cost of revenue (1) |  |  |  |  |  |  |  |  |  |  |
Cost of subscription and maintenance revenue | 54.1 |  |  | — |  |  | 54.1 |  |  | 104.5 |  |  | (0.1 | ) |  | 104.4 |
Cost of other revenue | 12.3 |  |  | 0.4 |  |  | 12.7 |  |  | 25.1 |  |  | 0.7 |  |  | 25.8 |
Operating expenses (1): |  |  |  |  |  |  |  |  |  |  |
Marketing and sales | 289.1 |  |  | (10.8 | ) |  | 278.3 |  |  | 565.5 |  |  | (24.4 | ) |  | 541.1 |
Provision for income taxes | (16.0 | ) |  | 3.1 |  |  | (12.9 | ) |  | (34.6 | ) |  | (1.5 | ) |  | (36.1 | )
Net loss (2) | $ | (39.4 | ) |  | $ | 12.3 |  |  | $ | (27.1 | ) |  | $ | (121.8 | ) |  | $ | 34.7 |  |  | $ | (87.1 | )
Basic net loss per share | $ | (0.18 | ) |  | $ | 0.06 |  |  | $ | (0.12 | ) |  | $ | (0.56 | ) |  | $ | 0.16 |  |  | $ | (0.40 | )
Diluted net loss per share | $ | (0.18 | ) |  | $ | 0.06 |  |  | $ | (0.12 | ) |  | $ | (0.56 | ) |  | $ | 0.16 |  |  | $ | (0.40 | )
____________________
(1) | While not shown here, gross margin, loss from operations, and loss before income taxes have consequently been affected as a result of the net effect of the adjustments noted above.
(2) | The impact on the unaudited Condensed Consolidated Statements of Comprehensive Loss is limited to the net effects of the impacts noted above on the Condensed Consolidated Statements of Operations, specifically on the line item "Net loss."
The following table shows select line items that were materially impacted by the adoption of ASC Topics 606 and 340-40 on Autodesk’s unaudited Condensed Consolidated Balance Sheet as of July 31, 2018:
| As reported |  | Impact from the adoption of ASC 606 and 340-40 |  | As Adjusted
ASSETS |  |  |  |  |
Current assets: |  |  |  |  |
Accounts receivable, net | $ | 234.4 |  |  | $ | 53.0 |  |  | $ | 287.4 |
Prepaid expenses and other current assets (1) | 194.6 |  |  | (70.1 | ) |  | 124.5 |
Deferred income taxes, net | 81.5 |  |  | 11.0 |  |  | 92.5 |
Other assets (1) | 195.4 |  |  | (18.0 | ) |  | 177.4 |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |  |  |  |  |  |
Current liabilities: |  |  |  |  |
Accrued income taxes | 38.8 |  |  | (1.4 | ) |  | 37.4 |
Deferred revenue | 1,491.5 |  |  | 99.1 |  |  | 1,590.6 |
Other accrued liabilities | 139.4 |  |  | 2.4 |  |  | 141.8 |
Long-term deferred revenue | 308.0 |  |  | 25.3 |  |  | 333.3 |
Long-term income taxes payable | 41.5 |  |  | (0.2 | ) |  | 41.3 |
Long-term deferred income taxes | 88.2 |  |  | (4.6 | ) |  | 83.6 |
Accumulated deficit (2) | (2,103.2 | ) |  | (144.7 | ) |  | (2,247.9 | )
____________________
(1) | Short term and long term "contract assets" under ASC Topic 606 are included within "Prepaid expenses and other current assets" and "Other assets", respectively, on the unaudited Condensed Consolidated Balance Sheet.
(2) | Included in the "Accumulated deficit" adjustment is $179.4 million for the cumulative effect adjustment of adopting ASC Topic 606 and 340-40 on the opening balance as of February 1, 2018.
Adoption of the standard had no impact to net cash provided by or (used in) operating, financing, or investing activities on the Company’s unaudited Condensed Consolidated Statements of Cash Flows. Recently issued accounting standards not yet adopted In February 2018, FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendment allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The amendment only impacts the income tax effect of the passage of the Tax Cuts and Jobs Act but does not affect the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. The amendment is effective for Autodesk's fiscal year beginning February 1, 2019, unless Autodesk elects early adoption, which Autodesk is still evaluating. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The targeted amendments help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required only prospectively. The amendments are effective for Autodesk's fiscal year beginning February 1, 2019. Autodesk will not early adopt. Autodesk is currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In June 2016, FASB issued ASU No. 2016-13 regarding ASC Topic 326, "Financial Instruments - Credit Losses," which modifies the measurement of expected credit losses of certain financial instruments. Autodesk plans to adopt ASU 2016-13 as of the effective date which represents Autodesk’s fiscal year beginning February 1, 2020. Autodesk does not believe the ASU will have a material impact on its consolidated financial statements. In February 2016, FASB issued ASU No. 2016-02, Leases (ASC Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The new standard requires entities to reflect the net present value of all future fixed lease payments for both operating and finance leases. It also requires entities to disclose fixed and variable lease payments separately and by lease type (operating vs. finance leases). ASU 2016-02 requires a modified retrospective approach with optional practical expedients. Autodesk has elected to not reassess the lease classification of existing leases and to combine lease and non-lease components for new leases post adoption. Autodesk is currently in the process of evaluating if it will elect any of the other remaining practical expedient options. In addition, FASB issued ASU No. 2018-10 and 2018-11 in July 2018, to help provide interpretive clarifications on various issues raised by stakeholders. ASU 2018-10 clarifies ambiguous or potentially conflicting guidance in ASU 2016-02 but is not expected to have a material impact on Autodesk. ASU 2018-11 provides an additional transition option to apply ASU 2016-02 upon adoption of the new standard. Autodesk will use this option and apply ASU 2016-02 to leases active as of the adoption date of the new standard, February 1, 2019. Autodesk has made and will continue to make investments in systems and processes to enable timely and accurate reporting under ASC Topic 842. Autodesk currently expects that necessary operational changes will be implemented prior to the adoption date and expects that most of its lease commitments will be subject to the updated standard and recognized as lease liabilities and right-of-use assets upon adoption. Autodesk is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures and cannot currently estimate the financial statement impact of adoption.

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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