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Financial Instruments | 9 Months Ended
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Oct. 31, 2019
Investments, All Other Investments [Abstract] |
Financial Instruments | Financial Instruments The following tables summarize the Company's financial instruments' amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category as of October 31, 2019 and January 31, 2019:
|  |  | October 31, 2019
|  |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Cash equivalents (1): |  |  |  |  |  |  |  |  |  |  |  |  |
| Commercial paper | $ | 42.7 |  |  | $ | — |  |  | $ | — |  |  | $ | 42.7 |  |  | $ | — |  |  | $ | 42.7 |  |  | $ | — |
| Money market funds | 377.3 |  |  | — |  |  | — |  |  | 377.3 |  |  | 377.3 |  |  | — |  |  | — |
| Other (2) | 1.9 |  |  | — |  |  | — |  |  | 1.9 |  |  | 0.9 |  |  | 1.0 |  |  | — |
Marketable securities: |  |  |  |  |  |  |  |  |  |  |  |  |
| Short-term trading securities |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Mutual funds | 59.8 |  |  | 8.5 |  |  | — |  |  | 68.3 |  |  | 68.3 |  |  | — |  |  | — |
Derivative contract assets (3) | 2.3 |  |  | 6.7 |  |  | (2.6 | ) |  | 6.4 |  |  | — |  |  | 5.8 |  |  | 0.6 |
Derivative contract liabilities (4) | — |  |  | — |  |  | (7.2 | ) |  | (7.2 | ) |  | — |  |  | (7.2 | ) |  | — |
|  | Total | $ | 484.0 |  |  | $ | 15.2 |  |  | $ | (9.8 | ) |  | $ | 489.4 |  |  | $ | 446.5 |  |  | $ | 42.3 |  |  | $ | 0.6 |
____________________
(1) | Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets.
(2) | Consists of custody cash deposits and certificates of deposit.
(3) | Included in “Prepaid expenses and other current assets” or “Other assets” in the accompanying Condensed Consolidated Balance Sheets.
(4) | Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
|  |  | January 31, 2019
|  |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Cash equivalents (1): |  |  |  |  |  |  |  |  |  |  |  |  |
| Certificates of deposit | $ | 1.0 |  |  | $ | — |  |  | $ | — |  |  | $ | 1.0 |  |  | $ | — |  |  | $ | 1.0 |  |  | $ | — |
| Commercial paper | 87.9 |  |  | — |  |  | — |  |  | 87.9 |  |  | — |  |  | 87.9 |  |  | — |
| Corporate debt securities | 5.0 |  |  | — |  |  | — |  |  | 5.0 |  |  | — |  |  | 5.0 |  |  | — |
| Custody cash deposit | 0.8 |  |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |  |  | — |  |  | — |
| Money market funds | 281.4 |  |  | — |  |  | — |  |  | 281.4 |  |  | 281.4 |  |  | — |  |  | — |
Marketable securities: |  |  |  |  |  |  |  |  |  |  |  |  |
| Short-term |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Other (2) | 6.2 |  |  | 1.1 |  |  | — |  |  | 7.3 |  |  | 2.7 |  |  | 4.6 |  |  | — |
| Short-term trading securities |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Mutual funds | 56.6 |  |  | 3.7 |  |  | — |  |  | 60.3 |  |  | 60.3 |  |  | — |  |  | — |
Convertible debt securities (3) | 4.6 |  |  | 1.9 |  |  | (2.1 | ) |  | 4.4 |  |  | — |  |  | — |  |  | 4.4 |
Derivative contract assets (4) | 1.7 |  |  | 8.6 |  |  | (1.8 | ) |  | 8.5 |  |  | — |  |  | 7.7 |  |  | 0.8 |
Derivative contract liabilities (5) | — |  |  | — |  |  | (7.4 | ) |  | (7.4 | ) |  | — |  |  | (7.4 | ) |  | — |
|  | Total | $ | 445.2 |  |  | $ | 15.3 |  |  | $ | (11.3 | ) |  | $ | 449.2 |  |  | $ | 345.2 |  |  | $ | 98.8 |  |  | $ | 5.2 |
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(1) | Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets.
(2) | Consists of corporate bonds, commercial paper, and common stock.
(3) | Considered "available for sale" and included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets.
(4) | Included in “Prepaid expenses and other current assets,” “Other assets,” or “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
(5) | Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
Autodesk classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Generally, marketable securities with remaining maturities of up to 12 months are classified as short-term and marketable securities with remaining maturities greater than 12 months are classified as long-term. Autodesk may sell certain of its marketable securities prior to their stated maturities for strategic purposes or in anticipation of credit deterioration. Autodesk applies fair value accounting for certain financial assets and liabilities, which consist of cash equivalents, marketable securities and other financial instruments, on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and (Level 3) unobservable inputs for which there is little or no market data, which require Autodesk to develop its own assumptions. When determining fair value, Autodesk uses observable market data and relies on unobservable inputs only when observable market data is not available. Key inputs for currency derivatives are spot rates, forward rates, interest rates, volatility, and credit default rates. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date. Autodesk reviews for any potential changes on a quarterly basis, in conjunction with our fiscal quarter-end close. It is Autodesk's assessment that the leveling best reflects current market activity when observing the pricing information for these assets. Autodesk's cash equivalents, marketable securities and financial instruments are primarily classified within Level 1 or Level 2 of the fair value hierarchy. Autodesk values its securities on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1) or inputs other than quoted prices that are observable either directly or indirectly in determining fair value (Level 2). Autodesk's Level 2 securities and derivatives are valued primarily using observable inputs other than quoted prices in active markets for identical assets and liabilities. The Company has elected to use the income approach to value derivatives using the observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted). Mid-market pricing is used as a practical expedient and when required, rates are interpolated from commonly quoted intervals published by market sources. Autodesk's Level 3 securities consist of derivative contracts and convertible debt securities. A reconciliation of the change in Autodesk’s Level 3 items for the nine months ended October 31, 2019, was as follows:
| Fair Value Measurements Using Significant Unobservable Inputs
| (Level 3)
|  | Derivative Contracts |  | Convertible Debt Securities |  | Total
Balances, January 31, 2019 |  | $ | 0.8 |  |  | $ | 4.4 |  |  | $ | 5.2 |
Impairments |  | — |  |  | (1.0 | ) |  | (1.0 | )
Settlements |  | — |  |  | (3.5 | ) |  | (3.5 | )
(Loss) gain included in earnings (1) |  | (0.2 | ) |  | 0.2 |  |  | — |
Loss included in OCI |  | — |  |  | (0.1 | ) |  | (0.1 | )
Balances, October 31, 2019 |  | $ | 0.6 |  |  | $ | — |  |  | $ | 0.6 |
____________________ (1) Included in "Interest and other expense, net" in the accompanying Condensed Consolidated Statements of Operations. As of October 31, 2019 and January 31, 2019, Autodesk had no material unrealized losses, individually and in the aggregate, for securities that are in a continuous unrealized loss position for greater than twelve months. There was no gain or loss for the sales or redemptions of securities during the nine months ended October 31, 2019 and 2018. Gains and losses resulting from the sale or redemption of securities are recorded in “Interest and other expense, net” on the Company's Condensed Consolidated Statements of Operations. Autodesk did no t have any proceeds from the sale and maturity of marketable securities for the three months ended October 31, 2019. Proceeds from the sale and maturity of marketable securities for the nine months ended October 31, 2019 were $27.4 million and for the three and nine months ended October 31, 2018 were $109.6 million and $256.2 million, respectively. Non-marketable equity securities As of October 31, 2019 and January 31, 2019, Autodesk had $121.8 million and $111.6 million in direct investments in privately held companies, respectively. These non-marketable equity security investments do not have readily determined fair values, and Autodesk uses the measurement alternative to account for the adjustment to these investments in a given quarter. Under the measurement alternative method, these investments are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer in the current period. To determine if a transaction is deemed a similar investment, Autodesk considers 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. The fair value would then be adjusted positively or negatively based on available information such as pricing in recent rounds of financing. During the nine months ended October 31, 2019 and October 31, 2018, Autodesk recorded $2.5 million and $6.2 million, respectively, as an upward adjustment on certain of its privately held investments, reflected as a gain in "Interest and other expense, net" on the Company's Condensed Consolidated Statement of Operations. As of October 31, 2019, Autodesk has recorded $8.7 million in cumulative upward adjustments on its privately held investments. Non-marketable equity securities investments are periodically assessed for impairment based on available information such as current cash positions, earnings and cash flow positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. Autodesk does not intend to sell these investments and it is not more likely than not that Autodesk will be required to sell the investment before recovery of the cost basis. If Autodesk determines that an impairment has occurred, Autodesk writes down the investment to its fair value. During the nine months ended October 31, 2019 and October 31, 2018, Autodesk recorded $4.3 million and $4.8 million, respectively, in impairments and negative adjustments on its privately held investments, reflected as a loss in "Interest and other expense, net" on the Company's Condensed Consolidated Statements of Operations. As of October 31, 2019, Autodesk has recorded $9.0 million in cumulative impairments and negative adjustments on its privately held investments. Autodesk does not consider the remaining investments to be impaired at October 31, 2019. 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 that exist as part of ongoing business operations. Autodesk's general practice is to hedge a portion of transaction exposures primarily denominated in euros, Japanese yen, British pounds, Canadian dollars, Australian dollars, Singapore dollars, Swiss francs, Swedish krona and Czech koruna. These instruments generally have maturities between one and twelve months in the future. Autodesk does not enter into derivative instrument transactions for trading or speculative purposes. The bank counterparties to the derivative contracts potentially 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 counterparty risk on at least a quarterly basis and will adjust its exposure to various counterparties as necessary. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Autodesk does not have any master netting arrangements in place with collateral features. Foreign currency contracts designated as cash flow hedges Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. These currency collars and forward contracts are designated and documented as cash flow hedges. The effectiveness of the cash flow hedge contracts is assessed quantitatively using regression at inception and qualitatively thereafter considering transaction timing and probability and counterparty credit quality. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge relationship and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged transactions. The gains and losses on these hedges are included in “Accumulated other comprehensive loss” and are reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies and discloses the gain or loss on the related cash flow hedge from “Accumulated other comprehensive loss” to “Interest and other expense, net” in the Company's Condensed Consolidated Financial Statements at that time. The notional amounts of these contracts are presented net settled and were $1.25 billion at October 31, 2019 and $803.5 million at January 31, 2019. Outstanding contracts are recognized as either assets or liabilities on the balance sheet at fair value. The majority of the net gain of $10.7 million remaining in “Accumulated other comprehensive loss” as of October 31, 2019 is expected to be recognized into earnings within the next twenty-four months. The location and amount of gain or loss recognized in income on cash flow hedges together with the total amount of income or expense presented in the Company's Condensed Consolidated Statements of Operations where the effects of the hedge are recorded were as follows for the three and nine months ended October 31, 2019:
|  | Three Months Ended October 31, 2019
|  | Net revenue |  | Cost of revenue |  | Operating expenses
|  | Subscription revenue |  | Maintenance revenue |  | Cost of subscription and maintenance revenue |  | Marketing and sales |  | Research and development |  | General and administrative
Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded |  | $ | 715.0 |  |  | $ | 91.2 |  |  | $ | 54.2 |  |  | $ | 330.7 |  |  | $ | 213 |  |  | $ | 99.1 |
Gain (loss) on cash flow hedging relationships in Subtopic ASC 815-20 |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from accumulated other comprehensive income into income |  | $ | 3.3 |  |  | $ | 1.6 |  |  | $ | (0.4 | ) |  | $ | (1.0 | ) |  | $ | (0.1 | ) |  | $ | (0.5 | )
|  | Nine Months Ended October 31, 2019
|  | Net revenue |  | Cost of revenue |  | Operating expenses
|  | Subscription revenue |  | Maintenance Revenue |  | Cost of subscription and maintenance revenue |  | Marketing and sales |  | Research and development |  | General and administrative
Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded |  | $ | 1,974.5 |  |  | $ | 306.7 |  |  | $ | 166.9 |  |  | $ | 960.8 |  |  | $ | 634.0 |  |  | $ | 299.6 |
Gain (loss) on cash flow hedging relationships in Subtopic ASC 815-20 |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from accumulated other comprehensive income into income |  | $ | 8.7 |  |  | $ | 4.7 |  |  | $ | (0.7 | ) |  | $ | (3.4 | ) |  | $ | (0.6 | ) |  | $ | (1.7 | )
Derivatives not designated as hedging instruments Autodesk uses foreign currency contracts that are not designated as hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated receivables, payables, and cash. These forward contracts are marked-to-market at the end of each fiscal quarter with gains and losses recognized in “Interest and other expense, net.” These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivative instruments are intended to offset the gains or losses resulting from the revaluation and settlement of the underlying foreign currency denominated receivables, payables, and cash. The notional amounts of these foreign currency contracts are presented net settled and were $357.1 million at October 31, 2019 and $579.8 million at January 31, 2019. In addition to these foreign currency contracts, Autodesk holds derivative instruments issued by privately held companies, which are not designated as hedging instruments. These derivatives consist of certain conversion options on the convertible debt securities held by Autodesk and an option to acquire a privately held company. These derivatives are recorded at fair value as of each balance sheet date and are recorded in “Other assets.” Changes in the fair values of these instruments are recognized in “Interest and other expense, net.” Fair Value of Derivative Instruments The fair values of derivative instruments in Autodesk’s Condensed Consolidated Balance Sheets were as follows as of October 31, 2019 and January 31, 2019:
| Balance Sheet Location |  | Fair Value at
| October 31, 2019 |  | January 31, 2019
Derivative Assets |  |  |  |  |
Foreign currency contracts designated as cash flow hedges | Prepaid expenses and other current assets |  | $ | 2.4 |  |  | $ | 4.3 |
Derivatives not designated as hedging instruments | Prepaid expenses and other current assets and Other assets |  | 4.0 |  |  | 4.2 |
Total derivative assets |  |  | $ | 6.4 |  |  | $ | 8.5 |
Derivative Liabilities |  |  |  |  |
Foreign currency contracts designated as cash flow hedges | Other accrued liabilities |  | $ | 3.0 |  |  | $ | 3.3 |
Derivatives not designated as hedging instruments | Other accrued liabilities |  | 4.2 |  |  | 4.1 |
Total derivative liabilities |  |  | $ | 7.2 |  |  | $ | 7.4 |
The effects of derivatives designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and nine months ended October 31, 2019 and 2018 (amounts presented include any income tax effects):
| Foreign Currency Contracts
| Three Months Ended October 31, |  | Nine Months Ended October 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Am ount of (loss) gain recognized in accumulated other comprehensive loss on derivatives (effective portion) | $ | (0.4 | ) |  | $ | 6.8 |  |  | $ | 2.7 |  |  | $ | 20.1 |
Amount and location of gain (loss) reclassified from accumulated other comprehensive loss into income (loss) (effective portion) |  |  |  |  |  |  |
Net revenue | $ | 4.9 |  |  | $ | (2.5 | ) |  | $ | 13.4 |  |  | $ | (8.5 | )
Cost of revenue | (0.4 | ) |  | — |  |  | (0.7 | ) |  | — |
Operating expenses | (1.6 | ) |  | (2.2 | ) |  | (5.7 | ) |  | (0.5 | )
Total | $ | 2.9 |  |  | $ | (4.7 | ) |  | $ | 7.0 |  |  | $ | (9.0 | )
Amount and location of gain recognized in income (loss) on derivatives (ineffective portion and amount excluded from effectiveness testing) |  |  |  |  |  |  |
Interest and other expense, net | $ | 1.5 |  |  | $ | 0.9 |  |  | $ | 2.8 |  |  | $ | 1.4 |
The effects of derivatives not designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and nine months ended October 31, 2019 and 2018 (amounts presented include any income tax effects):
| Three Months Ended October 31, |  | Nine Months Ended October 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Amount and location of gain recognized on derivatives in net (loss) income |  |  |  |  |  |  |
Interest and other expense, net | $ | 1.5 |  |  | $ | 4.7 |  |  | $ | 3.2 |  |  | $ | 10.7 |

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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- References No definition available. + Details
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