ADSKAutodesk

We note your disclosure that certain of your contracts contain multiple performance obligations that are accounted for as a single performance obligation because they are part of a series of distinct goods and services. Please tell us, and revise to specify, which arrangements contain a series of distinct goods and services. Refer to 606-10-50-12(c).

We respectfully advise the Staff that the arrangements referred to in this disclosure include our product subscriptions, software-as-a-service (“SaaS”) offerings and flexible enterprise business arrangements ("EBAs"). These arrangements may include multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer.

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Two typical scenarios in which we concurrently deliver distinct goods and services with the same pattern of transfer to the customer are (a) our product subscriptions and EBAs which include one performance obligation for access to our highly interrelated desktop software and cloud technology, and another performance obligation to provide ongoing technical support, and (b) our SaaS offerings which include a performance obligation for access to our SaaS technology and a performance obligation to provide ongoing technical support.

In evaluating our accounting for the performance obligations to provide the technical support included in our product subscriptions, industry collections, SaaS offerings and enterprise contracts (EBAs), we have concluded that the services are concurrently delivered and that measurement of progress by the passage of time is appropriate for each of the performance obligations. We then considered the Basis for Conclusions paragraph 116 in ASU 2014-09, which states:

“The Boards noted that Topic 606 would not need to specify the accounting for concurrently delivered distinct goods or services that have the same pattern of transfer. This is because, in those cases, an entity is not precluded from accounting for the goods or services as if they were a single performance obligation, if the outcome is the same as accounting for the goods and services as individual performance obligations.”

Accordingly, we account for these arrangements that include multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer as a single performance obligation.

In our future periodic reports on Forms 10-Q and 10-K, to better assist investors in understanding the performance obligations in our contracts, we will clarify this disclosure in a manner substantially similar to the following (underlined and strikethrough text shows changes to Form 10-Q disclosure):

Our contracts with customers may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation may require significant judgment. Judgment is required to determine the level of integration and interdependency between individual components of software and cloud functionality. This determination influences whether the software is considered distinct and accounted for separately as a license performance obligation, or not distinct and accounted for together with the cloud functionality as a single subscription performance obligation recognized over time.

For product subscriptions, industry collections, and EBAs in which the desktop software and related cloud functionality are highly interrelated, the combined performance obligation is recognized ratably over the contract term as the obligation is delivered. For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer. For standalone maintenance subscriptions, cloud subscriptions, and technical support services the performance obligation is satisfied ratably over the contract term as those services are delivered. For consulting services, the performance obligation is satisfied over a period of time as those services are delivered.

When an arrangement includes multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer (the services transfer to the customer over the contract period), we account for those performance obligations as a single performance obligation.

For bundled contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling prices ("SSP") of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount that should be allocated based on the relative SSP of the various products and services.

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We note your disclosure on page 29 regarding various SaaS offerings. To the extent that these offerings are significant, please tell us, and revise to clarify your revenue recognition policy for such offerings.

We respectfully advise the Staff that, in the context of preparing the revenue recognition policy disclosures in the Form 10-Q, we considered the specific disclosure requirements under the provisions of ASC 235-10-50-3. These disclosure requirements state that an entity shall identify and describe the accounting principles and the methods of applying those principles that materially affect the determination of financial position, cash flows, or results of operations.

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Pursuant to § 210.4-02 of Regulation S-X:

“if the amount which would otherwise be required to be shown with respect to any item is not material, it need not be separately set forth.”

In accordance with ASC 235-10-50-3 and pursuant to § 210.4-02, our SaaS offerings, also referred to as “cloud subscriptions” for the period ended April 30, 2018, represent less than 5% of Autodesk’s total revenue and such amount is not considered a material revenue category that would affect the determination of our results of operations and financial position. Therefore, we do not believe that individual disclosure within the revenue recognition policy section of the Form 10-Q is warranted. We will continue to monitor the materiality of such classes of revenue or income to determine whether they need to be disclosed separately within the disclosure of our revenue recognition accounting policy.

We further advise the Staff that the Company has included cloud subscriptions in our general revenue recognition policy disclosures, and respectfully direct the Staff to the clarified disclosure language proposed in our response to comment #1.

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We note your disclosure that you have bundled contracts with multiple performance obligations. Please tell us, and revise to specify, which arrangements this disclosure refers to. Refer to 606-10-50-12(c).

We respectfully advise the Staff that the vast majority of our contracts are (a) our product subscriptions and EBAs which include a performance obligation for access to our highly interrelated desktop software and cloud functionality, and a performance obligation to provide ongoing technical support, and (b) our cloud subscriptions include a performance obligation for access to our SaaS technology and a performance obligation to provide ongoing technical support.

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We account for these arrangements as described in our response to comment #1, and respectfully direct the Staff to the clarified disclosure language proposed therein.

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We note your disclosure that in your indirect channel, transfer of control begins at the time access to your subscription is made available electronically. Please tell us, and revise to clarify, if you are referring to access given to the channel partner or to the end user. Refer to ASC 606-10-50-17.

For transactions processed through a channel partner, transfer of control begins at the time access to our subscriptions is made available electronically to the channel partner, which is the same time at which control is transferred to the end user.

In our future periodic reports on Forms 10-Q and 10-K, we will clarify this disclosure in a manner substantially similar to the following (underlined text shows changes to Form 10-Q disclosure):

Our indirect channel model includes both a two-tiered distribution structure, where Autodesk sells to distributors who subsequently sells to resellers,

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and a one-tiered structure where Autodesk sells directly to resellers. For these arrangements, transfer of control begins at the time access to our subscriptions is made available electronically to our customer, provided all other criteria for revenue recognition are met. Judgment is required to determine whether our distributors and resellers have the ability to honor their commitment to pay, regardless of whether they collect payment from their customers. If we were to change this assessment, it could cause a material increase or decrease in the amount of revenue that we report in a particular period.

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Please provide us with your analysis of how you determined that your desktop software and the related cloud functionality are highly interrelated and are therefore accounted for as a single performance obligation. Refer to 606-10-25-21(c).

We respectfully advise the Staff that our product subscriptions represent an integrated offering of desktop software and cloud functionality that provide a device-independent, collaborative design workflow for designers and their stakeholders. Specifically, our subscriptions provide our customers with the ability to create designs on multiple computing platforms (including desktop computers, tablets and smartphones), sync design data effortlessly between devices, collaborate with distributed team members, and share design intent with stakeholders from initial concept to finished

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project.

Under ASC 606-10-25-19, goods and services represent distinct performance obligations when they are both capable of being distinct, and distinct within the context of the contract. The intent is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services individually or to transfer a combined performance obligation.

Although we concluded that the desktop software and cloud functionality included in our product subscriptions are each capable of being distinct because customers can derive some level of benefit and use from the desktop applications and cloud services separately, we concluded they are not distinct within the context of the contract as they are highly integrated, interdependent, and interrelated as described under ASC 606-10-25-21(c). That is, the Company’s on-premise software and the cloud technology significantly affect each other because the entity would not be able to fulfill its promise by transferring each of the goods or services independently.

In Example 10, Case C of ASC 606, software and updates “are not separately identifiable because the license and the updates are, in effect, inputs to a combined item (anti-virus protection) in the contract. Consequently, the license and updates fulfill a single promise to the customer in the contract (a promise to provide protection from computer viruses.)” Similarly, the marketing for our product subscriptions focuses on a central value proposition for the customer: a hybrid of desktop software and cloud functionality that provides a device-independent, collaborative design workflow for designers and their stakeholders. The value proposition is ultimately fulfilled by the ongoing interaction of our desktop applications and cloud functionality to provide specific and unique functionality for the design process.

ASC 606-10-25-21 includes several factors that indicate two or more goods or services in a contract may not be separately identifiable, though there may be other factors an entity could consider, as acknowledged in BC29 of ASU 2016-10. In addition, we considered the Basis for Conclusions paragraphs in ASU 2016-10 to understand the Financial Accounting Standards Boards’ intent:

BC29 of ASU 2016-10:

“…The inputs to a combined item (or items) concept might be further explained, in many cases, as those in which an entity’s promise to transfer the promised goods or services results in a combined item (or items) that is greater than (or substantively different from) the sum of those promised (component) goods and services.”

BC32 of ASU 2016-10:

“…Therefore, the entity should evaluate whether two or more promised goods or services (for example, a delivered item and an undelivered item) each significantly affect the other (and, therefore, are highly interrelated or highly interdependent) in the contract. The entity should not merely evaluate whether one item, by its nature, depends on the other (for example, an undelivered item that would never be obtained by a customer absent the presence of the delivered item in the contract or the customer having obtained that item in a different contract).”

BC33(b) of ASU 2016-10:

“…Therefore, utility also is relevant in evaluating whether two or more promises in a contract are separately identifiable because even if two or more goods or services are capable of being distinct because the customer can derive some measure of economic benefit from each one, the customer’s ability to derive its intended benefit from the contract may depend on the entity transferring each of those goods or services.”

We also considered AICPA Software Revenue Recognition Issue #14-1: Determining Whether Software Intellectual Property is Distinct in Cloud Computing Arrangements (i.e., Hosting, Software-as-a-Service and Hybrid Software/SAAS), specifically paragraph 16(b):

“A portion of the hosted functionality is available from other vendors, but the entity provides significant additional utility from the manner in which it integrates the software with its own hosted functionality. For example, the online storage and sharing is integrated with the on-premise software in such a manner that the customer gains capabilities or workflow efficiencies that would not be available when using another vendor’s hosted services. In such circumstances the on-premise software is capable of being distinct, but the customer obtains a significant functional benefit by purchasing the complete hybrid offering from the entity. This may indicate that the software license and hosting service are interrelated to each other, and are not distinct within the context of the contract.”

Our product subscriptions afford the customers additional capabilities and workflow efficiencies by the interoperability of the on-premise software and cloud functionality. For example, our cloud services provide intelligent data management which enables users to work with and transfer complex designs, often comprised of many cross-linked files, without risk of losing critical data. This benefit is not just storage, but complete file and data management capabilities including version control, permission features, data linkage, search ability, etc. Without the integration of the on-premise software with the cloud functionalities, these benefits could not be obtained by the customer without a significant level of incremental manual effort and risk, which would lead to a significant diminution of utility to the customer. In addition, there are numerous functions which can only be performed via our cloud services, including the synchronization of settings and data across multiple platforms (PC, phone, tablet, etc.) and offloading computationally intensive tasks (simulations, rendering, etc.) rather than consume CPU resources on the desktop.

After considering the functional nature of our product subscriptions, as well as the customer’s expectations, we have determined that the desktop applications and cloud functionality are not distinct in the context of the contract and should be accounted for as a single performance obligation. The value to the customer in our product subscriptions is derived from the high degree of interaction of the desktop applications and cloud functionality, which is not available with the desktop applications alone or in conjunction with third-party services. The customer would not be able to use the licensed software for its intended purpose without the cloud functionality. The nature of the promise to the customer is to provide a technology solution that allows its customer to collaborate on design projects more effectively and efficiently by being able to view, share, and review design projects seamlessly. Furthermore, the customer would suffer a significant diminution in utility if the cloud functionality is not provided. The diminution of utility would stem from not having the ability to do certain activities (e.g., data management, collaboration features, device independence), even if they employed significant manual “work arounds ”, or from efficiency loss due to increased CPU consumption on their desktops for simulation and rendering tasks.

Accordingly, our product subscriptions are a combined output that is based on the high degree of interaction and interdependence between inputs that are the desktop software and cloud functionality, as suggested in BC29 of ASU 2016-10, and therefore they are highly interrelated as described under ASC 606-10-25-21(c).

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We note your disclosure on page 12 that you do not have any material variable consideration. Please reconcile this statement with your disclosure on page 11 regarding your partner incentive program.

We respectfully advise the Staff that as part of our distribution through our channel, we have partner incentive programs that provide cash consideration for the quarterly attainment of agreed-upon business goals to incentivize our partners.

The consideration payable to the partner under this program includes a material variable amount based on quarterly sales activity. Therefore, we are required to estimate the reduction of the transaction price in accordance with the variable consideration guidance in ASC 606-10-32-5 through 32-13.

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However, there is not a significant amount of estimation necessary related to these incentives as the amount payable is determined on a quarterly basis, and therefore the amount payable is known before the financial statements are issued.

In our future periodic reports on Forms 10-Q and 10-K, we will clarify this disclosure based on the requirements of ASC 340-40-50-2(b) in a manner substantially similar to the following (underlined text shows changes to Form 10-Q disclosure):

Payments for product subscriptions, industry collections, cloud subscriptions, and maintenance subscriptions are typically due up front with payment terms of 30 to 45 days. Payments on EBAs are typically due in annual installments over the contract term, with payment terms of 30 to 45 days. Autodesk does not have any material variable consideration, such as obligations for returns, refunds, or warranties or amounts payable to customers for which significant estimation or judgment is required as of the reporting date.

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Please help us understand the circumstances in which you pay commissions to your reseller partners. In addition, provide us your analysis regarding how you determined that these amounts should be capitalized given that resellers are your customers.

We respectfully advise the Staff that reseller commissions that are subject to the scope of ASC 340-40 are paid only in circumstances in which those resellers provide activities that aid the sales process of a contract that is entered into directly between Autodesk and the end customer. In such cases, the reseller functions as a sales agent of the Company, similar to Autodesk’s internal sales personnel, and is not a direct party to (or customer in) the contract.

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These commissions are paid only upon execution of the contract between Autodesk and the end customer, and therefore meet the definition of costs to obtain a contract in accordance with ASC 340-40-25-2. The aggregate amount of these commissions is immaterial to the Company’s annual financial results.

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You disclose that commissions earned by internal sales personnel for contract renewals are commensurate with those earned on the initial contract and are amortized over the period of benefit. Please tell us whether the period of benefit for these commissions exceeds the term of respective customer contract and if so, how your policy complies with ASC 340-40-35-1. Also refer to ASC 340-40-50-2(b).

We respectfully advise the Staff that the period of benefit for internal sales commissions for contract renewals that are commensurate with those earned on the initial contract is the term of the respective customer contract. We believe this treatment is consistent with the guidance of the FASB/IASB Joint Transition Resource Group’s Incremental costs of obtaining a contract paper (TRGRR Memo No.

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23).

In our future periodic reports on Forms 10-Q and 10-K, we will clarify this disclosure based on the requirements of ASC 340-40-50-2(b) in a manner substantially similar to the following (underlined text shows changes to Form 10-Q disclosure):

“Sales commissions earned by our internal sales personnel and our reseller partners are considered incremental and recoverable costs of obtaining a contract with a customer. The commission costs are capitalized and included in prepaid expenses and other current assets on our consolidated balance sheet. The deferred costs are then amortized over the period of benefit. Autodesk determined that sales commissions earned by internal sales personnel that are related to contract renewals are commensurate with sales commissions earned on the initial contracts, and we determined the period of benefit to be the term of the respective customer contract. Commissions paid to our reseller partners that are related to contract renewals are not commensurate with commissions earned on the initial contract, and we determined the estimated period of benefit by taking into consideration customer retention data, customer contracts, our technology and other factors. Deferred costs are periodically reviewed for impairment. Amortization expense is included in sales and marketing expenses in the Condensed Consolidated Statements of Operations.”

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We note your response to prior comment 5. Please provide a more specific and comprehensive discussion regarding how your desktop software and related cloud functionality create a collaborative workforce. Provide us with more details regarding your statement that a collaborative design workforce is created.

We respectfully advise the Staff that our product subscriptions represent an integrated offering of desktop software and cloud functionality that provide a device-independent, collaborative design workflow for designers and their stakeholders. Specifically, our subscriptions provide our customers with the ability to create designs on multiple computing platforms (including desktop computers, tablets and smartphones), sync design data effortlessly between devices, collaborate with distributed team members, and share design intent with stakeholders from initial concept to finished project.

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A collaborative design workflow is created through the ongoing interaction between our desktop applications and cloud functionality which provide unique functionality, including those listed below, and is the core value proposition to our customers:

•

Intelligent data management enables users to work with and transfer complex designs between teams, often consisting of many cross-linked files, without risk of losing critical data. Design is an iterative and increasingly distributed process (with team members separated by organization and geography), and the ability to reliably manage data across multiple stakeholders and versions is only possible with the cloud.

Collaboration capabilities provide access to designs that are worked on across teams of users in one workspace. The cloud also allows designers to share design intent with stakeholders leveraging the full, interactive 3D model (as opposed to limited flat images), regardless of whether they have access to Autodesk products themselves.

Nearly unlimited computational power can be harnessed by running CPU-intensive simulation and rendering tasks in the cloud.

The cloud also extends the reach of customers beyond their desktops to a wide variety of mobile devices. Our customers are increasingly utilizing Autodesk’s technology across multiple devices, both desktop and mobile, and the cloud is critical in synchronizing settings and data across those platforms.

The marketing of our product subscriptions emphasizes that value proposition and provides a valuable indicator that customers are purchasing a solution that is a combined output rather than individual goods or services. The following are quotes from Autodesk’s subscription marketing materials:

When you subscribe to AutoCAD you get access to an all new web app and enhanced mobile app, providing fast, seamless access to your files wherever you are from virtually any device.

Make edits to your designs and Autodesk Drive (cloud storage) will manage references automatically.

Individuals and small teams can work together seamlessly, with cloud-based sharing capabilities built into product workflows.

Streamline your drafting, review, and revision workflows. Track projects, add comments, and share project files online or via your mobile device.

Publish design views of your drawing in a web browser for viewing and commenting.

Unlike generic cloud storage, Autodesk Drive lets your collaborators on CAD, CAM, and BIM projects view models and drawings right in their browser, no plug-ins or downloads needed.

With cloud rendering, you can take advantage of virtually infinite computing power to create photorealistic and high-resolution images in less time. Submit renders to the cloud directly through your product and access them online anytime.

The value proposition is fulfilled by the ongoing interaction of our desktop applications and cloud services to provide specific and unique functionality for the design process. The following are examples of the specific functionalities our customers receive due to this interaction between our desktop applications and cloud services:

Platform Independence - An AutoCAD design may be initiated on a desktop computer and saved on our cloud services. The design automatically syncs across all devices connected to the user’s account and may be accessed and edited in a web browser or on a mobile device. Users are no longer constrained by particular computer hardware on which an application has been installed to perform design functions. For example, AutoCAD Web is a fully browser-based version of our core design product that allows subscribers to work from their storage account on any available device without the need to install desktop software.

Intelligent Data Management - Autodesk’s cloud storage provides customers with intelligent data management capabilities that are specifically attuned to our design data. Designs produced with our products frequently consist of complex series of linked files, frequently in disparate formats and stored in multiple locations. Manual transfer of such files can result in broken links and critical data loss, which would mean significantly reduced utility to our customers. Autodesk’s cloud-based intelligent data management recognizes the complete design, regardless of source or format, ensuring that all relevant data is transferred between team members involved with the design process. Users can also manage access to the design by team members, setting permission features for who can download a design and for how long, track changes made, who made changes, and search the full version history of a design. This holistic management of complex design data management is only possible with our cloud services.

Collaboration - Autodesk’s cloud services provide real-time feedback and collaboration capabilities, enabling distributed team members to post comments and images to a design and share with others. Users may tag colleagues, clients, and consultants to notify them of project updates, and those various stakeholders may then view the comments and post replies. This collaboration feature of the cloud services is not available from other vendors and it is not available using solely desktop software. This feature is important as it lets designers work directly with other stakeholders in a given project.

Design Intent Communication - Users may upload 3D designs to the cloud for others to view and review without the need of an Autodesk product or account. Those stakeholders are able to use any web browser or mobile device to view a full version of the design, enabling them to zoom in, walk through, and orbit from any angle. This allows users to easily publish design data for distributed stakeholders in an easily accessible, yet secure manner in order to gather feedback throughout the design process. This capability is not available from other vendors, and without the cloud users would be limited to sharing flat 2D screenshots that lose substantial design intent.

Rendering - Autodesk's cloud services translate designs into photorealistic and high-resolution images in less time, which requires a significant amount of computing power. The virtually infinite computing capacity of the cloud allows customers to run computationally intense tasks like rendering or simulations of different designs without slowing down their desktop or the need for expensive hardware. Users can simultaneously test the performance of multiple design options and rapidly increase the number of visualizations as an integrated part of their workflow. Without this cloud capability, users would be unable to simultaneously perform design work while these processes run or would require distinct dedicated hardware.

As noted in our previous response, as part of our analysis we also evaluated the guidance of the AICPA’s Software Revenue Recognition Issue #14-1: Determining Whether Software Intellectual Property is Distinct in Cloud Computing Arrangements (i.e., Hosting, Software-as-a-Service and Hybrid Software/SAAS), specifically paragraph 16(b):

“A portion of the hosted functionality is available from other vendors, but the entity provides significant additional utility from the manner in which it integrates the software with its own hosted functionality. For example, the online storage and sharing is integrated with the on-premise software in such a manner that the customer gains capabilities or workflow efficiencies that would not be available when using another vendor’s hosted services. In such circumstances the on-premise software is capable of being distinct, but the customer obtains a significant functional benefit by purchasing the complete hybrid offering from the entity. This may indicate that the software license and hosting service are interrelated to each other, and are not distinct within the context of the contract.”

We considered this guidance in the following context:

Are the cloud features unique and add significant value, or could a customer obtain the cloud features from another vendor or other Autodesk offering?

As discussed in the specific examples above, our cloud features are unique and significant, and the customer could not obtain these benefits with the same level of utility in another manner. For example, the customers’ ability to work on a design from any device (desktop, phone, tablet) or to have a cloud service seamlessly integrate multiple files in varying formats as a single design is only possible by the interaction and integration of our desktop software and cloud services.

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We note your response to prior comment 1. With a specific focus on your AutoCAD and AutoCAD LT product subscriptions (collectively “AutoCAD”), please tell us how you concluded that the promise to transfer the AutoCAD desktop application is not separately identifiable from the promise to transfer AutoCAD cloud services in accordance with ASC 606-10-25-21.Within your response please discuss, at a minimum: • The

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specific functionalities that reside within the cloud services of AutoCAD and are incremental to the AutoCAD desktop application, with a focus on the specific functionalities that were significant to the Company’s conclusion that the AutoCAD desktop application is not distinct from the AutoCAD cloud services. Additionally, please describe the extent to which these specific AutoCAD cloud service functionalities are incremental to similar functionalities, if any, in the AutoCAD desktop application. • How the specific AutoCAD cloud service functionalities interact with and/or are integrated with the AutoCAD desktop application. • How you determined that the nature of the promise, in the context of the contract, is to transfer the combined item to which the AutoCAD desktop application and the AutoCAD cloud services are inputs (for example, how each of the AutoCAD desktop application and the AutoCAD cloud services significantly affects the other’s utility to the customer and therefore the customer’s ability to derive its intended benefit from the contract depends on the Company transferring both the AutoCAD desktop application and the AutoCAD cloud services). Consider whether one or more examples would be helpful to illustrate this point.

We respectfully advise the Staff that our AutoCAD and AutoCAD LT product subscriptions (collectively “AutoCAD Family”) represent an integrated offering of desktop software and cloud functionality that provide a device-independent, collaborative design workflow for designers and their stakeholders. AutoCAD is a computer-aided design (“CAD”) product that architects, engineers, and construction professionals rely on to create precise 2D and 3D drawings. AutoCAD LT offers many of the same capabilities, but is limited to 2D design.

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Our AutoCAD Family subscriptions provide our customers with the ability to create designs on multiple computing platforms, sync design data effortlessly between devices, collaborate with distributed team members, and share design intent with stakeholders from initial concept to finished project. As summarized in our previous response, the collaborative design workflow for AutoCAD Family products, the core value proposition to our customers, is created through the ongoing interaction between our desktop applications and cloud services which provides the following unique incremental functionalities:

Intelligent Cloud Data Management – Autodesk’s cloud functionality enables users to work with and transfer complex designs between teams without risk of losing critical data. Design is an iterative and increasingly distributed process, and the ability to reliably manage data across multiple stakeholders and versions is only possible with the cloud.

Mobility – The cloud also extends the reach of customers beyond their desktops to a wide variety of mobile devices. Our customers are increasingly utilizing Autodesk’s technology across multiple platforms (including desktop computers, tablets and smartphones, or through web browsers), and the cloud is critical in synchronizing settings and data across them.

Cloud Collaboration – Autodesk’s cloud capabilities provide access to designs that are worked on across teams of users in one workspace. The cloud also allows designers to share design intent with stakeholders leveraging the full, interactive 3D model (as opposed to limited flat images), regardless of whether they have access to Autodesk products themselves.

Rendering – Nearly unlimited computational power can be harnessed by running

CPU-intensive rendering tasks in the cloud.

Intelligent Cloud Data

Management

The foundation for these capabilities rests in the nature of AutoCAD design data. A design developed in AutoCAD is usually not a single file, but commonly draws data from multiple externally referenced (commonly referred to as “x-ref”) files. Those x-refed files may be located in multiple repositories and in a variety of formats, both native AutoCAD (DWG) and third-party. However, they all contribute important drafting and engineering data to the overall design.

For example, an architect may initiate a building design in an AutoCAD Family product. That design may incorporate distinct x-refed files for each floor of the building, the electrical systems, the air systems, or the plumbing. Those latter systems may be developed by other specialist engineers. The architect may choose windows from a particular vendor, and directly link the CAD data from the window vendor’s product file. If the window vendor uses a third-party CAD format, the architect can translate it to DWG by leveraging Autodesk’s always up-to-date cloud-based translators. More complex designs will incorporate significantly more x-refed files, exponentially increasing the data links that must be maintained for the complete design. A break in any of those links can lead to missing data, errors, inefficiencies and unnecessary costs for the design project.

For a single user who works alone (without collaborators or stakeholders) on a single desktop device and maintains all of his or her data locally on their hard drive, managing x-ref data may not be difficult. However, such users are an increasingly small portion of AutoCAD Family subscribers.

Design is an iterative and increasingly distributed process (with team members separated by organization, company, or geography), and users are increasingly utilizing Autodesk’s technology across multiple devices, both desktop and mobile. These broad technological trends substantially complicate the management of x-ref designs; as soon as a user attempts to move a design between devices (say, from desktop to mobile) or share with another team member, they must account for all the linked files or risk the loss of crucial design or engineering data. Referring to our example above, the architect may transfer his or her design to another user without accounting for a link to the window vendor CAD file. In that instance, the recipient would open the design to find that the building has no windows. While this error may be easily noticed, other missing data may not be as evident and lead to subsequent errors and costly rework.

Autodesk’s cloud storage (formerly “A360 Drive”, now “Autodesk Drive”) provides all Autodesk subscribers

(including AutoCAD Family subscribers) with an intelligent cloud data management solution that sees the design holistically. When a user creates or edits a design in his or her Autodesk Drive account, our cloud functionality tracks any added or updated x-refs, regardless of their location (on the user’s local computer, their Autodesk Drive account, or another subscriber’s account which has been shared with them). For example, if someone using third-party storage simply relocates x-refed files to different folders, they will break the links to their design and lose important data. In contrast, Autodesk Drive will maintain links even if the x-refed files are moved to other directories. Autodesk’s cloud functionality manages the entire design, regardless of the number of x-refed files, at all times and in a manner which is effortless for the user. The following publicly-available promotion video demonstrates this core cloud functionality:

https://www.youtube.com/watch?v=MbyWLHWd0_0

Mobility

This cloud-based technological foundation enables numerous mobility and collaboration capabilities for our AutoCAD Family products which are directly integrated with the desktop and mobile software applications and will grow increasingly more so over time. One such capability is device independence. AutoCAD Family subscribers have access to the AutoCAD Mobile app, which provides viewing and editing functions on iOS and Android devices. They also have access to AutoCAD Web, which can be accessed on any device through a web browser. The seamless transfer of a design, including all x-ref data, from the AutoCAD Family desktop products is initiated through the “save to web and mobile” buttons directly integrated within those applications. A dialogue menu enables users to select the entire design or specific portions for transfer. Our cloud-based intelligent cloud data management functionality draws the relevant data from across the x-refed files and packages it in the user’s Autodesk Drive account, where it can then be accessed remotely via the AutoCAD Mobile or Web applications. Edits made by the user on remote devices may then be saved back to the user’s desktop system, including all changes to impacted x-refed files. The following publicly-available promotion video demonstrates this functionality:

https://www.youtube.com/watch?v=nHFcgUDNjA4

Collaboration

When an

AutoCAD Family subscriber needs to collaborate with other designers, he or she may invite those other users to access a particular Autodesk Drive account. Those collaborators may then edit the design directly, and Autodesk’s intelligent cloud data management will automatically update all x-refed data and visualizations that were saved by the AutoCAD Family desktop software. Autodesk Drive also provides the user with access control and version management capabilities for designs shared with other team members.

Collaborating on anything but the simplest designs becomes extraordinarily difficult with third-party cloud storage offerings. A user must manually identify all the relevant linked files for the design and save them in the third-party storage account. As more x-ref files are incorporated into a design, the difficulty of managing edits through third-party storage increases exponentially.

For example, if someone shares their design folder in a third-party cloud storage offering, but fails to identify and provide access to every other folder which contains files x-refed in the design, the x-ref links will be broken and the collaborator will have missing data. The design workflow becomes highly inefficient, with a significant risk of critical data loss.

Autodesk’s cloud functionality also enables AutoCAD Family subscribers to collaborate with Shared Views. Users may leverage this capability to get feedback on a design while restricting access to the actual files, or from team members and stakeholders who don’t have access to the AutoCAD Family desktop software themselves. The Shared Views function is directly integrated into the AutoCAD Family desktop software, and accessed through the application menu or collaboration tab. The application dialogue allows users great control over the data which is shared, including specific layers, objects and engineering metadata.

The Shared View is generated by Autodesk’s cloud functionality and a web link is provided through the desktop software and can then be sent to others. Those who are provided with the link can access the cloud-based model view in a web browser, and interact with it in a number of ways:

Layers can be turned on or off, and individual objects can be isolated, allowing the viewer to focus on points of interest.

3D designs may be rotated and viewed from any angle. The Shared View is not a flat image, but a complete 3D model.

Engineering metadata can be examined. For example, the viewer may highlight a wall in a building design and get precise measurements of length, height or thickness.

Viewers may mark-up and draft comments, and save these to the Shared View file. The designer is then notified of the feedback, and can download it from his or her Autodesk Drive account. The user can then respond to the feedback with comments or edits directly within the desktop software.

The following publicly-available promotion video demonstrates this functionality:

https://www.youtube.com/watch?v=GEwN9J4NnrE

Without the AutoCAD Family software and our cloud functionality working together, such collaboration is not possible. If a designer lacking our cloud functionality needed feedback from another AutoCAD Family user, he or she would have to send the full set of design files. This leads to the same complexities in transferring x-refed designs outlined above. To get feedback from a non-user, the designer would be limited to sending flat images (for example, JPEG or PDF) of the design that lack rich engineering metadata and ability to interact with the design as described above. Shared Views represents an integration of our desktop software and cloud-based data management that provides unique capabilities to our subscribers, significantly increasing the utility of the design workflow.

Rendering

While AutoCAD

LT focuses on 2D designs, AutoCAD’s 3D functionality enables users to leverage Autodesk’s powerful cloud-based rendering functionality. Autodesk’s cloud services translate AutoCAD designs into photorealistic and high-resolution images in less time. The virtually infinite computing capacity of the cloud allows customers to run computationally intense rendering tasks without slowing down his or her desktop or the need for expensive hardware. An AutoCAD user simply selects the

“render in the cloud” button in the desktop application, which automatically loads his or her 3D design to Autodesk’s cloud rendering engine. Users can simultaneously test the performance of multiple design options at low resolution to identify the best visualization parameters (including camera angle, framing, lighting, etc.). Once the best options are identified, the user can quickly run a high-resolution image that he or she may present to project stakeholders to clearly express design intent. Although high-resolution renders are metered (consuming a number of “cloud credits” which are bundled with AutoCAD Family subscriptions), users may run an unlimited number of lower-resolution renders which allows them to rapidly increase the number of visualization options they can consider as an integrated part of their workflow. Without this cloud capability, users would be unable to simultaneously perform design work while these processes run or would require distinct dedicated hardware.

https://www.youtube.com/watch?v=UrRXXM5gHDg

The following tables summarizes the key capabilities of the AutoCAD Family products described above, and the extent to which Autodesk’s cloud services provide significant incremental functionality:

AutoCAD

Source of functionality

Create and edit x-ref designs

Intelligent cloud data management

Cloud

Desktop software

X

Extent to which cloud functionality above is incremental to similar functionalities, if any, in the desktop software

Users may create and edit designs entirely in a browser via AutoCAD Web, without the need to install desktop software

Fully incremental – provided only through Autodesk’s cloud functionality

Significant incremental functionality – while rendering may be performed on a user’s desktop, it diminishes the user’s ability to continue working on their computer

AutoCAD LT

Cloud Collaboration

Nature of the Promise to the Customer

As described in detail above, each of these capabilities is achieved by interaction of the AutoCAD Family desktop software and our cloud functionality. The functions are initiated within the desktop software, either as foundational x-ref design data structure or through application commands and dialogues. Those software actions directly trigger the cloud functionality to draw the relevant data, transfer it, share it or render it. As the cloud-based data is interacted with (by the user on other devices, or by other collaborators), the changes and feedback are seamlessly returned to the user’s desktop software.

While we concluded that the desktop software in our AutoCAD Family subscriptions is capable of being distinct within the guidelines of ASC 606-10-25-19 as a user can perform certain stand-alone design functions solely on their desktop computer, we concluded the desktop software and cloud services are not distinct within the context of the contract as they are highly integrated, interdependent, and interrelated in a manner consistent with ASC

606-10-25-21(c).

As noted in our initial comment letter response, we considered the Basis for Conclusions paragraphs in ASU

2016-10 to understand the Financial Accounting Standards Boards’ intent in ASC

606-10-25-21:

BC29 of ASU 2016-10:

“…The inputs to a combined item (or items) concept might be further explained, in many cases, as those in which an entity’s promise to transfer the promised goods or services results in a combined item (or items) that is greater than (or substantively different from) the sum of those promised (component) goods and services.”

BC32 of ASU 2016-10:

“…Therefore, the entity should evaluate whether two or more promised goods or services (for example, a delivered item and an undelivered item) each significantly affect the other (and, therefore, are highly interrelated or highly interdependent) in the contract. The entity should not merely evaluate whether one item, by its nature, depends on the other (for example, an undelivered item that would never be obtained by a customer absent the presence of the delivered item in the contract or the customer having obtained that item in a different contract).”

BC33(b) of ASU 2016-10:

“…Therefore, utility also is relevant in evaluating whether two or more promises in a contract are separately identifiable because even if two or more goods or services are capable of being distinct because the customer can derive some measure of economic benefit from each one, the customer’s ability to derive its intended benefit from the contract may depend on the entity transferring each of those goods or services.”

We also considered AICPA Software Revenue Recognition Issue #14-1: Determining Whether Software Intellectual Property is Distinct in Cloud Computing Arrangements (i.e., Hosting,

Software-as-a-Service and Hybrid Software/SAAS), specifically paragraph 16(b):

“A portion of the hosted functionality is available from other vendors, but the entity provides significant additional utility from the manner in which it integrates the software with its own hosted functionality. For example, the online storage and sharing is integrated with the on-premise software in such a manner that the customer gains capabilities or workflow efficiencies that would not be available when using another vendor’s hosted services. In such circumstances the on-premise software is capable of being distinct, but the customer obtains a significant functional benefit by purchasing the complete hybrid offering from the entity. This may indicate that the software license and hosting service are interrelated to each other, and are not distinct within the context of the contract.”

In Example 10, Case C of ASC 606, software and updates “are not separately identifiable because the license and the updates are, in effect, inputs to a combined item (anti-virus protection) in the contract. Consequently, the license and updates fulfill a single promise to the customer in the contract (a promise to provide protection from computer viruses.)” Similarly, the capabilities enabled by the two-way interaction of our AutoCAD Family desktop software and cloud functionality are part of the core promise to our subscription customers. Autodesk specifically and actively markets this functionality as a key user benefit for our subscriptions. The links above represent publicly-available marketing videos promoting these features, which clearly explain the interaction between the software and cloud to deliver them. Autodesk’s marketing of these benefits extends through multiple channels, including the following:

Autodesk’s public website for the AutoCAD Family products, as well as specifically for AutoCAD Mobile,

AutoCAD Web, Autodesk Drive, and Autodesk cloud rendering.

Print advertising and direct marketing materials, as well as collateral and training provided to Autodesk’s resellers for their promotion of our subscriptions.

Social media communications, including Autodesk’s official Twitter, Facebook and Instagram feeds, as well as our public web blogs.

Presentations and classes at our worldwide Autodesk University user conferences, many of which are recorded and made available on our website for public viewing.

We have included extensive examples of our promotional material for the cloud-enabled capabilities of our AutoCAD Family subscriptions in an exhibit to this response.

The nature of promises made to our customers in these materials is to provide a technology solution that allows our customer to collaborate on design projects more effectively and efficiently by being able to view, share, and review design projects seamlessly. Without the ongoing cloud functionality, the features described above would simply not work and we would fail to deliver on that promise to our subscribers. While users can derive benefits from the desktop software alone, their ability to derive the intended benefit from the contract—in the form of, among other things, creation of designs on multiple platforms, data syncing, collaboration, and sharing of design intent—depends on Autodesk transferring both the software and cloud services to the user and the risks are therefore not separable. This is consistent with the Basis for Conclusions paragraph 106 which acknowledges that the “notion of ‘separately identifiable’ [in ASC 606-10-25-21] is based on the notion of separable risks in paragraph BC103 (that is, whether the risk that an entity assumes to fulfill its obligation to transfer one of those promised goods or services to the customer is a risk that is inseparable from the risk relating to the transfer of the other promised goods or services).”

Furthermore, the customer would suffer a significant diminution in utility if the cloud functionality is not provided, in a manner consistent with the concepts of the Basis for Conclusions and AICPA Software Revenue Recognition Issue #14-1. This diminution of utility would stem from not having the ability to do certain activities (e.g., data management, collaboration features, device independence), even if they employed significant manual “work arounds”, or from efficiency loss due to increased CPU consumption on their desktops for rendering tasks.

After considering the functional nature of our product subscriptions, as well as the customer’s expectations, we have concluded that the desktop applications and cloud functionality are not distinct in the context of the contract and should be accounted for as a single performance obligation. The value to the customer in our product subscriptions is derived from the high degree of interaction of the desktop applications and cloud functionality, which is not available with the desktop applications alone or in conjunction with third-party services.

Accordingly, our product subscriptions are a combined output that is based on the high degree of interaction and interdependence between inputs that are the desktop software and cloud functionality, as suggested in BC29 of ASU 2016-10, and therefore they are highly interrelated as described under ASC 606-10-25-21(c).

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You state on page 8 and elsewhere in the Form 10-K that you operate in the Middle East and Africa, regions that include Syria and Sudan. Syria and Sudan are designated as state sponsors of terrorism by the State Department and are subject to U.S. economic sanctions and export controls. You do not include disclosure in the Form 10-K about contacts with Syria and Sudan.

Rest of the question

Please describe to us the nature and extent of any past, current and anticipated contacts with Syria and Sudan, whether through subsidiaries, distributors, resellers, or other direct or indirect arrangements. You should describe any products, technology or services you have provided into Syria or Sudan, directly or indirectly, and any agreements, arrangements or other contacts you have had with the governments of those countries or entities they control.

The Company is a global provider of 3D computer-aided design, engineering and entertainment software, which it distributes primarily through a network of direct and indirect channel partners. The Company is committed to complying with U.S. export control and economic sanctions regulations. The Company has a trade compliance program designed to prevent the unauthorized sale, export or re-export of its products and the diversion of those products to Iran, Sudan, Syria and any other country designated by the State Department as a state sponsor of terrorism.

Rest of the answer

The Company does not, and does not permit its channel partners to, distribute its products to Iran, Sudan or Syria except as permitted by applicable law and regulation.

The Company has no known direct or indirect past, current or anticipated contacts with Iran, Sudan or Syria. To the best of its knowledge, the Company has not directly or indirectly provided products, technology or services to Iranian-, Sudaneseor Syrian-domiciled companies, persons, or governmental institutions or any entities that they control. Further, the Company has no known agreements, arrangements or other contacts with the governments of Iran, Sudan or Syria or entities they control. The Company does have limited indirect contacts with South Sudan, a separate country that is not designated as a state sponsor of terrorism. These contacts are the result of transactions between the Company’s channel partners and customers - primarily international humanitarian aid organizations - located in South Sudan. The customers are contractually prohibited from using our products in violation of U.S. export laws.

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You disclose on page 50 in the Form 10-Q for the quarterly period ended April 30, 2017, that you filed a Voluntary Self Disclosure with OFAC in December 2016, with respect to the sale of certain licenses that may have been made in potential violation of U.S. export control and economic sanctions laws. Please briefly describe the referenced sales to us, including whether they related to Sudan and/or Syria.

The Company respectfully advises the Staff that the referenced sales do not relate to Iran, Sudan or Syria.

The Company maintains a robust global compliance program that undergoes regular review and improvement. The compliance program, among other things, uses industry-leading automated screening technology to regularly screen customer accounts against embargoed locations and against applicable U.S.

Rest of the answer

and international sanctions lists; the Company’s technical systems are designed to prohibit order fulfillment or product activation for accounts that have not cleared the export screen.

As part of its ongoing compliance efforts, the Company recently implemented several enhancements designed to address common technical limitations of third-party screening software. As a result of the system enhancements, the Company discovered a limited number of accounts belonging to entities subject to sanctions imposed by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”). Among these were a number of entities subject to OFAC’s “50% Rule.” The 50% Rule expands parties subject to sanctions beyond those parties published on sanctions lists to majority-owned subsidiaries of parties published on sanctions lists even if the majority-owned subsidiaries themselves do not appear on the published sanctions lists. The Company voluntarily notified OFAC of transactions totaling approximately $550,000 with these entities, which as disclosed above did not relate to Iran, Sudan or Syria.

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Please discuss the materiality of any contacts with Syria and Sudan you describe in response to the comments above, and whether the contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any revenues, assets and liabilities associated with Syria and Sudan for the last three fiscal years and the

Rest of the question

subsequent interim period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. Various state and municipal governments, universities and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. You should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Syria and Sudan.

As described above, the Company does not have any known contacts with Iran, Sudan or Syria. Accordingly, the Company does not believe that its security holders face a material investment risk, in either qualitative or quantitative terms, related to contacts with Iran, Sudan or Syria. Similarly, the Company does not believe that it faces a material risk with regard to investor sentiment directed toward companies that have operations associated with Iran, Sudan and Syria. Read in the reply ↗