Income Tax

Autodesk's income tax expense was $21.3 million and $293.5 million for the three and nine months ended October 31, 2015, respectively, relative to a pre-tax loss of $22.5 million and pre-tax income of $0.2 million, respectively, for the same periods. For the nine months ended October 31, 2015, tax expense consists primarily of foreign taxes and changes to valuation allowances, including a $230.8 million valuation allowance against the Company’s U.S. federal and remaining state deferred tax assets recorded during the three months ended July 31, 2015.

Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, Autodesk considered recent cumulative losses in the United States arising from the Company's business model transition as a significant piece of negative evidence. As a result, Autodesk previously established a valuation allowance against the Company’s deferred tax assets in the three months ended July 31, 2015. In the course of preparing the consolidated financial statements for the three months ended October 31, 2015, Autodesk determined that it had understated income tax expense by $33.1 million for the three and six months ended July 31, 2015, primarily related to an error in the establishment of the valuation allowance, which had been understated at July 31, 2015. Autodesk evaluated the materiality of the error, quantitatively and qualitatively, and concluded it was not material to the Company’s condensed consolidated financial statements as of July 31, 2015 or for the three and six month periods ended July 31, 2015.

However, in light of the significance of a correction of the error to the results for the three months ended October 31, 2015, Autodesk chose to correct the error by revising the previously reported results for the three and six months ended July 31, 2015, to include the additional $33.1 million of income tax expense primarily related to the establishment of the valuation allowance.

The following table summarizes the impact of adjusting the condensed consolidated income statement balances presented for the three and six months ended July 31, 2015:



	As previously reported						As adjusted
(In millions, except per share data)	Three Months Ended July 31, 2015			Adjustment			Three Months Ended July 31, 2015
Provision for income tax	$	(236.4	)	$	(33.1	)	$	(269.5	)
Net loss	(235.5		)	(33.1		)	(268.6		)
Basic and diluted net loss per share	$	(1.04	)	$	(0.14	)	$	(1.18	)

	Six Months Ended July 31, 2015			Adjustment			Six Months Ended July 31, 2015
Provision for income tax	$	(239.1	)	$	(33.1	)	$	(272.2	)
Net loss	(216.4		)	(33.1		)	(249.5		)
Basic and diluted net loss per share	$	(0.95	)	$	(0.15	)	$	(1.10	)

The following table summarizes the impact of adjusting the Condensed Consolidated Balance Sheet balances as of July 31, 2015:



	As previously reported					As adjusted
(In millions)	July 31, 2015		Adjustment			July 31, 2015
Current deferred tax liabilities (1)	$	8.3	$	1.2		$	9.5
Accrued income taxes	52.3		(29.4		)	22.9
Long term deferred tax liabilities	28.9		25.1			54.0
Long term income tax payable	124.0		36.2			160.2
Retained earnings	$	164.4	$	(33.1	)	$	131.3

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(1)	Included in "Other accrued liabilities" in the accompanying Condensed Consolidated Balance Sheets.

The cumulative valuation allowances against U.S. federal and state deferred tax were $312.3 million and $26.7 million at October 31, 2015 and January 31, 2015, respectively.

As of October 31, 2015, the Company had $254.0 million of gross unrecognized tax benefits, excluding interest, of which approximately $236.6 million represents the amount of unrecognized tax benefits that would impact the effective tax rate, if recognized. However, this rate impact would be offset to the extent that recognition of unrecognized tax benefits currently presented as a reduction of deferred tax assets would increase the valuation allowance. It is possible that the amount of unrecognized tax benefits will change in the next twelve months; however, an estimate of the range of the possible change cannot be made at this time.