Income Tax

3 Months Ended

Apr. 30, 2018

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

 Autodesk had an income tax expense of $18.6 million, relative to pre-tax losses of $63.8 million for the three months ended April 30, 2018, and an income tax expense of $8.2 million, relative to pre-tax losses of $121.4 million for the three months ended April 30, 2017. Income tax expense increased primarily due to the mix of increased worldwide earnings, foreign taxes, and withholding taxes. The variance between April 30, 2017, and April 30, 2018 was mainly due to reversal of foreign withholding tax accruals in April 30, 2017.

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 cumulative losses in the United States arising from the Company's business model transition as a significant piece of negative evidence and established a valuation allowance against the Company’s U.S. deferred tax assets in fiscal 2016. Based on the positive and negative evidence as of April 30, 2018, the Company continues to maintain a valuation allowance for the U.S. deferred tax assets.

As of April 30, 2018, the Company had $341.3 million of gross unrecognized tax benefits, of which $307.9 million would reduce our valuation allowance, if recognized. The remaining $33.4 million would impact the effective tax rate. 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.

The Internal Revenue Service is examining the Company's U.S. consolidated federal income tax returns for fiscal years 2014 and 2015.  While it is possible that the Company's tax positions may be challenged, the Company believes its positions are consistent with the tax law, and the balance sheet reflects appropriate liabilities for uncertain federal tax positions for the years being examined.

The U.S. Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017, and provides broad and significant changes to the U.S. corporate income tax regime. As of April 30, 2018, Autodesk has not completed the determination of the accounting implications of the Tax Act. The provisional amounts recorded are based on Autodesk’s current interpretation and understanding of the Tax Act and may change as the Company receives additional clarification and implementation guidance and finalizes the analysis of all impacts and positions with regard to the Tax Act. There have been no material changes since January 31, 2018. As additional regulatory guidance is issued, Autodesk will continue to collect and analyze necessary data and may adjust provisional amounts previously recorded in the period in which the adjustments are made. Pursuant to Staff Accounting Bulletin 118 (“SAB 118”), Autodesk will complete the accounting for the tax effects of all provisions of the Tax Act within the required measurement period not to extend beyond one year from the enactment date.