Twenty-First Century Fox 2005 Annual Report Download - page 109

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
The following is a summary of the components of the deferred tax accounts:
2005 2004
As of June 30, (in millions)
Deferred tax assets:
Net operating loss carryforwards $ 971 $ 1,523
Capital loss carryforwards 508 549
Total deferred tax assets 1,479 2,072
Deferred tax liabilities, net:
Accrued Liabilities 316 325
Amortization and basis difference (4,133) (3,270)
Revenue recognition (187) (201)
Sports rights contracts (118) (124)
Other (695) (360)
Total deferred tax liabilities (4,817) (3,630)
Net deferred tax liabilities before valuation allowance (3,338) (1,558)
Less: valuation allowance (1,324) (1,541)
Net deferred tax liabilities $(4,662) $(3,099)
At June 30, 2005 and 2004, the Company had net current deferred tax assets of $155 million and $521 million, respectively, and non-
current deferred tax liabilities of $4,817 million and $3,620 million, respectively.
At June 30, 2005, the Company had approximately $3.3 billion of net operating and $1.6 billion of capital loss carryforwards available to
offset future taxable income. The majority of these net operating loss carryforwards, if not utilized to reduce taxable income in future periods, will
expire in varying amounts between 2006 and 2023, with a significant portion, approximately $2.1 billion relating to foreign operations, expiring
within the next five years, while approximately half of the capital loss carryforwards expire in five years, the remaining capital loss carryforward are
in jurisdictions where they do not expire. In assessing the realizability of deferred tax assets, management evaluates a variety of factors in
considering whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized. Management considers
earnings expectations, the existence of taxable temporary differences, tax planning strategies, and the periods in which estimated losses can be
utilized. Based upon this analysis, management has concluded that it is more likely than not that the Company will not realize all of the benefits of
its deferred tax assets. In particular, this is due to the uncertainty of generating capital gains as well as generating taxable income within the
requisite period in various foreign jurisdictions and the uncertainty of fully utilizing the capital losses and NOL’s before they expire, through tax
planning strategies or reversing taxable temporary differences in the foreseeable future. Accordingly, valuation allowances of $1.3 billion and
$1.5 billion have been established to reflect the expected realization of the deferred tax assets as to June 30, 2005 and 2004, respectively. The
net decrease in the valuation allowance during fiscal 2005 of $217 million was primarily due to the expiration of NOLs in a foreign jurisdiction in
which the NOLs had full valuation allowances.
The Company has not provided for possible U.S. taxes on the undistributed earnings of foreign subsidiaries that are considered to be
reinvested indefinitely. Calculation of the unrecognized deferred tax liability for temporary differences related to these earnings is not practicable.
Undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested amounted to approximately $4.7 billion at June 30, 2005.
(See Note 2 Summary of Significant Accounting Policies)
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