Twenty-First Century Fox 2006 Annual Report Download - page 46

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Results of Operations (CONTINUED)
Income tax expense—The effective tax rate for the fiscal year ended June 30, 2006 was 35%. The effective tax rate for fis-
cal 2006 reflects the positive impact of the Company’s application of the American Jobs Creation Act of 2004 (“AJCA”). The
Company reflected ataxbenefit of approximately $126 million in the fiscal year ended June 30, 2006, primarily resulting
from the reduction of prior deferred tax accruals relating to the repatriation of foreign earnings at the lowerrate of 5.25%
under the AJCA.
The effective tax rate for fiscal 2006 was slightly higher than the effective tax rate for fiscal 2005 of 34%, primarily due
to the impact of the resolution of foreign income tax audits in fiscal 2005, offset by the impact of the AJCA noted above.
Minority interest in subsidiaries, net of tax—Minority interest expense improved by $146 million for the fiscal year
ended June 30, 2006, as compared to the fiscal year ended June 30, 2005. The improvement was primarily due to the
acquisition of minority shares of FEG in fiscal 2005.
Gain on disposition of discontinued operations, net of tax—In October 2005, the Company sold its TSL Education
Ltd. division (“TSL”), which primarily included The TimesEducational Supplement publication in the UnitedKingdom, for
cash consideration of approximately $395 million. In connection with this transaction, the Company recorded again of
$381 million, net of tax of $0. In April 2006, the Company sold Sky Radio Limited (“Sky Radio”), acommercial radio sta-
tion group in the Netherlands and Germany, for cash consideration of approximately $215 million. In connection with this
transaction, the Company recorded again of approximately $134 million, net of tax of $0. Both of these transactions are
included in gain on disposition of discontinued operations in the consolidatedstatement of operations for the fiscal year
ended June 30, 2006.
There is no provision for income taxesrelated to these transactions as any tax due is offset by arelease of a valuation
allowance that was applied to an existing deferred tax asset established for capital losses, which, because of the sale of TSL
and Sky Radio, can now be utilized. Therefore, there is no resulting tax provision.
Cumulative effect of accounting change, net of tax—Effective July 1, 2005, the Company adopted Emerging Issues
Task Force Topic No. D-108, “Use of the Residual Method to Value Acquired Assets Other Than Goodwill” (“D-108”). D-108
requires companies who have applied the residual value method in the valuation of acquired identifiable intangibles for
purchase accounting and impairment testing to use a direct value method. As aresult of the adoption, the Company
recorded acharge of $1.6 billion ($1 billion net of tax, or ($0.33) per diluted share of Class ACommon Stock and ($0.28)
per diluted share of Class BCommon Stock), to reduce the intangible balances attributable to its television stations’ FCC
licenses. This charge has been reflected as a cumulative effect of accounting change, net of tax in the consolidated state-
ment of operations for the fiscal year ended June 30, 2006.
Net income—Net income increased $186 million for the fiscal year ended June 30, 2006 as compared to fiscal 2005. The
increase was primarily due to increases in Operatingincome, Equity earnings from affiliates, Other income, the Gain on the
disposition of discontinued operations, as well as lower minority interest expense, partially offset by the Cumulative effect
of accounting change.
46 NEWS CORPORATION