Twenty-First Century Fox 2006 Annual Report Download - page 75

News Corporation
Notes totheConsolidated Financial Statements
NOTE 1. DESCRIPTION OF BUSINESS
On November 12, 2004, anewDelaware corporation named News Corporation (for periods after November 12, 2004, the
“Company”) became, through awholly-owned subsidiary named News Australia Holdings Pty Ltd (“News Australia
Holdings”), the parent of News Holdings Inc. (formerly known as The News Corporation Limited), an Australian corpo-
ration (“TNCL” or for periods prior to November 12, 2004, the “Company”). These transactions are collectively referred to
as the “Reorganization.”
In the Reorganization, all outstanding TNCL ordinary shares and preferred limited voting ordinary shares were can-
celled and shares of the Company’s ClassAcommon stock, par value $0.01 per share (“Class ACommon Stock”), and Class
Bcommon stock, par value $0.01 per share (“Class BCommon Stock”), were issued in exchange on a one-for-two share
basis. The consolidated financial statements have been presented as if the one-for-two share exchange took place on July 1,
2003.
On November 12, 2004, as part of the Reorganization, News Corporation acquired from the A.E. Harris Trust(the
“Harris Trust”) the approximate 58% shareholding in Queensland Press Pty Limited (“QPL”) not already owned by TNCL
through the acquisition of the Cruden Group of companies. The principal assets of the Cruden Group were the share-
holding in QPL and shares of TNCL. (See Note 3 Acquisitions and Disposals)
News Corporation and its subsidiaries (together, “News Corporation” or the “Company”) is aDelaware corporation,
incorporated in 2004 (See Note 3 Acquisitions and Disposals). News Corporation is a diversified entertainment company,
which manages and reports its businesses in eight segments: Filmed Entertainment, which principally consists of the pro-
duction andacquisition of live-action andanimated motion pictures for distribution andlicensing in all formats in all
entertainment media worldwide, and the production of original television programmingprimarily in the UnitedStates and
Canada; Television, which consists of the operation of broadcast television stationsinthe UnitedStates; the broadcasting
of network programming in the United States through the Fox Broadcasting Company (“FOX”); and the development,
production andbroadcasting of television programminginAsia through Star Group Limited (“STAR”); Cable Network Pro-
gramming, which principally consists of the production andlicensing of programming distributed through cable television
systems and direct broadcast satellite (“DBS”) operators in the United States; Direct Broadcast Satellite Television, which
principally consists of the distribution of premium programming services via satellite directly to subscribers in Italy through
SKY Italia; Magazines and Inserts, which principally consists of the publication of free standing inserts, which are promo-
tional booklets containing consumer offersdistributed through insertion in local Sunday newspapers in the United States,
and providing in-store marketing products and services, primarily to consumer packaged goods manufacturers in the
United States and Canada; Newspapers, which principally consists of the publication of four national newspapers in the
United Kingdom, the publication of more than 110 newspapers in Australia, and the publication of amass circulation,
metropolitan morning newspaper in the United States; Book Publishing, which principally consists of the publication of
English language books throughout the world through HarperCollins; and Other, which includes NDS Group plc (“NDS”),
which is engaged in the business of supplying digital technology and services, enabling and supporting digital
pay-television platform operators and content providers; News Outdoor, an advertising business which offers display adver-
tising primarily in locationsthroughout Russia and Eastern Europe; Fox Interactive Media, which operates the Company’s
Internet activities; and Global Cricket Corporation, which has the exclusive rights to broadcast the CricketWorld Cup and
other related events through 2007.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidatedfinancial statements include the accounts of all majority-owned and controlled subsidiaries. In addition,
the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined
by Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 46R, “Consolidation of Variable Interest Enti-
ties, an Interpretation of ARB No. 51” (“FIN 46R”) and to assess whether it is the primary beneficiary of such entities. If the
determination is made that the Company is the primary beneficiary,then that entity is consolidated in accordance with
FIN 46R.
Fox Television Holdings, Inc. (“FTH”), a subsidiary of the Company, has 7,600 shares of voting preferred stock issued
and outstanding with aliquidation value of $760,000 and cumulative dividends at the rate of 12% per annum. Such shares
are held by an executive of the Company and represent 76% of the voting power of FTH. FTH is included in these con-
solidated financial statements because the Company is deemed to control FTH for financial reporting purposes. Among the
reasons why the Company has acontrolling financial interest in FTH are (i) the Company has the ability to redeem the
voting preferred stock, at any time, at the liquidation value of $760,000 plus accrued dividends, (ii) the dividends on, and
amounts to be paid on redemption of, the voting preferred stock are fixed, and not related to the performance of FTH, and,
(iii) senior management of FTH, including its Board of Directors, consists solely of persons employed by the Company. As a
result, the controlling financial interest in FTH rests with theCompany through its common stock ownership of FTH.
All significant intercompany accounts and transactions have been eliminated in consolidation, including the inter-
company portion of transactions with equity method investees.
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