Twenty-First Century Fox 2006 Annual Report Download - page 77

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
Equity method investments
Investments in andadvances to equity or joint ventures in which the Company has a substantial ownership interest of
approximately 20% to 50% and exercises significant influence, or for which the Company owns more than 50% but does
not control policy decisions, are accountedforbythe equity method. The difference between the Company’s investment
and its share of the fair value of the underlying net assets of the investee represents either finite-lived intangibles,
indefinite-lived intangibles or goodwill. The Company follows SFAS No. 142, “Goodwill and Other Intangible Assets”
(“SFAS No. 142”), which requires that Equity method finite-lived intangibles be amortizedover their estimated useful life
while indefinite-lived intangibles and goodwill are not amortized.
Equity method investments are reviewed for impairment on aquarterly basis by initially comparing their fair value to
their respective carrying amounts each quarter. The Company determines the fair value of its public company investments
by reference to their publicly traded stock price. With respect to private company investments, the Company makes its
estimate of fair value by considering other available information, including recent investee equity transactions, discounted
cash flow analyses, estimates based on comparable public company operating multiples and, in certain situations, balance
sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers
several factors when determining whether an other-than-temporary decline in market value has occurred including the
length of the time and extent to which the marketvalue has been below cost, the financial condition and near-term pros-
pects of the issuer, the intent and ability of the Company to retain its investment in the issuer for aperiod of time suffi-
cient toallow for any anticipated recovery in market value and other factors influencing the fair market value, such as
general market conditions.
Other investments
Investments in which there is no significant influence (generally less than a20% ownership interest) are accounted for
under the cost method of accounting, unless they have readily determinable fair values. The Company reports investments
with readily determinable fair values at fair value basedonquoted market prices. Investment securities with readily
determinable fair values are designated as available for sale with unrealized gains and losses included in accumulated other
comprehensive income (loss), net of applicable taxesandother adjustments. The Company regularly reviews available for
sale investment securities for other-than-temporary impairment based on criteria thatinclude the extent to which the
investment’s carrying value exceeds its related market value, the duration of the marketdecline, the Company’s ability to
hold until recovery and the financial strength and specific prospects of the issuer of the security. Unrealized losses that are
other than temporary are recognized in earnings. Realized gains and losses are accountedforonthe specific identification
method.
Property, plant and equipment
Property, plant and equipment are statedat cost. Depreciation is provided using the straight-line method over an estimated
useful life of two to fifty years. Leasehold improvements are amortized using the straight-line method over the shorterof
their useful lives or the life of the lease. Costs associated with the repair and maintenance of property are expensed as
incurred. Changes in circumstances, such as technological advances, changes to the Company’s business model or capital
strategy could result in the actual useful lives differing from the Company’s estimates. In those caseswhere the Company
determines that the useful life of buildings and equipment should be shortened, the Company would depreciate the asset
over its revised remaining useful life thereby increasing depreciation expense.
Goodwill and intangible assets
The Company has a significant amount of intangible assets, including goodwill, film and television libraries, Federal
Communications Commission (“FCC”) licenses, newspaper mastheads, distribution networks, publishing rights and other
copyright productsandtrademarks. Goodwill is recorded as the difference between the cost of acquiring entities and
amounts assigned to their tangible and identifiable intangible netassets. In accordance with SFAS No. 142, the Company’s
goodwill and indefinite-lived intangible assets, which primarily consist of FCC licenses are no longer amortized but are
tested annually for impairment or earlier if events occur or circumstances change that would more likely than not reduce
the fair value below its carrying amount. Intangible assets with finite lives, are generally amortized using the straight-line
method over their estimated useful lives, which generally range from three to 20 years and are reviewed for impairment at
least annually. SFAS No. 142 requires the Company to perform an annual impairment assessment of its goodwill and
indefinite-lived intangible assets. This impairment assessment compares the fair value of these intangible assets to their
carrying value. As a result of the tests performed, the Company determined that the goodwill and indefinite-lived
intangible assets included in the consolidated balance sheets were not impaired.
Effective July 1, 2005, the Company adopted Emerging Issues Task Force (“EITF”) No. D-108 “Use of the Residual
Method to Value AcquiredAssets Other Than Goodwill” (“D-108”). (See Note 8 Goodwill and Intangible Assets)
Impairment of long-lived and intangible assets
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that the Company periodically
review the carrying amounts of its property, plant and equipment and its finite-lived intangible assets to determine
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