Twenty-First Century Fox 2007 Annual Report Download - page 110

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
The following is a summary of the components of the deferred tax accounts:
2007 2006
As of June 30, (in millions)
Deferred tax assets:
Net operating loss carryforwards $ 695 $ 874
Capital loss carryforwards 991 1,107
Accrued liabilities 265 172
Total deferred tax assets 1,951 2,153
Deferred tax liabilities, net:
Basis difference and amortization (5,448) (4,872)
Revenue recognition (271) (228)
Sports rights contracts (164) (78)
Other (284) (205)
Total deferred tax liabilities (6,167) (5,383)
Net deferred tax liabilities before valuation allowance (4,216) (3,230)
Less: valuation allowance (1,562) (1,877)
Net deferred tax liabilities $(5,778) $(5,107)
At June 30, 2007 and 2006, the Company had net current deferred tax assets of $4 million and $18 million, respectively, and
non-current deferred tax assets of $117 million and $75 million, respectively. The Company also had non-current deferred tax
liabilities of $5,899 million and $5,200 million at June 30, 2007 and 2006, respectively.
At June 30, 2007, the Company had approximately $2.0 billion of net operating and $3.2 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 2008 and 2026, with a significant portion, approximately $1.4 bil-
lion relating to foreign operations, expiring within the next four years. While approximately $464 million of the capital loss carryfor-
wards expire in four years, the remaining capital loss carryforwards 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 net operating
losses before they expire through tax planning strategies or reversing taxable temporary differences in the foreseeable future.
Accordingly, valuation allowances of $1.6 billion and $1.9 billion have been established to reflect the expected realization of the
deferred tax assets as to June 30, 2007 and 2006, respectively. The net decrease in the valuation allowance during fiscal 2007 of
$315 million was primarily due to the expiration of foreign net operating losses for which a full valuation had previously been pro-
vided.
Except for amounts repatriated under the AJCA, 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 consid-
ered to be indefinitely reinvested amounted to approximately $5.0 billion at June 30, 2007. (See Note 2, Summary of Significant
Accounting Policies)
NEWS CORPORATION 2007 Annual Report 109