Twenty-First Century Fox 2007 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2007 Twenty-First Century Fox annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 135

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
average long-term rate of return of 7% for fiscal 2008 based principally on a combination of asset mix and historical experience of
actual plan returns. The net losses on the Company’s pension plans were $301 million at June 30, 2007, a decrease from $348 mil-
lion at June 30, 2006. This decrease of $47 million was due primarily to an actual plan asset return of 12% in fiscal 2007, which was
higher than the expected rate of return of 7%, and loss amortization in fiscal 2007. The net losses at June 30, 2006 were primarily a
result of economic conditions and the strengthening of the mortality assumptions. Economic conditions impacting the plan were
the lower interest rate environment for high-quality fixed income debt instruments over the past five years and the downturn in the
equity markets in the earlier part of this decade. These deferred losses are being systematically recognized in future net periodic
pension expense in accordance with SFAS No. 87, “Employers Accounting for Pensions” (“SFAS No. 87”). Unrecognized losses in
excess of 10% of the greater of the market-related value of plan assets or the plans projected benefit obligation are recognized over
the average future service of the plan participants.
The Company made contributions of $67 million, $149 million and $236 million to its pension plans in fiscal 2007, 2006 and
2005, respectively. These were primarily voluntary contributions made to improve the funded status of the plans which were
impacted by a declining interest rate environment, as well as the downturn of the equity markets earlier in this decade. Future plan
contributions are dependent upon actual plan asset returns and interest rate movements. Assuming that actual plan returns are
consistent with the Company’s expected plan returns in fiscal 2008 and beyond, and that interest rates remain constant, the Com-
pany would not be required to make any statutory contributions to its primary U.S. pension plans for the foreseeable future.
Changes in net periodic pension expense may occur in the future due to changes in the Company’s expected rate of return on
plan assets and discount rate resulting from economic events. The following table highlights the sensitivity of the Company’s pen-
sion obligations and expense to changes in these assumptions, assuming all other assumptions remain constant:
Changes in Assumption
Impact on Annual
Pension Expense Impact on PBO
0.25 percentage point decrease in discount
rate Increase $12 million Increase $87 million
0.25 percentage point increase in discount
rate Decrease $12 million Decrease $87 million
0.25 percentage point decrease in expected
rate of return on assets Increase $6 million —
0.25 percentage point increase in expected
rate of return on assets Decrease $6 million —
Net periodic pension expense for the Company’s pension plans is expected to be approximately $80 million in fiscal 2008 which is
consistent with fiscal 2007.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements of News Corporation for discussion of recent accounting pronouncements.
62