Twenty-First Century Fox 2007 Annual Report Download - page 75

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
Other investments
Investments in which there is no significant influence (generally less than a 20% ownership interest) are accounted for under the
cost method of accounting, unless they have readily determinable fair values. The Company reports investments with readily deter-
minable fair values at fair value based on quoted market prices. Investment securities with readily determinable fair values are des-
ignated as available for sale with unrealized gains and losses included in accumulated other comprehensive income (loss), net of
applicable taxes and other adjustments. The Company regularly reviews available for sale investment securities for other-than-
temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related market
value, the duration of the market decline, the Company’s ability to hold until recovery and the financial strength and specific pros-
pects of the issuer of the security. Unrealized losses that are other than temporary are recognized in earnings. Realized gains and
losses are accounted for on the specific identification method.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over an estimated useful
life of two to 50 years. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or
the life of the lease. Costs associated with the repair and maintenance of property are expensed as incurred. Changes in circum-
stances, 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 cases where 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 increas-
ing 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 products and
trademarks. Goodwill is recorded as the difference between the cost of acquiring entities and amounts assigned to their tangible and
identifiable intangible net assets. 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. 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 Acquired Assets Other Than Goodwill” (“EITF 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 whether current events or
circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the
expected undiscounted cash flows to be generated by such asset, an impairment adjustment is to be recognized. Such adjustment is
measured by the amount that the carrying value of such assets exceeds their fair value. The Company generally measures fair value
by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate.
Considerable management judgment is necessary to estimate the fair value of assets, accordingly, actual results could vary sig-
nificantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair
value less costs to sell. The Company determined that the long-lived and intangible assets included in the consolidated balance
sheets were not impaired.
Financial instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, cost investments and long-term
borrowings, approximate fair value. The fair value of financial instruments is generally determined by reference to market values
resulting from trading on a national securities exchange or in an over-the-counter market. Derivative instruments embedded in
other contracts, such as exchangeable securities, are separated into their host and derivative financial instrument components. The
derivative component is recorded at its estimated fair value in the consolidated balance sheet with changes in estimated fair value
recorded in Other, net in the consolidated statement of operations.
Guarantees
The Company follows FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others” (“FIN 45”). FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing certain guarantees.
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