Twenty-First Century Fox 2007 Annual Report Download - page 77

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NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
Capitalization of interest
Interest cost on funds invested in major projects, primarily theatrical productions, with substantial development and construction
phases are capitalized until production or operations commence. Once production or operations commence, the interest costs are
expensed as incurred. Capitalized interest is amortized over future periods on a basis consistent with that of the project to which it
relates. Total interest capitalized was $24 million, $28 million and $31 million, for the fiscal years ended June 30, 2007, 2006 and
2005, respectively. Amortization of capitalized interest for the fiscal years ended June 30, 2007, 2006 and 2005 was $34 million,
$44 million and $48 million, respectively.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109
requires an asset and liability approach for financial accounting and reporting for income taxes. Under the asset and liability
approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established where
management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Deferred
taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries to the extent amounts are expected
to be reinvested indefinitely.
Earnings per share
Net income available to the Company’s common stockholders is allocated between the Company’s two classes of common stock,
Class A Common Stock and Class B Common Stock. The allocation between classes is based upon the two-class method. Under the
two-class method, earnings per share for each class of common stock is allocated according to dividends declared and participation
rights in undistributed earnings. (See Note 20–Earnings Per Share for the calculation of basic and diluted earnings per share under
the two-class method.)
Basic earnings per share for Class A and Class B Common Stock is calculated by dividing net income or loss, less dividends on
perpetual preference shares, by the weighted average number of shares of Class A and Class B Common Stock outstanding. Diluted
earnings per share for Class A and Class B Common Stock is calculated similarly, except that the calculation includes the dilutive
effect of the assumed issuance of shares issuable under the Company’s equity-based compensation plans and the dilutive effect of
convertible securities.
Comprehensive income (loss)
The Company follows SFAS No. 130, “Reporting Comprehensive Income,” for the reporting and display of comprehensive income.
2007 2006 2005
For the years ended June 30, (in millions)
Accumulated other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities:
Balance, beginning of year $ 19 $ 83 $ 177
Fiscal year activity 121 (64) (94)
Balance, end of year 140 19 83
Pension liability adjustments:
Balance, beginning of year (79) (246) (212)
Adoption of SFAS No. 158 (199) — —
Fiscal year activity 73 167 (34)
Balance, end of year (205) (79) (246)
Foreign currency translation adjustments:
Balance, beginning of year 140 (9) (101)
Fiscal year activity 870 149 92
Balance, end of year 1,010 140 (9)
Total accumulated other comprehensive income (loss), net of tax $ 945 $ 80 $(172)
Equity based compensation
The Company accounts for share based payments in accordance with SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS
123R”). SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the consolidated
financial statements. SFAS 123R establishes fair value as the measurement objective in accounting for share-based payment
arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-
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