Twenty-First Century Fox 2007 Annual Report Download - page 78

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
based payment transactions with employees. The Company adopted SFAS 123R in July 2005 using a modified prospective applica-
tion, as permitted under SFAS 123R. Accordingly, prior period amounts have not been restated. Under this application, the Com-
pany is required to record compensation expense for all share-based awards granted after the date of adoption and for the unvested
portion of previously granted awards that remain outstanding at the date of adoption.
Pension and other postretirement benefits
In June 2007, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans–an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires an employer to
recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize changes in that funded status in the fiscal year in which the
changes occur through comprehensive income. (See Note 16–Pensions and Other Postretirement Benefits)
The following table summarizes the incremental effects of the initial adoption of SFAS No. 158 on the Company’s consolidated
balance sheet as of June 30, 2007:
Before
application of
SFAS No. 158
SFAS
No. 158
adjustment
After
application of
SFAS No. 158
(in millions)
Intangible assets $11,710 $ (7) $11,703
Other non-current assets 1,096 (274) 822
Total assets 62,624 (281) 62,343
Other liabilities 3,301 18 3,319
Deferred income taxes 5,999 (100) 5,899
Total stockholders’ equity 33,121 (199) 32,922
Total liabilities and stockholders’ equity 62,624 (281) 62,343
Derivatives
SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), requires every derivative instru-
ment (including certain derivative instruments embedded in other contracts) to be recorded on the balance sheet at fair value as
either an asset or a liability. SFAS No. 133 also requires that changes in the fair value of recorded derivatives be recognized currently
in earnings unless specific hedge accounting criteria are met.
The Company uses financial instruments designated as cash flow hedges to hedge its limited exposures to foreign currency
exchange risks associated with the costs for producing films abroad. All cash flow hedges are recorded at fair value on the con-
solidated balance sheet. As of June 30, 2007 and 2006, the notional amount of foreign exchange forward contracts with foreign
currency risk was $107.8 million and $39.0 million, respectively, and the net unrealized gain was approximately $2.5 million and
$0.4 million, respectively. The potential loss in fair value for such financial instruments for a 10% adverse change in quoted foreign
currency exchange rates would be approximately $10.8 million and $0.5 million, respectively. The effective changes in fair value of
derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) with foreign currency
translation adjustments. Amounts are reclassified from accumulated other comprehensive income (loss) when the underlying
hedged item is recognized in earnings. If derivatives are not designated as hedges, changes in fair value are recorded in earnings.
(See Note 10–Exchangeable Securities.)
Recent accounting pronouncements
In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109,
Accounting for Income Taxes” (“FIN 48”), to create a single model to address accounting for uncertainty in tax positions. FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before
being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest
and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company adopted FIN 48 as of July 1, 2007, as required. The Company does not anticipate that the
adoption of FIN 48 will have a material effect on the Company’s future results of operation and financial condition.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), providing a framework to
improve the comparability and consistency of fair value measurements in applying GAAP. SFAS No. 157 also expands the disclosures
regarding fair value measurement. SFAS No. 157 will become effective for the Company beginning in fiscal 2009. The Company is
currently evaluating what effects the adoption of SFAS No. 157 will have on the Company’s future results of operations and financial
condition.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities–Including
an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 allows companies to choose to measure many finan-
cial instruments and certain other items at fair value. SFAS No. 159 will become effective for the Company beginning in fiscal 2009.
NEWS CORPORATION 2007 Annual Report 77