Twenty-First Century Fox 2011 Annual Report Download - page 46

Notes to the Consolidated Financial Statements (continued)
Receivables, net consist of:
2011 2010
At June 30, (in millions)
Total receivables $ 7,779 $ 7,947
Allowances for returns and doubtful accounts (1,099) (1,170)
Total receivables, net 6,680 6,777
Less: current receivables, net (6,330) (6,431)
Non-current receivables, net $ 350 $ 346
Inventories
Filmed Entertainment Costs:
In accordance with ASC 926, “Entertainment – Films” (“ASC 926”) Filmed Entertainment costs include capitalized production costs,
overhead and capitalized interest costs, net of any amounts received from outside investors. These costs, as well as participations and talent
residuals, are recognized as operating expenses on an individual film or network series based on the ratio that fiscal 2011’s gross revenues bear to
management’s estimate of total remaining ultimate gross revenues. Television production costs incurred in excess of the amount of revenue
contracted for each episode in the initial market are expensed as incurred on an episode-by-episode basis. Estimates for initial syndication and
basic cable revenues are not included in the estimated lifetime revenues of network series until such sales are probable. Television production costs
incurred subsequent to the establishment of secondary markets are capitalized and amortized. Marketing costs and development costs under term
deals are charged as operating expenses as incurred. Development costs for projects not produced are written-off at the earlier of the time the
decision is made not to develop the story or after three years.
Filmed Entertainment costs are stated at the lower of unamortized cost or estimated fair value on an individual motion picture or television
product basis. Revenue forecasts for both motion pictures and television products are continually reviewed by management and revised when
warranted by changing conditions. When estimates of total revenues and other events or changes in circumstances indicate that a motion picture or
television production has a fair value that is less than its unamortized cost, a loss is recognized currently for the amount by which the unamortized
cost exceeds the film or television production’s fair value.
Programming Costs:
In accordance with ASC 920, “Entertainment – Broadcasters,” costs incurred in acquiring program rights or producing programs for the
Television, DBS and Cable Network Programming segments are capitalized and amortized over the license period or projected useful life of the
programming. Program rights and the related liabilities are recorded at the gross amount of the liabilities when the license period has begun, the
cost of the program is determinable and the program is accepted and available for airing. Television broadcast network and original cable
programming are amortized on an accelerated basis. The Company has single and multi-year contracts for broadcast rights of programs and
sporting events. At the inception of these contracts and at least annually, the Company evaluates the recoverability of the costs associated
therewith, using aggregate estimated advertising and other revenues directly attributable to the program material and related expenses. Where an
evaluation indicates that a multi-year contract will result in an ultimate loss, additional amortization is provided. The costs of national sports
contracts at FOX are charged to expense based on the ratio of each period’s operating profits to estimated total remaining operating profit of the
contract. Estimates of total operating profit can change and, accordingly, are reviewed periodically and amortization is adjusted as necessary. Such
changes in the future could be material.
The costs of local and regional sports contracts for a specified number of events are amortized on an event-by-event basis while costs for local
and regional sports contracts for a specified season are amortized over the season on a straight-line basis.
Inventories for other divisions are valued at the lower of cost or net realizable value. Cost is primarily determined by the first in, first out
average cost method or by specific identification.
Investments
Investments in and advances to equity or joint ventures in which the Company has significant influence, but less than a controlling voting
interest, are accounted for using the equity method. Significant influence is generally presumed to exist when the Company owns an interest
between 20% and 50% and exercises significant influence. In certain circumstances, investments for which the Company owns more than 50%
but does not control policy decisions would be accounted for by the equity method.
Under the equity method of accounting the Company includes its investment and amounts due to and from its equity method investments in its
consolidated balance sheets. The Company’s consolidated statements of operations include the Company’s share of the investees’ earnings (losses) and
the Company’s consolidated statements of cash flows include all cash received from or paid to the investee.
The difference between the Company’s investment and its share of the fair value of the underlying net assets of the investee is first allocated to
either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. The Company follows ASC 350,
“Intangibles – Goodwill and Other” (“ASC 350”), which requires that equity method finite-lived intangibles be amortized over their estimated
useful life while indefinite-lived intangibles and goodwill are not amortized.
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