Twenty-First Century Fox 2011 Annual Report Download - page 47

Notes to the Consolidated Financial Statements (continued)
Investments in which the Company has no significant influence (generally less than a 20% ownership interest) or does not exert significant
influence are designated as available-for-sale investments if readily determinable market values are available. If an investment’s fair value is not
readily determinable, the Company accounts for its investment at cost. The Company reports available-for-sale investments at fair value based on
quoted market prices. Unrealized gains and losses on available-for-sale investments are included in accumulated other comprehensive income, net
of applicable taxes and other adjustments until the investment is sold or considered impaired. Dividends and other distributions of earnings from
available-for-sale investments and cost investments are included in Interest income in the consolidated statements of operations when declared.
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 circumstances, such as technological advances or
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 increasing 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 ASC 350, the Company’s goodwill and indefinite-lived intangible assets, which primarily consist of FCC licenses, 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 over their estimated useful lives. The impairment assessment of
indefinite-lived intangibles compares the fair value of these intangible assets to their carrying value.
The Company’s goodwill impairment reviews are determined using a two-step process. The first step of the process is to compare the fair value
of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of
the reporting unit is not impaired and the second step of the impairment review is not necessary. If the carrying amount of a reporting unit exceeds
its fair value, the second step of the goodwill impairment review is required to be performed to estimate the implied fair value of the reporting
unit’s goodwill. The implied fair value of the reporting unit’s goodwill is compared with the carrying amount of that goodwill. If the carrying
amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to
that excess.
When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method.
Asset impairments
Investments
Equity method investments are regularly reviewed for impairment by initially comparing their fair value to their respective carrying amounts
each quarter. The Company determines the fair value of its public company investments by reference to their publicly traded stock price. With
respect to private company investments, the Company makes its estimate of fair value by considering other available information, including recent
investee equity transactions, discounted cash flow analyses, estimates based on comparable public company operating multiples and, in certain
situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers
several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of the time and
extent to which the market value has been below cost, the financial condition and near-term prospects of the issuer, the intent and ability of the
Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value and other
factors influencing the fair market value, such as general market conditions.
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 prospects of the issuer of the security.
The Company regularly reviews investments accounted for at cost for other-than-temporary impairment based on criteria that include the
extent to which the investment’s carrying value exceeds its related estimated fair value, the duration of the estimated fair value decline, the
Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security.
Long-lived assets
ASC 360, “Property, Plant, and Equipment,” (“ASC 360”) and ASC 350 require that the Company periodically review the carrying amounts
of its long-lived assets, including property, plant and equipment and 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 recognized if the carrying value of such asset exceeds its 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 significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value
less their costs to sell.
2011 Annual Report 45