Twenty-First Century Fox 2011 Annual Report Download - page 49

Notes to the Consolidated Financial Statements (continued)
Subscriber acquisition costs
Subscriber acquisition costs in the DBS segment primarily consist of amounts paid for third-party customer acquisitions, which consist of the
cost of commissions paid to authorized retailers and dealers for subscribers added through their respective distribution channels and the cost of
hardware and installation subsidies for subscribers. All costs, including hardware, installation and commissions, are expensed upon activation.
However, where legal ownership is retained in the equipment, the cost of the equipment is capitalized and depreciated over the useful life.
Additional components of subscriber acquisition costs include the cost of print, radio and television advertising, which are expensed as incurred.
Advertising expenses
The Company expenses advertising costs as incurred, including advertising expenses for theatrical and television product in accordance with
ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses recognized totaled $2.7 billion for the fiscal year ended June 30, 2011
and $2.5 billion for each of the fiscal years ended June 30, 2010 and 2009.
Translation of foreign currencies
Income and expense accounts of foreign subsidiaries and affiliates are translated into U.S. dollars using the current rate method, whereby
trading results are converted at the average rate of exchange for the period and assets and liabilities are converted at the closing rates on the period
end date. The resulting translation adjustments are accumulated as a component of accumulated other comprehensive income. Gains and losses
from foreign currency transactions are included in income for the period.
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
$44 million in both the fiscal years ended June 30, 2011 and 2010 and $55 million for the fiscal year ended June 30, 2009. Amortization of
capitalized interest for the fiscal years ended June 30, 2011, 2010 and 2009 was $56 million, $73 million and $50 million, respectively.
Income taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 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
Basic earnings per share for the Class A common stock, par value $0.01 per share (“Class A Common Stock”), and Class B common stock,
par value $0.01 per share (“Class B Common Stock”) is calculated by dividing Net income (loss) attributable to News Corporation stockholders
by the weighted average number of shares of Class A Common Stock and Class B Common Stock outstanding. Diluted earnings per share for
Class A Common Stock 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.
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