Twenty-First Century Fox 2011 Annual Report Download - page 59

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Notes to the Consolidated Financial Statements (continued)
The changes in redeemable noncontrolling interests classified as Level 3 measurements during the fiscal year ended June 30, 2011 are as
follows (in millions):
Beginning of period $(325)
Total gains (losses) included in net income (24)
Total gains (losses) included in other comprehensive income (1)
Other(a) 108
End of period $(242)
(a) The redeemable noncontrolling interest in the Company’s majority-owned outdoor marketing subsidiary expired during fiscal 2011 and as a result, approximately $104 million has been
reclassified to noncontrolling interests as of June 30, 2011.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables, payables and cost investments,
approximates fair value.
The aggregate fair value of the Company’s borrowings at June 30, 2011 was approximately $17.2 billion compared with a carrying value of
approximately $15.5 billion and, at June 30, 2010, was approximately $15.0 billion compared with a carrying value of approximately $13.3
billion. Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an
over-the-counter market.
Foreign Currency Forward Contracts
The Company uses financial instruments designated as cash flow hedges primarily to hedge certain exposures to foreign currency exchange
risks associated with the cost for producing or acquiring films and television programming abroad. The notional amount of foreign exchange
forward contracts with foreign currency risk outstanding at June 30, 2011 and 2010 was $766 million and $381 million, respectively. As of
June 30, 2011 and 2010, the fair values of the foreign exchange forward contracts of approximately $(22) million and $33 million, respectively
were recorded in the underlying hedged balances. The Company’s foreign currency forward contracts are valued using an income approach based
on the present value of the forward rate less the contract rate multiplied by the notional amount.
The effective changes in fair value of derivatives designated as cash flow hedges for the year ended June 30, 2011 of $(58) million were
recorded in accumulated other comprehensive income with foreign currency translation adjustments. The ineffective changes in fair value of
derivatives designated as cash flow hedges were immaterial. Amounts are reclassified from accumulated other comprehensive income when the
underlying hedged item is recognized in earnings. During the fiscal year ended June 30, 2011, the Company reclassified losses of approximately $3
million from other comprehensive income to net income. During the fiscal year ended June 30, 2010, the Company reclassified losses of
approximately $2 million from other comprehensive income to net income. Amounts reclassified from other comprehensive income to net income
during the fiscal year ended June 30, 2009 were not material. The Company expects to reclassify the cumulative change in fair value included in
other comprehensive income within the next 24 months. Cash flows from the settlement of foreign exchange forward contracts offset cash flows
from the underlying hedged item and are included in operating activities in the consolidated statements of cash flows.
Concentrations of Credit Risk
Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the
amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial
institutions of reputable credit and, therefore, bear minimal credit risk.
The Company’s receivables did not represent significant concentrations of credit risk at June 30, 2011 or June 30, 2010 due to the wide
variety of customers, markets and geographic areas to which the Company’s products and services are sold.
The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial
instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. At June 30, 2011, the
Company did not anticipate nonperformance by any of the counterparties.
2011 Annual Report 57