Twenty-First Century Fox 2011 Annual Report Download - page 61

Notes to the Consolidated Financial Statements (continued)
The changes in the carrying value of goodwill, by segment, are as follows:
Balance as of
June 30, 2010 Acquisitions
Foreign Exchange
Movements Adjustments
Balance as of
June 30, 2011
(in millions)
Cable Network Programming $ 6,167 $ 21 $ 2 $ (53) $ 6,137
Filmed Entertainment 1,071 479 5 — 1,555
Television 1,906 3 — — 1,909
Direct Broadcast Satellite Television 540 — 96 — 636
Publishing 3,169 — 330 (6) 3,493
Other 896 346 27 (302) 967
Total goodwill $13,749 $849 $460 $(361) $14,697
During the fiscal year ended June 30, 2011, the increase in the carrying value of goodwill was primarily due to acquisitions of $849 million,
principally related to Shine in the Filmed Entertainment segment and Wireless Generation in the Other segment as well as foreign currency
adjustments of $460 million. These increases were partially offset by adjustments of $302 million in the Other segment primarily relating to fiscal
2011 dispositions and impairments, principally related to Myspace.
Annual Impairment Review
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. In performing the first step, the Company determines the fair value of a reporting
unit by primarily using a discounted cash flow analysis and market-based valuation approach methodologies. Determining fair value requires the
exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates, relevant comparable company
earnings multiples and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s
estimated outlook and various growth rates have been assumed for years beyond the long-term business plan period. Discount rate assumptions
are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. In assessing the reasonableness of its
determined fair values, the Company evaluates its results against other value indicators, such as comparable public company trading values. If the
fair value of a reporting unit exceeds its carrying amount, 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 goodwill is determined in the
same manner as the amount of goodwill recognized in a business combination. That is, the estimated fair value of the reporting unit is allocated to
all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business
combination and the estimated fair value of the reporting unit was the purchase price paid. 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.
The Company performs impairment reviews consisting of a comparison of the estimated fair value of the Company’s FCC licenses with their
carrying amount on a station-by-station basis using a discounted cash flow valuation method, assuming a hypothetical start-up scenario for a
broadcast station in each of the markets the Company operates in. The significant assumptions used are the discount rate and terminal growth
rates and operating margins, as well as industry data on future advertising revenues in the markets where the Company owns television stations.
These assumptions are based on actual historical performance in each market and estimates of future performance in each market.
Fiscal 2011
During the second quarter of fiscal 2011, the Company performed an interim impairment review of its Digital Media Group reporting unit’s
goodwill as a result of lower than expected earnings and cash flows relative to the assumptions utilized in its fiscal 2010 annual impairment
review, as well as the organizational restructuring at this reporting unit. As a result of the review performed, the Company recorded a non-cash
goodwill impairment charge of $168 million in the fiscal year ended June 30, 2011.
Fiscal 2010
During the fourth quarter of fiscal 2010, the Company completed its annual impairment review of goodwill and indefinite-lived intangible
assets. As part of the annual review process the Company determined that it was more likely than not that its News Outdoor and Fox Mobile
businesses, which are considered reporting units under ASC 350, would be sold or otherwise disposed. In connection with such disposal, the
Company reviewed these businesses for impairment and recognized a non-cash impairment charge of $200 million in the fiscal year ended June 30,
2010. The impairment charge consisted of a write-down of finite-lived intangible assets of $52 million, a write-down of $137 million in goodwill
and a write-down of fixed assets of $11 million. In accordance with ASC 360, the assets and liabilities of both News Outdoor and Fox Mobile
were carried at their fair value, measured using the market value approach, as of June 30, 2010. The net income, assets, liabilities and cash flow
attributable to the News Outdoor and Fox Mobile operations are not material to the Company in any of the periods presented and, accordingly,
have not been presented separately. Fox Mobile was sold in fiscal 2011 (See Note 3 – Acquisitions, Disposals and Other Transactions) and News
Outdoor was sold in July 2011 (See Note 24 – Subsequent Events).
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