Twenty-First Century Fox 2013 Annual Report Download - page 118

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TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of June 30, 2012
Description Total
Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(in millions)
Assets
Available-for-sale securities (a) ................. $561 $351 $210 $ —
Derivatives (b) .............................. 17 — 17 —
Redeemable noncontrolling interests (c) ............ (641) — — (641)
Total ........................................ $ (63) $351 $227 $(641)
(a) See Note 7—Investments.
(b) Represents derivatives associated with the Company’s foreign exchange forward contracts designated as
hedges.
(c) The Company accounts for the redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A
because their exercise is outside the control of the Company and, accordingly, as of June 30, 2013 and 2012,
has included the fair value of the redeemable noncontrolling interests in the consolidated balance sheets.
The majority of redeemable noncontrolling interests recorded at fair value are put arrangements held by the
noncontrolling interests in two of the Company’s majority-owned RSNs and in one of the Company’s Asian
general entertainment television joint ventures.
The Company utilizes the market, income or cost approaches or a combination of these valuation techniques
for its Level 3 fair value measures. Inputs to such measures could include observable market data obtained
from independent sources such as broker quotes and recent market transactions for similar assets. It is the
Company’s policy to maximize the use of observable inputs in the measurement of its Level 3 fair value
measurements. To the extent observable inputs are not available, the Company utilizes unobservable inputs
based upon the assumptions market participants would use in valuing the asset. Examples of utilized
unobservable inputs are future cash flows, long term growth rates and applicable discount rates.
Significant unobservable inputs used in the fair value measurement of the Company's redeemable
noncontrolling interests are OIBDA growth rates (3%-7% range) and discount rates (8%). Significant
increases (decreases) in growth rates and multiples, assuming no change in discount rates, would result in a
significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates,
assuming no changes in growth rates and multiples, would result in a significantly higher (lower) fair value
measurement.
The fair value of the redeemable noncontrolling interests in the RSNs were primarily determined by
(i) applying a multiples-based formula that is intended to approximate fair value for one of the RSNs and
(ii) using a discounted OIBDA valuation model, assuming an 8% discount rate for the other RSN. At
June 30, 2013, the minority shareholder’s put right in one of the RSNs is currently exercisable.
The remaining redeemable noncontrolling interest is currently not exercisable and is not material.
110