Twenty-First Century Fox 2013 Annual Report Download - page 77

for each contract. Estimates of total profit can change and accordingly, are reviewed periodically and
amortization is adjusted as necessary. Such changes in the future could be material.
The costs of local and regional sports contracts for a specified number of events are amortized on an event-
by-event basis, while costs for local and regional sports contracts for a specified season are amortized over the
season on a straight-line basis.
In the first quarter of fiscal 2012, the Company voluntarily changed its method of recognizing losses on its
multi-year U.S. national sports agreements by no longer accruing for estimated future losses. The Company will,
however, continue to recognize programming rights at the lower of unamortized cost or estimated net realizable
value in accordance with ASC 920, “Entertainment – Broadcasters” (“ASC 920”). The Company believes that
this method is preferable because the change will (1) align the Company’s policy with peer companies in the
media industry; (2) result in better correspondence with the substance of the event being recognized as estimated
future losses will no longer be recognized; and (3) limit the effect of judgment on any potential impairment loss
because the impairment analysis, which involves significant judgment about future revenue and revenue
allocations, will only affect programming rights recorded on the balance sheet. Retrospective application of the
change in accounting policy had no effect on the consolidated financial statements of the Company for any of the
periods presented.
Original cable programming is amortized on an accelerated basis. Management regularly reviews, and
revises when necessary, its total revenue estimates on a contract basis, which may result in a change in the rate of
amortization and/or a write-down of the asset to fair value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated on a straight-line method over the
estimated useful lives of such assets. Changes in circumstances, such as technological advances, 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.
Intangible Assets
The Company has a significant amount of intangible assets, including goodwill, film and television libraries,
FCC licenses, and other copyright products and trademarks. Intangible assets acquired in business combinations
are recorded at their estimated fair value at the date of acquisition. Goodwill is recorded as the difference
between the cost of acquiring an entity and the estimated fair values assigned to its tangible and identifiable
intangible net assets and is assigned to one or more reporting units for purposes of testing for impairment. The
judgments made in determining the estimated fair value assigned to each class of intangible assets acquired, their
reporting unit, as well as their useful lives can significantly impact net income.
The Company accounts for its business acquisitions under the purchase method of accounting. The total cost
of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. The
excess of the purchase price over the estimated fair values of the tangible net assets acquired is recorded as
intangibles. Amounts recorded as goodwill are assigned to one or more reporting units. Determining the fair
value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of
significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows,
discount rates, asset lives and market multiples, among other items. Identifying reporting units and assigning
goodwill to them requires judgment involving the aggregation of business units with similar economic
characteristics and the identification of existing business units that benefit from the acquired goodwill. The
Company allocates goodwill to disposed businesses using the relative fair value method.
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