Twenty-First Century Fox 2013 Annual Report Download - page 99

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Direct Broadcast Satellite Television programming expense and subscriber acquisition costs
Programming expenses of the Direct Broadcast Satellite Television segment are the fees paid to vendors to
license the programming distributed to customers. These programming expenses are recognized at the time the
Company distributes the related programming. Contracts with vendors are generally multi-year agreements that
provide for the Company to make payments at agreed upon rates based on the number of subscribers.
Subscriber acquisition costs in the Direct Broadcast Satellite Television 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 $2.2 billion, $1.9 billion and $2.2 billion for the fiscal years ended June 30, 2013, 2012 and
2011, respectively.
Translation of foreign currencies
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 with substantial development and construction phases are
capitalized until operations commence. Once 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 $41 million, $42 million and $44 million for the fiscal years ended June 30,
2013, 2012 and 2011, respectively. Amortization of capitalized interest was $45 million, $96 million and $56
million for the fiscal years ended June 30, 2013, 2012 and 2011, respectively. For all three periods, capitalization
of interest related to discontinued operations is immaterial.
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 reinvested indefinitely.
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