Twenty-First Century Fox 2008 Annual Report Download - page 125

NEWSCORP
Notes to the Consolidated Financial Statements (continued)
The following is a summary of the components of the deferred tax accounts:
2008 2007
As of June 30, (in millions)
Deferred tax assets:
Net operating loss carryforwards $ 532 $ 695
Capital loss carryforwards 1,124 991
Accrued liabilities 268 265
Total deferred tax assets 1,924 1,951
Deferred tax liabilities, net:
Basis difference and amortization (5,016) (5,448)
Revenue recognition (234) (271)
Sports rights contracts (192) (164)
Other (384) (284)
Total deferred tax liabilities (5,826) (6,167)
Net deferred tax liabilities before valuation allowance (3,902) (4,216)
Less: valuation allowance (1,406) (1,562)
Net deferred tax liabilities $(5,308) $ (5,778)
At June 30, 2008 and 2007, the Company had net current deferred tax assets of $4 million and non-current deferred tax assets of $144 million
and $117 million, respectively. The Company also had non-current deferred tax liabilities of $5,456 million and $5,899 million at June 30, 2008 and
2007, respectively.
At June 30, 2008, the Company had approximately $1.6 billion of net operating and $3.7 billion of capital loss carryforwards available to offset
future taxable income. The majority of these net operating loss carryforwards, if not utilized to reduce taxable income in future periods, will expire
in varying amounts between fiscal 2009 and 2026, with a significant portion, approximately $1.0 billion relating to foreign operations, expiring
within the next three fiscal years. While approximately $1.0 billion of the capital loss carryforwards expire in three years, the remaining capital loss
carryforwards are in jurisdictions where they do not expire. In assessing the realizability of deferred tax assets, management evaluates a variety of
factors in considering whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized. Management
considers earnings expectations, the existence of taxable temporary differences, tax planning strategies, and the periods in which estimated
losses can be utilized. Based upon this analysis, management has concluded that it is more likely than not that the Company will not realize all of
the benefits of its deferred tax assets. In particular, this is due to the uncertainty of generating capital gains, as well as generating taxable income
within the requisite period in various foreign jurisdictions and the uncertainty of fully utilizing the capital losses and net operating losses before
they expire through tax planning strategies or reversing taxable temporary differences in the foreseeable future. Accordingly, valuation allowances
of $1.4 billion and $1.6 billion have been established to reflect the expected realization of the deferred tax assets as to June 30, 2008 and 2007,
respectively. The net decrease in the valuation allowance during fiscal 2008 of $156 million was primarily due to the release of valuation
allowances on foreign net operating losses.
Except for amounts repatriated under the AJCA in fiscal 2006, the Company has not provided for possible U.S. taxes on the undistributed
earnings of foreign subsidiaries that are considered to be reinvested indefinitely. Calculation of the unrecognized deferred tax liability for
temporary differences related to these earnings is not practicable. Undistributed earnings of foreign subsidiaries considered to be indefinitely
reinvested amounted to approximately $6.9 billion at June 30, 2008. (See Note 2—Summary of Significant Accounting Policies)
124 NEWSCORP 2008 Annual Report