Twenty-First Century Fox 2008 Annual Report Download - page 88

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Notes to the Consolidated Financial Statements (continued)
Under the equity method of accounting the Company includes its investment and amounts due to and from its equity method investments in
its consolidated balance sheets. The Company’s consolidated statements of operations include the Company’s share of the investees earnings
(losses) and the Company’s consolidated statements of cash flows include all cash received from or paid to the investee.
The difference between the Company’s investment and its share of the fair value of the underlying net assets of the investee is first allocated
to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. The Company follows SFAS No. 142,
“Goodwill and Other Intangible Assets” (“SFAS No. 142”), which requires that equity method finite-lived intangibles be amortized over their
estimated useful life while indefinite-lived intangibles and goodwill are not amortized.
Investments in which the Company has no significant influence (generally less than a 20% ownership interest) or does not exert significant
influence are designated as available-for-sale investments if readily determinable market values are available. If an investment’s fair value is not
readily determinable, the Company accounts for its investment at cost. The Company reports available-for-sale investments at fair value based on
quoted market prices. Unrealized gains and losses on available-for-sale investments are included in accumulated other comprehensive income,
net of applicable taxes and other adjustments until the investment is sold or considered impaired. Dividends and other distributions of earnings
from available-for-sale investments and cost investments are included in Interest income in the consolidated statements of operations when
declared.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over an estimated useful life of two to
50 years. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or the life of the lease. Costs
associated with the repair and maintenance of property are expensed as incurred. 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.
Goodwill and intangible assets
The Company has a significant amount of intangible assets, including goodwill, film and television libraries, Federal Communications Commission
(“FCC”) licenses, newspaper mastheads, distribution networks, publishing rights and other copyright products and trademarks. Goodwill is
recorded as the difference between the cost of acquiring entities and amounts assigned to their tangible and identifiable intangible net assets. In
accordance with SFAS No. 142, the Company’s goodwill and indefinite-lived intangible assets, which primarily consist of FCC licenses, are no longer
amortized but are tested annually for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair
value below its carrying amount. Intangible assets with finite lives, are generally amortized over their estimated useful lives, which generally range
from three to 25 years and are reviewed for impairment at least annually. SFAS No. 142 requires the Company to perform an annual impairment
assessment of its goodwill and indefinite-lived intangible assets. This impairment assessment compares the fair value of these intangible assets
to their carrying value. The Company determined that the goodwill and indefinite-lived intangible assets included in the consolidated balance
sheets were not impaired.
Asset impairments
Investments
Equity method investments are reviewed for impairment on a quarterly basis by initially comparing their fair value to their respective carrying
amounts each quarter. The Company determines the fair value of its public company investments by reference to their publicly traded stock price.
With respect to private company investments, the Company makes its estimate of fair value by considering other available information, including
recent investee equity transactions, discounted cash flow analyses, estimates based on comparable public company operating multiples and, in
certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management
considers several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of the
time and extent to which the market value has been below cost, the financial condition and near-term prospects of the issuer, the intent and
ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value and
other factors influencing the fair market value, such as general market conditions.
The Company regularly reviews available for sale investment securities for other-than-temporary impairment based on criteria that include
the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to
hold until recovery and the financial strength and specific prospects of the issuer of the security.
The Company regularly reviews investments accounted for at cost for other-than-temporary impairment based on criteria that include the
extent to which the investment’s carrying value exceeds its related estimated fair value, the duration of the estimated fair value decline, the
Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security.
Long-lived assets
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that the Company periodically review the carrying
amounts of its long-lived assets, including property, plant and equipment and finite-lived intangible assets, to determine whether current events
or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected
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