Twenty-First Century Fox 2014 Annual Report Download - page 108

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TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
102
As of June 30, 2013
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) .................... $ 268 $ 268 $ - $ -
Derivatives(b) .............................................. 3 - 3 -
Liabilities
Contingent consideration(c) ......................... (84) - - (84)
Redeemable noncontrolling interests(d) ............ (519) - - (519)
Total ................................................................. $ (332) $ 268 $ 3 $ (603)
(a) See Note 7 – Investments.
(b) Primarily represents derivatives associated with the Company’s foreign currency forward contracts and
interest rate swap contracts designated as cash flow hedges.
(c) Represents contingent consideration related to EMM and SportsTime Ohio. (See Note 3 – Acquisitions,
Disposals and Other Transactions)
(d) The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A
because their exercise is outside the control of the Company. The redeemable noncontrolling interests
recorded at fair value are put arrangements held by the noncontrolling interests in certain of the Company’s
majority-owned sports networks.
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 operating income before depreciation and amortization (“OIBDA”) growth rates
(3%-6% 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 two of the sports networks were primarily
determined by (i) applying a multiples-based formula that is intended to approximate fair value for one of the
sports networks and (ii) using a discounted OIBDA valuation model, assuming an 8% discount rate for
another sports network. As of June 30, 2014, one minority shareholder’s put right is currently exercisable and
another minority shareholder’s put right will become exercisable in March 2015. The remaining redeemable
noncontrolling interest is currently not exercisable and is not material.