Twenty-First Century Fox 2014 Annual Report Download - page 110

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TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
104
Interest Rate Swap Contracts
The Company uses financial instruments to hedge certain exposures to interest rate risks associated with
certain borrowings. The Company’s interest rate swap contracts are valued using an income approach. The notional
amounts of interest rate swap contracts with interest rate risk outstanding as of June 30, 2014 and 2013 were $578
million and nil, respectively. As of June 30, 2014 approximately $310 million of the total notional amount of interest
rate swap contracts outstanding was designated as cash flow hedges. The fair value of the interest rate swap
contracts as of June 30, 2014 and the change in fair value for the year ended June 30, 2014 was approximately $(6)
million and was recorded along with the underlying hedged balance. For designated cash flow hedges and economic
hedges, the changes in fair value were recorded in Accumulated other comprehensive loss and earnings, respectively,
and are presented net in the table below.
The following table shows the changes in fair value of derivatives designated as cash flow hedges and other
derivatives:
For the years ended June 30,
2014 2013
(in millions)
Beginning of period ....................................................................................................... $ 3 $ 17
Changes in fair value recorded in accumulated other comprehensive loss,
net of settlements ....................................................................................................... (24 ) (2)
Reclassified losses (gains) from accumulated other comprehensive loss to net income .... 14 (13)
Other .............................................................................................................................. (3 ) 1
End of period ................................................................................................................. $ (10 ) $ 3
The ineffective changes in fair values of derivatives designated as cash flow hedges were immaterial. The
effective changes in the fair values of derivative contracts designated as cash flow hedges are reclassified from
Accumulated other comprehensive loss to Net income when the underlying hedged item is recognized in earnings.
The Company expects to reclassify the cumulative changes in fair values of the foreign currency forward contracts,
included in Accumulated other comprehensive loss, within the next 24 months. For interest rate swaps, the Company
expects to reclassify changes in fair values included in Accumulated other comprehensive loss to earnings during the
relevant period as interest payments are made until the expiration of the swap contracts occurs at various dates until
fiscal 2017. Cash flows from the settlement of these derivative contracts offset cash flows from the underlying
hedged item and are included in operating activities in the Consolidated Statement of Cash Flows.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company’s assets measured at fair value on a nonrecurring basis include investments, long-lived assets,
indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets whenever
events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually as
of June 30 for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the
asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3
measurements.
Concentrations of Credit Risk
Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held
with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be
redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear
minimal credit risk.
The Company’s receivables did not represent significant concentrations of credit risk at June 30, 2014 or 2013
due to the wide variety of customers, markets and geographic areas to which the Company’s products and services
are sold.