Twenty-First Century Fox 2014 Annual Report Download - page 137

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
131
The following is a summary of the components of the deferred tax accounts:
As of June 30,
2014 2013
(in millions)
Deferred tax assets:
N
et operating loss carryforwards ........................................................................................... $ 284 $ 1,109
Capital loss carryforwards ..................................................................................................... 1,360 1,676
Foreign tax credit carryforwards ............................................................................................ 561 474
Accrued liabilities .................................................................................................................. 733 653
Other ...................................................................................................................................... 293 231
Total deferred tax assets ........................................................................................................ 3,231 4,143
Deferred tax liabilities:
Basis difference and amortization .......................................................................................... (2,898 ) (2,449)
Revenue recognition .............................................................................................................. (528 ) (505)
Sports rights contracts ............................................................................................................ (135 ) (128)
Total deferred tax liabilities ................................................................................................... (3,561 ) (3,082)
N
et deferred tax (liability) asset before valuation allowance ................................................. (330 ) 1,061
Less: valuation allowance ...................................................................................................... (2,338 ) (3,284)
Total net deferred tax liabilities ............................................................................................. $ (2,668 ) $ (2,223)
At June 30, 2014, there were no net current deferred tax assets recorded by the Company. At June 30, 2013,
there were $9 million of net current deferred tax assets recorded.
The Company had non-current deferred tax assets of $61 million and $48 million at June 30, 2014 and 2013,
respectively. The Company also had non-current deferred tax liabilities of $2,729 million and $2,280 million at
June 30, 2014 and 2013, respectively.
At June 30, 2014, the Company had approximately $866 million attributable to net operating loss
carryforwards available to offset future taxable income. The majority of these net operating loss carryforwards have
an unlimited carryforward period, however, in accordance with ASC 740, a valuation allowance of $216 million was
established against these operating losses to reflect their realizable value. In addition, at June 30, 2013, a net
deferred tax asset of $1.1 billion with a corresponding valuation allowance of $1.1 billion was recorded with respect
to net operating losses, primarily due to the consolidation of Sky Deutschland. The valuation allowance was
recorded because Sky Deutschland had a history of net operating losses and the Company had made a determination
that it was not more likely than not that there would be sufficient future taxable income to recognize these net
operating loss carry forwards. In fiscal 2014, the deferred asset and the valuation allowance have been adjusted
pending the completion of a confirmation process prescribed under German tax law which is expected to commence
in the second half of calendar 2014.
At June 30, 2014, the Company had approximately $3.9 billion of gross capital loss carryforwards available to
offset future taxable income. The majority of these losses are subject to a five year carryforward period. It is not
more likely than not that the Company will generate capital gain income in the normal course of business.
Therefore, a valuation allowance of $1.3 billion has been established to reflect the expected realization of these
capital loss carryforwards as of June 30, 2014, in accordance with ASC 740.
At June 30, 2014, the Company has approximately $561 million of foreign tax credit carryovers available to
offset future income tax expense. Foreign tax credit carryforwards may only be utilized to offset the portion of the
Company’s earnings in the U.S. which are considered foreign source. The Company has concluded that it is more
likely than not that these foreign tax credit carryforwards will not be realized. In accordance with ASC 740, a full
valuation allowance has been established.