Twenty-First Century Fox 2014 Annual Report Download - page 33

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Increased volatility and disruptions in the financial markets could make it more difficult and more expensive
for the Company to refinance outstanding indebtedness and obtain new financing. Disruptions in the financial
markets can also adversely affect the Company’s lenders, insurers, customers and counterparties, including vendors,
retailers and film co-financing partners. For instance, the inability of the Company’s counterparties to obtain capital
on acceptable terms could impair their ability to perform under their agreements with the Company and lead to
negative effects on the Company, including business disruptions, decreased revenues and increases in bad debt
expenses.
Acceptance of the Company’s Films and Television Programming by the Public is Difficult to Predict, Which Could
Lead to Fluctuations in Revenues.
Feature film and television production and distribution are speculative businesses since the revenues derived
from the production and distribution of a feature film or television series depend primarily upon its acceptance by
the public, which is difficult to predict. The commercial success of a feature film or television series also depends
upon the quality and acceptance of other competing films and television series released into the marketplace at or
near the same time, the availability of a growing number of alternative forms of entertainment and leisure time
activities, general economic conditions and their effects on consumer spending and other tangible and intangible
factors, all of which can change and cannot be predicted with certainty. Further, the theatrical success of a feature
film and the audience ratings for a television series are generally key factors in generating revenues from other
distribution channels, such as home entertainment and premium pay television, with respect to feature films, and
syndication, with respect to television series.
The Company Could Suffer Losses Due to Asset Impairment Charges for Goodwill, Intangible Assets and
Programming.
In accordance with applicable generally accepted accounting principles, the Company performs an annual
impairment assessment of its recorded goodwill and indefinite-lived intangible assets, including FCC licenses,
during the fourth quarter of each fiscal year. The Company also continually evaluates whether current factors or
indicators, such as the prevailing conditions in the capital markets, require the performance of an interim impairment
assessment of those assets, as well as other investments and other long-lived assets. Any significant shortfall, now or
in the future, in advertising revenue and/or the expected popularity of the programming for which the Company has
acquired rights could lead to a downward revision in the fair value of certain reporting units. A downward revision
in the fair value of a reporting unit, indefinite-lived intangible assets, investments or long-lived assets could result in
an impairment and a non-cash charge would be required. Any such charge could be material to the Company’s
reported net earnings.
Fluctuations in Foreign Exchange Rates Could Have an Adverse Effect on the Company’s Results of Operations.
The Company has significant operations in a number of foreign jurisdictions and certain of the Company
operations are conducted in foreign currencies. The value of these currencies fluctuates relative to the U.S.
dollar. As a result, the Company is exposed to exchange rate fluctuations, which could have an adverse effect on its
results of operations in a given period or in specific markets.
For example, our business activities in Venezuela operate in a highly inflationary economy. Recently, there
have been significant changes to the foreign currency exchange rate environment in Venezuela governing the
conversion of Venezuelan Bolivars (“Bolivars”) to U.S. Dollars. Companies generally have used the official
exchange rate controlled by Venezuela’s Commission for the Administration of Foreign Exchange (“CADIVI”),
which is 6.3 Bolivars per U.S. Dollar unless they had transactions or were among the entities the Venezuelan
government had specifically authorized to use the Supplementary Foreign Currency Administration System
(“SICAD”) auction rate. In January 2014, the Venezuelan government significantly expanded the use of the SICAD
rate and, more recently, in March 2014, the Venezuelan government created a third currency exchange mechanism
called SICAD 2 and said it may be used by all entities for all transactions. Until March 31, 2014, our Bolivar
denominated net monetary assets were translated at the official exchange rate of 6.3 Bolivars per U.S. Dollar.
During the fourth quarter of fiscal 2014, we were able to use the SICAD 2 mechanism to convert a portion of our
Bolivar denominated cash to U.S. Dollars. Accordingly, we remeasured all our Bolivar denominated net monetary
assets at the SICAD 2 exchange rate resulting in a devaluation loss of approximately $100 million for fiscal 2014.
The Venezuelan government may issue more regulations or take other steps that might introduce significant