Twenty-First Century Fox 2014 Annual Report Download - page 89

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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series bear to management’s estimate of its total remaining ultimate gross revenues. Television production costs
incurred in excess of the amount of revenue contracted for each episode in the initial market are expensed as
incurred on an episode-by-episode basis. Estimates for initial syndication and basic cable revenues are not included
in the estimated lifetime revenues of network series until such sales are probable. Television production costs
incurred subsequent to the establishment of secondary markets are capitalized and amortized. Marketing costs and
development costs under term deals are charged as operating expenses as incurred. Development costs for projects
not produced are written-off at the earlier of the time the decision is made not to develop the story or after three
years.
Filmed Entertainment costs are stated at the lower of unamortized cost or estimated fair value on an individual
motion picture or television series basis. Revenue forecasts for both motion pictures and television series are
continually reviewed by management and revised when warranted by changing conditions. When estimates of total
revenues and other events or changes in circumstances indicate that a motion picture or television series has a fair
value that is less than its unamortized cost, a loss is recognized currently for the amount by which the unamortized
cost exceeds the film or television series’ fair value.
Programming Rights
In accordance with ASC 920, “Entertainment—Broadcasters,” costs incurred in acquiring program rights or
producing programs for the Cable Network Programming, Television and Direct Broadcast Satellite Television
segments are capitalized and amortized over the license period or projected useful life of the programming. Program
rights and the related liabilities are recorded at the gross amount of the liabilities when the license period has begun,
the cost of the program is determinable and the program is accepted and available for airing. Television broadcast
network and original cable programming are amortized on an accelerated basis. The Company has single and multi-
year contracts for broadcast rights of programs and sporting events. At least annually, the Company evaluates the
recoverability of the unamortized costs associated therewith, using total estimated advertising and other revenues
attributable to the program material. The recoverability of sports rights contracts for content broadcast on the
national sports channels is assessed on an aggregate basis. Where an evaluation indicates that these multi-year
contracts will result in an asset that is not recoverable, additional amortization is provided. The costs of national
sports contracts at FOX and the national sports channels are charged to expense and allocated to segments based on
the ratio of each current period’s attributable revenue for each contract to the estimated total remaining attributable
revenue for each contract. Estimates can change and, accordingly, are reviewed periodically and amortization is
adjusted as necessary. Such changes in the future could be material.
The costs of local and regional sports contracts for a specified number of events are amortized on an event-by-
event basis while costs for local and regional sports contracts for a specified season are amortized over the season on
a straight-line basis.
Investments
Investments in and advances to equity or joint ventures in which the Company has significant influence, but
less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally
presumed to exist when the Company owns an interest between 20% and 50% and exercises significant influence.
Under the equity method of accounting, the Company includes its investments and amounts due to and from
its equity method investees 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 investees.
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 ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), which
requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-
lived intangibles and goodwill are not amortized.