Twenty-First Century Fox 2014 Annual Report Download - page 92

TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
86
Filmed Entertainment
Revenues from the distribution of motion pictures are recognized in accordance with ASC 926. Revenues
from the theatrical distribution of motion pictures are recognized as they are exhibited, and revenues from home
entertainment sales, net of a reserve for estimated returns, are recognized on the date that DVD and Blu-ray units are
made widely available for sale by retailers or when made available for viewing via digital distribution platforms and
all Company-imposed restrictions on the sale or availability have expired. Revenues from television distribution are
recognized when the motion picture or television series is made available to the licensee for broadcast.
Management bases its estimates of ultimate revenue for each motion picture on the historical performance of
similar motion pictures, incorporating factors such as the past box office record of the lead actors and actresses, the
genre of the motion picture, pre-release market research (including test market screenings) and the expected number
of theaters in which the film will be released. Management updates such estimates based on information available on
the actual results of each film through its life cycle.
License agreements for the broadcast of theatrical and television series in the broadcast network, syndicated
television and cable television markets are routinely entered into in advance of their available date for broadcast.
Cash received and amounts billed in connection with such contractual rights for which revenue is not yet
recognizable is classified as deferred revenue. Because deferred revenue generally relates to contracts for the
licensing of motion pictures and television series which have already been produced, the recognition of revenue for
such completed product is principally only dependent upon the commencement of the availability period for
broadcast under the terms of the related licensing agreement.
The Company earns and recognizes revenues as a distributor on behalf of third parties. In such cases,
determining whether revenue should be reported on a gross or net basis is based on management’s assessment of
whether the Company acts as the principal or agent in the transaction. To the extent the Company acts as the
principal in a transaction, revenues are reported on a gross basis. Determining whether the Company acts as
principal or agent in a transaction involves judgment and is based on an evaluation of whether the Company has the
substantial risks and rewards of ownership under the terms of an arrangement.
Direct Broadcast Satellite Television programming expense and subscriber acquisition costs
Programming expenses of the Direct Broadcast Satellite Television segment are the fees paid to vendors to
license the programming distributed to customers. These programming expenses are recognized at the time the
Company distributes the related programming. Contracts with vendors are generally multi-year agreements that
provide for the Company to make payments at agreed upon rates based on the number of subscribers.
Subscriber acquisition costs in the Direct Broadcast Satellite Television segment primarily consist of amounts
paid for third-party customer acquisitions, which consist of the cost of commissions paid to authorized retailers and
dealers for subscribers added through their respective distribution channels and the cost of hardware and installation
subsidies for subscribers. All costs, including hardware, installation and commissions, are expensed upon activation.
However, where legal ownership is retained in the equipment, the cost of the equipment is capitalized and
depreciated over the useful life. Additional components of subscriber acquisition costs include the cost of print,
radio and television advertising, which are expensed as incurred.
Advertising expenses
The Company expenses advertising costs as incurred, including advertising expenses for theatrical and
television productions in accordance with ASC 720-35, “Other Expenses—Advertising Cost.” Advertising expenses
recognized totaled $2.9 billion, $2.2 billion and $1.9 billion for the fiscal years ended June 30, 2014, 2013 and 2012,
respectively.
Translation of foreign currencies
Foreign subsidiaries and affiliates are translated into U.S. Dollars using the current rate method, whereby
trading results are converted at the average rate of exchange for the period and assets and liabilities are converted at