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Income Taxes
3 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 11. INCOME TAXES

The Company’s effective income tax rate for the three months ended September 30, 2013 was higher than the statutory rate primarily due to the impact of the refund from a foreign jurisdiction, which is discussed below, certain non-taxable indemnification payments received from 21st Century Fox and other permanent differences. In addition, the Company’s effective tax rate is dependent on the mix of pre-tax book income or loss between jurisdictions and the overall level of pre-tax book income, including the impact of non-recurring items. The Company’s effective income tax rate for the three months ended September 30, 2012 was lower than the statutory rate, primarily due to foreign operations which are subject to lower tax rates and permanent differences.

At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect, and are individually computed, are recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

The Company has previously filed refund claims for certain losses, pertaining to periods prior to the Separation, in a foreign jurisdiction that have been subject to litigation. As of June 30, 2013, the Company had not recognized an asset for these claims since such amounts were being disputed by the foreign tax authority and the resolution was not determinable at that date because the foreign tax authority had further legal recourse including the ability to appeal a favorable ruling for the Company.

In the first quarter of fiscal 2014, the foreign tax authority determined that it would not appeal such ruling received by the Company in July 2013 and therefore, a portion of the uncertain matter has been resolved in the quarter. As a result, the Company received a refund of taxes plus interest of $555 million in October 2013 and recorded a tax benefit, net of applicable taxes, of $483 million to Income tax benefit in the Statements of Operations for the three months ended September 30, 2013.

Refunds received related to these matters are to be remitted to 21st Century Fox in accordance with the terms of the Tax Sharing and Indemnification Agreement. Accordingly, the Company recorded an expense to Other, net of $483 million for the payable to 21st Century Fox in the Statements of Operations for the three months ended September 30, 2013. This is included in Amounts due to 21st Century Fox, net on the Balance Sheets as of September 30, 2013.

In addition, the Company may receive an additional refund of taxes of nil to $200 million plus interest for periods still subject to the foreign tax authority’s review. It is possible that this uncertainty will be resolved during fiscal 2014. Additional refunds received related to this matter are also subject to the terms of the Tax Sharing and Indemnification Agreement and would be payable to 21st Century Fox.

During the three months ended September 30, 2013 and 2012, the Company paid gross income taxes of $19 million and $31 million, respectively and received income tax refunds of $17 million and $2 million, respectively.