NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying values of the Company’s intangible assets and related accumulated amortization for the fiscal years ended June 30, 2014 and 2013 were as follows:


	As of June 30,
	2014		2013
	(in millions)
Intangible Assets Not Subject to Amortization
Newspaper Mastheads	$	317	$	317
Distribution Networks		397		397
Imprints		190		194
Other		4		16

Total intangible assets not subject to amortization		908		924

Intangible Assets Subject to Amortization
Channel Distribution Agreements^(a)		471		476
Publishing Rights^(b)		358		338
Customer Relationships^(c)		352		387
Other^(d)		48		61

Total intangible assets subject to amortization, net		1,229		1,262

Total Intangible assets, net	$	2,137	$	2,186

^(a)	Net of accumulated amortization of $33 million and $12 million as of June 30, 2014 and 2013, respectively. The average useful life of the channel distribution agreements is 25 years primarily based on the period that a majority of the future cash flows from these intangibles will be generated.

^(b)

Net of accumulated amortization of $94 million and $78 million as of June 30, 2014 and 2013, respectively. The average useful life of publishing rights is 20 to 30 years primarily based on the weighted-average remaining contractual terms of the underlying publishing contracts and the Company’s estimates of the period within those terms that the asset is expected to generate a majority of its future cash flows.

^(c)

Net of accumulated amortization of $325 million and $282 million as of June 30, 2014 and 2013, respectively. The average useful life of customer relationships ranges from 2 to 25 years. The useful lives of these assets are estimated by applying historical attrition rates and determining the resulting period over which a majority of the accumulated undiscounted cash flows related to the customer relationships are expected to be generated. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows.

^(d)

Net of accumulated amortization of $86 million and $70 million as of June 30, 2014 and 2013, respectively. The average useful life of other intangible assets ranges from 2 to 10 years. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows.

Amortization related to amortizable intangible assets, net was $95 million, $94 million and $77 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively.

Based on the current amount of amortizable intangible assets, net, the estimated amortization expense for each of the succeeding five fiscal years is as follows: 2015—$90 million; 2016—$82 million; 2017—$77 million; 2018—$68 million; and 2019—$63 million. These amounts may vary as acquisitions and disposals occur in the future and as purchase price allocations are finalized.

The changes in the carrying value of goodwill, by segment, are as follows:


	News and Information Services			Cable Network Programming			Digital Real Estate Services			Book Publishing			Digital Education		Other			Total Goodwill
	(in millions)
Balance, June 30, 2012	$	2,149		$	—		$	76		$	3		$	325	$	35		$	2,588
Acquisitions		30			657			—			67			—		—			754
Foreign currency movements		(18	)		(76	)		(6	)		—			—		1			(99	)
Impairments		(489	)		—			—			—			—		(5	)		(494	)
Dispositions		—			—			—			—			—		(24	)		(24	)
Other		7			—			—			—			—		(7	)		—

Balance, June 30, 2013	$	1,679		$	581		$	70		$	70		$	325	$	—		$	2,725

Acquisitions		19			—			12			2			—		—			33
Foreign currency movements		3			18			4			—			—		—			25
Impairments		—			—			—			—			—		—			—
Dispositions		—			—			—			(1	)		—		—			(1	)
Other		—			—			—			—			—		—			—

Balance, June 30, 2014	$	1,701		$	599		$	86		$	71		$	325	$	—		$	2,782

The carrying amount of goodwill as of June 30, 2014 and 2013 reflected accumulated impairments, principally relating to the News and Information Services segment of $3.4 billion.

The Company has a significant amount of intangible assets, including goodwill, newspaper mastheads, distribution networks, publishing rights, copyrighted products and trademarks. Goodwill is recorded as the difference between the cost of acquiring entities and amounts assigned to their tangible and identifiable intangible net assets. In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually during the fourth quarter for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. Intangible assets with finite lives are generally amortized over their estimated useful lives. The impairment assessment of indefinite-lived intangibles compares the fair value of these intangible assets to their carrying value. (See Note 2—Summary of Significant Accounting Policies for additional information).

Annual Impairment Assessments

Fiscal 2014

The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2014. See Note 2—Summary of Significant Accounting Policies for additional information regarding the Company’s annual impairment methodology.

Significant unobservable inputs utilized in the income approach valuation methods were discount rates (ranging from 9.0%-35.0%), long-term growth rates (ranging from 0.0%-4.0%) and royalty rates (ranging from 0.5%-2.8%). Significant unobservable inputs utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 5%-20%). Significant increases (decreases) in royalty rates, growth rates, control premium and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premium and multiples, would result in a significantly higher (lower) fair value measurement.

Fiscal 2013

During the fourth quarter of fiscal 2013, as part of the Company’s long-range planning process in preparation for the Separation, the Company adjusted its future outlook and related strategy principally with respect to the News and Information Services business in Australia and secondarily with respect to the News and Information Services businesses in the U.S. which resulted in a reduction in expected future cash flows. As a result, the Company determined that the fair value of these reporting units declined below their respective carrying values and recorded non-cash impairment charges of approximately $1.4 billion ($1.1 billion, net of tax) in the fiscal year ended June 30, 2013. The charges primarily consisted of a write-down of the Company’s goodwill of $494 million, a write-down of intangible assets (primarily newspaper mastheads) of $862 million and a write-down of fixed assets of $46 million. The impairment charges also included $42 million reflecting the expected sale of assets at values below their carrying value. As of June 30, 2013, these net assets of approximately $89 million were classified as held for sale and included in other current assets in the Balance Sheets.

Significant unobservable inputs utilized in the income approach valuation methods were discount rates (ranging from 11.0%-14.5%), long-term growth rates (ranging from (0.5)%-1.5%) and royalty rates (ranging from 0.5%-1.5%). Significant unobservable inputs utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 5%. Significant increases (decreases) in royalty rates, growth rates, control premium and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premium and multiples, would result in a significantly higher (lower) fair value measurement.

Other than the impairments noted above, the Company determined that the goodwill and indefinite-lived intangible assets included in the Balance Sheets were not impaired.

Fiscal 2012

During the fourth quarter of fiscal 2012, the Company completed its annual impairment review of goodwill and indefinite-lived intangible assets. As a result of the impairment review performed, the Company recorded non-cash impairment charges of approximately $2.6 billion ($2.2 billion, net of tax) for the fiscal year ended June 30, 2012. The charges consisted of a write-down of goodwill of approximately $1.3 billion and a write-down of indefinite-lived intangible assets (primarily newspaper mastheads and distribution networks) of approximately $1.3 billion. These impairment charges were primarily the result of adverse trends affecting several businesses in the News and Information Services segment, including secular declines in the economic environment in Australia, a decline in in-store advertising spend by consumer packaged goods manufacturers in the U.S. and lower forecasted revenues from certain businesses utilizing various trade names owned by the Company’s newspaper operations. The Company’s newspaper business in Australia, in particular, experienced weakness in newspaper advertising reflecting a combination of a softening economy and declines in paid circulation. During the fourth quarter, the business announced a number of major new initiatives to extend the business into multiple platforms and to address these challenges. As part of the annual review process, the Company determined that it was more likely than not that certain assets would be sold. The impairment charges also reflected the potential sale of these assets at a value below their carrying value. As of June 30, 2012, these net assets of approximately $126 million were classified as held for sale and included in other current assets in the Balance Sheets. Significant unobservable inputs utilized in the income approach valuation methods were discount rates (ranging from 9.5%-12.5%), long-term growth rates (ranging from 0.5%-3.0%) and royalty rates (ranging from 2.0%-3.5%). Significant unobservable inputs utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%.

Other than the impairments noted above, the Company determined that the goodwill and indefinite-lived intangible assets included in the Balance Sheets were not impaired.