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, 2015 and June 30, 2014 were as follows:


	As of June 30,
	2015		2014
	(in millions)
Intangible Assets Not Subject to Amortization
Newspaper Mastheads	$	308	$	317
Distribution Networks		392		397
Imprints		266		190
Tradenames		120		4

Total intangible assets not subject to amortization		1,086		908

Intangible Assets Subject to Amortization
Channel Distribution Agreements^(a)		366		471
Publishing Rights^(b)		389		358
Customer Relationships^(c)		360		352
Other^(d)		41		48

Total intangible assets subject to amortization, net		1,156		1,229

Total Intangible assets, net	$	2,242	$	2,137

^(a)	Net of accumulated amortization of $43 million and $33 million as of June 30, 2015 and 2014, 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 $122 million and $94 million as of June 30, 2015 and 2014, respectively. The average useful life of publishing rights is 4 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 $354 million and $325 million as of June 30, 2015 and 2014, 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 $90 million and $86 million as of June 30, 2015 and 2014, 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 was $102 million, $95 million and $94 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively.

Based on the current amount of amortizable intangible assets, the estimated amortization expense for each of the succeeding five fiscal years is as follows: 2016—$94 million; 2017—$90 million; 2018—$83 million; 2019—$70 million; and 2020—$65 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			Book Publishing			Digital Real Estate Services			Cable Network Programming			Digital Education			Other		Total Goodwill
	(in millions)
Balance, June 30, 2013	$	1,679		$	70		$	70		$	581		$	325		$	—	$	2,725
Acquisitions		19			2			12			—			—			—		33
Foreign currency movements		3			—			4			18			—			—		25
Dispositions		—			(1	)		—			—			—			—		(1	)

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

Acquisitions		—			191			566			—			—			4		761
Foreign currency movements		(5	)		(21	)		(16	)		(113	)		—			—		(155	)
Impairments		—			—			—			—			(325	)		—		(325	)

Balance, June 30, 2015	$	1,696		$	241		$	636		$	486		$	—		$	4	$	3,063

The carrying amount of goodwill as of June 30, 2015 reflected accumulated impairments, principally relating to the News and Information Services segment of $3.4 billion and the Digital Education segment of $325 million. Refer to the discussion below for further details on the fiscal 2015 goodwill and intangible asset impairment in the Digital Education segment.

Annual Impairment Assessments

Fiscal 2015

In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually in the fourth quarter for impairment or earlier if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below their carrying amount. (See Note 2—Summary of Significant Accounting Policies for additional information regarding the Company’s annual impairment methodology).

During the fourth quarter of fiscal 2015, as part of the Company’s long-range planning process, the Company changed its strategy and related outlook with respect to the Amplify reporting unit which resulted in a reduction in expected future cash flows for the business (See Note 18—Segment Information). As a result, the Company determined that the fair value of this reporting unit declined below its carrying value and recorded a non-cash impairment charge of $371 million, with no associated tax impact, in the fiscal year ended June 30, 2015. The charge primarily consisted of a write-down of the Company’s goodwill of $325 million and a write-down of capitalized software development costs of $45 million. For the impaired reporting unit, significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 12%-45%) and long-term growth rates (ranging from 0%-4%).

Other than the impairment noted above, the Company determined that the goodwill and indefinite-lived intangible assets included in the Balance Sheets were not impaired for the remaining reporting units. Significant unobservable inputs utilized in the income approach valuation method for these reporting units were discount rates (ranging from 9%-14%), long-term growth rates (ranging from 0%-3%) and royalty rates (ranging from 0.5%-3.3%). 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 10%-15%). 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 2014

The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2014. 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.