Goodwill and Other Intangible Assets

12 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 8. 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, 2017 and June 30, 2016 were as follows:


	As of June 30,
	2017		2016
	(in millions)
Intangible Assets Not Subject to Amortization
Newspaper mastheads	$	299	$	307
Distribution networks		390		391
Imprints		237		245
Radio broadcast licenses		185		—
Trademarks and tradenames		179		191

Total intangible assets not subject to amortization		1,290		1,134


Intangible Assets Subject to Amortization
Channel distribution agreements^(a)		335		342
Publishing rights^(b)		329		365
Customer relationships^(c)		310		336
Other^(d)		17		30

Total intangible assets subject to amortization, net		991		1,073

Total Intangible assets, net	$	2,281	$	2,207

^(a)

Net of accumulated amortization of $76 million and $58 million as of June 30, 2017 and 2016, 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 intangible assets will be generated.

^(b)

Net of accumulated amortization of $181 million and $150 million as of June 30, 2017 and 2016, respectively. The useful lives of publishing rights range from 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 $399 million and $363 million as of June 30, 2017 and 2016, respectively. The useful lives of customer relationships range 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.

^(d)

Net of accumulated amortization of $83 million and $69 million as of June 30, 2017 and 2016, respectively. The useful lives of other intangible assets range from 2 to 15 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.

During the fiscal year ended June 30, 2017, the Company recognized impairment charges of $58 million related to trademarks and tradenames.

Amortization expense related to amortizable intangible assets was $91 million, $91 million and $90 million for the fiscal years ended June 30, 2017, 2016 and 2015, 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: 2018—$88 million; 2019—$75 million; 2020—$67 million; 2021— $62 million; and 2022—$57 million.

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			Other			Total Goodwill
	(in millions)
Balance, June 30, 2015	$	1,696		$	241		$	636		$	486		$	4		$	3,063
Acquisitions		80			31			545			—			—			656
Foreign currency movements		(11	)		(12	)		28			(10	)		—			(5	)

Balance, June 30, 2016	$	1,765		$	260		$	1,209		$	476		$	4		$	3,714

Acquisitions		136			10			2			11			—			159
Impairments^(a)		(20	)		—			(24	)		—			(4	)		(48	)
Dispositions^(b)		—			—			(20	)		—			—			(20	)
Foreign currency movements		3			1			16			13			—			33

Balance, June 30, 2017	$	1,884		$	271		$	1,183		$	500		$	—		$	3,838

^(a)	In the News and Information Services segment, the write-down of goodwill primarily relates to a reporting unit in the U.K.. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit.

^(b)	Relates to REA Group’s sale of its European business.

The carrying amount of goodwill as of June 30, 2017 reflected accumulated impairments, principally relating to the News and Information Services segment, of $3.5 billion.

Annual Impairment Assessments

Fiscal 2017

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 its carrying amount. (See Note 2—Summary of Significant Accounting Policies).

The performance of the Company’s annual impairment analysis resulted in impairments of $88 million of goodwill and indefinite-lived intangible assets in fiscal 2017. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9.0%-25.0%), long-term growth rates (ranging from 0.0%-3.3%) and royalty rates (ranging from 0.5%-7.5%). Significant unobservable inputs utilized in the market approach valuation method 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 premiums 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 premiums and multiples, would result in a significantly higher (lower) fair value measurement.

Fiscal 2016

The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2016. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from 9%-14.5%), long-term growth rates (ranging from 0%-3.5%) and royalty rates (ranging from 0.5%-3.4%). Significant unobservable inputs utilized in the market approach valuation method 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 premiums 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 premiums and multiples, would result in a significantly higher (lower) fair value measurement.

Fiscal 2015

The performance of the Company’s annual impairment analysis did not result in any impairments of goodwill in fiscal 2015. Significant unobservable inputs utilized in the income approach valuation method 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 method 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 premiums 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 premiums and multiples, would result in a significantly higher (lower) fair value measurement.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details