NOTE 7. FAIR VALUE MEASUREMENTS

In accordance with ASC 820, fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories:

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Level 1 — Quoted prices in active markets for identical assets or liabilities.

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Level 2 — Observable inputs other than quoted prices included in Level 1. The Company could value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.

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Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. For the Company, this primarily includes the use of forecasted financial information and other valuation related assumptions such as discount rates and long term growth rates in the income approach as well as the market approach which utilizes certain market and transaction multiples.

Recurring Fair Value Measurements

Certain assets and liabilities are required to be remeasured to fair value at the end of each reporting period.

The fair values of investments in available-for-sale securities are determined using the quoted market prices from active markets based on the closing price at the end of each reporting period. These investments are classified as Level 1 in the fair value hierarchy outlined above.

The Company has liabilities recorded in its Balance Sheets for its mandatorily redeemable noncontrolling interests. These liabilities represent management’s best estimate of the amounts expected to be paid in accordance with the contractual terms of the underlying acquisition agreements. The fair values of these liabilities are based on the contractual payout formulas included in the acquisition agreements taking into account the expected performance of the business. Any remeasurements of the Company’s mandatorily redeemable noncontrolling interests are recorded through Interest, net in the Statements of Operations. As the fair value does not rely on observable market inputs, the Company classifies these liabilities as Level 3 in the fair value hierarchy.

The following tables summarize those assets and liabilities measured at fair value on a recurring basis:


	As of March 31,								As of June 30,
	2018								2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Available-for-sale securities^(a)	$	78	$	—	$	—	$	78	$	97	$	—	$	—	$	97

Total assets	$	78	$	—	$	—	$	78	$	97	$	—	$	—	$	97

Liabilities:
Mandatorily redeemable noncontrolling interests^(b)	$	—	$	—	$	92	$	92	$	—	$	—	$	79	$	79

Total liabilities	$	—	$	—	$	92	$	92	$	—	$	—	$	79	$	79

(a)	See Note 4 – Investments.

(b)

Primarily related to REA Group’s mandatorily redeemable noncontrolling interest associated with the acquisition of iProperty. The fair value is determined based on formulas specified in the acquisition agreement and REA Group management’s expectations of the business’ performance. The mandatorily redeemable noncontrolling interest was redeemed in April 2018 and the amount paid was based on the actual performance of the business against the targets stipulated in the acquisition agreement.

There have been no transfers between levels of the fair value hierarchy during the periods presented.

A rollforward of the Company’s mandatorily redeemable noncontrolling interest liabilities classified as Level 3 is as follows:


	For the nine months ended March 31,
	2018			2017
	(in millions)
Balance - beginning of year	$	79		$	82
Additions		12			—
Payments		—			—
Measurement adjustments		—			(8	)
Accretion		2			3
Foreign exchange movements		(1	)		1

Total liabilities	$	92		$	78

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are remeasured at fair value on a recurring basis, the Company has certain assets, primarily goodwill, intangible assets, equity method investments and property, plant and equipment, that are not required to be remeasured to fair value at the end of each reporting period. On an ongoing basis, the Company monitors whether events occur or circumstances change that would more likely than not reduce the fair values of these assets below their carrying amounts. If the Company determines that these assets are impaired, the Company would write down these assets to fair value. These nonrecurring fair value measurements are considered to be Level 3 in the fair value hierarchy.

In the third quarter of fiscal 2018, the Company recognized a $957 million non-cash write-down of the carrying value of its investment in Foxtel from $1,588 million to $631 million. In the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel from $1,432 million to $1,205 million. See Note 4 – Investments.

In the third quarter of fiscal 2018, the Company recognized non-cash impairment charges of $120 million and $45 million related to goodwill and intangible assets, respectively, at the News America Marketing reporting unit. The carrying value of goodwill at News America Marketing decreased from $301 million to $181 million and the carrying value of intangible assets decreased from $391 million to $346 million. See Note 3 – Impairment and Restructuring Charges.

In the third quarter of fiscal 2018, the Company recognized a $41 million non-cash impairment charge related to goodwill at the FOX SPORTS Australia reporting unit. The carrying value of goodwill at FOX SPORTS Australia decreased from $490 million to $449 million. See Note 3 – Impairment and Restructuring Charges.

In the second quarter of fiscal 2017, the Company recognized non-cash impairment charges of approximately $310 million primarily related to the write-down of fixed assets at News Corp Australia. The carrying value of fixed assets at News Corp Australia decreased from $667 million to $375 million and the carrying value of intangible assets decreased from $48 million to $30 million. See Note 3 – Impairment and Restructuring Charges.

Other Fair Value Measurements

As of March 31, 2018 and June 30, 2017, the carrying value of the REA Facility approximates fair value and is classified as Level 3 in the fair value hierarchy.