Mail Stop 3561
February 17,
2006
By U.S. Mail and Facsimile
Mr. K. Rupert Murdoch
Director, Chairman and Chief Executive Officer
News Corporation
1211 Avenue of the Americas
New York, New York 10036
RE: News Corporation
Form 10-K for the Fiscal Year Ended June 30, 2005
Form 10-Q for the Quarterly Period Ended September 30, 2005
Schedule 14A Proxy Statement filed on October 11, 2005
File No. 1-32352
Dear Mr. Murdoch:
We have reviewed the above filings to disclosures restricted
solely to considerations of the Financial Statements, Management`s
Discussion and Analysis, and Selected Financial Data. Your
filings
have also been subject to a limited review by the Office of Global
Security Risk. Certain comments require amendments to your
filings
and certain comments require the submission of supplemental
information. After our review of your response, we may have
further
comments. Comply with the remaining comments in future filings.
Please confirm that such comments will be complied with, or, if
certain of the comments are deemed inappropriate, advise us of the
reason(s) for your position. Pursuant to Rule 101(a)(3) of
Regulation S-T, your response should be submitted in electronic
form,
under the label "corresp." Please respond within fifteen (15)
business days.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Year Ended June 30, 2005
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Fiscal 2005 versus Fiscal 2004
Equity earnings of affiliates, page 46
1. We note the disclosure indicating that your share of DIRECTV`s
losses for the fiscal year ended June 30, 2006, "exclude certain
items that were recognized by DIRECTV as income and expense within
its results." In this regard, please tell us, and explain in
future
filings, the nature and amounts of the income and expense
recognized
by DIRECTV that were excluded from your results of operations. As
part of your response, you should also explain why you believe
exclusion of these items from your equity in DIRECTV`s
earnings/losses is appropriate.
Financial Statements
Note 2. Summary of Significant Accounting Policies
Television, Cable Network Programming and Direct Broadcast
Satellite
Television, page 83
2. Supplementally provide the following information with regard to
your cable distribution investments (capitalized fees paid to a
cable
or DBS operator to facilitate the launch of a cable network). for
each of the past three years:
* The amount that was capitalized;
* The amount of any write-offs; and
* A description of the facts and circumstances surrounding each
write-off.
Supplementally explain in detail the reason it is appropriate to
capitalize these fees and the accounting literature that supports
your accounting treatment. Since it is an upfront payment for a
new
cable distribution system, it appears that the amounts should be
recorded as research and development, and immediately expensed.
Please describe the risks that you have assumed as part of these
investments and the anticipated rates of return. As part of your
response, tell us the period of time that usually lapses before
you
start to receive a return on your investment, and the period of
time
before you recoup your entire investment. Please include company
specific examples to support your response. Also, tell us and
disclose in future filings, the period over which the capitalized
amounts are being amortized to expense, and explain why you
believe
the period used is appropriate.
Stock-based compensation, page 86
3. We note disclosure that you have accelerated the vesting of
stock
options that are out-of-the-money before adopting Statement 123R
and
that the acceleration eliminates approximately $100 million ($65
million net of tax) of future compensation expense of which $58
million ($38 million net of tax) and $42 million ($27 million net
of
tax) would otherwise be recognized by the Company in fiscal years
2006 and 2007, respectively, in its consolidated statements of
operations once SFAS No. 123(R) becomes effective. In this
regard,
please revise your pro forma compensation fair value disclosures
provided pursuant to SFAS No. 123 for fiscal year 2005 in future
filings to include compensation expense for the unamortized fair-
value-based compensation expense that would have been recorded in
the
period when the options become fully vested. See the guidance
outlined in Staff Accounting Bulletin Topic 14:K.
Note 3. Acquisitions and Disposals, page 88
4. Please revise future filings to include the pro forma
disclosures
required by paragraph 54 of SFAS No.141 with respect to the
acquisitions of QPL and FEG or explain why you do not believe
these
disclosures are required. These disclosures should also be
provided
with respect to your acquisitions of interests in entities that
are
accounted for using the equity method of accounting.
Note 7. Goodwill and Other Intangible Assets, page 98
5. Please tell us in further detail the specific nature of the
$136
million adjustment that was made to the goodwill associated with
the
Direct Broadcast Satellite Television segment during fiscal 2005.
As
part of your response, please indicate the acquisition to which
this
adjustment relates (including when the acquisition transaction
originally occurred) and indicate the nature and timing of the
circumstances that resulted in the adjustment to goodwill during
2005.
Note 11. Shareholders` Equity, page 105
6. Please revise future filings to disclose the rights associated
with your Class A and Class B common shares. Refer to the
disclosure
requirements outlined in paragraph 4 of SFAS No. 129.
Note 20. Earnings per Share, page 128
7. In future filings, please revise to include reconciliations of
both the numerators and denominators of your basic and diluted
earnings per share computations in the notes to your financial
statements as required by paragraph 40a of SFAS No.128. The
reconciliations of the weighted average shares used in your basic
and
diluted earnings per share computations should separately disclose
the effects of each category of securities included in your
diluted
earnings per share computations that are not included in your
basic
earnings per share computations.
Note 25. Supplemental Guarantor Information, page 132
8. We note the disclosure in Note 25 indicating that certain
subsidiaries of News Corporation are guarantors of NAI`s senior
public indebtedness. Please tell us, and clarify in the notes to
your financial statements in future filings, the nature and terms
of
the guarantees provided. As part of your response and your
revised
disclosures, please clarify whether the guarantees provided are
full
and unconditional and joint and several and indicate whether the
guarantors are wholly owned by New Corporation or NAI. If not,
please explain why financial statements for the guarantors have
not
been included in your Annual Report on Form 10-K. Refer to the
guidance outlined in Rule 3-10(f) of Regulation S-X. We may have
further comment upon receipt of your response.
General
9. We note from Exhibit 21 that you own Fox Film De Cuba, SA, a
Cuban
entity. Please describe for us your previous, existing and
anticipated operations in and contacts with Cuba, including
through
investments, distributors, subsidiaries, affiliates and any other
direct or indirect means. We also note that the DTH agreement
dated
October 8, 2004 includes an Exhibit D, list of Latin American
Platforms, and that some Affiliates may participate in DTH
Business
in Central American Countries through LOAs. Your description of
contacts should address any direct or indirect contacts affected
by
the DTH Agreement. Please provide us Exhibits A and D to the DTH
Agreement.
10. In light of the fact that Cuba is identified as a state
sponsor
of terrorism by the U.S. State Department and is subject to
economic
sanctions administered by the Treasury Department`s Office of
Foreign
Assets Control, please address the materiality of any operations,
arrangements or other contacts with Cuba. Please present your
view
as to whether such operations, arrangements or other contacts
constitute a material investment risk for your security holders.
11. In preparing your response please consider that evaluations of
materiality should not be based solely on quantitative factors,
but
should include consideration of qualitative factors that a
reasonable
investor would deem important in making an investment decision,
including the potential impact of corporate activities upon a
company`s reputation and share value. In this regard, we note
that
Arizona and Louisiana have adopted legislation requiring their
state
retirement systems to prepare reports regarding state pension fund
assets invested in, and/or permitting divestment of state pension
fund assets from, companies that do business with U.S.-designated
state sponsors of terrorism. We also note that Florida requires
issuers to disclose in their prospectuses any business contacts
with
Cuba or persons located in Cuba.
Form 10-Q for the Quarterly Period Ended September 30, 2005
Unaudited Consolidated Statements of Operations, page 3
Note 5. Intangible Assets, page 12
12. Supplementally provide us with the details supporting your
calculation of $1.6 billion charge reflected as a cumulative
effect
of accounting change, net of tax, in your consolidated statement
of
operations for the period ended September 30, 2005. Your response
should explain in further detail the nature of the direct value
method used to compute the impairment charge and the significant
assumptions used in your impairment testing.
Unaudited Consolidated Statements of Operations, page 3
Note 14. Earnings Per Share, page 29
13. We note that your calculations of (1) loss per Class A share
- -
diluted, related to the cumulative effect of accounting change,
net
of tax for the period ended September 30, 2005 and (2) net loss
per
Class B share - diluted for the period ended September 30, 2005
appear to include the impact of securities that have an
antidilutive
effect on your loss per share calculations. In this regard,
please
advise us of your rational for including securities that have an
antidilutive effect on your loss per share calculations in your
detailed earnings per share computations and the accounting
literature that supports your accounting treatment. We may have
further comments.
General
14. Comply with the comments on the Form 10-K for the year ended
June
30, 2005 in future filings on Form 10-Q.
Schedule 14A Proxy Statement
Stock Appreciation Rights Granted in Fiscal Year 2005
15. We note from the disclosure included on page 25 of your
Schedule
14A Proxy Statement that you granted 1,187,500 stock appreciation
rights to your executive officers during 2005. However, we note
that
the issuance of these stock appreciation rights and any related
compensation expense has not been disclosed in the notes to your
financial statements in accordance with paragraphs 47(c) and (e)
of
SFAS No.123. In this regard, please revise the notes to your
financial statements in future filings to include disclosure
regarding stock appreciation rights granted during the periods
presented and the amount of any related compensation expense
recognized as required by paragraph 64 of SFAS No.123(R).
Closing
You may contact Katherine Mathis at (202) 551-3383 or me, at
(202) 551-3813 if you have questions regarding comments on the
financial statements and related matters. Please contact James
Lopez
at (202) 551-1805 or Cecilia Blye at (202) 551-3475 with any other
questions.
Sincerely,
Linda Cvrkel
Branch Chief
cc: Via Facsimile: (212) 852-7094
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Mr. K. Rupert Murdoch
News Corporation
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