Telstra 2007 Annual Report Download - page 127

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.10 Property, plant and equipment (continued)
(b) Depreciation
Items of property, plant and equipment, including buildings and
leasehold property, but excluding freehold land, are depreciated on a
straight line basis to the income statement over their est imat ed
service lives. We start depreciating assets when they are installed and
ready for use.
The service lives of our significant items of property, plant and
equipment are as follows:
The service lives and residual values of our assets are reviewed each
year. We apply management judgment in determining the service
lives of our assets. This assessment includes a comparison with
internat ional trends for telecommunication companies, and in
relation to communication assets, includes a determination of when
the asset may be superseded technologically or made obsolete.
The net effect of the reassessment of service lives for fiscal 2007 was a
decrease in our depreciation expense of $26 million (2006: $66 million
increase) for the Telstra Group and a decrease of $41 million (2006: $66
million increase) for the Telstra Entity.
Our major repairs and maintenance expenses relate to maintaining
our exchange equipment and the customer access network. We
charge the cost of repairs and maintenance, including the cost of
replacing minor items, which are not substantial improvements, to
operating expenses.
2.11 Leased plant and equipment
We distinguish between finance leases, which effectively transfer
substantially all the risks and benefits incidental to ownership of the
leased asset from the lessor to the lessee, from operating leases under
which the lessor effectively retains all such risks and benefits.
(a) Telstra as a lessee
Where we acquire non current assets via a finance lease, the lower of
the fair value of t he asset and the present value of future minimum
lease payments is capitalised as equipment under finance lease at the
beginning of the lease term. Capitalised lease assets are depreciated
on a straight line basis over the shorter of the lease term or the
expected useful life of the assets. A corresponding liabilit y is also
established and each lease payment is allocated between the liability
and finance charges.
Operating lease payment s are charged to the income statement on a
straight line basis over the term of the lease.
Where we lease properties, costs of improvement s to these properties
are capitalised as leasehold improvements and amortised over the
shorter of the useful life of the improvements or the term of the lease.
(b) Telstra as a lessor
Where we lease non current assets via a finance lease, a lease
receivable equal to the present value of the minimum lease payments
receivable plus the present value of any unguaranteed residual value
expected to accrue at the end of the lease term is recognised at the
beginning of the lease term. Finance lease payments are allocated
between interest revenue and a reduction of the lease receivable over
the term of the lease in order to reflect a constant periodic rat e of
return on the net investment outstanding in respect of the lease.
Rental income from operat ing leases is recognised on a straight line
basis over the term of the relevant lease.
2.Summary of accounting policies (continued)
Telst ra Group
As at 30 June
2007 2006
Property, plant and equipment
Service life
(years)
Service life
(years)
Buildings - building shell . . . . . . . . 55 55
- general purpose . . . . . 8 - 40 8 - 40
- fitout . . . . . . . . . . . . 10 - 20 10 - 20
Communicat ion assets
Buildings - building shell . . . . . . . 55 55
- network. . . . . . . . . . . 8 - 40 8 - 40
- fitout . . . . . . . . . . . . 10 - 20 10 - 20
Customer premises equipment . . . . 3 - 8 3 - 8
Transmission equipment . . . . . . . . 1 - 25 2 - 25
Switching equipment . . . . . . . . . . 2 - 12 4 - 12
Mobile equipment . . . . . . . . . . . . 1 - 10 2 - 10
Cables . . . . . . . . . . . . . . . . . . . 4 - 25 5 - 25
Ducts and pipes - main cables. . . . . 40 40
- distribution . . . . . 30 30
Other communications plant . . . . . 1 - 30 1 - 30
Other assets
Leasehold plant and equipment . . . 3 - 15 3 - 15
Other plant, equipment and motor
vehicles . . . . . . . . . . . . . . . . . . 3 - 15 3 - 15