Telstra 2008 Annual Report Download - page 120

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.17 Revenue recognition
Sales revenue
Our categories of sales revenue are recorded after deducting sales
returns, trade allowances, discounts, sales incentives, duties and
taxes.
(a) Rendering of services
Revenue from the provision of our telecommunications services
includes telephone calls and other services and facilities provided,
such as internet and data.
We record revenue earned from:
• telephone calls on completion of the call; and
• other services generally at completion, or on a straight line basis
over the period of service provided, unless another method better
represents the stage of completion.
Installation and connection fee revenues are deferred and recognised
over the average estimated customer life that are not considered to be
separate units of accounting. Incremental costs directly related to
these revenues are also deferred and amortised over the customer
contract life in accordance with note 2.12(d).
In relation to basic access installation and connection revenue, we
apply our management judgement to determine the estimated
customer contract life. Based on our reviews of historical information
and customer trends, we have determined that our average estimated
customer life is 5 years (2007: 5 years).
(b) Sale of goods
Our revenue from the sale of goods includes revenue from the sale of
customer equipment and similar goods. This revenue is recorded on
delivery of the goods sold.
Generally we record the full gross amount of sales proceeds as
revenue, however if we are acting as an agent under a sales
arrangement, we record the revenue on a net basis, being the gross
amount billed less the amount paid to the supplier. We review the
facts and circumstances of each sales arrangement to determine if we
are an agent or principal under the sale arrangement.
(c) Rent of network facilities
We earn rent mainly from access to retail and wholesale fixed and
mobile networks and from the rent of dedicated lines, customer
equipment, property, plant and equipment and other facilities. The
revenue from providing access to the network is recorded on an
accrual basis over the rental period.
(d) Construction contracts
We record construction revenue on a percentage of contract
completion basis. The percentage of completion of contracts is
calculated based on estimated costs to complete the contract.
Our construction contracts are classified according to their type.
There are three types of construction contracts, these being material
intensive, labour intensive and short duration. Revenue is recognised
on a percentage of completion basis using the appropriate measures
as follows:
• (actual costs / planned costs) x planned revenue - for material
intensive projects;
• (actual labour hours / planned labour hours) x planned revenue -
for labour intensive projects; and
• short duration projects are those that are expected to be
completed within a month and revenues and costs are recognised
on completion.
(e) Advertising and directory services
Classified advertisements and display advertisements are published
on a daily, weekly and monthly basis for which revenues are
recognised at the time the advertisement is published.
All of our Yellow Pages and White Pages directory revenues are
recognised on delivery of the published directories using the delivery
method. We consider our directories delivered when they have been
published and delivered to customers’ premises. Revenue from online
directories is recognised over the life of service agreements, which is
on average one year. Voice directory revenues are recognised at the
time of providing the service to customers.
(f) Royalties
Royalty revenue is recognised on an accrual basis in accordance with
the substance of the relevant agreements.
(g) Interest revenue
We record interest revenue on an accruals basis. For financial assets,
interest revenue is determined by the effective yield on the
instrument.
Revenue arrangements with multiple deliverables
Where two or more revenue-generating activities or deliverables are
sold under a single arrangement, each deliverable that is considered
to be a separate unit of accounting is accounted for separately. When
the deliverables in a multiple deliverable arrangement are not
considered to be separate units of accounting, the arrangement is
accounted for as a single unit.
We allocate the consideration from the revenue arrangement to its
separate units based on the relative fair values of each unit. If the fair
value of the delivered item is not available, then revenue is allocated
based on the difference between the total arrangement consideration
and the fair value of the undelivered item. The revenue allocated to
each unit is then recognised in accordance with our revenue
recognition policies described above.
2. Summary of accounting policies (continued)