Telstra 2009 Annual Report Download - page 109

Telstra Corporation Limited and controlled entities
94
Notes to the Financial Statements (continued)
2.12 Intangible assets
Intangible assets are assets that have value, but do not have physical
substance. In order to be recognised, an intangible asset must be
either separable or arise from contractual or other legal rights.
(a) Goodwill
On the acquisition of investments in controlled entities, jointly
controlled and associated entities, when we pay an amount greater
than the fair value of the net identifiable assets of the entity, this
excess is considered to be goodwill. We calculate the amount of
goodwill as at the date of purchasing our ownership interest in the
entity.
When we purchase an entity that we will control, the amount of
goodwill is recorded in intangible assets. When we acquire a jointly
controlled or associated entity, the goodwill amount is included as
part of the cost of the investment.
Goodwill is not amortised but is tested for impairment in accordance
with note 2.9 on an annual basis or when an indication of impairment
exists.
(b) Internally generated intangible assets
Research costs are recorded as an expense as incurred. Development
costs are capitalised if the project is technically and commercially
feasible, we are able to use or sell the asset, and we have sufficient
resources and intent to complete the development.
Software assets
We record direct costs associated with the development of business
software for internal use as software assets if the development costs
satisfy the criteria for capitalisation described above.
Costs included in software assets developed for internal use are:
• external direct costs of materials and services consumed; and
• payroll and direct payroll-related costs for employees (including
contractors) directly associated with the project.
Software assets developed for internal use have a finite life and are
amortised on a straight line basis over their useful lives to us.
Amortisation commences once the software is ready for use.
(c) Acquired intangible assets
We acquire other intangible assets either as part of a business
combination or through separate acquisition. Intangible assets
acquired in a business combination are recorded at their fair value at
the date of acquisition and recognised separately from goodwill. We
apply management judgement to determine the appropriate fair
value of identifiable intangible assets.
Intangible assets that are considered to have a finite life are amortised
on a straight line basis over the period of expected benefit. Intangible
assets that are considered to have an indefinite life are not amortised
but tested for impairment in accordance with note 2.9 on an annual
basis, or where an indication of impairment exists.
(d) Deferred expenditure
Deferred expenditure mainly includes costs incurred for basic access
installation and connection fees for in place and new services, and
direct incremental costs of establishing a customer contract.
Significant items of expenditure are deferred to the extent that they
are recoverable from future revenue and will contribute to our future
earning capacity. Any costs in excess of future revenue are recognised
immediately in the income statement. Handset subsidies are
considered to be separate units of accounting and expensed as
incurred.
We amortise deferred expenditure over the average period in which
the related benefits are expected to be realised.
(e) Amortisation
The weighted average amortisation periods of our identifiable
intangible assets are as follows:
The service lives of our identifiable intangible assets are reviewed
each year. Any reassessment of service lives in a particular year will
affect the amortisation expense through to the end of the reassessed
useful life for both that current year and future years. The net effect
of the reassessment for fiscal 2009 was a decrease in our amortisation
expense of $110 million (2008: $19 million increase) for the Telstra
Group and a decrease of $110 million (2008: $21 million increase) for
the Telstra Entity.
In relation to acquired intangible assets, we apply management
judgement to determine the amortisation period based on the
expected useful lives of the respective assets. In some cases, the useful
lives of certain acquired intangible assets are supported by external
valuation advice on acquisition. In addition, we apply management
judgement to assess annually, the indefinite useful life assumption
applied to certain acquired intangible assets.
2. Summary of accounting policies (continued)
Telstra Group
As at 30 June
2009 2008
Identifiable intangible assets
Expected
benefit
(years)
Expected
benefit
(years)
Software assets . . . . . . . . . . . . . . . 86
Patents and trademarks . . . . . . . . . . . 19 17
Licences . . . . . . . . . . . . . . . . . . . . 15 14
Brandnames . . . . . . . . . . . . . . . . . 18 18
Customer bases . . . . . . . . . . . . . . . 10 11
Deferred expenditure. . . . . . . . . . . . 44