Telstra 2011 Annual Report Download - page 110

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.10 Property, plant and equipment
(a) Acquisition
Items of property, plant and equipment are recorded at cost and
depreciated as described in note 2.10(b). The cost of our
constructed property, plant and equipment is directly attributable
in bringing the asset to the location and condition necessary for its
intended use and includes:
• the cost of material and direct labour;
• an appropriate proportion of direct and indirect overheads; and
• where we have an obligation for removal of the asset or
restoration of the site, an estimate of the cost of restoration or
removal if that cost can be reliably estimated.
Management judgement is required in the assessment of the types
of costs that are directly attributable to the construction of our
property, plant and equipment. Satisfying the directly attributable
criteria requires an assessment of those unavoidable costs that, if
not incurred, would result in the property, plant and equipment not
being constructed.
We capitalise borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset. In
fiscal 2011, we revised the methodology for calculating our
capitalised interest adjustment to reflect our new process for
identifying capital expenditure related to incomplete projects. This
change has decreased the amount of capitalised interest that would
have been recorded in our property, plant and equipment by $30
million for fiscal 2011.
We review our property, plant and equipment assets and property,
plant and equipment under construction on a regular basis to
ensure that the assets are still in use and that the projects are still
expected to be completed. Refer to note 7 for details of impairment
losses recognised on our property, plant and equipment.
Where settlement of any part of the cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of acquisition. The unwinding of this discount
is recorded within finance costs.
We account for our assets individually where it is practical, feasible
and in line with commercial practice. Where it is not practical and
feasible, we account for assets in groups. Group assets are
automatically removed from our financial statements on reaching
the group life. Therefore, any individual asset may be physically
retired before or after the group life is attained. This is the case for
certain communication assets as we assess our technologies to be
replaced by a certain date.
(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 estimated
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 judgement in determining the
service lives of our assets. This assessment includes a comparison
with international trends for telecommunications companies and, in
relation to communication assets, includes a determination of when
the asset may be superseded technologically or made obsolete.
2. Summary of significant accounting policies, estimates, assumptions and
judgements (continued)
Telstra Group
As at 30 June
2011 2010
Property, plant and equipment
Service life
(years)
Service life
(years)
Buildings
Buildings . . . . . . . . . . . . . 52-53 53-55
Fitouts . . . . . . . . . . . . . . 10-20 10-20
Leasehold improvements. . . . . . 5-40 7-40
Communication assets
Network land and buildings. . . . . 10-58 5-55
Network support infrastructure . . . 3-52 4-52
Access fixed. . . . . . . . . . . . 3-30 4-30
Access mobile . . . . . . . . . . . 3-17 4-16
Content/IP products - core . . . . . 4-10 5-10
Core network - data . . . . . . . . 3-8 4-8
Core network - switch . . . . . . . 2-25 5-23
Core network - transport . . . . . . 5-30 6-30
Specialised premise equipment . . . 3-8 3-8
International connect . . . . . . . 11-21 6-15
Managed service. . . . . . . . . . 3-12 9-10
Network control layer . . . . . . . 2-13 3-11
Network product. . . . . . . . . . 2-9 3-9
Other plant and equipment
IT equipment . . . . . . . . . . . 3-5 3-5
Motor vehicles/trailer/caravan/huts . 5-15 3-15
Other plant and equipment . . . . . 2-20 2-20