Telstra 2013 Annual Report Download - page 83

NOTES TO THE
FINANCIAL STATEMENTS
(CONTINUED)
FINANCIAL STATEMENTS
Telstra Corporation Limited and controlled entities Telstra Annual Report 2013 81
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(a) 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.
Management judgement is required to determine whether to
capitalise development costs. 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.
(i) 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.
We capitalise borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset.
We review our software assets and software assets under
development on a regular basis to ensure the assets are still in use
and projects are still expected to be completed. Refer to note 7 for
details of impairment losses recognised on our intangible assets.
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(a) 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 are
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.
(#) Decrease due to the disposal of TelstraClear.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, ASSUMPTIONS AND JUDGEMENTS
(CONTINUED)
Telstra Group
As at 30 June
2013 2012
Identifiable intangible assets
Expected
benefit
(years)
Expected
benefit
(years)
Software assets . . . . . . . . . . . 99
Patents and trademarks . . . . . . . 56
Mastheads . . . . . . . . . . . . . . 55
Licences . . . . . . . . . . . . . . . 15 14
Brand names . . . . . . . . . . . . 17 18
Customer bases (#) . . . . . . . . . 613
Deferred expenditure . . . . . . . . 34