Telstra 2003 Annual Report Download - page 51

www.telstra.com.au/investor P.49
Basis of preparation of the concise financial report
The principal accounting polices adopted in preparing the concise
financial report of Telstra Corporation Limited (referred to as the
Telstra Entity) are included in the financial report which forms part
of the detailed “Annual Report 2003”.
This concise financial report has been prepared in accordance with
the Corporations Act 2001 and AASB 1039:“Concise Financial Reports”
and is derived from the detailed “Annual Report 2003”.
These accounting policies are consistent with those adopted in
previous periods,apart from the following changes during fiscal 2003:
Provision for dividends
In previous financial years, our accounting policy was to provide for
dividends in the statement of financial position when that dividend
was declared after reporting date but before the completion of
the financial report. Due to the first time application of accounting
standard AASB 1044:“Provisions, Contingent Liabilities and Contingent
Assets”, a provision can no longer be raised at balance date if the
dividend is declared after that date.
As a result, we have changed our accounting policy to reflect this
position and we now provide for a dividend in the period in which it is
declared. When the declaration date is after balance date but before
completion of the financial report, we disclose the dividend as an
event occurring after balance date.
The transitional provisions of this standard require a write-back of
the provision raised as at 30 June 2002 to opening retained profits
in the current financial year. The effect of the revised policy has been
to increase consolidated retained profits and decrease provisions
at the beginning of the year by $1,415 million. No adjustment has
been made to the prior year statement of financial performance,
statement of financial position or cash flows.
Cross currency swaps
In accordance with AASB 1012:“Foreign Currency Translation”
we revalue the principal of our cross currency swaps to take into
account movements in foreign currency. As these cross currency
swaps are designated as hedges, we had previously included the
swap balances with the underlying borrowings in the statement
of financial position.
To give affect to a change in AASB 1012 in relation to the disclosure
of our financial instruments, we have now separated these foreign
currency swaps and recorded them as separate financial assets
and liabilities.
This reflects the fact that the swap contracts, although specifically
hedging our borrowings, are made with different counterparties and
as such are separate financial assets and liabilities in their own right.
On a similar basis, we have reviewed the treatment of our interest
rate swaps to ensure that interest receivable and payable are set
off only where our dealings are with the same counterparty and
we have a legally recognised right to do so. Adjustments required
for our interest rate swaps have not had a significant effect on
our statement of financial position.
To appropriately assess our price risk from foreign currency
borrowings, hedge receivables and hedge payables arising from
cross currency swaps and accruals arising from interest rate swaps
should continue to be viewed in the context of movements in the
underlying borrowings being hedged.
This change in accounting policy has had no impact on our
statement of financial performance or our net assets in the statement
of financial position. It has however resulted in an increase to both
total assets and total liabilities. We have restated our comparative
figures to reflect the disclosure in the current year.
notes to the concise financial statements
1. Accounting policies
The restatement of our retained profits and provisions is disclosed as follows to show the information as if the new accounting policy
had always been applied:
Telstra Group
as at 30 June (Restated)
2003 2002
$m $m
Restatement of retained profits
Previously reported retained profits at beginning of year 7,661 6,795
Reversal of prior year dividend provided for 1,415 1,416
Profit after income tax expense 3,429 3,661
Other movements in retained profits (23) 35
Dividends – interim dividend and prior year final dividend paid (refer note 3) (3,345) (2,831)
Restated retained profits at end of year 9,137 9,076
Restatement of current provisions
Current provisions at end of year 353 1,903
Adjustment for change in accounting policy –(1,415)
Restated current provisions at end of year 353 488