Telstra 2005 Annual Report Download - page 58

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notes to the concise financial statements continued
Telstra Media is responsible for:
• the management of our interest in the FOXTEL partnership, along with
the development and management of the hybrid fibre coaxial (HFC)
broadband cable network.
Sensis is responsible for:
• the management and growth of the information, advertising and
directories business, including printed publications, voice and online
products and services.
Corporate areas include:
• Legal Services – provides legal services across the Company;
• Regulatory, Corporate and Human Relations – responsible for managing
our relationships and positioning with key groups such as our customers,
the media, governments, community groups and staff. It manages
personnel, health and safety, environment, remuneration and training.
It also has responsibility for regulatory positioning and negotiation; and
• Finance and Administration – encompasses the functions of business
and finance services, treasury, productivity, risk management and
assurance, credit management, billing directorate, corporate services,
corporate development and the office of the company secretary. It also
includes the financial management of the majority of the Telstra Entity
fixed assets (including network assets) through the Asset Accounting
Group.
The Corporate areas and the Telstra BigPond®, Telstra Media and Sensis
business segments are not reportable segments in their own right and have
been aggregated in the ‘Other’ category.
Segment financial results
Our internal management reporting structure provides the initial basis
for identifying those items that can be directly attributable, or reasonably
allocated to each respective business segment. Items are initially allocated
to each business unit for internal management reporting on a basis that is
considered suitable for senior management to manage the business. For
financial reporting purposes, we have reallocated certain items between
the respective business segments pursuant to the definitions of segment
revenues, segment expenses, segment assets and segment liabilities in
accordance with the requirements of the applicable accounting standard,
where a reasonable allocation basis exists.
Where no reasonable allocation basis exists, we have not reallocated
individual items to alternative segments. For financial reporting purposes,
these items are reported within the same business segment as for internal
management reporting. As a result, our segment revenues, segment
expenses, segment assets and segment liabilities do not reflect actual
operating results achieved for our business segments in certain
circumstances.
The following narrative further explains our segment results for those
individual items where it is considered that no reasonable allocation basis
exists:
• Sales revenue associated with mobile handsets for TC&M, TB&G and
TCW are allocated totally to the TC&M segment, with the exception
of products sold in relation to small to medium enterprises which are
allocated to TB&G. Ongoing prepaid and postpaid mobile revenues
derived from our mobile usage is recorded in TC&M, TB&G and TCW
depending on the type and location of customer serviced. In addition,
the majority of goods and services purchased, associated with our
mobile revenues, are allocated to the TC&M segment. As a result, the
TC&M segment also holds segment assets and segment liabilities
related to those revenues and expenses recorded in TC&M;
• trade debtors in relation to the mobile repayment option on mobile
handsets sold by our dealers are allocated totally to TC&M; and
• revenue received in advance in relation to installation and connection
fees is allocated totally to TC&M.
These allocations reflect management’s accountability framework and
internal reporting system and accordingly no reasonable basis for
reallocation to the respective business segments exist.
In addition, revenue derived from our BigPond Internet products and its
related segment assets are recorded in the customer facing business units
of TC&M, TB&G and TCW. Certain distribution costs in relation to these
products are recognised in these three business segments. IS and TTIP
recognise certain expenses in relation to the installation and running of
the broadband cable network. The related segment assets are managed
by the Asset Accounting Group. In accordance with our application of the
definition of business segment in relation to customer type, we have not
reallocated these items to the Telstra BigPond business segment.
Change in segment accounting policies
The following segment accounting policy change occurred during fiscal
2005:
Small to medium enterprise revenue
In previous financial years, our segment accounting policy was to recognise
sales revenue relating to our small to medium enterprises below a certain
limit in the TC&M segment. In fiscal 2005, the revenue earned from our
small to medium enterprises was allocated to the TB&G segment in
accordance with a revised threshold for small to medium enterprises.
In addition, the related expenses of these customers has also been
allocated to the TB&G segment. Sales revenue in TC&M was reduced and
sales revenue in TB&G was increased by $442 million in fiscal 2004 and
$471 million in fiscal 2003 to reflect this change in policy.
Inter-segment transfers
We account for all transactions of entities within the Telstra Group,
including international transactions between Australian and non-
Australian businesses, at market value. For segment reporting purposes,
transfer pricing is not used within the Company. As such the inter-segment
revenue line purely relates to intercompany revenue.
The Asset Accounting Group does not allocate depreciation expense related
to the use of assets owned at the corporate level to other business
segments.
Segment assets and liabilities
Segment assets and segment liabilities form part of the operating activities
of a segment and can be allocated directly to that segment.
The Asset Accounting Group performs a company wide function in relation
to the financial management of certain assets. These assets are accounted
for at the corporate level (aggregated in the ‘Other’ segment) and not
allocated across segment.
2. Segment information (continued)