Telstra 2007 Annual Report Download - page 130

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.15 Provisions (continued)
(a) Employee benefits (continued)
Cert ain employees who have been employed by Telstra for at least ten
years are entitled to long service leave of three months (or more
depending on the actual length of employment), which is included in
our employee benefits provision.
We accrue liabilities for other employee benefits not expected to be
paid or settled within 12 months of balance dat e, including long
service leave, at the present values of future amounts expected to be
paid. This is based on projected increases in wage and salary rates
over an average of 10 years, experience of employee depart ures and
periods of service. We calculate present values using rat es based on
government guaranteed securities with similar due dates to our
liabilities.
We apply management judgment in estimating the following key
assumptions used in the calculation of our long service leave provision
at reporting date:
• weighted average projected increases in salaries;
• weighted average discount rate; and
• leave taking rat e.
Refer to note 19 for further details on the key management
judgement s used in the calculation of our long service leave provision.
(b) Workers’ compensation
We self insure our workers’ compensation liabilities. We take up a
provision for the present value of these estimated liabilities, based on
an actuarial review of the liability. This review includes assessing
actual accidents and estimating claims incurred but not reported.
Present values are calculated using appropriate rates based on the
risks specific to the liability with similar due dates.
Cert ain controlled entities do not self insure, but pay annual
premiums to third party insurance companies for their workers’
compensation liabilities.
(c) Redundancy and restructuring costs
We recognise a provision for redundancy costs when a detailed formal
plan for the redundancies has been developed and a valid expectat ion
has been created that the redundancies will be carried out in respect
of those employees likely to be affected.
We recognise a provision for restructuring when a detailed formal
plan has been approved and we have raised a valid expectation in
those affected by the restructuring that the restructuring will be
carried out.
2.16 Share capital
Issued and paid up capital is recognised at the fair value of the
consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity, net of tax, as a reduction of the share
proceeds received.
Where we undertake a share buy-back, contributed equity is reduced
in accordance with the structure of the buy-back arrangement. Costs
associated with the buy-back, net of tax, are also deducted from
cont ributed equity. We also record the purchase of Telstra Entity
shares by our employee share plan trusts as a reduction in share
capital.
Share based remuneration associat ed with our employee share plans
is recognised as additional share capit al. Non-recourse loans
provided to employees to participate in these employee share plans
are recorded as a reduction in share capital.
Refer to note 2.21 for further details regarding our accounting for
employee share plans.
2.17 Revenue recognition
Sales revenue
Our categories of sales revenue are recorded after deducting sales
returns, trade allowances, discounts, sales incent ives, duties and
taxes.
(a) Rendering of services
Revenue from the provision of our telecommunications services
includes telephone calls and other services and facilities provided,
such as internet and data.
We record revenue earned from:
• telephone calls on completion of the call; and
• other services generally at completion, or on a straight line basis
over the period of service provided, unless another method better
represents the stage of completion.
Installation and connection fee revenues are deferred and recognised
over the average estimated customer life. Incremental costs directly
related to these revenues are also deferred and amortised over the
customer contract life in accordance with note 2.12(d).
In relation to basic access installat ion and connection revenue, we
apply our management judgement to determine the estimated
customer contract life. Based on our reviews of historical information
and customer trends, we have determined that our average estimated
customer life is 5 years (2006: 5 years).
2. Summary of accounting policies (continued)