Telstra 2007 Annual Report Download - page 132

Telstra Corporation Limited and controlled entities
129
Notes to the Financial Statements (continued)
2.18 Taxation (continued)
(a) Income taxes (continued)
We generally recognise deferred tax liabilities for all taxable
temporary differences, except to the extent that the deferred tax
liabilit y arises from:
• the initial recognition of goodwill; or
• the initial recognit ion of an asset or liability in a transaction that is
not a business combination and affects neither our account ing
profit or taxable income at the time of the transaction.
In respect of our investments in subsidiaries, jointly controlled and
associated entities, we recognise deferred tax liabilities for all taxable
temporary differences, except where we are able to control the timing
of our temporary difference reversal and it is probable that the
temporary difference will not reverse in the foreseeable future.
Subject to the exceptions described above, we generally recognise
deferred tax assets for all deductible temporary differences and for
the carry forward of unused tax losses and tax credits. These tax
assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry forward of unused tax losses and tax credits
can be utilised.
In respect of our investments in subsidiaries, jointly controlled and
associated entities, we recognise deferred tax assets for all deductible
temporary differences provided it is probable that our temporary
differences will reverse in the future and taxable profit will be
available against which our temporary differences can be utilised.
The carrying amount of our deferred tax assets is reviewed at each
reporting date. We reduce the carrying amount to the extent that it is
no longer probable that sufficient taxable profit will be available to
allow the benefit of part or the entire deferred tax asset to be ut ilised.
At each reporting date, we subsequently reassess our unrecognised
deferred tax assets to determine whether it has become probable that
future taxable profit will allow this deferred tax asset to be recovered.
Our current and deferred tax is recognised as an expense in the income
statement, except when it relates to items directly debited or credited
to equit y, in which case our current and deferred tax is also recognised
directly in equity.
The Telstra Entity and its Australian resident wholly owned entities
elected to form a tax consolidated group from 1 July 2002. The Telstra
Entity, as the head entity in the tax consolidated group, recognises in
addit ion to its transactions, t he current tax liabilities and the deferred
tax assets arising from unused tax losses and tax credits for all entit ies
in the group. The Telstra Entity and the entities in the tax
consolidated group account for their own current tax expense and
deferred tax amounts arising from temporary differences. These tax
amounts are measured as if each entity in the tax consolidated group
cont inues to be a separate taxpayer within the group.
Under our tax funding arrangements, amounts receivable recognised
by the Telstra Entity for the current tax payable assumed of our
wholly owned entities are booked as a current receivable. Amounts
payable recognised by the Telstra Ent ity for the current tax receivable
assumed of our wholly owned entities are booked as a current
payable. Amounts relating to unused tax losses and tax credits of the
wholly owned ent ities assumed by the Telstra Entity are recorded as
dividend revenue.
We offset deferred tax assets and deferred tax liabilities in the balance
sheet where they relate to income taxes levied by the same taxation
authority and to the extent that we intend to settle our current tax
assets and liabilit ies on a net basis. Our deferred tax assets and
deferred tax liabilit ies are netted within the tax consolidated group, as
these deferred tax balances relate to the same taxation authority. We
do not net deferred tax balances between controlled ent ities, apart
from those within the tax consolidated group.
(b) Goods and Services Tax (GST) (including other value added taxes)
We record our revenue, expenses and assets net of any applicable
goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the Australian Taxation Office (ATO).
In these circumstances the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense it em.
Receivables and payables balances include GST where we have either
included GST in our price charged to customers or a supplier has
included GST in their price charged t o us. The net amount of GST due,
but not paid, to the ATO is included under payables.
2.19 Earnings per share
(a) Basic earnings per share
Basic earnings per share (EPS) is determined by dividing the profit
attributable to ordinary shareholders after tax, excluding any costs of
servicing equity other than ordinary shares, by the weighted average
number of ordinary shares out standing during the period.
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the profit
attributable to ordinary shareholders after tax by the weighted
average number of ordinary shares outstanding during the period
(adjusted for the effects of the instruments in the Telstra Growthshare
Trust and the Telstra Employee Share Ownership Plans).
2. Summary of accounting policies (continued)