Telstra 2007 Annual Report Download - page 200

Telstra Corporation Limited and controlled entities
197
Notes to the Financial Statements (continued)
(f) Principal actuarial assumptions
We used the following major assumptions to determine our defined
benefit plan expense for the year ended 30 June:
We used the following major assumptions to determine our defined
benefit obligations at 30 June:
(i) The expected rate of return on plan assets has been based on
historical and fut ure expectations of returns for each of the major
cat egories of asset classes over the subsequent 10 year period, or
longer. Estimates are based on a combination of factors including the
current market outlook for interest rat es, inflation, earnings growth
and currency strength. To determine the aggregate return, the
expected future return of each plan asset class is weight ed according
to the strategic asset allocation of total plan assets.
Our assumption for the expected long-term rate of return on plan
assets for fiscal 2008 is 8% for Telstra Super and 7.4% for HK CSL
Retirement Scheme.
(ii) The present value of our defined benefit obligations is determined
by discounting the est imated future cash outflows using a discount
rate based on government guarant eed securities with similar due
dates to these expected cash flows.
For Telstra Super we have used the 10-year Australian government
bond rate as it has the closest term that one could get from the
Australian bond market to match the term of the defined benefit
obligations. We have not made any adjustment to reflect t he
difference between the term of the bonds and the estimated term of
liabilities due t o the observation that the current government bond
yield curve is reasonably flat implying that the yields from
government bonds with a term less than 10 years are expected to be
very similar to the extrapolated bond yields with a term of 12 to 13
years.
Based on industry practice in Australia, we have adjusted the discount
rate for Telstra Super to take into account future investment tax of the
fund which is considered part of the ultimate cost to settle the
obligation.
For the HK CSL Retirement Scheme we have extrapolated the 7 year
and 10 year yields of the Hong Kong Exchange Fund Not es t o 16 years
to match the term of the defined benefit obligations.
(iii) The salary inflation rate has been assumed to be 3.5% for fiscal
2008. For subsequent years, a rat e of 4% which is reflective of our long
term expectation for salary increases has been adopt ed.
28. Post employment benefits (continued)
Telstra Super HK CSL Retirement Scheme
Year ended 30 June Year ended 30 June
2007 2006 2007 2006
%%%%
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 4.7 5.0 3.7
Expected rate of return on plan assets (i). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0 7.5 6.8 6.8
Expected rate of increase in future salaries . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 4.0 4.0 2.5
Telstra Super HK CSL Retirement Scheme
Year ended 30 June Year ended 30 June
2007 2006 2007 2006
%%%%
Discount rate (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 5.1 4.75 5.0
Expected rate of increase in future salaries (iii) . . . . . . . . . . . . . . . . . . . . . . . 3.5 - 4.0 3.0 4.0 4.0