Telstra 2009 Annual Report Download - page 104

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.1 Changes in accounting policies
The following accounting policy changes occurred during the year
ended 30 June 2009.
(a) Transfer of Assets from Customers
AASB Interpretation 18: “Transfer of Assets from Customers” was
issued by the AASB in March 2009 and provides guidance in relation to
the accounting for assets that are received from customers, either in
the form of direct transfer of asset ownership or cash contributions
received towards the construction or purchase of an asset. The
interpretation outlines under what circumstances the transfer may be
recognised as revenue upfront or when it must be deferred over the
relevant service period.
Telstra receives contributions from a number of customers towards
the construction of network assets, including construction in remote
areas or where it is uneconomical for Telstra to incur the full capital
cost. The level of contribution from the customer varies depending on
the circumstances, but includes both full and partial contributions.
Our previous accounting policy required these customer contributions
to be deferred over the relevant service period.
We have elected to early adopt and apply AASB Interpretation 18 in
our financial report for the year ended 30 June 2009. As a result, where
the network construction does not result in additional obligations
being imposed on Telstra to provide additional services, then the
customer contribution is recognised as revenue when the construction
is complete and the asset is ready for use.
In addition to the above change in accounting policy, we note the
following new accounting standards and interpretations that are
applicable for the year ended 30 June 2009.
• AASB Interpretation 12: “Service Concession Arrangements”;
• AASB Interpretation 14: “The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interpretation”;
• AASB 2008-10: "Amendments to Australian Accounting Standards -
Reclassification of Financial Assets"; and
• AASB 2008-12: “Amendments to Australian Accounting Standards -
Reclassification of Financial Assets - Effective Date and Transition".
These new accounting standards and interpretations, including
interpretation 18, do not have any material impact on our financial
results.
2.2 Principles of consolidation
The consolidated financial report includes the assets and liabilities of
the Telstra Entity and its controlled entities as a whole as at the end of
the year and the consolidated results and cash flows for the year. The
effect of all intragroup transactions and balances are eliminated in
full from our consolidated financial statements.
An entity is considered to be a controlled entity where we are able to
dominate decision making, directly or indirectly, relating to the
financial and operating policies of that entity so as to obtain benefits
from its activities.
Where we do not control an entity for the entire year, results and cash
flows for those entities are only included from the date on which
control commences, or up until the date on which there is a loss of
control.
Our consolidated retained profits include retained profits/
accumulated losses of controlled entities from the time they became
a controlled entity until control ceases. Minority interests in the
results and equity of controlled entities are shown separately in our
consolidated income statement and consolidated statement of
financial position.
We account for the acquisition of our controlled entities using the
purchase method of accounting. This involves recognising the
acquiree’s identifiable assets, liabilities and contingent liabilities at
their fair value at the date of acquisition. Any excess of the cost of
acquisition over our interest in the fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities is recognised as
goodwill. On initial acquisition, we apply management judgement to
determine the appropriate allocation of purchase consideration to the
assets being acquired, including goodwill and identifiable intangible
assets.
The financial statements of controlled entities are prepared for the
same reporting period as the Telstra Entity, using consistent
accounting policies. Adjustments are made to bring into line any
dissimilar accounting policies.
2.3 Foreign currency translation
(a) Transactions and balances
Foreign currency transactions are converted into the relevant
functional currency at market exchange rates applicable at the date
of the transactions. Amounts payable or receivable in foreign
currencies at balance date are converted into the relevant functional
currency at market exchange rates at balance date. Any currency
translation gains and losses that arise are included in our income
statement. Where we enter into a hedge for a specific expenditure
commitment or for the construction of an asset, hedging gains and
losses are accumulated in equity over the period of the hedge and are
transferred to the carrying value of the asset upon completion, or
included in the income statement at the same time as the discharge of
the expenditure commitment.
The consolidated financial statements are presented in Australian
dollars, which is the functional and presentation currency of Telstra
Corporation Limited.
2. Summary of accounting policies