Telstra 2009 Annual Report Download - page 113

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.18 Taxation (continued)
(a) Income taxes (continued)
Deferred 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.
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 utilised.
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.
The Telstra Entity and its Australian resident wholly owned entities
have formed a tax consolidated group. The Telstra Entity, is the head
entity and recognises, in addition to its transactions, the current tax
liabilities and the deferred tax assets arising from unused tax losses
and tax credits for all entities in the tax consolidated 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 continues to be a separate
taxpayer.
Under our tax funding arrangements, amounts receivable (or
payable) recognised by the Telstra Entity for the current tax payable
(or receivable) assumed of our wholly owned entities are booked as
current. Amounts relating to unused tax losses and tax credits of the
wholly owned entities assumed by the Telstra Entity are recorded as
dividend revenue.
We offset deferred tax assets and deferred tax liabilities in the
statement of financial position 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 liabilities on a net basis. Our
deferred tax assets and deferred tax liabilities 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 entities, 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 item.
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 to us. The net amount of GST due,
but not paid, to the ATO is included under payables.
2.19 Earnings per share
Basic earnings per share 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 outstanding during the period.
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).
2.20 Post-employment benefits
(a) Defined contribution plans
Our commitment to defined contribution plans is limited to making
contributions in accordance with our minimum statutory
requirements. We do not have any legal or constructive obligation to
pay further contributions if the fund does not hold sufficient assets to
pay all employee benefits relating to current and past employee
services.
Contributions to defined contribution plans are recorded as an
expense in the income statement as the contributions become
payable. We recognise a liability when we are required to make future
payments as a result of employee services provided.
(b) Defined benefit plans
We currently sponsor a number of post-employment benefit plans. As
these plans have elements of both defined contribution and defined
benefit, these hybrid plans are treated as defined benefit plans.
At reporting date, where the fair value of the plan assets is less than
the present value of the defined benefit obligations, the net deficit is
recognised as a liability. If the fair value of the plan assets exceeds the
present value of the defined benefit obligations, the net surplus is
recognised as an asset. We recognise the asset as we have the ability
to control this surplus to generate future funds that are available to us
in the form of reductions in future contributions or as a cash refund.
Fair value is used to determine the value of the plan assets at reporting
date and is calculated by reference to the net market values of the
plan assets.
Defined benefit obligations are based on the expected future
payments required to settle the obligations arising from current and
past employee services. This obligation is influenced by many factors,
including final salaries and employee turnover. We engage qualified
actuaries to calculate the present value of the defined benefit
obligations. These obligations are measured gross of tax.
2. Summary of accounting policies (continued)