Telstra 2009 Annual Report Download - page 127

Telstra Corporation Limited and controlled entities
112
Notes to the Financial Statements (continued)
(ii) A combination of the following factors has resulted in a net
unrealised gain of $61 million (2008: $171 million) on our Australian
dollar pay floating interest rate positions relating to the effective
component of our fair value hedges:
• An increase in Telstra’s long term borrowing margins;
• A reduction in base market rates;
• A reduction in the number of future interest flows as we approach
maturity of the financial instrument; and
• Discount factor unwinding as the time to maturity shortens.
It is important to note that our intention is to hold our borrowings and
associated derivative instruments to maturity and accordingly
revaluation gains and losses will be recognised in our finance costs
over the life of the financial instrument and will progressively unwind
out to nil at maturity.
Refer to note 18 for further details regarding our hedging strategies.
(iii) We have recorded a gain of $222 million (2008: $40 million loss)
associated with financial instruments that are either not in a
designated hedge relationship or were previously designated in a
hedge relationship and no longer qualify for hedge accounting.
Notwithstanding that these borrowings and the related derivative
instruments do not satisfy the requirements for hedge accounting,
they are in effective economic relationships based on contractual face
value amounts and cash flows over the life of the transaction. Refer to
note 18 for further details.
The $222 million gain comprises the following movements:
• The valuation impacts described at (ii) above for fair value hedges;
• The different measurement bases of the borrowings (measured at
amortised cost) and the associated derivatives (measured at fair
value), resulting in some disparity attributable to the discounting
impact of future cash flows in the derivatives; and
• A net loss of $20 million for the amortisation impact of unwinding
previously recognised gains on those borrowings that were de-
designated from hedge relationships.
7. Profit from continuing operations (continued)
Telstra Group Telstra Entity
Year ended 30 June Year ended 30 June
2009 2008 2009 2008
Note $m $m $m $m
(a) Profit before income tax expense has been calculated
after charging/(crediting) the following items: (continued)
Depreciation of property, plant and equipment
- general purpose buildings including leasehold improvements . . . . . . . . . . . . .13 93 69 76 59
- communication assets including leasehold improvements . . . . . . . . . . . . . . . .13 3,296 3,203 2,891 2,878
- communication assets under finance lease . . . . . . . . . . . . . . . . . . . . . . . . .13 46 59 46 59
- other plant, equipment and motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . .13 189 155 144 110
3,624 3,486 3,157 3,106
Amortisation of intangible assets
- software assets developed for internal use. . . . . . . . . . . . . . . . . . . . . . . . . .14 633 584 534 469
- patents and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 11--
- licences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 60 57 18 18
- brandnames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 17 13 --
- customer bases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 53 45 --
- deferred expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2428 28
766 704 580 515
4,390 4,190 3,737 3,621
Finance costs
- interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 1,208 1,248 1,214 1,259
- unwinding of discount on liabilities recognised at present value . . . . . . . . . . . . . 23 24 39
- gain on fair value hedges - effective (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (171) (61) (171)
- gain on cash flow hedges - ineffective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (4) (1) (4)
- (gain)/loss on transactions not in a designated hedge relationship (iii) . . . . . . . . . (77) 27 (77) 27
- (gain)/loss on transactions de-designated from fair value hedge relationships (iii) . . (145) 13 (145) 13
- other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 20 19
967 1,158 953 1,152
Research and development
Research and development expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8989