Telstra 2010 Annual Report Download - page 107

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.17 Revenue recognition (continued)
(b) Sale of goods (continued)
Generally we record the full gross amount of sales proceeds as
revenue, however if we are acting as an agent under a sales
arrangement, we record the revenue on a net basis, being the
gross amount billed less the amount paid to the supplier. We
review the facts and circumstances of each sales arrangement to
determine if we are an agent or principal under the sale
arrangement.
(c) Rent of network facilities
We earn rent mainly from access to retail and wholesale fixed and
mobile networks and from the rent of dedicated lines, customer
equipment, property, plant and equipment and other facilities. The
revenue from providing access to the network is recorded on an
accrual basis over the rental period.
(d) Construction contracts
We record construction revenue on a percentage of contract
completion basis. The percentage of completion of contracts is
calculated based on estimated costs to complete the contract.
Our construction contracts are classified according to their type.
There are two types of construction contracts, these being material
intensive and short duration. Revenue is recognised on a
percentage of completion basis using the appropriate measures as
follows:
• for material intensive projects (actual costs/ planned costs) x
planned revenue; and
• for short duration projects (which are those that are expected to
be completed within a month), revenues and costs are
recognised on completion.
(e) Advertising and directory services
Classified advertisements and display advertisements are
published on a daily, weekly and monthly basis for which revenues
are recognised at the time the advertisement is published.
All of our Yellow Pages and White Pages directory revenues are
recognised on delivery of the published directories to customers’
premises. Revenue from online directories is recognised over the
life of service agreements, which is on average one year. Voice
directory revenues are recognised at the time of providing the
service to customers.
(f) Royalties
Royalty revenue is recognised on an accrual basis in accordance
with the substance of the relevant agreements.
(g) Interest revenue
We record interest revenue on an accruals basis. For financial
assets, interest revenue is determined by the effective yield on the
instrument.
(h) Revenue arrangements with multiple deliverables
Where two or more revenue-generating activities or deliverables
are sold under a single arrangement, each deliverable that is
considered to be a separate unit of accounting is accounted for
separately. When the deliverables in a multiple deliverable
arrangement are not considered to be separate units of accounting,
the arrangement is accounted for as a single unit.
We allocate the consideration from the revenue arrangement to its
separate units based on the relative fair values of each unit. If the
fair value of the delivered item is not available, then revenue is
allocated based on the difference between the total arrangement
consideration and the fair value of the undelivered item. The
revenue allocated to each unit is then recognised in accordance
with our revenue recognition policies described above.
2.18 Taxation
(a) Income taxes
Our income tax expense represents the sum of current tax and
deferred tax. Current tax is calculated on accounting profit after
allowing for non-taxable and non-deductible items based on the
amount expected to be paid to taxation authorities on taxable profit
for the period. Deferred tax is calculated at the tax rates that are
expected to apply to the period when the asset is realised or the
liability is settled. Both our current tax and deferred tax are
calculated using tax rates that have been enacted or substantively
enacted at reporting date.
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 other comprehensive income or equity, in which case
our current and deferred tax is also recognised directly in other
comprehensive income or equity.
We apply the balance sheet liability method for calculating our
deferred tax. Deferred tax is the expected tax payable or
recoverable on all taxable and deductible temporary differences
determined with reference to the tax bases of assets and liabilities
and their carrying amount for financial reporting purposes as at the
reporting date.
We generally recognise deferred tax liabilities for all taxable
temporary differences, except to the extent that the deferred tax
liability arises from:
• the initial recognition of goodwill; or
• the initial recognition of an asset or liability in a transaction that
is not a business combination and affects neither our accounting
profit or taxable income at the time of the transaction.
2. Summary of accounting policies (continued)