Telstra 2010 Annual Report Download - page 108

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.18 Taxation (continued)
(a) Income taxes (continued)
In respect of our investments in subsidiaries, jointly controlled and
associated entities, we recognise deferred tax liabilities for all
taxable temporary differences, except where we are able to control
the timing of our temporary difference reversal and it is probable
that the temporary difference will not reverse in the foreseeable
future.
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.
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)