Telstra 2011 Annual Report Download - page 112

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
2.12 Intangible assets (continued)
(b) Internally generated intangible assets
Research costs are recorded as an expense as incurred.
Management judgement is required to determine whether to
capitalise development costs. Development costs are capitalised if
the project is technically and commercially feasible, we are able to
use or sell the asset, and we have sufficient resources and intent
to complete the development.
Software assets
We record direct costs associated with the development of business
software for internal use as software assets if the development
costs satisfy the criteria for capitalisation described above.
Costs included in software assets developed for internal use are:
• external direct costs of materials and services consumed; and
• payroll and direct payroll-related costs for employees (including
contractors) directly associated with the project.
We capitalise borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset. In
fiscal 2011, we revised the methodology for calculating our
capitalised interest adjustment to reflect our new process for
identifying capital expenditure related to incomplete projects. This
change has decreased the amount of capitalised interest that would
have been recorded in our software assets developed for internal
use by $15 million for fiscal 2011.
We review our software assets and software assets under
development on a regular basis to ensure the assets are still in use
and projects are still expected to be completed. Refer to note 7 for
details of impairment losses recognised on our intangible assets.
Software assets developed for internal use have a finite life and are
amortised on a straight line basis over their useful lives to us.
Amortisation commences once the software is ready for use.
(c) Acquired intangible assets
We acquire other intangible assets either as part of a business
combination or through separate acquisition. Intangible assets
acquired in a business combination are recorded at their fair value
at the date of acquisition and recognised separately from goodwill.
We apply management judgement to determine the appropriate
fair value of identifiable intangible assets.
Intangible assets that are considered to have a finite life are
amortised on a straight line basis over the period of expected
benefit. Intangible assets that are considered to have an indefinite
life are not amortised but tested for impairment in accordance with
note 2.9 on an annual basis, or where an indication of impairment
exists.
(d) Deferred expenditure
Deferred expenditure mainly includes costs incurred for basic
access installation and connection fees for in place and new
services, and direct incremental costs of establishing a customer
contract.
Significant items of expenditure are deferred to the extent that
they are recoverable from future revenue and will contribute to our
future earning capacity. Any costs in excess of future revenue are
recognised immediately in the income statement. Handset
subsidies are considered to be separate units of accounting and
expensed as incurred.
We amortise deferred expenditure over the average period in which
the related benefits are expected to be realised.
(e) Amortisation
The weighted average amortisation periods of our identifiable
intangible assets are as follows:
The service lives of our identifiable intangible assets are reviewed
each year. Any reassessment of service lives in a particular year
will affect the amortisation expense through to the end of the
reassessed useful life for both that current year and future years.
The net effect of the reassessment for fiscal 2011 was a decrease
in our amortisation expense of $105 million (2010: $49 million
decrease) for the Telstra Group.
In relation to acquired intangible assets, we apply management
judgement to determine the amortisation period based on the
expected useful lives of the respective assets. In some cases, the
useful lives of certain acquired intangible assets are supported by
external valuation advice on acquisition. In addition, we apply
management judgement to assess annually, the indefinite useful
life assumption applied to certain acquired intangible assets.
2. Summary of significant accounting policies, estimates, assumptions and
judgements (continued)
Telstra Group
As at 30 June
2011 2010
Identifiable intangible assets
Expected
benefit
(years)
Expected
benefit
(years)
Software assets . . . . . . . . . . 97
Patents and trademarks . . . . . . 99
Mastheads . . . . . . . . . . . . 55
Licences . . . . . . . . . . . . . 13 13
Brandnames. . . . . . . . . . . . 18 19
Customer bases . . . . . . . . . . 10 10
Deferred expenditure . . . . . . . 44