Telstra 2015 Annual Report Download - page 102

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Notes to the Financial Statements (continued)
NOTE 7. EXPENSES (continued)
100 Telstra Corporation Limited and controlled entities
(a) We have recognised a $5 million impairment loss relating to
intangible assets (2014: $13 million relating to goodwill and other
intangible assets). Refer to note 14 for further details.
(b) During the financial year 2014, we recognised $111 million net
foreign currency translation losses, including a $98 million foreign
currency translation reserve written off as a result of the Octave
Group entering into voluntary liquidation.
(c) On adoption of AASB 9 (2013) “Financial Instruments” we de-
designated existing fair value hedge relationships and re-
designated them in new fair value hedge relationships to exclude
borrowing margins from the hedged risk. Also, transactions
previously de-designated from fair value hedge relationships
relating to a portion of our borrowings portfolio have been
reinstated in fair value hedges with effect from 1 July 2014. The
resulting cumulative fair value adjustment as at the date of de-
designation is unwound and amortised to the income statement
and included within other finance costs over the remaining life of
the borrowings. There has been no change to the underlying
economic objective of this hedging which is to convert fixed rate
borrowings to floating Australian dollar borrowings.
The current year revaluation impacts of our offshore debt portfolio
and associated hedges that are in fair value hedges have been
reduced. This is partly due to changes implemented in the way we
designate fair value hedges for accounting purposes and the
adoption of AASB 9 (2013), which allows a component of Telstra’s
borrowing margin associated with cross currency swaps to be
treated as a cost of hedging and deferred to equity. Residual
volatility from market movements has also not been significant.
In general, it is our intention to hold our borrowings and associated
derivative instruments to maturity. Accordingly, unrealised
revaluation gains and losses will be recognised in finance costs
over the life of the financial instrument and for each transaction
will progressively unwind to nil at maturity.
(d) Interest on borrowings has been capitalised using a
capitalisation rate of 6.2 per cent (2014: 6.2 per cent).