Telstra 2015 Annual Report Download - page 81

Telstra Corporation Limited and controlled entities 79
Notes to the Financial Statements (continued)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, ASSUMPTIONS AND
JUDGEMENTS (continued)
_Telstra Financial Report 2015
2.1 Changes in accounting policy (continued)
(a) Financial Instruments: classification and measurement of
financial assets and financial liabilities and hedge accounting
(AASB 9 (2013)) (continued)
(i) Changes to classification and measurement of financial
assets and financial liabilities (continued)
Impact of changes (continued)
The following table summarises the impact on the classification
and measurement of our financial assets as at 1 July 2014:
For more details on the classification of financial assets see note
17.
(ii) Changes to hedge accounting
AASB 9 (2013) aligns hedge accounting more closely with common
risk management practices. Hedge ineffectiveness will continue
to be recognised in profit or loss. An entity is still required to
prepare contemporaneous documentation; however, the
information to be documented under AASB 9 (2013) differs.
The following summarises the key changes:
• risk components that are separately identifiable and reliably
measurable will be eligible as hedged items, including non-
financial items
• effectiveness measurement testing is required only on a
prospective basis and new hedge effectiveness criteria include
existence of an economic relationship between the hedged item
and the hedging instrument
• certain requirements must be met for discontinuing a hedge
relationship. Changes to the hedge relationship may result in
rebalancing of the hedge ratio rather than de-designation
• hedging of groups of net positions is permitted subject to
certain criteria.
The accounting and presentation requirements for hedge
accounting remain largely unchanged, however additional
disclosures are required under the new standard.
Hedge relationships
Transactions previously de-designated from fair value hedge
relationships relating to a portion of our borrowing portfolio have
been re-instated in fair value hedges with effect from 1 July 2014.
These transactions were and continue to be in effective economic
relationships based on contractual amounts and cash flows over
the life of the transaction, however previously they did not satisfy
the requirements for hedge accounting. We have also redefined
our hedge relationships relating to the portion of our offshore
borrowing portfolio in fair value hedges to exclude borrowing
margins from the hedged risk. This has resulted in de-designating
our existing fair value hedge relationships and re-designating
from 1 July 2014 without any change to the underlying economic
objective of the hedging, i.e. to convert foreign currency
borrowings to floating Australian dollar borrowings. The above
changes did not result in any market transactions.
Foreign currency basis spreads and forward element of forward
contracts
We have the option to exclude the forward element of forward
contracts and the foreign currency basis spreads of financial
instruments that hedge transaction related or time-period related
hedged items.
We have elected to separate and exclude foreign currency basis
spreads from financial instruments that are designated hedging
instruments of our foreign currency overseas borrowings. The
cumulative change in fair value of the foreign currency basis
spreads is recognised in a separate component of equity. Cross
currency basis spreads are included in interest on borrowings in
the income statement over the life of the borrowing.
Telstra Group
As at 1 July 2014
Reported Restated
Presented in statement of
financial position Financial asset AASB 139 AASB 9 (2013) $m $m
Cash and cash equivalents Bank deposits and negotiable certificates of
deposit Available-for-sale Amortised cost 5,222 5,222
Trade and other
receivables – current Loans and receivables - current Loans and receivables Amortised cost 4,172 4,172
Trade and other
receivables – non current Loans and receivables - non current Loans and receivables Amortised cost 973 973
Investments other – non
current Equity investments not held for trading Available-for-sale Fair value through profit or
loss / other comprehensive
income 127 127