Telstra 2016 Annual Report Download - page 111

109
Section Title | Telstra Annual Report 2016
Notes to the financial statements (continued) Telstra Financial Report 2016
Section 4. Our capital and risk management (continued)
Telstra Corporation Limited and controlled entities | 109
4.2 Equity (continued)
4.2.2 Reserves (continued)
During the financial year 2016 due to issue of shares to employees,
we decreased our ownership of Autohome Inc. from 54.3 per cent at
30 June 2015 to 53.9 per cent prior to Autohome Inc. disposal.
On 23 June 2016, we disposed of 47.4 per cent of our 53.9 per cent
shareholding in Autohome Inc. and its controlled entities. On
disposal, we transferred $323 million held in our general reserve to
retained profits and $78 million of foreign currency translation
reserve to other comprehensive income. Refer to note 6.4 for further
details.
In the prior financial year, we decreased our ownership percentage of
Autohome Inc. shares from 63.2 per cent to 54.3 per cent due to
Autohome Inc.’s share buy-back of $333 million, subsequent initial
public offering of $116 million and employee share issues. None of
these transactions resulted in a change in control; therefore their
impact has been recognised in the general reserve in our equity.
Table below details the nature and purpose of our reserve balances.
4.2.3 Recognition and measurement
Issued and paid up capital is recognised at the fair value of the
consideration received by the Telstra Entity.
Any transaction costs arising on the issue of ordinary shares are
recognised directly in equity, net of income tax, as a reduction of the
share proceeds received.
Where we undertake a share buy-back, contributed equity is reduced
in accordance with the structure of the buy-back arrangement. Costs
associated with the buy-back, net of income tax, are also deducted
from contributed equity.
Net services received under employee share plans (i.e. share-based
payments) increase our share capital balance. Non-recourse loans
provided to employees to participate in these employee share plans
are recorded as a reduction in share capital.
We also record the purchase of Telstra Entity shares underpinning
our employee share plan as a reduction in share capital.
Reserve Nature and purpose
Foreign currency
translation reserve
Used to record exchange differences arising from the conversion of the non-Australian controlled
entities’ financial statements into Australian dollars. This reserve is also used to record our percentage
share of exchange differences arising from our equity accounted non-Australian investments in joint
ventures and associated entities.
Cash flow hedging
reserve
Represents the effective portion of gains or losses on remeasuring the fair value of hedge instruments,
where a hedge qualifies for hedge accounting.
Foreign currency basis
spread reserve
Used to record changes in the fair value of our derivative financial instruments attributable to
movements in foreign currency basis spread. Currency basis is included in interest on borrowings in the
income statement over the life of the borrowing.
Fair value of equity
instruments reserve
Represents changes in fair value of equity instruments we have elected to measure at fair value through
other comprehensive income.
General reserve Represents other items we have taken directly to equity.