Telstra 2016 Annual Report Download - page 114

112
Notes to the financial statements (continued)
Section 4. Our capital and risk management (continued)
112 | Telstra Corporation Limited and controlled entities
4.3 Capital management (continued)
4.3.2 Borrowings (continued)
Generally all our borrowings are unsecured, except for finance leases
as noted above. No assets are pledged as security for our borrowings.
All our borrowings are interest bearing, except for some loans from
wholly owned controlled entities and other organisations.
The notional (face) value of our total borrowings is $16,874 million
(2015:$15,316 million).
(a) Maturity of borrowings
We reduce refinancing risk by ensuring that our borrowings mature
at different periods. Refer to Table G in note 4.4 which shows the
repayment profile of our borrowings. The notional values disclosed
represent values repayable at contractual maturities.
(b) Recognition and measurement
(i) Borrowings
Borrowings are:
• recognised initially on the trade date (the date on which we
become a party to the contractual provisions of the instrument)
• derecognised when our contractual obligations are discharged or
cancelled or expired
• classified as non-current liabilities except for those that mature in
less than 12 months from the reporting date, which are classified
as current liabilities.
(ii) Finance leases
Refer to note 3.1.2 for accounting policy.
(c) Finance costs
Interest on our borrowings is shown in Table D. Amounts disclosed
are net amounts after offsetting interest income and interest
expense on associated derivative instruments. Our hedging
strategies are discussed further in note 4.3.3.
Borrowings Treasury policy and purpose
Offshore
borrowings
Unless designated as a hedge of a foreign
controlled entity, our policy is to swap
foreign currency denominated borrowings
into Australian dollars using cross currency
and interest rate swaps. Refer to note 4.4 for
further details.
Commercial
paper
Commercial paper is used principally to
support working capital and short-term
liquidity. Commercial paper will continue to
be supported by a combination of liquid
financial assets, and access to committed
bank facilities.
Finance
leases
Finance lease balances are secured as the
rights to the leased assets transfer to the
lessor in the event of a default by us.
Recognition and measurement
Initial
recognition
and
measurement
All loans and borrowings are initially
recorded at fair value, which typically
reflects the proceeds received, net of
directly attributable transaction costs.
Subsequent
measurement
After initial recognition, all interest
bearing loans and borrowings are stated
at amortised cost, using the effective
interest method. Any difference between
proceeds received net of direct
transaction costs and the amount payable
at maturity is recognised over the term of
the borrowing using the effective interest
method.
Loans or borrowings that are in
designated fair value hedge relationships
are adjusted for fair value movements
attributable to the hedged risk. Refer note
4.3.3 for our hedging policies.
Impact to the
income
statement
Gains or losses are recognised in the
income statement when the loan or
borrowing is derecognised.
Table D Year ended 30 June
Telstra Group 2016 2015
$m $m
Interest expense on
Domestic borrowings 138 151
Offshore borrowings 666 670
Bank loans 17 2
Commercial paper 27 16
Finance leases 24 21
Other 12 15
Total interest on borrowings 884 875