Accounting Financial Analysis of Telstra and TPG Telecom Ltd : Report

Added on - 01 Mar 2020

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Accounting FinancialAnalysis Assignment2017
Student Name: FARID AHMEDStudent ID: 216203438 Unit Code: MBA711Page1of14By FARID AHMEDTitle: Telstra and TPG Telecom Ltd.Unit code and unit name: MBA711 – Accounting and Analysis for ManagersName of the Unit Chair: Dr. Achinto RoyName of Lecturer: Dr. Achinto RoyStudent Name: Farid AhmedStudent ID: 216203438Due Date: 25 August, 2017 by 11:59 pm“I certify that the attached work is entirely my own, except where material quoted or paraphrasedis acknowledged in the text. I also declare that it has not been submitted for assessment in anyother unit or course.”1|P a g e
Student Name: FARID AHMEDStudent ID: 216203438 Unit Code: MBA711Page2of14ContentsDepreciation policy being followed by each company ...............................3Inventory Valuation methods of each company........................................5Analysis of Intangibles....................................................................7Recommendations.........................................................................10References...........................................................................................................112|P a g e
Student Name: FARID AHMEDStudent ID: 216203438 Unit Code: MBA711Page3of14Analysis and Explanation on Depreciation Policy:Telstra Group being the telecommunication company has the asset classes of Land and siteimprovements, telecommunication assets, building and other property, plant and equipment. It appliesstraight line method depreciation on all the asset classes over the estimated useful life of the respectiveassets. Depreciation is not charged on those assets which are still in construction and are not ready foruse. Depreciation is also calculated on leased assets over the term of the lease as per the latest AASB 16.The below table shows the useful life being considered in the company.[CITATION CIa17 \l 1033 ]As per this, building falls under the useful life classof 4-48 years, communication equipment’s under2-57 years and PPE under 4-20 years. These maychange depending upon the assessment of useful(Annual Report, Telstra, 2017, pp 97)life being made by the management each year based on the international standards beingfollowed in other telecommunication companies and in caser of communication equipment’s,technological obsolescence is also taken into consideration. In case the life needs to be changed, therevised depreciation is taken in the books on a prospective basis from the change year till the residuallife is left including the current year. The impact of this was $84 MN in 2016 as compared to $166Mn in2015. This can have a huge bearing on the financial profits of the year as the amount is material and it isone of the management estimates being taken into consideration here.[ CITATION Dow17 \l 1033 ]In case of TPG telecom limited, depreciation policy is almost the same as was in Telstra Group,here the asset classes are categorized under the category Network Infrastructure, Land and building andLeasehold improvements. Here again, depreciation is charged on the straight line basis over the periodof estimated useful life of the asset. Furthermore, depreciation will be charged on both the operatingand finance leased assets as per AASB 16.[ CITATION Cur17 \l 1033 ]The estimated life in case of TPG is estimated tobe 3-35 yrs. for Network infrastructure, 40 yearsstraightaway for building and 8 years forLeasehold(Annual Report, TPG Telecom, 2017, pp3|P a g e
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