Analysis on Corporate Accounting - Assignment

This report is based on the "elements of financial performance". We will discuss here the four objectives. The first objective of the report is to understand the nature of the business of the company and its composition. The second main objective of the report is to analyze the financial performance of the company in detail with regard to the items shown in the statement of the profit and loss account. The third main objective is to check whether the company has made the necessary compliance in regard to the relevant accounting standards or not in the preparation of the financial statements of Telstra. The fourth main objective is to analyze the applicability of the accounting standards in regard to the major head of the property plant and equipment including the intangibles.

CORPORATE ACCOUNTING
– ANALYSIS OF ANNUAL
REPORT

.
Contents
EXECUTIVE SUMMARY.................................................................................................................................3
INTRODUCTION...........................................................................................................................................3
DESCRIPTION OF COMPANY........................................................................................................................4
CORE BUSINESS.......................................................................................................................................4
INDUSTRY CHOSEN..................................................................................................................................5
INTERNAL AS WELL AS EXTERNAL FUNDING............................................................................................6
KEY ELEMENTS OF THE FINANCIAL PERFORMANCE.................................................................................6
EVENT OCCURRED AFTER REPORTING DATE...........................................................................................7
CHANGES IN ACCOUNTING POLICIES.......................................................................................................7
ASSETS – PPE AND INTANGIBLE...................................................................................................................7
PROPERTY PLANT AND EQUIPMENT........................................................................................................7
CARRYING AMOUNT............................................................................................................................8
ACCOUNTING POLICY..........................................................................................................................9
INTANGIBLES.........................................................................................................................................10
REPORTED IN ANNUAL REPORT AND THEIR COMPOSITION..............................................................10
RELEVANCE........................................................................................................................................11
ACCOUNTING POLICY........................................................................................................................12
IMPAIRMENT OF ASSETS.......................................................................................................................13
CONCLUSION AND RECOMMENDATION...................................................................................................13
REFERENCES..............................................................................................................................................14

EXECUTIVE SUMMARY
For every company it is necessary to assess the financial position and financial performance at
the relevant intervals of regular period. Secondly the financial statements shall be prepared with
transparency in the fair manner so that not only the management but also the users of the
financial statements can take the benefit of the same. The report has been framed with the
analysis of the financial statements of the selected company. The report has the four objectives.
The first objective of the report is to understand the nature of business of the company and its
composition. The second main objective of the report is to analyze the financial performance of
the company in detail with regard to the items shown in the statement of the profit and loss
account. The third main objective is to check whether the company has made the necessary
compliance in regard to the relevant accounting standards or not in the preparation of the
financial statements. The fourth main objective is to analyze the applicability of the accounting
standards in regard to the major head of the property plant and equipment including the
intangibles. With these objectives and the considerations the report has been prepared and has
been divided into proper headings and sub headings.
INTRODUCTION
Annual report of every company contains the financial statements along with the director’s
report and the independent auditor’s report of the company. Annual report gives an insight of the
working of the company in detail as to how the company is performing as well as working in the
industry and importantly it provides the detail of the major events that have been made in the
year under consideration which will have the material effect on the decision making power of the
users and the stakeholders of the company who uses the financial statements.
As the title suggest, the report has contained in detail the analysis of the financial statements of
the company as annexed in the annual report of the company. Also the company’s detail has
been discussed. For the purpose of furtherance of the report, the company – Telstra Corporation
Limited has been selected which is an ASX listed company and is from the given list and

accordingly the annual report for the year ending two thousand and sixteen has been selected.
The report has been divided into different headings and sub headings wherever required. At first
the company’s introduction has been given regarding to the core business of the company and
how the company is carrying out its activities and the operations. While discussing the
operations, the industry has been mentioned within which the company is operating and the
competitors of the company has been discussed with respect to their growth and other factors.
Then the financial structure of the company has been analyzed with respect to the internal as well
as the external sources of the funding. Then the financial performance has been discussed as to
how the company has grown and how the performance of the company is. Then the light has
been thrown on the accounting policy of the company and whether any event has been reported
which has occurred after the reporting date.
After discussing about the company, the noncurrent assets have been detailed with regard to the
main head of the property plant and equipment and the intangibles. This major head has been
discussed with regard to the accounting policies adopted by the company and how the same has
been valued in the financial statements of the company.
The report has then ended with the appropriate conclusion and recommendation thereon.
DESCRIPTION OF COMPANY
The company that has been selected is the Telstra Corporation Limited. The company has been
incorporated in the year of nineteen hundred and seventy five and is listed in the stock exchange
of Australia. The company has its headquarters located in Melbourne, Australia.
CORE BUSINESS
The main business of the company is to build and operate the network of the telecommunications
and is engaged in providing of the entertainment products and the services which includes the
voice over phone, mobiles, television on the payment basis and etc. In accordance with the
annual report of the company, the company has majorly the four segments. First segment is
related to the retail business, second business is related to the global enterprise and services, third
segment is related to the operations and the fourth segment is referred to as the wholesale

business. The first segment deals with the service of providing of the products, services and the
solutions, the carrying out of the activity relating to inbound and outbound call centre and
provides the platform where the customers can do the online browsing as well as with the online
buying of products and services. The second segment is mainly to deal with the government
customers and enters into the contract accordingly. The third segment is related with the overall
operation of the Telstra networks as how the company operates and in this segment all the
service centre which helps in the conduct of the revenue generating activities are considered. The
fourth segment is related to the wholesale business of the company (Telstra Corporation Limited,
2016).
INDUSTRY CHOSEN
The industry which is related to the company is telecommunications. The industry is the growing
industry due to the fact of having the digital world and accordingly the telecommunications
sector has the important role in achieving the digital economy across the globe. The main
competitor of the company is Optus and Vodafone. Owing to competition, Telstra has invested
$5 billion in mobile network and with that the Optus has decided to invest $1 billion in

expanding the network and Vodafone has started the process of committing the resources for
evaluating fixed line products. Thus, the industry is growing.
INTERNAL AS WELL AS EXTERNAL FUNDING
The company has borrowed the funds externally from banks and financial institution and the
commercial paper and has obtained borrowings from the off shore countries.
The company has been funded internally from the retained profits amounting to $4231 million
and there has been no issue of shares rather there has been the buyback of shares.
KEY ELEMENTS OF THE FINANCIAL PERFORMANCE
In accordance with the annual report of the company, following are the key elements of financial
performance:
- EBITDA – The Company has $10466 million as earnings before interest tax depreciation
and amortization.

- Revenue - The revenue of $27060 of current year has been generated during the year as
compared to $26112 million of last year (Barth, 2013).
EVENT OCCURRED AFTER REPORTING DATE
No event has been occurred after the reporting date and hence no disclosure is required.
CHANGES IN ACCOUNTING POLICIES
Only one change has been made in the accounting policy. The company has adopted the new
accounting standard on Materiality – AASB 2015 with the withdrawal of AASB 1031 and that
too with effective from month of July of 2015. It had no impacts in the financial statements and
there had been no other change in the financial statements of the company.
ASSETS – PPE AND INTANGIBLE
For the purpose of report, PPE and intangibles has been analyzed from the annual report for the
year ended 30th June, 2016 which has been discussed in detail:-
PROPERTY PLANT AND EQUIPMENT

As per AASB 116, Property, Plant and Equipment are the noncurrent assets which the company
owned from investment made. It shows under the no current section of consolidated balance
sheet which shows the financial position of the company. It includes land, buildings, office
equipments, machinery, vehicles, fixtures and furniture which are used in business of the
company.
CARRYING AMOUNT
Accounting principles defined that PPE is shown at carrying amount in the financial statements
of the company on particular date. Carrying amount is the amount at which asset is shown in the
balance sheet on reporting date (Goodwin, 2014).
In the Telstra Company’s annual, Property, Plant and Equipment include Land and site
improvements, Buildings, Communication Assets, Other Plant, Equipment and Motor Vehicles.
From the annual report note no 3.1 shows Total carrying amount of Property, Plant and
Equipment is $ 20581 million as on reporting date on 30th June, 2016 (Company Official
Website, 2016). The details of carrying amount according the class of item is as follows:-
Class of PPE Carrying Amount ($ m )
Land and Site Improvements 52
Buildings 621
Communication Assets 19429
Other Plant, Equipment and Motor Vehicles 479
Total Carrying Amount 20581

ACCOUNTING POLICY
Accounting policy are the specific rules, procedures and principles which company and its
management will implement and they are used for the purpose of preparation of financial
statements which can provide information to different stakeholders of the company. It includes
all the procedures, methods and presentation measure with the help of which accounting item has
been presented in financial statements (Assets, 2015).
As per the annual report of the company, in Note no 3.1.2, the recognition and measurement of
PPE of Telstra has been defined showing the accounting policy adopted by company to present
PPE in true and fair manner. PPE including construction process of the company has been valued
at cost less accumulated depreciation and accumulated impairment. And costs is consider at
value which includes purchase price and others costs which can be directly attributed to asset for
bringing it to the location where it will be used after fulfilling the required conditions of its

intended use. Borrowing costs which can be directly transferred to construction, acquisition and
production of asset are also included in the cost of asset and capitalized accordingly.
INTANGIBLES
As per IAS 38/AASB 138, intangibles are the assets which does have physical existence and
providing future monetary economic benefits. It includes patents, copyrights, trademark,
corporate intellectual rights, goodwill, brand recognition etc (Abdul-Shukor, 2016).
REPORTED IN ANNUAL REPORT AND THEIR COMPOSITION
The intangibles are reported in company annual report for the period ending 30th June, 2016 at a
book value of $ 9229 million which is reported in Note No 3.2. The intangibles reported in the
company include Goodwill and other intangibles which also includes Software, Licenses and

Deferred Expenses. Following are components of Intangibles reported in company balance sheet
as on 30th June, 2016:-
Type of Intangible Carrying Amount ($ m )
Goodwill 1346
Software Assets 4660
Licenses 1869
Deferred Expenditure 1143
Other Intangibles 211
Total Carrying Amount of Intangibles 9229
RELEVANCE
The company is
in the business
of
Telecommunications which required having permissions, licenses, software to run its operations
from Government agencies. The intangibles of the company plays important role in running the
business because they provide the plat form permissions and other facilities which can be used
by company to enhanced its business. The Goodwill acquired in business combination helps in
creation of synergies in Telecommunication industry which in turn making Telstra as major key
player (Steenkamp and Kashyap, 2012).

ACCOUNTING POLICY
The company in Note No 3.2 defines the accounting policy adopted for Intangibles according to
their composition. According Goodwill is valued at cost which has been paid in excess of fair
value of assets acquired in business combination agreement. It will be tested for impairment on
annual basis. Internally generated intangibles like software have been valued at cost directly
attributed towards development of intangible and research costs will be expensed in same year in
which they occur. Intangibles acquired in business combination agreement like licenses, brand
have value at fair market value on acquisition date. Deferred expenditure will be shown in
balance sheet at the value for which revenue will be recognized in future from the company’s
operations. They are amortized on year to year basis in the years in which benefits will earn by
company. Other intangibles like copyrights are valued at cost which will be incurred at the time
of individual acquisition or at the time of business combination agreement.
IMPAIRMENT OF ASSETS

Impairment of Asset will be recorded in the financial statements when the carrying amount of an
asset is more than the recoverable amount.
In the given case of Telstra, Impairment has been recorded for Property, Plant and Equipment
and for intangibles as well in Note No 3 of the annual report.
The following assets are impairment and accumulated impairment as on 30th June 2016 is shown
below:-
Name of Asset Asset Type Amount of
Impairment Loss
recognized on 30th
June 2016 ($ m)
Accumulated
Impairment and
depreciation/
amortization as on 30th
June 2018
Amount ($ m)
Communication Assets Property, Plant
and Equipment
11 42326
Other Plant, Equipment
and Motor Vehicles
Property, Plant
and Equipment
2 1397
Goodwill Intangible Asset 246 246
Software Assets Intangible Asset 4 5771
CONCLUSION AND RECOMMENDATION
The head in the financial statement shall be valued with proper care as the same will be
reflecting the value of the decisions made by the users of the financial statements of the
company. The company – Telstra Corporation Limited has been in the growing stage since its
inception and has been carrying out the functions with consideration of the varying needs of the
customers. The company’s financial performance is good and which is the positive factor for the
company to attract only the investors but also the potential investors. The accounting policies

have also been defined with regard to the property plant and equipment and the intangibles and
the valuation of the same has been detailed. In order to conclude the report, the report has
detailed all the material facts and figures and reported the same in the fine and accurate manner
and also company is complying will all the statutory requirements in the letter and spirit.
It is recommended for the company to detail the amount of the cash flows that have been used
for determining the impairment as it will help the investors to assess the valuation of assets and
judge the effectiveness of their decisions accordingly.
REFERENCES
Abdul-Shukor, Z., (2016), “The value relevance of intangibles non-current assets in different
economic conditions”. International Review of Business Research Papers, 4(2),
pp.316 -337.
Assets, I., (2015), “Non-Current Assets”. Group, 30, pp 284-306.
Barth, M.E. (2013), “Revalued financial, tangible, and intangible assets: Associations with share
prices and non-market-based value estimates”. Journal of Accounting
Research, 36, pp.199-233.
Telstra Corporation Limited, (2016), “Annual Report 2016”, available at
https://www.telstra.com.au accessed on 17-05-2018.
Goodwin, J., (2014), “Factors affecting the audit of revalued non‐current assets: Initial public
offerings and source reliability”. Accounting & Finance, 36(2), pp.151-170.
Steenkamp, N. and Kashyap, V., (2012), “Importance and contribution of intangible assets: SME
managers' perceptions”. Journal of Intellectual Capital, 11(3), pp.368-390.