Measurement and Recognition Requirements as per AASB 137

Financial Accounting: Telstra Corporation Telecommunication
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Part 1: Measurement and Recognition Requirements as per AASB 137
AASB 137 has outlined the criteria for recognizing and measuring provisions, contingent
assets and liabilities that are the possible assets or obligations that are not probable or reliably
measurable that can be explained as follows:
Provisions
As per the standard, the recognition of a provision by a reporting entity is done when it
possess a present obligation such as trade payable that need to be met due to its past transactions.
Also, there should be estimated outflow of resources for meeting the obligation based on a
reliable estimate. They are measured at the best estimation of the expenses to be incurred for
meeting the obligation (IAS 37-Provisions, Contingent Liabilities and Contingent Assets, 2019).
Contingent Assets and Liabilities
The term ‘contingent’ as per the standard denotes liabilities and assets that are not
recognized as their existence can be confirmed with occurrence or non-occurrence of future
events. The standard has prohibited the recognition of contingent assets as it can lead in reporting
of revenue gains that are not probable to be realized. It has also restricted the recognition of
contingent liabilities that are probable obligations that are yet to be realized (CPA Australia,
2015). Therefore, as per this standard, a reporting entity needs not to recognize the contingent
assets and liabilities on the balance sheet. Further, the standard has stated that the amount
recognized as a provision represents the best estimate of the expenses required for settling the
present obligation. The estimates that are taken depends on the ability of the management that is
unsupported by past experiences and also reports provided by independent experts (Accounting
Standard – AS 29, 2016).
Part 2: Recognition and measurement criteria disclosed by Telstra Corporation in its
annual report of year 2018
Provisions
Telstra Corporation has recognized provisions for employee benefits that have to be met
at any future period. Provisions related to the employee benefits have been recognized when
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company has present legal or constructive obligations to make a outflow of economic resources
in future due to the past transactions or events and there is probability that in future economic
benefits will flow out. Provisions are only recognized when reliable estimate can be made of the
values that are termed as provisions. Provisions for the redundancy costs have been recognized
by the Telstra only when formal planning for the redundancies has been developed with proper
expectations. Telstra Corporation also made provisions regarding the foreseeable losses of the
construction contracts. The provisions regarding the construction contracts have been measured
at the best estimate of the expenditure for settling the obligation on the balance sheet date. It
means present value is calculated for future expenditure to measure the value of provisions
(Telstra Corporation: Annual Report, 2018).
(Telstra Corporation: Annual Report, 2018)
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