Financial Accounting: Telstra Corporation Telecommunication Report

This report provides a comprehensive analysis of Telstra Corporation's financial accounting practices, specifically addressing the recognition and measurement requirements of AASB 137 concerning provisions, contingent liabilities, and contingent assets. The report is divided into two main parts. The first part outlines the criteria for recognizing and measuring provisions, contingent assets, and liabilities according to AASB 137, explaining the definitions and measurement principles for each. The second part applies these principles to Telstra Corporation's 2018 annual report, examining the company's disclosures on provisions for employee benefits, redundancy costs, and construction contracts, as well as contingent liabilities and assets. The report highlights how Telstra complies with the standard in its financial reporting, providing a clear understanding of the practical application of AASB 137 within a real-world corporate context. The references include the relevant accounting standards and Telstra's annual report.

Financial Accounting: Telstra Corporation Telecommunication
1

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
2

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)
3

(Telstra Corporation: Annual Report, 2018)
Contingent Liabilities
There have been certain contingent liabilities that have been stated in the notes to
accounts as they cannot be reliably estimated and recognized in balance sheet. They are present
within Telstra due to effect of law or to settle any guarantee provided by the Telstra. As per notes
to financial statements there are certain law claims that need to be resolved. The management
believes that overcoming of such case laws does not influence the financial outcomes of the
company (Telstra Corporation: Annual Report, 2018).
4

(Telstra Corporation: Annual Report, 2018)
Contingent Assets
As per the information given in the annual report of the Telstra Corporation it can be said
there has been no significant contingent assets as at 30 June, 2018 that have been disclosed
(Telstra Corporation: Annual Report, 2018).
(Telstra Corporation: Annual Report, 2018)
5

References
Accounting Standard – AS 29. 2016. Provisions, Contingent Liabilities and Contingent Assets.
[Online]. Available at: https://cleartax.in/s/as-29-provisions-contingent-liabilities-assets
[Accessed on: 8 June 2019].
CPA Australia. 2015. IAS 37 Provisions, Contingent Liabilities and Contingent Assets. [Online].
Available at: https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-
resources/reporting/reporting-ifrsfactsheet-provisions-contingent-liabilities-and-contingent-
assets.pdf?la=en [Accessed on: 8 June 2019].
IAS 37-Provisions, Contingent Liabilities and Contingent Assets. 2019. [Online]. Available at:
https://www.iasplus.com/en/standards/ias/ias37 [Accessed on: 8 June 2019].
Telstra Corporation: Annual Report, 2018. Telstra Annual Report 2018. [Online]. Available at:
https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20F/2018-Annual-
Report.pdf [Accessed on: 8 June, 2019].
6