Accounting Report

Part 1


This part discuss about the deal and agreement which has taken place between the NBN and Telstra Ltd. NBN is recognised as a Australia government-owned corporation which has a task to design, develop and operate Australia national broadcast. While Telstra recognised as an Australia telecom company (AFR, 2016). So in regards to this, the Telstra accounting method is identified through using the annual report of Telstra.


1.      A)

The NBN Definitive agreement is performed by Telstra with the aim of bringing more efficiency in the network with eliminating the disruption to company. Moreover, the agreements between NBN and Telstra help in reducing the problem of duplication and allow to generating the quick services (Bellingencourier, 2017). In the agreement, Telstra has a role to design and plan for the improvements of the HFC network. To perform their role, Telstra already started working on it through fibre-to-the-node NBN. In this, they spend the expenses on the infrastructure payments will be around to $4 billion and $2 billion in common wealth agreement. But at the same time, Telstra saves $30 billion through this agreement which clearly indicates that Telstra generated revenues from this project. Telstra is also recorded that with signed NBN definitive agreement, the maximum members accessed the network and Telstra also recognised the high revenue generation and building new growth to the business.

1.      B)

The AASB accounting method is used in the current cost accounting framework for preparation of Telstra reports. As per AASB CF, there should be proper objectives of financial statements, qualitative characteristics determining the usefulness of information in financial statements and the definition, recognition and measurement of the elements with concepts of capital and capital maintenance. Based on the annual report, it can be stated that Telstra focuses on the AASB CF and fulfils all the requirements related to framework (Annual Report, 2016). In addition, AASB 101 shows the presentation of financial statements including income statement, balance sheet and cash flow statement and changes in equity statement. In relevance with the AASB 101, the firm classifies all of its expenses excepting finance costs and share of net gain or loss from jointly controlled and associated entities on the basis of either expense nature or related function (Annual Report, 2016). Apart from this, the annual report of Telstra presents AASB 136 requirements related to impairment of assets. All non-current tangible assets are assessed for impairment by identifying cash generating units (CGUs) in Telstra’s annual report.  The amount of asset for recovery is the greater than its fair value less disposal cost and used value. The used value is the present value of the future amount that is expected to be recovered by using cash inflows and outflows obtained from continuous use of assets and their disposal. It recognises the reduction in the carrying value by reporting it as an expense in the profit loss account in the accounting period having the impairment loss (Annual Report, 2016). According to AASB 138, it is crucial for the firm to show the accounting treatment for intangible assets to meet the specified criteria. With relevance of this standard, Telstra annual report also gives an accounting treatment for intangible assets by meeting the specified criteria (Raiche, 2015). This also specifies the way of measuring the carrying amount of intangible assets of the firm with specified disclosures regarding the intangible assets. Under this standard, assets are valued on the basis of the current entry value methodology. It means that the monetary amount are recorded under the command of the entity and recognised in financial statements (Annual Report, 2016). The RC (Replacement cost) is largely used by the company in regards to estimating the current value of the assets and for recording purpose (Shepherd, 2014).


From the above discussion, it is concluded that the Telstra through incorporating the principle of AASB have been achieved the high revenue generation and able to enhancing customer base. It is recognised that the agreement between Telstra and NBN is proved to be effective in terms to bring the efficiency in network and it also reduce the number of duplications. Telstra perform various roles under this agreement such as designer and planner for bringing an improvement of the HFC network. In their performances, they follow the guidelines of AASB in order to make the agreement successful. Telstra record the current cost accounting in the financial statement as per the AASB principles.

Part 2


Part 2 discussed about the 4G voice services which is Telstra is launched for the rural and regional areas of Australia. At the same time, it is also identified that which accounting policy is used by the Telstra LTD for the research and development costs (Nicholls, 2016).


2.      A

“4G voice services on small cells” is considered as an innovation of Telstra in regards to providing the best network on the rural areas. Basically, 4G voice services is the intuitive which is taken by the Telstra for providing the voice calling services to the rural people in Australia. It is considered as revenue for the Telstra as they achieved high profits through these services but at the same time, it also cause to a bearing heavy expenses to the company. It is because, in installing of small cells into the rural areas was demand high expenses for the company which also give loss to the Telstra in the initial phase and afterwards it prove to be quite effective for the Telstra. As per the article Bellingencourier (2017), Telstra in 2014 make a reworked on the small cells for 4G data internet services in small regional areas of Australia where it is find difficulty in implementing the full sized work station. But at the launch of small cells, it is determined that small cells are proved to be in efficient to support 4G call. So in such situation, Telstra made innovation and developed the 4G voice calls in small cell coverage areas. Through this offering, rural customers get the voice calls over Wi-Fi services and it provides the effective coverage to customer in the outer place (Beltrán, 2014). In regards to the annual report 2016, Telstra has invested more for the implementation of 4G voice calls in small cell. Likewise, cost includes cables, cloud, cyber safety and many more. Besides that, Telstra operating capital expenditure for the year was 15.2 per cent of sales revenue or $4,045 million, in line with financial year 2016 guidance of around 15 per cent of sales. As Compared to the previous year spend of $3,589 million, it is identified that Telstra spending much of the increased capital expenditure on mobile in particular to the area of 4G services small cells. But at the same time, 4G services proved to be effective for the company in terms to attract large customers with their quality deliver in the form of well reliable voice &data, fewer dropouts and faster download speeds services.

2. B

Telstra in their under the AASB accounting policy, they used various standards on research and development costs. This standard mainly deals with the principle and method for determining of research and development costs. In the accounting, research and development is considered as intangible assets which are non-monetary assets for the company as it does not involve any physical substances. Because of this, it is recorded under intangible expenses. It is find that research and development of the company has a direct relation with the goodwill. Besides that, as per the AASB guidelines, the specialised activities in the extractive industries are not comparable as there is low research is conducted in it. But the cost generation in the services industry is considered high in regards to conduct the research and development under the AASB. It is record under the head of intangible assets. Similarly, the Telstra research and development cost for the 4G voice services is included under the head of intangible assets.


From the above discussion, it is stated that Telstra announced the “4G voice services on small cell” for the regional and rural areas. For implementation the 4G plan services, they made huge capital investment as their previous innovation was failed in 2014.

Part 3


This part 3 describes about the Telstra Ltd process for recording the venture capital of Ooyala. At the same time, the study also discuss about the write-down of Ooyala in 2016.


3.      A

In the venture capital, there are various investment are included. In addition to this, the venture division first made big investment in streaming video with the $500 million. The company only acquire 98% of the business in which only write down the value of that investment by $246 million at its full year. The reason of diminishing of such value was the frequently changing dynamics in the video streaming market. Furthermore, it is finding that the Telstra transfers $210 million into start-ups but due to making subsequent investments it becomes $300 million (Rappaport et al., 2013). According to the Telstra annual report, it is estimated that ventures portfolio contains the small stakes in more than the 20 technology start-ups which includes unicorn, electronic signature firm DocuSign and it is valued at $US3 billion under the private market. Thus, recently Telstra have five portfolio companies which involve in selling or investing in different listed publicly on stock markets. This helps the company in regards to generate positive returns for the venture divisions. Thus, it is stated that company value is write down with the investment as compare to previous investment. Due to failing in the previous investment, Telstra funding 44 start ups in 2013 with a$235 million. They also acquire the 18 health-related companies. Such investments push the company towards the generating profits.

3. B

Write-down is considered as an accounting term which indicates the reduction in book value of an assets and the reason could be the hurting from the changing market trend, economic or fundamental changes in an assets. Because of such causes, the situation of write-down gets occurred. Telstra can make treatment of write-down through reducing the credits of assets account inventory (Hoadley & Maveddat, 2012). There is needed to record the write down inventory entry into the debit account in order to show as a loss to the company and write down as expenses in the income statement account. As per the reports, Telstra made 11 new investments in different portfolios. In this, the major investments are the Telstra Health, Telstra software group, software business etc. But in the venture capital of Ooyala, Telstra determined that there is write-down of value due to the hurting from the economic changes. So in that situation, Telstra can treat the write-down entry in their accounting book through the following manner (Clanchy, 2012). In this, firstly require to reduce the credits from the assets by showing the assets write-down in debit account by showing the reduction amount. Thus, it is the rightly manner to make a recording of write-down in the accounting book. Thus, through such entry, company able to know about the assets whose value is declining and after that company take further investment. Similarly, Telstra after get to know that venture capital of Ooyala is diminishing then they take the decision of further investment in order to compensate their loss.


From the above discussion, it is stated that Telstra is made various investment in multiple portfolio. However, the venture division first made big investment in streaming video with the $500 million. But it only acquires the 98% of the business and $246 value is write-down which indicates loss to the company. Telstra is record the write-down entry into the bookkeeping through reduce the credit from the assets and showing the entry of write-down in the debit side. This clearly indicates that the company gets the less profit from this investment. Due to that, Telstra moves towards the further investment by expanding the business in different portfolios. According to the annual report, Telstra made 11 new investments in different portfolios. In this, the major investments are the Telstra Health, Telstra software group, software business etc which prove to be successful.

Part 4


Part 4 discusses about the need to consider the concept of amortisation of software assets under the Telstra Ltd. In addition to this, two factors are identified that would have an impact on Telstra choices over the amortisation of software assets.


4.      A

In the accounting, the term amortization is similar to deprecation that is applicable on the tangible assets of the company.  In the same context of this, Telstra Ltd is needed to consider amortisation of software assets. It will help the company and accountant to conduct the accrual accounting (Van Dierendonck, 2011). It is a significant accounting and tax payment methods that provide the accurate accounting of the financial statement of the company. If Telstra Ltd will concern the amortize expenses then it will allow the company to recode the transaction more closely. The concept of the Amortization is also considered as the part of the accurate accounting. The main advantage of the consideration of the Amortization is that it allows that companies to get the tax benefit (Miller, et. al. 2016). At the same time, Telstra Ltd also needs to concern on the amortisation of software assets. It is because it represents the actual value of the assets in the financial statements. It also focuses Straight-Line Depreciation that reduces the depreciation value from the value of assets. Hence, in order to represents the actual value of the software assets, Telstra Ltd should consider the amortisation (Openshaw, 2013). According to Telstra’s 2016 annual report, it found that it has software assets value of $438 million so that it should consider the amortisation of software cost.

  1. b

Intangible assets – It is one of the main factors that affect will affect Telstra’s choices for the amortisation of software assets. It is one of the main principles that amortisation is always applicable on the tangible assets. But, in the case of Telstra, it software is intangible assets so that it will affect the choice of amortisation of software assets (Smith and Binti Puasa,  2016).

Reduction of assets value – Amortisation of software assets is also a subject of reducing the value of the assets. It can affect Telstra’s choices for the amortisation of software assets. It is because no one company wants to minimise the value of assets.


From the above discussion, it can be stated that amortisation is more significant to identify the value of the assets, especially tangible assets. Intangible assets and reduction of assets are the key factors which would have an impact on the Telstra choices for the amortization of software assets.


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