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.
The NBN Definitive agreement is performed by the Telstra with the aim to bring 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 planning 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 save $30 billion through this agreement which clearly indicates that the 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.
The AASB accounting method is used in the current cost accounting framework for preparation of Telstra reports. Under this standard, Telstra reveal their wholesale and retail costs.
Moreover in CCA reporting, assets 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 (Raiche, 2015).
The RC (Replacement cost) is largely used by the company in regards to estimating the current value of the assets and for recording purpose. Moreover, Telstra with the help of AASB standard could identify that the agreement would be prove to be beneficial for them.
It can be done through evaluating their revenue generation by comparing from their previous performances.
Thus, this standard gives the clear understanding about the Telstra performances. In addition to this, Telstra stated that there are significant difficulties are arising in determining services potential for assets. It is because there is no direct relationship exists between the services potential and assets capacity.
Telstra believed that in some industry such as mining, gas/electricity distribution that has simple assets registers while in case of Telstra, it is find quite difficult for the company to record due to indirect relations of services potential with the assets.
It becomes difficult for the Telstra to record in their financial books and statements (Shepherd, 2014). As per the annual report of Telstra, it can be stated that Australia accounting standards calculate the value of the company based on the value of share.
Therefore, Telstra is also considered the Australian accounting standards for recoding the financial statements. It is because with this standards, company able to get their actual value in market. Company to manage their accounts, in such case they used the income statement, ledgers and balance sheet. These statements help the Telstra in understanding their financial position and their revenue generation.
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 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).
“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.
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.