Analysing the financial issues of Telstra Australia

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The financial statements of Telstra Australia is one of the company chosen in this essay, must be in accordance with applicable accounting standard as laid down by AASB.

The Australian Accounting Standards Board (AASB)1 is an Australian Government agency that develops and maintains financial reporting standards applicable to entities in the private and public sectors of the Australian economy. Also, the AASB contributes to the development of global financial reporting standards and facilitates the participation of the Australian community in global standard report of Telstra is prepared in accordance with the requirements of the Australian Corporations Act 2001 and Accounting Standards applicable in Australia, which include Australian equivalents to International Financial Reporting Standards (A-IFRS). Australian equivalents to IFRS (A-IFRS)2 is issued by AASB, numbering IFRS standards as AASB 1-8 and IAS standards as AASB 101 - 141. 2006 is the first full year financial report prepared in accordance with A-IFRS.

According to the table the mesurement and costing method of inventory are similar under Telstra and IASB. The LIFO method is prohibit by IFRS. Telstra uses two methods to calculate inventory which are FIFO and weithged average cost, inventory is divided into two parts on the basis of usage. A large number of inventory on hand is calculated using weighted average cost and materials serve as production of directories use 'first in first out' method. The methods used by calculating inventory have not been changed between the year 2006 and 2009. Example5 of the costing method and mesurement of Telstra in 2006

Telstra Group

As at 30 June

Current inventory 2006

Finished goods recorded at net realisable value . . . . . . . . . . . . . . . . . . . . 79

Finished goods recorded at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .123

Total finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

Raw materials and stores recorded at cost . . . . . . . . . . . . . . . . . . . . . . . . 15

Construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


According the table AASB Paragraphs a,b,d,e,f and h and paragraph 13.22 of the IFRS correspond. The differnces are paragraphs c and g which have no equivalent in the in the IFRS . Paragraph c explianes the carrying amount of inventories carried at fair value less costs to sell; g said the circumstances or events that led to the reversal of a write-down of inventories. On the basis of Telstra financial report in the year 2006,2007,2008,2009 Telstra has comply with the IFRA

The items need to depreciation are property, plant and equipment, including buildings and leasehold property, but excluding freehold land. The method used is straight line basis to the income statement over their estimated service lives. Telstra start depreciating assets when they are installed and ready for use. The service lives and residual value of the assets are reviewed each year.Telstra apply management judgment in determining the service lives of the assets. This assessment includes a comparison with international trends for telecommunication companies, and in relation to communication assets, includes a determination of when the asset may be superseded technologically or made obsolete.

According to AASB 10208 the following information must be disclosed, for each class of depreciable asset:

(a) the depreciation methods used

(b) the useful lives or the depreciation rates used

(c) the aggregate amount of depreciation allocated, whether recognised as an expense or as part of the carrying amounts of other assets during the financial year

(d) the gross amount of depreciable assets and the related accumulated depreciation.

According to the financial statement of Telstra has provied the depreciation method which is straight -line method, the service lives but it does not clearly give the the aggregate amount of depreciation allocated and the accumulated depreciation.

Telstra use EBITDA to help external investor know the company. EBITDA9 stand for Earnings before interest, income tax expense, depreciation and amortisation. it is reflects Telstra's profit for the year prior to including the effect of net finance costs, income taxes, depreciation and amortisation. EBITDA is useful to investors because analysts and other members of the investment community largely view EBITDA as a key and widely recognised measure of operating performance.

In conclusion, there is no doubt that diverse approach used by annual reports will result in different financial statement and it has been discussed from inventory and depreciation. The financial statements will be influenced unless the inconsistencies disappear. Therefore, although harmonization activity of accounting has prevailed in the world, those disconformities can not be recovered in a short term and may influence financial statement of different countries continuously. I recommend that Australian increase the process to comply with IFRS, at the same time it can append a chart to their financial report which show the main diffences of the approches between the countries have more trade contract with Australian.