Eligible Revenue Information Sessions

20122012

Overview

Purpose of session Legislative framework Reporting requirements Levies and Charges based on eligible revenue Cutover to TUSMA legislation 2010-11 period update 2011-12 reporting 2011-12 audit requirements Tools

assist industry participants to meet their statutory reporting requirements

assist auditors to understand the audit requirements in relation to carrier returns

update carriers and auditors on any changes to the regulatory framework for eligible revenue reporting and related levies and charges

Set out in Telecommunications Act 1997 (Telco Act)

Telecommunications (Consumer Protection and Service Standards) Act 1999 (TCPSS Act) Telecommunications Universal Service Obligation (Eligible Revenue)

Determination 2003 Telecommunications (Participating Persons) Determination 2011 (No.1)

(Participating Persons Determination) Telecommunications (Period for Providing Return of Eligible Revenue)

Specification 2010 Telecommunications (Approved Auditor) Determination 2010

Telecommunications Universal Service Management Agency Act 2012 (TUSMA Act) Subsidiary instruments to TUSMA Act – under development

What is a carrier?

Under section 7 of the Telecommunications Act 1997, a carrier is the holder of a carrier licence.

Not all carriers have to submit an eligible revenue return.

For each eligible revenue period, a carrier is either:

a participating person - and must submit an Eligible Revenue Submission to the ACMA by 31 October

OR a USO non-participating person – and must submit an

eligible statutory declaration to the ACMA by 31 October

A participating person for an eligible revenue period is an entity that was a carrier at any time during that eligible revenue period [section 20A of the TCPSS Act].

However, the minister has determined that a person is not a participating person when the person (or “grouped carrier”) has:• initial sales revenue;• gross telecommunications sales revenue; OR• eligible revenue

of less than AUD$25 million for the eligible revenue period and the person submits an eligible statutory declaration to the ACMA by 31 October [part 4 of the Participating Persons Determination].

Requirement TCPSS Act /Telco Act

[Subsidiary Legislation]

Participating person must lodge return of eligible revenue in form approved in writing by the ACMA

Section 20[Handbook on Eligible Revenue Portal on ACMA website]

Participating person (vs exempt person)

Section 20A / Section 7 [Participating Persons Determination]

Due date to provide returns by as specified by the ACMA (31 Oct)

Paragraph 20(2)(a)[Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010]

Verification [of return] by statutory declaration

Subsection 20(2)

Calculation of eligible revenueSection 20B[Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003]

Audit report on return by approved auditor

Section 20D[Telecommunications (Approved Auditor) Determination 2010]

Lodge return in approved form Section 91 TUSMA Act

Participating person (vs exempt person)

Section 92 TUSMA Act

Due date for returns Section 91 TUSMA Act

Verification of return by statutory declaration

Section 91(3) TUSMA Act

Calculation of eligible revenueSection 93 TUSMA Act [equivalent instrument to Eligible Revenue Determination]

Audit report on return Section 94 TUSMA Act

From 2012-13

Eligible revenue based on an eligible revenue submission (including substantially compliant eligible revenue return and supporting documents) or otherwise as estimated by the ACMA

Used to calculate fees and charges

Penalties and enforcement if non-compliant

Key concepts

Carrier revenue includes revenue of Declared Related Parties (DRPs) and consolidated related parties

Grouped carrier – for revenue calculation

Declaration of revenue must be verifiable to financial statements or other evidence on request or notification from the ACMA

2011-12 and future periods Telecommunications Industry Levy (TIL) Annual Carrier Licence Charge (ACLC)

(variable component)

2011-12 / 2012-13

> Total claimed total eligible revenue ($28.665 billion) > Total assessed eligible revenue ($28.755 billion)

> Understatement of eligible revenue for industry (by $89.3 mil in 2010-11, $48.9 mil in 2009-10 and $71.1 mill in 2008-09

> Partnerships and joint venture earnings disclosure> Mergers and acquisitions and changes in accounting period

(evidence requirements)> Evidence for significant deductions

Key reporting concepts

All participating persons to report

Eligible Revenue Submission on a group basis vs individual basis

Disclose revenue of Declared Related Parties (DRPs) and consolidated related parties

Key reporting concepts cont.

Evidence for revenues and deductions

Financial statements of carrier and related parties

Audit report OR Audit Waiver granted by the ACMA

Revenue Allocation Schedule – when submitting ERR Form for more than one carrier

Table 1: Eligible Revenue allocation

Note Ref Name of Carrier  

ABN/ACN (without spaces)

 

Eligible Revenue

allocation in $AUD

R11 BIGTelco

 

 

$19,000,000 

R12 MedTelco

 

 

$6,000,000 R13        

 Total  $25,000,000

          Total Eligible Revenue  $25,000,000

         

 Unallocated  $0

Include related party revenues

Consolidated related party

an entity:

(a) that is not the participating person; and

(b) the revenue of which is included in the annual consolidated financial statements of the participating person’s ultimate Australian parent entity (whose revenues are fully accounted for in the ERR Form)

Include related party revenues

Declared related party

Any entity that earns telecommunications sales revenue from the Australian telecommunications industry and that is not a participating person or a consolidated related party and is owned at any time during the eligible revenue period (>49%) by the owner of the carrier

Multiple Parties Schedule in ERR Form

Table 1: Ownership

   

Group Name:  

Note Ref Carrier Name  

Carrier Licence Number  

ABN/ACN (without spaces)

M1 BIGTelco    

 

M2 MedTelco      

 

M3        

 

Ultimate holding company

Bluetone

50% 50%

Carrier X

Multiple Parties Schedule in ERR Form

Table 2: Declared Related Parties

Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties

Declared Related Party (DRP) Name  

(A)Proportion of carrier owned by body with

greatest interest in the

carrier (participating

person interest)  

(B)Proportion

of DRP owned by body with greatest

interest in the DRP

(party interest)

DRP Factor(A x B)

M13           0.00%

M14           0.00%

M15           0.00%

M16           0.00%

Bluetone 50% 50% 25%

Carry through to revenue and deductions sheets – example:

Table 1: Sales Revenue (per financial statements)A B    D E  

Note Ref

Name of Group/Carrier or name of DRP  

DRP factor % if applicable

(automatically applied from

"Multiple Parties" sheet)   

Total Revenue in $AUD

Carrier/Group Portion of Revenue  

R1 Bluetone       

R2      

25% $100,000 $25,000

Carrier A

Holding Company

Co X

Co Y

Co Y1Co Z

Co M

Co N1

Co N2

Co N3

Co N

100% 45%

Co J

Co K

90%

80%

80%

49%

50%

100%

50%

50%

90%50%

30%

Holding Coy interest in Co N2: =(90%x100%x50%)+(90%x80%x50%)=45% + 36%=81%

Holding Coy interest in Carrier A: =90%x80%x80%=58%

Declared Related Party Factor for Co N2 =

Co J interest in Co N2 of 90%Multiplied by Co K interest in Carrier of 80%

= 72%

Multiple Parties Schedule in ERR Form

Table 2: Declared Related Parties

Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties

Declared Related Party (DRP) Name  

(A)Proportion of carrier owned by body with

greatest interest in the

carrier (participating

person interest)  

(B)Proportion

of DRP owned by body with greatest

interest in the DRP

(party interest)

DRP Factor(A x B)

M13           0.00%

M14           0.00%

M15           0.00%

M16           0.00%

Co N2 80% 90% 72%

A complete Eligible Revenue Submission (ERS) is made up of two parts:

1. A Return Eligible Revenue Return Form (ERR Form) Final Financial Statements for carrier and related parties Outline of Business Structure

2. Supporting Documents Independent Audit Report Statutory Declaration – Management Certification

ERS

ERR Form

>Eight sheets – incorporates related party percentage formulae>Prepare ERR Form in accordance with relevant Australian Accounting Standards>whole Australian dollars (AUD$) and English >exclusive of GST

Calculating Eligible Revenue Initial sales revenue Less Non-telco sales revenue and revenue earned whilst

not a licence holder = Gross telecommunications sales revenue Less Deductions:

- Overseas Activities and Acts in Australia for services outside Australia

- Customer equipment- Content services- Exempt base station- Infrastructure revenue- Inter-Person Input Payments

What is telecommunications revenue?

> Revenue earned from the telecommunications industry from carrying on business as a carrier or carriage service provider, or...

What is telecommunications revenue?

… supply goods or services for use in connection with the supply of a listed carriage service; supply a content service using a listed carriage service; manufacture or import customer equipment or customer cabling; or

install, maintain, operate or provide access to:

(i) a telecommunications network; or

(ii) a facility; used to supply a listed carriage service.

Audit report on return

An eligible revenue return given to the ACMA under section 20 must be accompanied by a report of an approved auditor that:

(a)is in a form approved in writing by the ACMA; …

This is the ACMA independent audit report template published for the relevant year on the:

ACMA Eligible Revenue Portal

Approved auditor

> Subsection 8F(1) of TCPSS Act – meaning of approved auditor:

A reference in this Part to an approved auditor is a reference to a person included in a class of persons specified in a written determination made by the ACMA for the purposes of this section

Approved auditor

Telecommunications (Approved Auditor) Determination 2010 specifies the following as approved auditors:

1. Registered auditors under Part 9.2 of the Corporations Act 2001

2.Authorised audit companies registered under Part 9.2A of the

Corporations Act

3.Auditors-General

Find an approved auditor or check approved auditor status by using the professional registers on the ASIC website: http://www.search.asic.gov.au/pro.html

Audit Report on Return - s20D TCPSS Act

The approved auditor must provide an audit opinion on the complete Return, not only the ERR Form

Only exception is where an audit waiver or a conditional audit waiver has been granted by the ACMA.

Requesting an Audit Waiver (may be a conditional audit waiver)

> Applies to only one eligible revenue period

> Request prior to lodging all other documents in an Eligible Revenue Submission

> Audit waiver is more likely to be approved where:- other sufficient and appropriate evidence is provided - when carrier did not hold the licence for the full eligible revenue

period- no significant errors in prior period returns- administrative expense is prohibitive for carrier compared to

expected revenue from telecommunications activity in Australia

Other Reports from Auditors-based on conditional audit waiver

> Limited subject matter audit reports> Agreed upon procedures reports> Review Reports> Client may need to provide methodology for revenue

recognition to the ACMA> Early contact with the ACMA Revenue Assurance

Section recommended

Single Point of Contact for Audit

> Specific carrier representation – use ACMA contact form> Personnel nominated as point of contact for the ACMA

and the carrier for:> Notification of general issues> Discussion regarding the form of the audit report

First stop: ACMA Eligible Revenue Portal

Future information sessions where there is interest

ACMA Revenue Assurance Section

Email: uso@acma.gov.au Ph: 61 02 6219 5355