1. Eligible Revenue Information Sessions For Auditors

2. Session overview  Purpose  Legislative Framework carriers  Which carriers are required to report?  Why is eligible revenue calculated?  Financial Reporting Framework  Eligible Revenue Submission  Tools for auditors

3. PURPOSE  Sessions are to assist auditors of industry participants to understand client statutory reporting requirements for conduct of audit and related engagements

5. Legislative framework for carriers

6. Set out in  Telecommunications Act 1997 (Telco Act)  Telecommunications (Consumer Protection and Service Standards) Act 1999  Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003  NEW! 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

7. Which carriers are required to report?

8. 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

9.  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].

10.  Regardless of a carrier earning under AUD$25mil revenue they will be a USO non participating person if they fail to provide an eligible statutory declaration to the ACMA by 31 October  Each participating person must provide a Return and supporting documentation to the ACMA by 31 October or may face penalties/other enforcement action – the Return must be compliant with the Act, i.e. substantially compliant with the form approved by the ACMA

11. Why is eligible revenue calculated?

12.  Universal Service Obligation Levy (annual)  National Relay Service Levy (quarterly)  Annual Carrier Licence Charge (annual variable component) FY1- Eligible Revenue Period (period of assessable activity) FY2- Claim Period 31 Oct Eligible Revenue Submissions due for FY1 Before EOY ACMA makes ER assessments for FY1 FY3- Invoicing Period Claim from universal service provider received in August levies assessment and invoicing in Sept/Oct

13. Financial Reporting Framework

14. RequirementReference Prepare an eligible revenue return and give to the ACMA What return must set out subsections 20(1) & (3) TCPSS Act ACMA approved form of return Verification by statutory declaration if required subsection 20(2) TCPSS Act Form & Handbook on ER Portal on ACMA website Date to provide return as specified by the ACMA (31 Oct) subsection 20(2) TCPSS Act Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010 Provide an audit report on return with the returnSection 20D TCPSS Act Calculation of eligible revenueTelecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 in accordance with subsection 20B(1) TCPSS Act Revenue from Australian telecommunications industry Section 7 Telco Act 1997

15. Eligible Revenue Submission for a participating person

16. 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

17. 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

18. Revenue Allocation Schedule – when submitting ERR Form for more than one carrier Table 1: Gross Telecommunications Revenue allocation A B C Note Ref Name of Carrier ABN/ACN (without spaces) Gross Telecommunicatio ns Revenue allocation in $AUD R1 BIGTelco 22,000,000 R2 MedTelco 10,000,000 R3 Total $32,000,000 Total Gross Revenue $32,000,000 Unallocated $0

19. Revenue Allocation Schedule – when submitting ERR Form for more than one carrier Table 2: 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

20. Related Parties 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)

21. Related Parties cont. 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

22. 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

23. Ultimate holding company Bluetone 50% Carrier X

24. 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 Ultimate holding company (participating person interest) (B) Proportion of DRP owned by Ultimate holding company (party interest) DRP Factor (A x B) M13 0.00% M14 0.00% M15 0.00% M16 0.00% Bluetone 50% 25%

25. Carry through to revenue and deductions sheets – example: Table 1: Sales Revenue (per financial statements) AB DE 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

26. Carrier A Ultimate Australian Parent Co X Co Y Co Y1 Co Z Co M Co N1 Co N2 Co N3 Co N 100% 50% Co J Co K 90% 80% 50% 100% 50% 90% 50% Parent interest in Co N2: =(90%x100%x50%) +(90%x80%x50%) =45% + 36% =81% Parent interest in Carrier A: =90%x80%x80% =58%

27. 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 Ultimate holding company (participating person interest) (B) Proportion of DRP owned by Ultimate holding company (party interest) DRP Factor (A x B) M13 0.00% M14 0.00% M15 0.00% M16 0.00% Co N2 58% 81% 47%

28. 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

29. ERR Form >Eight sheets (was 17 in 2008-09) and built in related party percentages >Prepare ERR Form in accordance with relevant Australian Accounting Standards >whole Australian dollars (AUD$) and English >exclusive of GST

30. 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

31. What is telecommunications revenue? >Revenue earned from the telecommunications industry from carrying on business as a carrier or carriage service provider, or….

32. … 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.

33. 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 form published for the relevant year on the: ACMA Eligible Revenue Portal http://www.acma.gov.au/WEB /STANDARD/pc=PC_410118

34. Audit report on return ….. (b)states that the auditor has audited the return; and (c)contains a determination, in the terms specified in the form, of the auditor’s opinion; and (d)states that the auditor has been given sufficient information and assistance in order to audit the return; and (e)includes all other statements and information required by the form to be included.

35. Audit Report on Return - s20D TCPSS Act The approved auditor must provide an audit opinion on all components of the Return, not only the ERR Form Only exception is where an audit waiver or a conditional audit waiver has been granted by the ACMA.

36. 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

37. Approved auditor cont. 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 Check your registration as either a registered auditor or authorised audit company by using the professional registers on the ASIC website: http://www.search.asic.gov.au/pro.html

38. 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

39. 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

40. Tools for auditors

41.  First stop: ACMA Eligible Revenue Portal http://www.acma.gov.au/WEB /STANDARD/pc=PC_410118  Potential for future information sessions where there is interest  ACMA Revenue Assurance Section Email: uso@acma.gov.au Ph: 61 02 6219 5355uso@acma.gov.au

42. Recommended: Point of Contact for Auditors >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