H5. Contingent assets and contingent liabilities
Recognition and measurement
Contingent assets and contingent liabilities are not recognised in the Statement of financial position, but are reported in this note. They may arise from uncertainty as to the existence of an asset or liability or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable, but not virtually certain and contingent liabilities are disclosed when the likelihood of settlement is greater than remote but not probable. The details of NBN Co’s significant contingent assets and liabilities are set out below:
ASIC deed of cross guarantee
NBN Co Limited and NBN Tasmania Limited are parties to a deed of cross guarantee as disclosed in Note H4. Each company guarantees the payment in full of the debt of the other named company in the event of their winding up.
Telstra Revised Definitive Agreements
Under the Telstra Revised Definitive Agreements, NBN Co has a right to undertake copper, HFC and associated passive infrastructure (API) pre-construction and construction works on Telstra’s networks pre-asset transfer. NBN Co has indemnified Telstra against any loss or claim for death, personal injury or damage as well as contractual liabilities of Telstra to its customers arising as a result of NBN Co undertaking such works on Telstra’s networks pre-asset transfer. To the extent that claims or damages could be reliably measured, adequate allowance has been made for resultant liabilities at the reporting date.
As at 30 June 2020, NBN Co had no outstanding legal action that would materially impact the 30 June 2020 financial statements. However, from time to time, the Group may be subject to a lawsuit or proceedings for which it may be required, either by law or based on its business judgement, to make payments to settle or otherwise resolve matters.
Contractual related claims and disputes
Various claims and disputes arise from time to time in the ordinary course of business. Where the resolution (if any) cannot be measured with sufficient reliability, no asset or liability for these claims or disputes is recognised.
To the extent a resolution for claims or disputes is probable and could be reliably measured, and in the case of an asset the resolution is virtually certain, adequate recognition has been made at the reporting date. The disclosure of any further information about claims or disputes would be prejudicial to the interests of the Group.