Vodafone 2001 Annual Report Download - page 31

Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
29
STATEMENT OF ACCOUNTING POLICIES
Basis of accou n tin g
The financial statements have been prepared in accordance with applicable accounting standards. During the financial year, the Group has
adopted Financial Reporting Standard 18, “Accounting Policies”, issued by the Accounting Standards Board. Adoption of this Financial Reporting
Standard has not had any effect on the results for the year or required any restatement of prior year comparatives.
The particular accounting policies adopted are stated below.
Accoun tin g con ven tion
The financial statements are prepared under the historical cost convention.
Basis of con solidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings and include the Group’s
share of the results of its joint ventures and associated undertakings for financial statements made up to 31 March 2001. A listing of the Group’s
principal subsidiary undertakings, joint ventures and associated undertakings is given on pages 59 and 60.
The acquisitions of Mannesmann AG and Airtel Móvil S.A., and the acquisitions of interests in Verizon Wireless and Swisscom Mobile SA, have
been accounted for as acquisitions in accordance with Financial Reporting Standard 6, “Acquisitions and Mergers”.
Prior to the formation of Verizon Wireless, the turnover and operating results of the Group’s US wireless and paging operations were consolidated
within Group operating profit from continuing operations. From 3 April 2000, the Group has equity accounted for its interest in the operating
results of Verizon Wireless, which is included in the Group’s share of the operating profit of joint ventures and associated undertakings from
continuing operations. The turnover and operating loss (after goodwill amortisation) of the Group’s US businesses for the year ended 31 March
2000 were £2,585m and £100m, respectively. The net assets of the US businesses contributed to the Verizon Wireless joint venture have been
treated as having been disposed, and the Group’s interest in the new venture is included within fixed asset investments as an interest in an
associated undertaking.
Foreign cu rrencies
Transactions in foreign currencies are recorded at the exchange rates ruling on the dates of those transactions, adjusted for the effects of any
hedging arrangements. Foreign currency monetary assets and liabilities are translated into sterling at year end rates.
The results of international subsidiary undertakings, joint ventures and associated undertakings are translated into sterling at average rates of
exchange. The adjustment to year end rates is taken to reserves. Exchange differences which arise on the retranslation of international subsidiary
undertakings’, joint ventures’ and associated undertakings’ balance sheets at the beginning of the year, and equity additions and withdrawals
during the financial year, are dealt with as a movement in reserves.
Other translation differences are dealt with in the profit and loss account.
Tu rn over
Turnover primarily consists of charges to mobile customers for monthly access charges and airtime usage and to fixed line customers for access
charges and line usage. Turnover is recognised as services are provided. Unbilled turnover resulting from mobile services provided from the
billing cycle date to the end of each period is accrued and unearned monthly access charges relating to periods after each accounting period
end are deferred.
Turnover also includes equipment sales, which are recognised upon delivery of equipment to customers, and connection charges, which are
recognised upon activation of customers.
Derivative finan cial in strum en ts
Transactions in derivative financial instruments are undertaken for risk management purposes only.
The Group uses derivative financial instruments to hedge its exposure to interest rate and foreign currency risk. To the extent that such
instruments are matched against an underlying asset or liability, they are accounted for using hedge accounting.
Gains or losses on interest rate instruments are matched against the corresponding interest charge or interest receivable in the profit and loss
account over the life of the instrument. For foreign exchange instruments, gains or losses and premiums or discounts are matched to the
underlying transactions being hedged.
Termination payments made or received in respect of derivative financial instruments held for hedging purposes are spread over the life of the
underlying exposure where the underlying exposure continues to exist. Where the underlying exposure ceases to exist, any termination payments
are taken to the profit and loss account.
Pen sion s
Costs relating to defined benefit plans, which are periodically calculated by professionally qualified actuaries, are charged against profits so that
the expected costs of providing pensions are recognised during the period in which benefit is derived from the employees’ services.
The costs of the various pension schemes may vary from the funding, dependent upon actuarial advice, with any difference between pension cost
and funding being treated as a provision or prepayment.
Defined contribution pension costs charged to the profit and loss account represent contributions payable in respect of the period.
Research an d develop m ent
Expenditure on research and development is written off in the year in which it is incurred.
Scrip dividen ds
Dividends satisfied by the issue of ordinary shares are credited to reserves. The nominal value of the shares issued is offset against the share
premium account.