Vodafone 2001 Annual Report Download - page 32

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Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
STATEMENT OF ACCOUNTING POLICIES continued
Goodwill
Goodwill is calculated as the surplus of cost over fair value attributed to the net assets (excluding goodwill) of subsidiary, joint venture or
associated undertakings acquired.
For acquisitions made after the financial year ended 31 March 1998, goodwill is capitalised and held as a foreign currency denominated asset,
where applicable. Goodwill is amortised on a straight line basis over its estimated useful economic life. For acquired network businesses, whose
operations are governed by fixed term licences, the amortisation period is determined primarily by reference to the unexpired licence period and
the conditions for licence renewal. For other acquisitions, including customer bases, the amortisation period for goodwill is typically between
5 and 10 years.
For acquisitions made before the adoption of Financial Reporting Standard 10, “Goodwill and Intangible Assets”, on 1 April 1998, goodwill was
written off directly to reserves. Goodwill written off directly to reserves is reinstated in the profit and loss account when the related business
is sold.
Oth er in tangible fixed assets
Purchased intangible fixed assets, including licence fees, are capitalised at cost.
Network licence costs are amortised over the periods of the licences. Amortisation is charged from commencement of service of the network.
The annual charge is calculated in proportion to the expected usage of the network during the start up period and on a straight line basis
thereafter.
Tan gible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is not provided on freehold land. The cost of other tangible fixed assets is written off, from the time they are brought into use, by
equal instalments over their expected useful lives as follows:
Freehold buildings 25 – 50 years
Leasehold premises the term of the lease
Motor vehicles 4 years
Computers and software 3 – 5 years
Equipment, fixtures and fittings 5 – 10 years
The cost of tangible fixed assets include directly attributable incremental costs incurred in their acquisition and installation.
In ve stm en ts
The consolidated financial statements include investments in associated undertakings using the equity method of accounting. An associated
undertaking is an entity in which the Group has a participating interest and, in the opinion of the directors, can exercise significant influence
in its management. The profit and loss account includes the Group’s share of the operating profit or loss, exceptional items, interest income or
expense and attributable taxation of those entities. The balance sheet shows the Group’s share of the net assets or liabilities of those entities,
together with loans advanced and attributed goodwill.
The consolidated financial statements include investments in joint ventures using the gross equity method of accounting. A joint venture is an
entity in which the Group has a long term interest and exercises joint control. Under the gross equity method, a form of the equity method of
accounting, the Group’s share of the aggregate gross assets and liabilities underlying the investment in the joint venture is included in the
balance sheet and the Group’s share of the turnover of the joint venture is disclosed in the profit and loss account.
Other investments, held as fixed assets, comprise equity shareholdings and other interests. They are stated at cost less provision for any
impairment. Dividend income is recognised upon receipt and interest when receivable.
Stocks
Stocks are valued at the lower of cost and estimated net realisable value.
Deferred taxation
Provision is made for deferred taxation only where there is a reasonable probability that a liability or asset will crystallise in the foreseeable
future.
No provision is made for any tax liability which may arise if undistributed profits of certain international subsidiary undertakings, joint ventures
and associated undertakings are remitted to the UK, except in respect of planned remittances.
Leases
Rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the periods of the leases.
Assets acquired under finance leases, which transfer substantially all the rights and obligations of ownership, are accounted for as though
purchased outright. The fair value of the asset at the inception of the lease is included in tangible fixed assets and the capital element of the
leasing commitment included in creditors. Finance charges are calculated on an actuarial basis and are allocated over each lease to produce a
constant rate of charge on the outstanding balance.
Lease obligations which are satisfied by cash and other assets deposited with third parties are set-off against those assets in the Group’s
balance sheet.