Vodafone 2004 Annual Report Download - page 128

Vodafone Group Plc Annual Report 2004
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Notes to the Consolidated Financial Statements continued
Group to recognise a charge for certain share-based transactions granted after 7 November 2002, equal to the fair value of the share or share option at the
date of the grant over the vesting period.
FRS 21 (IAS 10) “Events after the Balance Sheet Date”
In May 2004, the ASB issued FRS 21 (IAS 10) “Events after the Balance Sheet Date”, which is applicable for accounting periods beginning on or after 1 January
2005. The adoption of this standard will result in equity dividends, which are currently declared after the balance sheet date but recognised in the Consolidated
Financial Statements at the balance sheet date, being derecognised at the balance sheet date. This would reduce the Group’s retained loss under UK GAAP for
the 2002, 2003 and 2004 financial years by £47 million, £101 million and £116 million, respectively, and increase the Group’s net assets and equity
shareholders’ funds under UK GAAP at 31 March 2004 by £728 million (2003: £612 million).
US Standards
SFAS No. 143, “Accounting for Asset Retirement Obligations”
In June 2001, the FASB issued SFAS No. 143. SFAS No. 143 is effective for financial years beginning after 15 June 2002 and requires that the fair value of a
liability for an asset retirement obligation be recognised in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalised as part of the carrying amount of the long-lived asset. The Group adopted this statement effective 1 April 2003.
The Group is subject to asset retirement obligations in relation to certain operating lease agreements relating to sites on which the Group’s network
infrastructure is positioned. These leases can include legal obligations to restore the leased site at the end of the lease term. Based on the Group’s historical
experience it is expected that a high majority of current sites will continue to be of importance to the network and that, where possible, the Group will continue
to renew leases on these sites. The adoption of SFAS No. 143 did not have a material impact on the Group’s reported financial position and results under
US GAAP.
SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”
In May 2003, the FASB issued SFAS No. 150. The adoption of SFAS No. 150 on 1 April 2004 resulted in the Group’s class D & E preferred shares issued by
Vodafone Americas, Inc. with a carrying value of £875 million, currently classified as non-equity minority interests, being classified as long term liabilities. The
measurement provisions of SFAS No. 150 related to these preferred shares have, however, been indefinitely deferred. Applying the measurement provisions of
SFAS No. 150 would increase the carrying value as of 1 April 2004 by £23 million.
SFAS No. 132R, “Employers’ Disclosures about Pensions and Other Postretirement Benefits”
In December 2003, the FASB issued SFAS No. 132R (revised 2003), to improve financial statement disclosures for defined benefit plans. This standard requires
that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. The provisions of
SFAS 132R are effective for periods ending after 15 December 2003 and have been adopted for domestic plans. However, certain provisions related to non-UK
defined benefit plans are not effective until periods ended after 15 June 2004.
FASB Interpretation No. 46 (revised December 2003) (“FIN 46”), “Consolidation of Variable Interest Entities”
In January 2003, the FASB issued FIN 46. FIN 46 expands upon existing US accounting guidance that prescribes when an entity should consolidate the assets,
liabilities and results of a variable interest entity (“VIE”). A VIE is an entity whose equity is not sufficient to supports its activities without additional subordinated
financial support or its equity investors lack certain characteristics of a controlling financial interest. Under FIN 46 an enterprise shall consolidate a VIE if the
enterprise has a variable interest that will absorb a majority of the VIE’s expected losses or receive the majority of the VIE’s expected residual returns, or both. In
December 2003, the FASB issued a revised FIN 46 to modify some provisions and exempt certain entities. Adoption of FIN 46 and its revision has not impacted
the Group’s reported financial position and results under US GAAP.
EITF 00-21, “Accounting for Revenue Arrangements with Multiple element deliverables”
In November 2002, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF 00-21. EITF 00-21 provides guidance on how to account
for arrangements that may involve multiple revenue-generating activities, for example, the delivery of products or performance of services, and/or rights to use
other assets. The requirements of EITF 00-21 will be applicable to agreements entered into for periods beginning after 15 June 2003. The prospective adoption
of EITF 00-21 on 1 October 2003 has not impacted the Group’s reported financial position and results under US GAAP. However, as contracts entered into
before 1 October 2003 are accounted for in accordance with SAB 101, the related deferred connection revenues, and related costs, will continue to be
recognised over the remaining life of the customer relationship. At 31 March 2004, deferred revenue accounted for in accordance with SAB 101 amounted to
£3,737 million.
International Financial Reporting Standards
Introduction
The Group is preparing for the adoption of International Financial Reporting Standards (“IFRS”) as its primary accounting basis, following the adoption of
Regulation No. 1606/2002 by the European Parliament on 19 July 2002. IFRS will apply for the first time in the Group’s Annual Report for the year ending
31 March 2006.
37. Changes in accounting standards continued