Vodafone 2007 Annual Report Download - page 111

Download and view the complete annual report

Please find page 111 of the 2007 Vodafone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

Vodafone Group Plc Annual Report 2007 109
Financials
Goodwill, analysed by reportable segment, is as follows:
Middle
Other Eastern East, Common
Germany Italy Spain UK Arcor Europe Europe Africa, Asia Pacific Functions Total
£m £m £m £m £m £m £m £m £m £m £m
Cost:
1 April 2005 35,765 19,812 10,399 713 41 5,624 376 211 208 30 73,179
Exchange movements 595 330 172 – 2 51 110 37 (6) – 1,291
Arising on acquisition – 15 – 3 – – 1,367 1,417 – – 2,802
Disposals – – – – – (1,142) – – – – (1,142)
31 March 2006 36,360 20,157 10,571 716 43 4,533 1,853 1,665 202 30 76,130
Exchange movements (989) (547) (286) – (1) (123) (57) (320) 2 – (2,321)
Arising on acquisition – – – 19 – 22 1,597 94 14 – 1,746
Transfer to other investments – – – – – – – (487) – – (487)
31 March 2007 35,371 19,610 10,285 735 42 4,432 3,393 952 218 30 75,068
Accumulated impairment losses:
1 April 2005 – – – – – 475 – – – – 475
Exchange movements 442 82 – – – (11) – – – – 513
Impairment losses 19,400 3,600 – – – 515 – – – – 23,515
Disposals – – – – – (979) – – – – (979)
31 March 2006 19,842 3,682 – – – – – – – – 23,524
Exchange movements (526) (97) – – – – – – – – (623)
Impairment losses 6,700 4,900 – – – – – – – – 11,600
31 March 2007 26,016 8,485 – – – – – – – – 34,501
Net book value:
31 March 2007 9,355 11,125 10,285 735 42 4,432 3,393 952 218 30 40,567
31 March 2006 16,518 16,475 10,571 716 43 4,533 1,853 1,665 202 30 52,606
10. Impairment
Impairment losses
The impairment losses recognised in the income statement, as a separate line item within operating profit, in respect of goodwill are as follows:
2007 2006 2005
Cash generating unit: Reportable segment: £m £m £m
Germany Germany 6,700 19,400 –
Italy Italy 4,900 3,600 –
Sweden Other Europe –515 475
11,600 23,515 475
During the year ended 31 March 2007, the increase in long term interest rates, which led to higher discount rates, led to a reduction in value of £3,700
million in Germany and Italy.
Germany
During the year ended 31 March 2007, the goodwill in relation to the Group’s mobile operation in Germany was impaired by £6.7 billion following a test for
impairment triggered by an increase in long term interest rates and increased price competition in the German market along with continued regulatory pressures.
The impairment loss for the year ended 31 March 2006 of £19.4 billion was determined as part of the annual test for impairment and was as a result of the
intensification in price competition, principally from new market entrants, together with high levels of penetration and continued regulated reductions in
incoming call rates.
The pre-tax risk adjusted discount rate used in the testing at 31 March 2007 was 10.6% (31 January 2007: 10.5%, 30 September 2006: 10.4%, 31 January
2006: 10.1%, 31 March 2005: 9.6%).
Italy
During the year ended 31 March 2007, the goodwill in relation to the Group’s mobile joint venture in Italy was impaired by £4.9 billion. During the second half
of the 2007 financial year, £3.5 billion of the impairment loss resulted from the estimated impact of legislation cancelling the fixed fees for the top up of
prepaid cards and the related competitive response in the Italian market. At 30 September 2006, the goodwill was impaired by £1.4 billion, following a test for
impairment triggered by an increase in long term interest rates.
The impairment loss for the year ended 31 March 2006 of £3.6 billion was due to competitive pressures increasing with the mobile network operators
competing aggressively on subsidies and, increasingly, on price.
The pre-tax risk adjusted discount rate used in the testing at 31 March 2007 was 11.5% (31 January 2007: 11.2%, 30 September 2006: 10.9%, 31 January
2006: 10.1%, 31 March 2005: 9.2%).
Sweden
The impairment of the carrying value of goodwill of the Group’s mobile operation in Sweden in the years ended 31 March 2006 and 31 March 2005 resulted
from fierce competition in the Swedish market combined with onerous 3G licence obligations.
Prior to its disposal in the year ended 31 March 2006, the carrying value of goodwill was tested for impairment as increased competition provided an indicator that the
goodwill may have been further impaired. The recoverable amount of the goodwill was determined as the fair value less costs to sell, reflecting the announcement on
31 October 2005 that the Group’s 100% interest in Vodafone Sweden was to be sold for €953 million (£653 million). The sale completed on 5 January 2006.