Vodafone 2007 Annual Report Download - page 98

96 Vodafone Group Plc Annual Report 2007
Notes to the Consolidated Financial Statements
continued
Other intangible assets
Other intangible assets with finite lives are stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged to the income
statement on a straight-line basis over the estimated useful lives of
intangible assets from the date they are available for use. The estimated
useful lives are as follows:
Brands 1 – 10 years
Customer bases 3 – 8 years
Property, plant and equipment
Land and buildings held for use are stated in the balance sheet at their cost,
less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.
Equipment, fixtures and fittings are stated at cost less accumulated
depreciation and any accumulated impairment losses.
Assets in the course of construction are carried at cost, less any recognised
impairment loss. Depreciation of these assets commences when the assets
are ready for their intended use.
The cost of property, plant and equipment includes directly attributable
incremental costs incurred in their acquisition and installation.
Depreciation is charged so as to write off the cost or valuation of assets, other
than land and properties under construction, using the straight-line method,
over their estimated useful lives, as follows:
Freehold buildings 25 – 50 years
Leasehold premises the term of the lease
Equipment, fixtures and fittings
•Network infrastructure 3 – 25 years
•Other 3 – 10 years
Depreciation is not provided on freehold land.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, the term of the
relevant lease.
The gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the
income statement.
Impairment of assets
Goodwill
Goodwill is not subject to amortisation but is tested for impairment annually
or whenever there is an indication that the asset may be impaired.
For the purpose of impairment testing, assets are grouped at the lowest
levels for which there are separately identifiable cash flows, known as cash-
generating units. If the recoverable amount of the cash-generating unit is less
than the carrying amount of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to
the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. Impairment losses recognised for goodwill are not
reversed in a subsequent period.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have not been adjusted.
2. Significant accounting policies continued
Intangible assets
Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the
cost of acquisition over the Group’s interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the entity recognised
at the date of acquisition. Goodwill is initially recognised as an asset at cost
and is subsequently measured at cost less any accumulated impairment
losses. Goodwill is held in the currency of the acquired entity and revalued to
the closing rate at each balance sheet date.
Goodwill is not subject to amortisation but is tested for impairment.
Negative goodwill arising on an acquisition is recognised directly in the
income statement.
On disposal of a subsidiary or a jointly controlled entity, the attributable
amount of goodwill is included in the determination of the profit or loss
recognised in the income statement on disposal.
Goodwill arising before the date of transition to IFRS, on 1 April 2004, has
been retained at the previous UK GAAP amounts, subject to being tested for
impairment at that date. Goodwill written off to reserves under UK GAAP prior
to 1998 has not been reinstated and is not included in determining any
subsequent profit or loss on disposal.
Licence and spectrum fees
Licence and spectrum fees are stated at cost less accumulated amortisation.
The amortisation periods range from 3 to 25 years and are determined
primarily by reference to the unexpired licence period, the conditions for
licence renewal and whether licences are dependent on specific technologies.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives from the commencement of service of the network.
Computer software
Computer software licences are capitalised on the basis of the costs incurred
to acquire and bring into use the specific software. These costs are amortised
over their estimated useful lives, being 3 to 5 years.
Costs that are directly associated with the production of identifiable and
unique software products controlled by the Group, and that are expected to
generate economic benefits exceeding costs beyond one year, are
recognised as intangible assets. Direct costs include software development
employee costs and directly attributable overheads.
Software integral to a related item of hardware equipment is accounted for as
property, plant and equipment.
Costs associated with maintaining computer software programmes are
recognised as an expense when they are incurred.
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
An internally-generated intangible asset arising from the Group’s development
activity is recognised only if all of the following conditions are met:
•an asset is created that can be separately identified;
•it is probable that the asset created will generate future economic
benefits; and
•the development cost of the asset can be measured reliably.
Internally-generated intangible assets are amortised on a straight-line basis
over their estimated useful lives. Where no internally-generated intangible
asset can be recognised, development expenditure is charged to the
income statement in the period in which it is incurred.