Vodafone 2008 Annual Report Download - page 137

1. Basis of preparation
The separate financial statements of the Company are drawn up in accordance
with the Companies Act 1985 and UK generally accepted accounting principles
(“UK GAAP”).
The preparation of Company Financial Statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the Company Financial
Statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised
if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the Company is not presented in this Annual Report. These separate
financial statements are not intended to give a true and fair view of the profit or
loss or cash flows of the Company. The Company has not published its individual
cash flow statement as its liquidity, solvency and financial adaptability are
dependent on the Group rather than its own cash flows.
The Company has taken advantage of the exemption contained in FRS 8 “Related
party disclosures” and has not reported transactions with fellow Group undertakings.
The Company has taken advantage of the exemption contained in FRS 29
“Financial Instruments: Disclosures” and has not produced any disclosures
required by that standard, as disclosures that comply with FRS 29 are available
in the Vodafone Group Plc Annual Report for the year ended 31 March 2008.
2. Significant accounting policies
The Company’s significant accounting policies are described below.
Accounting convention
The Company Financial Statements are prepared under the historical cost
convention and in accordance with applicable accounting standards of the UK
Accounting Standards Board and pronouncements of the Urgent Issues Task Force.
Investments
Shares in Group undertakings are stated at cost less any provision for impairment.
The Company assesses investments for impairment whenever events or
changes in circumstances indicate that the carrying value of an investment may
not be recoverable. If any such indication of impairment exists, the Company
makes an estimate of the recoverable amount. If the recoverable amount of the
cash-generating unit is less than the value of the investment, the investment
is considered to be impaired and is written down to its recoverable amount.
An impairment loss is recognised immediately in the profit and loss account.
For available-for-sale investments, gains and losses arising from changes in fair
value are recognised directly in equity, until the investment is disposed of or is
determined to be impaired, at which time the cumulative gain or loss previously
recognised in equity, determined using the weighted average cost method,
is included in the net profit or loss for the period.
Foreign currencies
In preparing the Company Financial Statements, transactions in currencies other
than the Company’s functional currency are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date, monetary
items denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rate prevailing on the
date when fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the profit and loss account for the
period. Exchange differences arising on the retranslation of non-monetary items
carried at fair value are included in the profit and loss account for the period.
Borrowing costs
All borrowing costs are recognised in the profit and loss account in the period
in which they are incurred.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts
expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full on timing differences that exist at the balance
sheet date and that result in an obligation to pay more tax, or a right to pay less
tax in the future. The deferred tax is measured at the rate expected to apply in
the periods in which the timing differences are expected to reverse, based on
the tax rates and laws that are enacted or substantively enacted at the balance
sheet date. Timing differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those in which
they are included in the Company Financial Statements. Deferred tax assets are
recognised to the extent that it is regarded as more likely than not that they will
be recovered. Deferred tax assets and liabilities are not discounted.
Financial instruments
Financial assets and financial liabilities in respect of financial instruments are
recognised on the Company Balance Sheet when the Company becomes a party
to the contractual provisions of the instrument.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Company are classified
according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument. An equity instrument is
any contract that evidences a residual interest in the assets of the Company after
deducting all of its liabilities and includes no obligation to deliver cash or other
financial assets. The accounting policies adopted for specific financial liabilities
and equity instruments are set out below.
Capital market and bank borrowings
Interest-bearing loans and overdrafts are initially measured at fair value (which is
equal to cost at inception) and are subsequently measured at amortised cost
using the effective interest rate method, except where they are identified as a
hedged item in a fair value hedge. Any difference between the proceeds net of
transaction costs and the settlement or redemption of borrowings is recognised
over the term of the borrowing.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Derivative financial instruments and hedge accounting
The Company’s activities expose it to the financial risks of changes in foreign
exchange rates and interest rates.
The use of financial derivatives is governed by the Group’s policies approved by
the Board of directors, which provide written principles on the use of financial
derivatives consistent with the Group’s risk management strategy.
Derivative financial instruments are initially measured at fair value on the contract
date and are subsequently re-measured to fair value at each reporting date.
The Company designates certain derivatives as hedges of the change of fair
value of recognised assets and liabilities (“fair value hedges”). Hedge accounting
is discontinued when the hedging instrument expires or is sold, terminated or
exercised, or no longer qualifies for hedge accounting.
Vodafone Group Plc Annual Report 2008 135
Notes to the Company Financial Statements