Vodafone 2008 Annual Report Download - page 95

determined had no impairment loss been recognised for the asset or cash-
generating unit in prior years. A reversal of an impairment loss is recognised
immediately in the income statement.
Disposal groups held for sale
Disposal groups held for sale are stated at the lower of carrying value and fair
value less costs to sell.
Revenue
Group revenue comprises revenue of the Company and its subsidiary
undertakings plus the Group’s share of the revenue of its joint ventures and
excludes sales taxes and discounts.
Revenue from mobile telecommunications comprises amounts charged to
customers in respect of monthly access charges, airtime usage, messaging,
the provision of other mobile telecommunications services, including data
services and information provision, fees for connecting users of other fixed line
and mobile networks to the Group’s network, revenue from the sale of equipment,
including handsets, and revenue arising from partner market agreements.
Access charges and airtime used by contract customers are invoiced and
recorded as part of a periodic billing cycle and recognised as revenue over the
related access period, with unbilled revenue resulting from services already
provided from the billing cycle date to the end of each period accrued and
unearned revenue from services provided in periods after each accounting
period deferred. Revenue from the sale of prepaid credit is deferred until such
time as the customer uses the airtime, or the credit expires.
Other revenue from mobile telecommunications primarily comprises equipment
sales, which are recognised upon delivery to customers, and customer
connection revenue. Customer connection revenue is recognised together with
the related equipment revenue to the extent that the aggregate equipment and
connection revenue does not exceed the fair value of the equipment delivered
to the customer. Any customer connection revenue not recognised together
with related equipment revenue is deferred and recognised over the period in
which services are expected to be provided to the customer.
Revenue from data services and information provision is recognised when the
Group has performed the related service and, depending on the nature of the
service, is recognised either at the gross amount billed to the customer or the
amount receivable by the Group as commission for facilitating the service.
Incentives are provided to customers in various forms and are usually offered on
signing a new contract or as part of a promotional offering. Where such incentives
are provided on connection of a new customer or the upgrade of an existing
customer, revenue representing the fair value of the incentive, relative to other
deliverables provided to the customer as part of the same arrangement, is
deferred and recognised in line with the Group’s performance of its obligations
relating to the incentive.
For equipment sales made to intermediaries, revenue is recognised if the
significant risks associated with the equipment are transferred to the intermediary
and the intermediary has no general right of return. If the significant risks are not
transferred, revenue recognition is deferred until sale of the handset to an end
customer by the intermediary or the expiry of the right of return.
Intermediaries are incentivised by the Group to connect new customers and
upgrade existing customers. Where such incentives are separable from the initial
sale of equipment to an intermediary, the incentive is accounted for as an expense
upon connection, or upgrade, of the customer.
Revenue from other businesses primarily comprises amounts charged to
customers of the Group’s fixed line businesses, mainly in respect of access
charges and line usage, invoiced and recorded as part of a periodic billing cycle.
In revenue arrangements including more than one deliverable, the arrangement
consideration is allocated to each deliverable based on the fair value of the
individual element. The Group generally determines the fair value of individual
elements based on prices at which the deliverable is regularly sold on a
standalone basis, after considering volume discounts where appropriate.
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is determined
on the basis of weighted average costs and comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership of the asset to the lessee.
All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair
value at the inception of the lease or, if lower, at the present value of the minimum
lease payments as determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the
lease obligation so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are recognised in the income statement.
Rentals payable under operating leases are charged to the income statement
on a straight line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are also spread on a
straight line basis over the lease term.
Foreign currencies
In preparing the financial statements of the individual entities within the Group,
transactions in currencies other than the entity’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.
Changes in the fair value of monetary securities denominated in foreign currency
classified as available for sale are analysed between translation differences and
other changes in the carrying amount of the security. Translation differences are
recognised in the income statement and other changes in carrying amount are
recognised in equity.
Translation differences on non-monetary financial assets and liabilities are
reported as part of the fair value gain or loss. Translation differences on non-
monetary financial assets, such as investments in equity securities classified
as available for sale, are included in equity.
For the purpose of presenting Consolidated Financial Statements, the assets and
liabilities of entities with a functional currency other than sterling are expressed
in sterling using exchange rates prevailing on the balance sheet date. Income and
expense items and cash flows are translated at the average exchange rates for
the period and exchange differences arising are recognised directly in equity.
Such translation differences are recognised in the income statement in the period
in which a foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated accordingly.
In respect of all foreign operations, any exchange differences that have arisen
before 1 April 2004, the date of transition to IFRS, are deemed to be nil and will
be excluded from the determination of any subsequent profit or loss on disposal.
The net foreign exchange gains recognised in the Consolidated Income
Statement for continuing operations is £373 million (2007: £92 million loss,
2006: £36 million loss). A loss of £794 million was recognised in the 2007 financial
year for discontinued operations.
Vodafone Group Plc Annual Report 2008 93