Vodafone 2009 Annual Report Download - page 80

78 Vodafone Group Plc Annual Report 2009
Amortisation is charged to the income statement on a straight-line basis over the
estimated useful lives from the date the software is available for use.
Other intangible assets
Other intangible assets including brands and customer bases, are recorded at fair
value at the date of acquisition. 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.
Estimated useful lives
The estimated useful lives of finite lived intangible assets are as follows:
Licence and spectrum fees 3 – 25 years•
Computer software 3 – 5 years•
Brands 1 – 10 years•
Customer bases 2 – 7 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 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
2. Signicant accounting policies continued
Intangible assets
Identifiable intangible assets are recognised when the Group controls the asset, it is
probable that future economic benefits attributed to the asset will flow to the Group
and the cost of the asset can be reliably measured.
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.
Finite lived intangible assets
Intangible assets with finite lives are stated at acquisition or development cost, less
accumulated amortisation. The amortisation period and method is reviewed at least
annually. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset is accounted for by changing the
amortisation period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets with finite lives
is recognised in profit or loss in the expense category consistent with the function of
the intangible asset.
Licence and spectrum fees
Amortisation periods for licence and spectrum fees 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 comprises computer software purchased from third parties as
well as the cost of internally developed software. Computer software licences are
capitalised on the basis of the costs incurred to acquire and bring into use the specific
software. Costs that are directly associated with the production of identifiable and
unique software products controlled by the Group, and are probable of producing
future economic benefits 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 programs are recognised as
an expense when they are incurred.
Internally developed software 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.•
Notes to the consolidated nancial statements continued