Vodafone 2010 Annual Report Download - page 82

80 Vodafone Group Plc Annual Report 2010
Notes to the consolidated nancial statements continued
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 sale 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.
The Group prepares and approves formal five year management plans for its
operations, which are used in the value in use calculations. In certain developing
markets the fifth year of the management plan is not indicative of the long-term
future performance as operations may not have reached maturity. For these
operations, the Group extends the plan data for an additional five year period.
Property, plant and equipment and finite lived intangible assets
At each end of reporting period date, the Group reviews the carrying amounts of its
property, plant and equipment and finite lived intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent, if any, of the impairment loss. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
If the recoverable amount of an asset or cash-generating unit is estimated to be less
than its carrying amount, the carrying amount of the asset or cash-generating unit
is reduced to its recoverable amount. An impairment loss is recognised immediately
in the income statement.
Where an impairment loss subsequently reverses the carrying amount of the asset
or cash-generating unit is increased to the revised estimate of its recoverable amount,
not to exceed the carrying amount that would have been 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.
Revenue
Revenue is recognised to the extent the Group has delivered goods or rendered
services under an agreement, the amount of revenue can be measured reliably and
it is probable that the economic benefits associated with the transaction will flow to
the Group. Revenue is measured at the fair value of the consideration received,
exclusive of sales taxes and discounts.
The Group principally obtains revenue from providing the following
telecommunication services: access charges, airtime usage, messaging, interconnect
fees, data services and information provision, connection fees and equipment sales.
Products and services may be sold separately or in bundled packages.
Revenue for access charges, airtime usage and messaging by contract customers is
recognised as revenue as services are performed, with unbilled revenue resulting
from services already provided accrued at the end of each period and unearned
revenue from services to be provided in future periods deferred. Revenue from the
sale of prepaid credit is deferred until such time as the customer uses the airtime, or
the credit expires.
2. Signicant accounting policies continued
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. 
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 statement of financial position 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.