Vodafone 2012 Annual Report Download - page 147

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Business review Performance Governance Financials Additional information
145
Vodafone Group Plc
Annual Report 2012
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.
Derivative nancial instruments and hedge accounting
The Company’s activities expose it to the nancial risks of changes in foreign exchange rates and interest rates.
The use of nancial derivatives is governed by the Group’s policies approved by the Board of directors, which provide written principles on the use of
nancial derivatives consistent with the Group’s risk management strategy.
Derivative nancial instruments are initially measured at fair value on the contract date and are subsequently remeasured 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, no longer qualies for hedge
accounting or the Company chooses to end the hedgingrelationship.
Fair value hedges
The Company’s policy is to use derivative instruments (primarily interest rate swaps) to convert a proportion of itsxed rate debt to oating rates in
order to hedge the interest rate risk arising, principally, from capital market borrowings.
The Company designates these as fair value hedges of interest rate risk with changes in fair value of the hedging instrument recognised in the prot
and loss account for the period together with the changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is
effective. The ineffective portion is recognised immediately in the prot and loss account.
Share-based payments
The Group operates a number of equity-settled share-based compensation plans for the employees of subsidiaries using the Company’s equity
instruments. The fair value of the compensation given in respect of these share-based compensation plans is recognised as a capital contribution to
the Company’s subsidiaries over the vesting period. The capital contribution is reduced by any payments received from subsidiaries in respect of
these share-based payments.
Dividends paid and received
Dividends paid and received are included in the Company nancial statements in the period in which the related dividends are actually paid or
received or, in respect of the Company’s nal dividend for the year, approved by shareholders.
Pensions
The Company is the sponsoring employer of the Vodafone Group pension scheme, a dened benet pension scheme. The Company is
unabletoidentify its share of the underlying assets and liabilities of the Vodafone Group pension scheme on a consistent and reasonable basis.
Therefore,the Company has applied the guidance within FRS 17 to account for dened benet schemes as if they were dened contribution
schemes and recognise only the contribution payable each year. The Company had no contributions payable for the years ended 31 March 2012
and 31March2011.
3. Fixed assets
Shares in Group undertakings
£m
Cost:
1 April 2011 70,743
Capital contributions arising from share-based payments 143
Contributions received in relation to share-based payments (212)
Disposals (7)
31 March 2012 70,667
Amounts provided for:
1 April 2011 and 31 March 2012 5,631
Net book value:
31 March 2011 65,112
31 March 2012 65,036
At 31 March 2012 the Company had the following principal subsidiary:
Country of Percentage
Name Principal activity incorporation shareholding
Vodafone European Investments Holding company England 100