Vodafone 2013 Annual Report Download - page 132

A1. Signicant accounting policies (continued)
Investments in associates
An associate is an entity over which the Group has signicant inuence and that is neither a subsidiary nor an interest in a joint venture.
Signicantinuence is the power to participate in the nancial and operating policy decisions of the investee but is not control or joint control
overthose policies.
The results and assets and liabilities of associates are incorporated in the consolidated nancial statements using the equity method of accounting.
Under the equity method, investments in associates are carried in the consolidated statement of nancial position at cost as adjusted for post-
acquisition changes in the Group’s share of the net assets ofthe associate, less any impairment in the value of the investment. Losses of an associate
in excess of the Group’s interest in that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identiable assets, liabilities and contingent liabilities of the
associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment.
The licences of the Group’s associate in the US, Verizon Wireless, are indenite lived assets as they are subject to perfunctory renewal. Accordingly,
they are not subject to amortisation but are tested annually for impairment, or when indicators exist that the carrying value is not recoverable.
Intangible assets
Identiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benets attributed to the asset
will ow 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
identiable 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 denominated in the currency of the acquired entity and revalued to the closing exchange rate at each reporting period 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 prot 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 prot or loss ondisposal.
Finite lived intangible assets
Intangible assets with nite 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 benets embodied
in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
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 specic technologies. Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives from the commencement of related network services.
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 specic software. Costs that are directly
associated with the production of identiable and unique software products controlled by the Group, and are probable of producing
future economic benets are recognised as intangible assets. Direct costs include software development employee costs and directly
attributable overheads.
Software integral to an item of hardware equipment is classied 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:
a an asset is created that can be separately identied;
a it is probable that the asset created will generate future economic benets; and
a 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 life 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, over the estimated useful lives of intangible assets from the date they are available for use, on a straight-line basis, with the
exception of customer relationships which are amortised on a sum of digits basis. The amortisation basis adopted for each class of intangible asset
reects the Group’s consumption of the economic benet from that asset.
Notes to the consolidated nancial statements (continued)
130 Vodafone Group Plc
Annual Report 2013