Vodafone 2014 Annual Report Download - page 119

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Sensitivity analysis
Other than as disclosed below, management believes that no reasonably possible change in any of the above key assumptions would cause the
carrying value of any cash-generating unit to exceed its recoverable amount.
The estimated recoverable amounts of the Group’s operations in Italy, Spain, Portugal and Greece are equal to, or not materially greater than,
their carrying values; consequently, any adverse change in key assumptions would, in isolation, cause a further impairment loss to be recognised.
The estimated recoverable amounts of the Group’s operations in Germany and Romania exceeded their carrying values by approximately
£1,034 million and £184 million respectively.
Change required for carrying value
to equal the recoverable amount
Germany Romania
pps pps
Pre-tax risk adjusted discount rate 0.4 1.0
Long-term growth rate (0.5) (1.2)
Budgeted EBITDA1(0.7) (1.7)
Budgeted capital expenditure21.1 2.8
Notes:
1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial ve years for all cash-generating units of the plans used for impairment testing.
2 Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ve years for all cash-generating units of the plans used for impairment testing.
The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an (increase)/decrease to the aggregate
impairment loss recognised in the year ended 31 March 2013:
Italy Spain Portugal
Increase Decrease Increase Decrease Increase Decrease
by 2pps by 2pps by 2pps by 2pps by 2pps by 2pps
£bn £bn £bn £bn £bn £bn
Pre-tax risk adjusted discount rate (1.4) 1.8 (0.7) –(0.3) –
Long-term growth rate 1.8 (1.3) –(0.7) –(0.3)
Budgeted EBITDA1 0.5 (0.5) –(0.1) –(0.1)
Budgeted capital expenditure2(0.9) 0.9 (0.6) –(0.2) –
Notes:
1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial ve years for all cash-generating units of the plans used for impairment testing.
2 Budgeted capital expenditure is expressed as a percentage of revenue in the initial ve years for all cash-generating units of the plans used for impairment testing.
Year ended 31 March 2012
During the year ended 31 March 2012 impairment charges of £2,450 million, £900 million, £450 million and £250 million were recorded in respect
of the Group’s investments in Italy, Spain, Greece and Portugal, respectively. Of the total charge, £3,848 million related to goodwill, and £202 million
was allocated in Greece to licence intangible assets (£121 million) and property, plant and equipment (£81 million). The recoverable amounts of Italy,
Spain, Greece and Portugal were £13.5 billion, £7.4 billion, £0.4 billion and £1.8 billion respectively.
The impairment charges were primarily driven by increased discount rates as a result of increases in bond rates, with the exception of Spain where
rates reduced marginally compared to 31 March 2011. In addition, business valuations were negatively impacted by lower cash ows within business
plans reecting challenging economic and competitive conditions, and faster than expected regulatory rate cuts, particularly in Italy.
The table below shows the key assumptions used in the value in use calculations.
Assumptions used in value in use calculation
Germany Italy Spain Greece Portugal India Romania
% % % % % % %
Pre-tax risk adjusted discount rate 8.5 12.110.622.816.915.111. 5
Long-term growth rate 1.5 1.2 1.6 1.0 2.3 6.8 3.0
Budgeted EBITDA12.3 (1.2) 3.9 (6.1) 0.2 15.0 0.8
Budgeted capital expenditure28 . 5 –11. 8 10 .1–12. 3 10 . 3 –11.7 9. 3–12.7 12. 5–14.0 11.4–14.4 12.0 –14. 3
Notes:
1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial ve years for all cash-generating units of the plans used for impairment testing.
2 Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ve years for all cash-generating units of the plans used for impairment testing.
Annual Report 2014 117Overview Strategy
review Performance Governance Financials Additional
information