Vodafone 2016 Annual Report Download - page 50

Accounting policies and practices
The Committee received reports from management in relation
to theidentication of critical accounting judgements and key sources
of estimation uncertainty, signicant accounting policies and proposed
disclosure of these in the 2016 Annual Report. This disclosure also
includes qualitative details in relation to IFRS 15 “Revenue from
contracts with customers” and IFRS 16 “Leases”, both of which are likely
to have a substantial effect on the Group’s accounting when adopted.
Following discussions with management and the external auditor,
the Committee approved these critical accounting judgements,
signicant accounting policies and disclosures which are set out
in note1 “Basis of preparation” to the consolidated nancial statements.
Regulators and our nancial reporting
There has been no correspondence from regulators in relation to our
nancial reporting during the 2016 nancial year.
The Committee is committed to improving the effectiveness and clarity
of the Group’s corporate reporting and has continued to encourage
management to consider, and adopt where appropriate, initiatives
by regulatory bodies which would enhance our reporting, such as the
FRC Lab projects on the use of digital media in corporate reporting,
the disclosure of dividends and business model reporting.
Signicant judgements and issues
The signicant areas of focus considered and actions taken by the
Committee in relation to the 2016 Annual Report are outlined below.
We discussed these with the external auditor during the year and,
where appropriate, these have been addressed as areas of audit focus
as outlined in the Audit Report on pages 79 to 86.
Signicant judgements and issues
Matter considered Action
Revenue recognition
The timing of revenue recognition, the recognition of revenue on
a gross or net basis, the treatment of discounts, incentives and
commissions and the accounting for arrangements with multiple
deliverables are complex areas of accounting. See note 1 “Basis of
preparation” for further detail.
In addition there is heightened risk in relation to the accounting
for revenue as a result of the inherent complexity of systems and
changing pricing models.
An in-depth review of revenue accounting was undertaken by the
Committee during the previous nancial year.
PricewaterhouseCoopers LLP shared its approach to the audit of
revenue in their detailed audit plan, which identied the primary
risks attaching to the audit of revenue to be (a) the controls over
the underlying accuracy of billing systems and (b) presumed fraud
risk, and reported on the results of its audit work in this area to the
Committee at both the half-year and year end.
The Committee received reporting from PricewaterhouseCoopers
LLP in relation to revenue recognition and discussed a number
of judgements in relation to the presentation of revenue and
commissions. The Committee was satised with the appropriateness
of the revenue recognised in the nancial statements.
Taxation
The Group is subject to a range of tax claims and related legal actions
across a number of jurisdictions where it operates. The most material
claim continues to be from the Indian tax authorities in relation to our
acquisition of Vodafone India Limited in 2007, further details of which
are included in note 30 “Contingent liabilities and legal proceedings”.
Further, the Group has extensive accumulated tax losses as detailed
in note 6 “Taxation”, and a key management judgement is whether
a deferred tax asset should be recognised in respect of these losses.
As at 31 March 2016, the Group had recognised a £22,382 million
deferred tax asset primarily in respect of these tax losses.
The Group Tax Director presented on both provisioning and
disclosure of tax contingencies and deferred tax asset recognition at
the November 2015 and May 2016 Committee meetings. He also
provided an update on upcoming changes in the wider tax landscape
that were potentially relevant to the Group. PricewaterhouseCoopers
LLP also identied this as an area of higher audit effort and the
Committee received reporting from it on these matters.
The Committee challenged both management and
PricewaterhouseCoopers LLP on the legal judgements underpinning
both the provisioning and disclosure stance adopted in relation to
material elements of tax contingent liabilities and the IFRS basis of, and
operating assumptions underlying, the deferred tax assets recognised
at the period end. The Committee was satised with the approach
adopted in the nancial statements by management for each matter.
Board committees (continued)
Vodafone Group Plc
Annual Report 2016
48