Vodafone 2016 Annual Report Download - page 98

Vodafone Group Plc
Annual Report 2016
96
Notes to the consolidated nancial statements (continued)
2. Segmental analysis
The Group’s businesses are managed on a geographical basis. Selected nancial data is presented on this
basisbelow.
The Group’s operating segments are established on the basis of those components of the Group that are evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing performance. The Group has a single group of related services and products,
being the supply of communications services and products. Revenue is attributed to a country or region based on the location of the Group
company reporting the revenue. Transactions between operating segments are charged at arm’s-length prices.
Segment information is provided on the basis of geographic areas, being the basis on which the Group manages its worldwide interests, with each
country in which the Group operates treated as an operating segment. The aggregation of operating segments into the Europe and AMAP regions
reects, in the opinion of management, the similar economic characteristics within each of those regions as well the similar products and services
offered and supplied, classes of customers and the regulatory environment. In the case of the Europe region this largely reects membership
of the European Union, while for the AMAP region this largely includes emerging and developing economies that are in the process of rapid growth
and industrialisation.
Certain nancial information is provided separately within the Europe region for Germany, Italy, the UK and Spain, and within the AMAP region for
India and Vodacom, as these operating segments are individually material for the Group. During the year ended 31 March 2016, the Group amended
its segmental reporting to reect changes in the internal management of its Enterprise business. The primary change has been that on 1 April 2015,
the Group redened its segments to report international voice transit revenue and costs within common functions rather than within the results
disclosed for each country and region. The results presented for the years ended 31 March 2015 and 31 March 2014 have been restated onto
a comparable basis. There is no impact on total Group revenue or cost.
Accounting policies
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 benets associated with the transaction will ow to the Group. Revenue is measured at the
fair value of the consideration receivable, exclusive of sales taxes and discounts.
The Group principally obtains revenue from providing mobile and xed telecommunication services including: access charges, voice and video calls,
messaging, interconnect fees, xed and mobile broadband and related services such as providing televisual and music content, connection fees and
equipment sales. Products and services may be sold separately or in bundled packages.
Revenue for access charges, voice and video calls, messaging and xed and mobile broadband provided to contract customers is recognised
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.
Revenue from interconnect fees is recognised at the time the services are performed.
Revenue for the provision of televisual and music content is recognised when or as the Group performs the related service and, depending on the
nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for
facilitating the service.
Customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and
connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised
together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer.
Revenue for device sales is recognised when the device is delivered to the end customer and the signicant risks and rewards of ownership have
transferred. For device sales made to intermediaries, revenue is recognised if the signicant risks associated with the device are transferred to the
intermediary and the intermediary has no general right to return the device to receive a refund. If the signicant risks are not transferred, revenue
recognition is deferred until sale of the device to an end customer by the intermediary or the expiry of any right of return.
In revenue arrangements including more than one deliverable, the arrangements are divided into separate units of accounting. Deliverables are
considered separate units of accounting if the following two conditions are met: (i) the deliverable has value to the customer on a stand-alone basis
and (ii)there is evidence of the fair value of the item. The arrangement consideration is allocated to each separate unit of accounting based on its
relative fair value. Revenue allocated to deliverables is restricted to the amount that is receivable without the delivery of additional goods or services.
This restriction typically applies to revenue recognised for devices provided to customers, including handsets.
Commissions
Intermediaries are given cash incentives by the Group to connect new customers and upgrade existing customers.
For intermediaries who do not purchase products and services from the Group, such cash incentives are accounted for as an expense. Such cash
incentives to other intermediaries are also accounted for as an expense if:
a the Group receives an identiable benet in exchange for the cash incentive that is separable from sales transactions to that intermediary; and
a the Group can reliably estimate the fair value of that benet.
Cash incentives that do not meet these criteria are recognised as a reduction of the related revenue.