Vodafone 2007 Annual Report Download - page 141

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Vodafone Group Plc Annual Report 2007 139
Financials
Discontinued operations
The Group disposed of its interests in Vodafone Sweden during the year
ended 31 March 2006. Vodafone Sweden has been classified as discontinued
under US GAAP.
Summary of differences between IFRS and US GAAP
The Consolidated Financial Statements are prepared in accordance with IFRS,
which differ in certain material respects from US GAAP. The differences that
are material to the Group relate to the following:
a. Basis of consolidation
The basis of consolidation under IFRS differs from that under US GAAP. The
Group has interests in several jointly controlled entities, the most significant
being Vodafone Italy. Under IFRS, the Group reports its interests in jointly
controlled entities using proportionate consolidation. The Group’s share of
the assets, liabilities, income, expenses and cash flows of jointly controlled
entities are combined with the equivalent items in the Consolidated Financial
Statements on a line-by-line basis. Under US GAAP, the results and assets and
liabilities of jointly controlled entities are incorporated in the Consolidated
Financial Statements using the equity method of accounting. Under the
equity method, investments in jointly controlled entities are carried in the
consolidated balance sheet at cost as adjusted for post-acquisition changes
in the Group’s share of the net assets of the jointly controlled entity, less any
impairment in the value of the investment. The Group’s share of the assets,
liabilities, income and expenses of jointly controlled entities which are
included in the Consolidated Financial Statements are reported in note 13.
b. Connection revenues and costs
Under IFRS and, for transactions subsequent to 30 September 2003, under
US GAAP, 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.
For transactions prior to 1 October 2003, connection revenue under US GAAP
is recognised over the period that a customer is expected to remain
connected to a network. Connection costs directly attributable to the income
deferred are recognised over the same period. Where connection costs exceed
connection revenue, the excess costs were charged in the profit and loss
account immediately upon connection. The balances of deferred revenue and
deferred charges as of 30 September 2003 continue to be recognised over
the period that a customer is expected to remain connected to a network.
During the year ended 31 March 2007, the Group revised the estimated
period customers are expected to remain connected to the network. As a
result of this change in estimate, an additional £210 million of revenue and
related costs were recognised during the year.
c. Investments accounted for under the equity method
This line item includes the net effect of IFRS to US GAAP adjustments
affecting net loss and shareholders’ equity related to investments accounted
for under the equity method, other than the cumulative effect of change in
accounting principle related to intangible assets, which has been disclosed
separately. The differences are:
Adjustment to the share of results in investments accounted for under
the equity method
2007 2006
£m £m
Goodwill and other intangible assets associated
with investments accounted for under the
equity method (6,497) (7,772)
Impairment loss 4,900 3,600
Income taxes 2,198 2,863
Other 79 79
680 (1,230)
Adjustments to the carrying value of investments accounted for under
the equity method
2007 2006
£m £m
Goodwill and other intangible assets associated
with investments accounted for under the
equity method 7,462 9,539
Income taxes (8,742) (11,997)
Other 210 171
(1,070) (2,287)
US GAAP condensed consolidated statement of operations 2007 2007 2006 2005
Reference $m £m £m £m
Revenue 49,919 25,359 23,756 21,370
Cost of sales (58,246) (29,589) (28,126) (27,803)
Selling, general and administrative expense (8,574) (4,356) (4,342) (3,779)
Operating loss (16,901) (8,586) (8,712) (10,212)
Non-operating income and expense 374 190 (662) (465)
Share of results in investments accounted for under the equity method (51) (26) (1,044) (2,179)
Loss before income taxes (16,578) (8,422) (10,418) (12,856)
Income tax benefit 7,978 4,053 3,228 4,994
Minority interests (254) (129) (98) (108)
Loss from continuing operations (8,854) (4,498) (7,288) (7,970)
Discontinued operations, net of taxes 340 173 (5,982) 590
Cumulative effect of changes in accounting principles, net of taxes
– (6,372)
Net loss (8,514) (4,325) (13,270) (13,752)
Basic and diluted loss per share: Cents Pence Pence Pence
Loss from continuing operations (16.06) (8.16) (11.64) (12.03)
Discontinued operations 0.63 0.32 (9.56) 0.89
Cumulative effect of changes in accounting principles
– (9.63)
Net loss k(15.43) (7.84) (21.20) (20.77)