Vodafone 2008 Annual Report Download - page 96

2. Significant accounting policies continued
Borrowing costs
All borrowing costs are recognised in the income statement in the period in which
they are incurred.
Post employment benefits
For defined benefit retirement plans, the difference between the fair value of the
plan assets and the present value of the plan liabilities is recognised as an asset or
liability on the balance sheet. Scheme liabilities are assessed using the projected
unit funding method and applying the principal actuarial assumptions as at the
balance sheet date. Assets are valued at market value.
During the year ended 31 March 2006, the Group early adopted the amendment
to IAS 19, “Employee Benefits”, and applied it from 1 April 2004. Accordingly,
actuarial gains and losses are taken to the statement of recognised income and
expense as incurred. For this purpose, actuarial gains and losses comprise both
the effects of changes in actuarial assumptions and experience adjustments
arising because of differences between the previous actuarial assumptions and
what has actually occurred.
Other movements in the net surplus or deficit are recognised in the income
statement, including the current service cost, any past service cost and the effect
of any curtailment or settlements. The interest cost less the expected return
on assets is also charged to the income statement. The amount charged to the
income statement in respect of these plans is included within operating costs or
in the Group’s share of the results of equity accounted operations as appropriate.
The Group’s contributions to defined contribution pension plans are charged
to the income statement as they fall due.
Cumulative actuarial gains and losses as at 1 April 2004, the date of transition
to IFRS, have been recognised in the balance sheet.
Taxation
Income tax expense represents the sum of the current tax payable and deferred tax.
Current tax payable or recoverable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the income statement because some items
of income or expense are taxable or deductible in different years or may never
be taxable or deductible. The Group’s liability for current tax is calculated using
UK and foreign tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable in the future arising
from temporary differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the
computation of taxable profit. It is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. Deferred tax liabilities are not recognised
to the extent they arise from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except
where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date
and adjusted to reflect changes in probability that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period
when the liability is settled or the asset realised, based on tax rates that have been
enacted or substantively enacted by the balance sheet date.
Tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they either relate to
income taxes levied by the same taxation authority on either the same taxable
entity or on different taxable entities which intend to settle the current tax assets
and liabilities on a net basis.
Tax is charged or credited to the income statement, except when it relates to
items charged or credited directly to equity, in which case the tax is also recognised
directly in equity.
Financial instruments
Financial assets and financial liabilities, in respect of financial instruments, are
recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
The Group has applied the requirements of IFRS to financial instruments for all
periods presented and has not taken advantage of any exemptions available to
first time adopters of IFRS in this respect. During the year ended 31 March 2006,
the Group early adopted IFRS 7, “Financial Instruments: Disclosures”,
amendments to IAS 39, “Financial Instruments: Recognition and Measurement”
and IFRS 4, “Insurance Contracts”, regarding “Financial Guarantee Contracts”
and amendments to IAS 39 regarding “The Fair Value Option” and “Cash Flow
Hedge Accounting of Forecast Intragroup Transactions” and applied them from
1 April 2004.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value
as reduced by appropriate allowances for estimated irrecoverable amounts.
Estimated irrecoverable amounts are based on the ageing of the receivable
balances and historical experience. Individual trade receivables are written off
when management deems them not to be collectible.
Other investments
Other investments are recognised and derecognised on a trade date where
a purchase or sale of an investment is under a contract whose terms require
delivery of the investment within the timeframe established by the market
concerned, and are initially measured at cost, including transaction costs.
Other investments classified held for trading and available-for-sale are stated
at fair value. Where securities are held for trading purposes, gains and losses
arising from changes in fair value are included in net profit or loss for the period.
For available-for-sale investments, gains and losses arising from changes in fair
value are recognised directly in equity, until the security is disposed of or is
determined to be impaired, at which time the cumulative gain or loss previously
recognised in equity, determined using the weighted average costs method,
is included in the net profit or loss for the period.
Other investments classified as loans and receivables are stated at amortised
cost using the effective interest method, less any impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group are classified
according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument. An equity instrument
is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities and includes no obligation to deliver cash or other
financial assets. The accounting policies adopted for specific financial liabilities
and equity instruments are set out below.
94 Vodafone Group Plc Annual Report 2008
Notes to the Consolidated Financial Statements continued
Vodafone – Financials