Vodafone 2002 Annual Report Download - page 113

Notes to the Consolidated Financial Statements Vodafone Group Plc 111Annual Report & Accounts and Form 20-F
26. Acquisitions and disposals
The Group has undertaken a number of transactions during the year including the completion of the acquisition of increased stakes in Japan Telecom and
the J-Phone Group, the acquisition of Eircell and the acquisition of a 34.5% interest in Grupo Iusacell.
The total goodwill capitalised in respect of transactions completed during the year has been provisionally assessed to be £11,709m of which £4,932m,
£6,771m and £6m is in respect of subsidiary undertakings, associated undertakings and customer bases, respectively.
Further details of these transactions are given below.
Acquisition of increased stakes in Japan Telecom and the J-Phone Group
Further details on the series of transactions connected with these increased stakes can be found under “Information on the Company – Acquisitions of
businesses”. In accordance with FRS 2, “Accounting for Subsidiary Undertakings”, and in order to give a true and fair view, purchased goodwill has been
calculated as the sum of the goodwill arising on each stake increase in Japan Telecom and the J-Phone Group, being the difference at the date of each
purchase between the fair value of the consideration given and the fair value of the identifiable assets and liabilities attributable to the interest purchased.
This represents a departure from the statutory method, under which goodwill is calculated as the difference between cost and fair value on the date that
Japan Telecom and the J-Phone Group became subsidiary undertakings. The statutory method would not give a true and fair view because it would result in
the Group’s share of Japan Telecom and the J-Phone Group’s retained reserves, during the period that they were associated undertakings, being reclassified
as goodwill. The effect of this departure is to increase retained profits, and purchased goodwill, by £216m.
On 12 April 2001, following the second payment of Yen 125.1 billion (£0.8 billion), the acquisition of a 15% stake in Japan Telecom from West Japan
Railway Company and Central Japan Railway Company was completed. The initial payment of Yen 124.6 billion (£0.7 billion) was made on 31 January 2001.
On 27 April 2001, the Group completed the acquisition of a further 10% stake in Japan Telecom from AT&T for a cash consideration of $1.35 billion
(£0.9 billion).
On 1 June 2001, the Group completed the acquisition of additional 20% interests in Japan Telecom and J-Phone Communications Co., Ltd for a total
consideration of £3.1 billion. From this date until 12 October 2001, Japan Telecom was accounted for as an associated undertaking of the Group.
The J-Phone Group was accounted for as an associated undertaking of the Group from the 1 April 2001 until 11 October 2001.
The share of assets/(liabilities) acquired as a result of these transactions were:
Accounting
At policy
acquisition conformity Revaluations(1) Fair value
£m £m £m £m
Fixed assets 3,167 (216)(2) (149)(3) 2,802
Current assets 1,818 3 60(4) 1,881
Liabilities due within one year (2,798) (39) (144)(4) (2,981)
Liabilities due after more than one year (1,566) (66) (47) (1,679)
621 (318) (280) 23
Goodwill 5,497
Consideration satisfied by:
Cash (including acquisition costs) 5,520
Notes:
(1) The revaluations are provisional and may be subject to adjustment in the year ending 31 March 2003.
(2) Elimination of acquired intangible fixed assets and adjustments to tangible fixed assets to bring depreciation policy in line with the Group.
(3) Revaluation of certain tangible fixed assets to fair value.
(4) Revaluation of certain working capital balances to fair value.