The way ahead? - Vodafone

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Foreign currencies
The consolidated financial statements are presented in sterling, which is the parent company’s functional and presentation currency. Each entity
in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that
functional currency.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the
reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing
on the initial transaction dates. Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation
differences and other changes in the carrying amount of the security. Translation differences are recognised in the income statement and other
changes in carrying amount are recognised in equity.
Translation differences on non-monetary financial assets, such as investments in equity securities, classified as available-for-sale are reported as part
of the fair value gain or loss and are included in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than sterling
are expressed in sterling using exchange rates prevailing at the reporting period date. Income and expense items and cash flows are translated
at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a foreign entity,
the cumulative amount previously recognised in equity relating to that particular foreign operation is recognised in profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and
translated accordingly.
In respect of all foreign operations, any exchange differences that have arisen before 1 April 2004, the date of transition to IFRS, are deemed to be nil
and will be excluded from the determination of any subsequent profit or loss on disposal.
The net foreign exchange loss recognised in the consolidated income statement for the year ended 31 March 2013 is £118 million (2012:
£702 million gain; 2011: £1,022 million gain). The net loss and net gains are recorded within operating profit (2013: £22 million charge; 2012:
£34 million charge; 2011: £14 million charge), other income and expense and non-operating income and expense (2013: £1 million charge;
2012: £681 million credit; 2011: £630 million credit), investment and financing income (2013: £91 million charge; 2012: £55 million credit; 2011:
£405 million credit) and income tax expense (2013: £4 million charge; 2012: £nil; 2011: £1 million credit). The foreign exchange gains and losses
included within other income and expense and non-operating income and expense arise on the disposal of interests in joint ventures, associates and
investments from the recycling of foreign exchange gains previously recorded in the consolidated statement of comprehensive income.
Research expenditure
Expenditure on research activities is recognised as an expense in the period in which it is 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 statement of financial position. Scheme liabilities are assessed using the projected unit funding method and applying
the principal actuarial assumptions at the reporting period date. Assets are valued at market value.
Actuarial gains and losses are taken to the statement of comprehensive income 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 at 1 April 2004, the date of transition to IFRS, have been recognised in the statement of financial position.
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Vodafone Group Plc
Annual Report 2013