The way ahead? - Vodafone

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136 Vodafone Group Plc Annual Report 2013 Notes to the consolidated financial statements (continued) A1. Significant accounting policies (continued) Net investment hedges Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity. Gains and losses on those hedging instruments (which include bonds, commercial paper and foreign exchange contracts) designated as hedges of the net investments in foreign operations are recognised in equity to the extent that the hedging relationship is effective; these amounts are included in exchange differences on translation of foreign operations as stated in the statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the income statement for the period. Gains and losses accumulated in the translation reserve are included in the income statement when the foreign operation is disposed of. Put option arrangements The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary. The amount that may become payable under the option on exercise is initially recognised at present value within borrowings with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to noncontrolling interests in the net assets of consolidated subsidiaries. The Group recognises the cost of writing such put options, determined as the excess of the present value of the option over any consideration received, as a financing cost. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable; the charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. Fair value is measured by deducting the present value of expected dividend cash flows over the life of the awards from the share price as at the grant date. Some share awards have an attached market condition, based on total shareholder return (‘TSR’), which is taken into account when calculating the fair value of the share awards. The valuation for the TSR is based on Vodafone’s ranking within the same group of companies, where possible, over the past five years. The fair value of awards of non-vested shares is equal to the closing price of the Group’s shares on the date of grant, adjusted for the present value of future dividend entitlements where appropriate. A2. Segment analysis The Group’s businesses are primarily managed on a geographical basis. Selected financial data is presented on this basis below. 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. Inter-segment sales are charged at arm’s length prices. During the year ended 31 March 2013 the Group changed its organisation structure. The Northern and Central Europe region comprises Germany, the UK, the Netherlands, Turkey, the Czech Republic, Hungary, Ireland and Romania. The Southern Europe region comprises Italy, Spain, Greece, Portugal, Albania and Malta. The tables below present segment information on the revised basis, with prior years amended to conform to the current year presentation.
Overview Business review Performance Governance Financials Additional information Segment Intra-region Regional Inter-region Group revenue revenue revenue revenue revenue EBITDA 1 £m £m £m £m £m £m 31 March 2013 Germany 7,857 (16) 7,841 (17) 7,824 2,735 UK 5,150 (24) 5,126 (10) 5,116 1,209 Other Northern and Central Europe 7,181 (49) 7,132 (10) 7,122 1,769 Northern and Central Europe 20,188 (89) 20,099 (37) 20,062 5,713 Italy 4,755 (5) 4,750 (17) 4,733 1,908 Spain 3,904 (9) 3,895 (33) 3,862 942 Other Southern Europe 1,883 (6) 1,877 (13) 1,864 633 Southern Europe 10,542 (20) 10,522 (63) 10,459 3,483 India 4,324 – 4,324 (4) 4,320 1,240 Vodacom 5,206 – 5,206 – 5,206 1,891 Other Africa, Middle East and Asia Pacific 3,937 (1) 3,936 (19) 3,917 1,047 Africa, Middle East and Asia Pacific 13,467 (1) 13,466 (23) 13,443 4,178 Non-Controlled Interests and Common Functions 481 – 481 – 481 (99) Group 44,678 (110) 44,568 (123) 44,445 13,275 Verizon Wireless 2 21,972 8,831 31 March 2012 Germany 8,233 (35) 8,198 (10) 8,188 2,965 UK 5,397 (29) 5,368 (14) 5,354 1,294 Other Northern and Central Europe 6,042 (33) 6,009 (15) 5,994 1,675 Northern and Central Europe 19,672 (97) 19,575 (39) 19,536 5,934 Italy 5,658 (7) 5,651 (22) 5,629 2,514 Spain 4,763 (13) 4,750 (43) 4,707 1,193 Other Southern Europe 2,128 (7) 2,121 (19) 2,102 731 Southern Europe 12,549 (27) 12,522 (84) 12,438 4,438 India 4,265 – 4,265 (6) 4,259 1,122 Vodacom 5,638 – 5,638 (8) 5,630 1,930 Other Africa, Middle East and Asia Pacific 3,965 – 3,965 (23) 3,942 1,063 Africa, Middle East and Asia Pacific 13,868 – 13,868 (37) 13,831 4,115 Non-Controlled Interests and Common Functions 614 – 614 (2) 612 (12) Group 46,703 (124) 46,579 (162) 46,417 14,475 Verizon Wireless 2 20,187 7,689 31 March 2011 Germany 7,900 (39) 7,861 (13) 7,848 2,952 UK 5,271 (39) 5,232 (17) 5,215 1,233 Other Northern and Central Europe 5,846 (39) 5,807 (16) 5,791 1,594 Northern and Central Europe 19,017 (117) 18,900 (46) 18,854 5,779 Italy 5,722 (6) 5,716 (27) 5,689 2,643 Spain 5,133 (14) 5,119 (50) 5,069 1,562 Other Southern Europe 2,208 (10) 2,198 (19) 2,179 783 Southern Europe 13,063 (30) 13,033 (96) 12,937 4,988 India 3,855 (1) 3,854 (11) 3,843 985 Vodacom 5,479 – 5,479 (8) 5,471 1,844 Other Africa, Middle East and Asia Pacific 3,971 – 3,971 (27) 3,944 1,170 Africa, Middle East and Asia Pacific 13,305 (1) 13,304 (46) 13,258 3,999 Non-Controlled Interests and Common Functions 867 – 867 (32) 835 (96) Group 46,252 (148) 46,104 (220) 45,884 14,670 Verizon Wireless 2 18,7 1 7,313 137 Vodafone Group Plc Annual Report 2013 Notes: 1 The Group’s measure of segment profit, EBITDA, excludes the Group’s share of results in associates. The Group’s share of results in associates, by segment, for the year ended 31 March 2013 is Other Northern and Central Europe £1 million (2012: £3 million; 2011 £3 million), Other Southern Europe £1 million (2012: £nil; 2011 £(3) million), Other Africa, Middle East and Asia Pacific £52 million (2012: £36 million; 2011: £51 million) and Non- Controlled Interests and Common Functions £6,423 million (2012: £4,924 million; 2011: £5,008 million). 2 Values shown for Verizon Wireless, which is an associate, are not included in the calculation of Group revenue or EBITDA.
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The way ahead? - Vodafone

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