129 Vodafone Group Plc Annual Report 2024
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Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Risk Carrying value of cash generating units, including goodwill As more fully described in Note 4 to the consolidated financial statements, in accordance with IAS 36 Impairment of Assets, the Group calculates the value in use (‘VIU’) for cash generating units (‘CGUs’) to determine whether an adjustment to the carrying value of the CGU, and therefore, goodwill, is required. As at 31 March 2024, the Group has recorded €24,956 million (FY23: €27,615 million) of goodwill, including €20,335 million (FY23: €20,335 million) in respect of Germany. The Group’s assessment of the VIU of its CGUs involves estimation about the future performance of the local market businesses. In particular, the determination of the VIU for Germany was sensitive to the significant assumptions of projected adjusted EBITDAaL growth, projected capital expenditure, the long-term growth rate, and the discount rate. Auditing the Group’s annual impairment test for the Germany CGU was complex and involved significant auditor judgement, given the estimation uncertainty related to the significant assumptions described above and the sensitivity to fluctuations in those assumptions, as well as market specific factors. Our response to the risk The recoverability of the Group’s Germany CGU carrying value was subject to full scope audit procedures performed by the primary audit team with support from the component audit team on certain procedures at the local market level. We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Group’s goodwill impairment review process, including, for example, management’s controls over the significant assumptions described for the Germany VIU assessment above. For the annual impairment assessment as at 31 March 2024, we also evaluated, with the help of EY valuation specialists, the methodology applied in the Germany VIU model, as compared to the requirements of IAS 36, including the mathematical accuracy of management’s model. We performed procedures to assess the significant assumptions used in the Germany VIU model, including: – Evaluating projected adjusted EBITDAaL growth, for example by comparing underlying assumptions to external data, such as economic and industry forecasts for the German and European markets, supporting evidence provided by management, and for consistency with evidence obtained from other areas of our audit, including, for example, the results of our procedures described in ‘Recognition and recoverability of deferred tax assets on tax losses – Luxembourg’ below; – comparing the cash flow projections used in the Germany VIU model to the information approved by the Group’s Board of Directors and evaluating the historical accuracy of management’s business plans, which underpin the VIU model, by comparing prior years’ forecasts to actual results; – comparing forecast capital expenditure to actual historical spend, market specific events such as fibre and 5G roll-out, industry analysis and competitor data, where available; – with the support of EY valuation specialists, comparing the long-term growth rate and discount rate assumptions to EY independently determined ranges; – performing sensitivity analyses on the above-described assumptions in the VIU model, to evaluate whether a reasonable change in assumptions would cause an impairment of the Germany CGU or indicate additional disclosures were appropriate; and – in considering the existence of contrary evidence, for management’s assessment of implied recoverable value, we compared the Germany CGU EBITDAaL multiple to market listed peers and considered independent analyst valuations for the Germany CGU, where available. We also assessed the adequacy of the related disclosures provided in Note 4 of the consolidated financial statements, in particular the sensitivity disclosures in relation to reasonably possible changes in assumptions that could result in impairment. Key observations communicated to the Audit and Risk Committee We agree with management’s conclusion that no impairment charge is required to be recognised in the year in respect of the Germany CGU. The disclosures in Note 4 of the consolidated financial statements in respect of the Germany CGU are consistent with the requirements of IAS 36 including the sensitivity disclosures, which reflect those changes in certain key assumptions that would eliminate the headroom of €2.3 billion.
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