130 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
Other information
Independent auditor’s report to the members of Vodafone Group Plc continued
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact on its financial statements. The Group has explained in Note 1 Basis of Preparation to the consolidated financial statements, environmental, regulatory and other factors responsive to climate change risks are still developing, and are outside of the Group’s control, and consequently financial statements cannot capture all possible future outcomes as these are not yet known. The degree of uncertainty of these changes may also mean that they cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the requirements of UK-adopted international accounting standards. The significant accounting estimates and judgements assessed by management to be potentially impacted by climate risks have been described in Note 1. Our audit effort in considering the impact of climate change on the consolidated financial statements was focused on evaluating management’s assessment of the impact of climate risk, physical and transition, their climate commitments, the effects of material climate risks disclosed on pages 65 to 70 and the significant judgements and estimates disclosed in note 1, and whether these have been appropriately reflected in asset values and associated disclosures where values are determined through modelling future cash flows, being ‘Goodwill’, ‘Other intangible assets’ and ‘Deferred tax assets’, and in the timing and nature of liabilities recognised, being ‘Asset Retirement Obligations’. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists, to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit. We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above. Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to materially impact a key audit matter. 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 (Germany) As more fully described in Note 4 to the consolidated financial statements, in accordance with IAS 36 Impairment of Assets, the Group calculates the recoverable amount for cash generating units (‘CGUs’) based on value in use (‘VIU’) to determine whether an impairment to the carrying value of the CGU, and therefore, goodwill, is required. As at 31 March 2026, the Group has recorded €21,918 million (FY25: €20,514 million) of goodwill, including €16,092 million (FY25: €15,985 million) with respect to 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, timing and amount of future capital expenditure, licence and spectrum payments, 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 and market specific factors in those assumptions. Our response to the risk We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over the Group’s goodwill impairment review process, including, for example, management’s controls over the significant assumptions described above. We evaluated, with the involvement 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 including Average Revenue Per User (‘ARPU’) to external data, such as economic and industry forecasts and competitor data for the German telecoms market, supporting contracts and benchmarking provided by management, and for consistency with evidence obtained from other areas of our audit; – comparing the cash flow projections used in the Germany VIU model to the Long-Range Plan approved by the Group’s Board of Directors as part of their annual budgeting exercise and evaluating the historical accuracy of management’s German business projections, which underpin the VIU model, by comparing the prior years’ forecast to actual results for each of the last five years; – comparing forecast capital expenditure and license and spectrum payments to actual historical spend, assessing market specific events such as network deployment plans, industry analysis and competitor data, where available; – comparing the long-term growth rate and discount rate assumptions to independently determined ranges, with the involvement of EY valuation specialists; – performing sensitivity analyses on the VIU model, to evaluate the impact that changes in assumptions would cause to the valuation of the Germany CGU; 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. 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 changes in assumptions that would lead to an impairment being recorded.
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