133 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
Other information
Independent auditor’s report to the members of Vodafone Group Plc continued
To test the valuation models used to fair value the acquired identifiable intangible assets, our audit procedures included, among others: – assessing the competence, capabilities and objectivity of management’s specialists; – testing the completeness and accuracy of the underlying data used in the purchase price allocation by comparing to supporting ledgers, and evaluation of the valuation methodologies applied against the requirements of IFRS 13, with the involvement of our internal valuation specialists, and; – for identified intangible assets impacted by prospective financial information, we identified key assumptions and benchmarked them to available competitor data and external industry reports, and performed sensitivity analysis over the key assumptions. To test the valuation of consideration, our audit procedures include, assessing the valuation of the Vodafone UK equity value contributed based on its standalone valuation model, market assumptions and review of the Shareholder Agreement. In addition, we evaluated the adequacy of the related disclosures, in particular the description of the transaction and the purchase price allocation. Key observations communicated to the Audit and Risk Committee Based on the procedures performed, we agree that the assumptions, methodologies and judgements applied as part of the purchase price allocation (‘PPA’) are reasonable The disclosures in Note 1 and 27 are appropriate. How we scoped our audit to respond to the risk and involvement with component teams The Accounting for the merger with Three UK was audited centrally by the Group audit team with support from the component audit team on certain procedures at the local market level.
Key observations communicated to the Audit and Risk Committee Based on the procedures performed, including those in respect of manual adjustments to revenue, we concluded that revenue has been appropriately recognised in accordance with IFRS 15, in the year ended 31 March 2026. How we scoped our audit to respond to the risk and involvement with component teams Our component audit teams performed audit procedures over this risk area in 5 full scope and 3 specific scope components, which covered 74% of the Group’s revenue. The Group audit team also performed centralised audit procedures over certain revenue streams which covered 1% of the Group’s revenue. For the remaining 25% of revenue, we performed risk assessment, and selective analytical and controls testing procedures to ensure the risk of material misstatement was sufficiently low. We also performed targeted journal entry testing procedures to mitigate residual risk of material misstatement. We held regular discussions with component teams throughout the audit, including in person on site visits at all locations. We participated in the development of their planned audit strategy for revenue recognition, reviewed all component deliverables and additional key and supporting workpapers prepared by the component teams to address the risk identified. Risk Merger of Vodafone Limited and Hutchison 3G UK Holdings Limited in the UK As more fully described in Note 27 to the consolidated financial statements, on 31 May 2025, the Group completed a transaction to merge Vodafone Limited (‘Vodafone UK’) and Hutchison 3G UK Holdings Limited (‘Three UK’), to form VodafoneThree Holdings Limited (‘VodafoneThree’) for a total consideration valued at €2,446 million. The transaction was accounted for using the acquisition method, which resulted in the recognition of identifiable intangible assets of €2,555 million, tangible assets of €3,457 million and goodwill of €1,358 million. The audit of the merger required significant auditor judgement, in assessing control over VodafoneThree, including whether the Group has the power and ability to use that power to affect its returns. Significant judgement was also involved in evaluating the valuation of the consideration and the identified intangible and tangible assets, given the estimation uncertainty and sensitivity of key assumptions, including those relating to future performance. Our response to the risk We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over its accounting for the acquisition. We tested controls over management’s review of the control assessment, valuation of the consideration and valuation of identifiable intangible and tangible assets, including the review of the valuation models and significant assumptions, as described above, used in the valuation. To test the control assessment, our audit procedures included, an evaluation of the terms of the Shareholder Agreement, including the rights of minority shareholders, and management’s own assessment against the requirements of IFRS 10.
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