145 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
Other information
hence reported assets and profit or loss. Further details, including a sensitivity analysis, are included in note 4 ‘Impairment losses’ to the consolidated financial statements. Where the Group has interests in listed entities, market data, such as share price, is used to assess the fair value of those interests. If the market capitalisation indicates that their carrying amounts may not be recoverable, possible adjustments to the share price are reviewed and, where information is available, a value in use calculation is performed to support a conclusion on impairment. For operations that are classified as held for sale, management is required to determine whether the carrying value of the discontinued operation can be supported by the fair value less costs to sell. Where not observable in a quoted market or via an agreed sale price, management has determined fair value less costs to sell by reference to the outcomes from the application of a number of potential valuation techniques, determined from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Held for sale accounting When the value of a non-current asset or a group of assets in a disposal group will be primarily recovered through a sale transaction and there is an active plan for the disposal such that it is highly probable that the disposal will be completed within 12 months (subject to certain matters outside of the Group’s control) then the related assets will be classified as held for sale and, where appropriate, as a discontinued operation. Judgement is applied by management in determining if assets meet the requirements to be classified as held for sale. Climate change The potential climate change-related risks and opportunities to which the Group is exposed, as identified by management, are disclosed in the Group’s Climate-related risk reporting on pages 65 to 70. Management has assessed the potential financial impacts relating to the identified risks, primarily considering the useful lives of, and retirement obligations for, property, plant and equipment, the possibility of impairment of goodwill and other long-lived assets and the recoverability of the Group’s deferred tax assets. Management has exercised judgement in concluding that there are no further material financial impacts of the Group’s climate-related risks and opportunities on the consolidated financial statements. These judgements will be kept under review by management as the future impacts of climate change depend on environmental, regulatory and other factors outside of the Group’s control which are not all currently known.
1. Basis of preparation (continued) Post employment benefits
Management uses estimates when determining the Group’s liabilities and expenses arising for defined benefit pension schemes. Management is required to estimate the future rates of inflation, salary increases, discount rates and longevity of members, each of which may have a material impact on the defined benefit obligations that are recorded. Further details, including a sensitivity analysis, are included in note 25 ‘Post employment benefits’ to the consolidated financial statements. Contingent liabilities The Group exercises significant judgement to determine whether to recognise provisions and the exposures to contingent liabilities related to pending litigations or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities (see note 29 ‘Contingent liabilities and legal proceedings’ to the consolidated financial statements). Judgement is necessary to assess the likelihood that a pending claim will succeed, or a liability will arise. Impairment reviews IFRS requires management to perform impairment tests annually for indefinite lived assets (comprising goodwill). Impairment tests are also performed for indefinite and finite lived assets, and for equity accounted investments if events or changes in circumstances indicate that their carrying amounts may not be recoverable. Management is required to make significant judgements concerning the identification of potentially impaired assets and the determination of recoverable amounts for its assets which are based on the higher of their fair value less costs to sell and their value in use. Management considers a range of indicators when judging whether assets may be impaired including recent and forecast business performance, external factors such as changes in the economic environment, interest rates, and, where entities are listed, observable market data. Observable market data on fair values for equivalent assets is often limited and, for a number of reasons, transaction values agreed as part of any business acquisition or disposal may be higher than the assessed value in use. The Group performs an annual impairment test which focuses on determining the recoverable amounts for its assets based on value in use, being the present value of the future cash flows it expects to generate from the continuing use of its assets or cash-generating units. Calculating the net present value of the future cash flows requires estimates to be made in respect of highly uncertain matters including management’s expectations of: − Growth in Adjusted EBITDAaL, (see note 2 ‘Revenue disaggregation and segmental analysis’ for a reconciliation to the consolidated income statement); − Timing and amount of future capital expenditure, licence and spectrum payments; − Long-term growth rates; and − Discount rates that reflect the future cash flows. Changing the assumptions selected by management, in particular projected Adjusted EBITDAaL, long-term growth rate and discount rate assumptions, could significantly affect the Group’s impairment evaluation and
Powered by FlippingBook