VODAFONE NEW ZEALAND LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2016 VODAFONE NEW ZEALAND LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2016 Directors: Russell Stanners (Managing) Antony Welton Mark Nature of business: Telecommunications Service Provider Holdin company: Vodafone Europe B.V. Ultimate holding company: Vodafone Group Auditor: PricewaterhouseCoopers Company number: 927212 Registered of?ce: 20 Viaduct Harbour Avenue, Auckland, New Zealand VODAFONE NEW ZEALAND LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2016 Contents Page independent Auditor's report 3-4 Directors? approval of the ?nancial statements 5 Consolidated statement of comprehensive income 6 Consolidated statement of ?nancial position 7 Consolidated statement of changes in equity 8 Consolidated statement of cash ?ows 9 Notes to the ?nancial statements 10-22 i. Independent Auditors? Report to the shareholder of Vodafone New Zealand Limited Report on the Consolidated Financial Statements We have audited the consolidated ?nancial statements of Vodafone New Zealand Limited (?the Company) on pages 6 to 22, which comprise the consolidated statement of ?nancial position as at 31 March 2016, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash ?ows for the year then ended, and the notes to the consolidated ?nancial statements that include a summary of signi?cant accounting policies and other explanatory information for the Group. The Group comprises the Company and the entities it controlled at 31 March 2016 or from time to time during the ?nancial year. Directors?Responsibility for the Consolidated Financial Statements The Directors are responsible on behalf of the Company for the preparation and fair presentation of these consolidated ?nancial statements in accordance with New Zealand Equivalents to International Financial Reporting Standards Reduced Disclosure Regime and for such internal controls as the Directors determine are necessary to enable the preparation of consolidated ?nancial statements that are free from material misstatement, whether due to fraud or error. Auditors?Responsibility Our responsibility is to express an opinion on these consolidated ?nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated ?nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated ?nancial statements. The procedures selected depend on the auditors? judgement, including the assessment of the risks of material misstatement of the consolidated ?nancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company?s preparation and fair presentation of the consolidated ?nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company?s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the consolidated ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion. We are independent of the Group. Our ?rm carries out other assignments for the Group in the areas of other assurance services. The provision of these other services has not impaired our independence. In addition to this, partners and employees of our ?rm deal with Vodafone New Zealand Limited on normal terms within the ordinary course of trading activities of the business of Vodafone New Zealand Limited. The ?rm has no other relationship with, or interest in, Vodafone New Zealand Limited or any of its subsidiaries. PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, pwc.co.nz Independent Auditors? Report Vodafone New Zealand Limited Opinion In our opinion, the consolidated ?nancial statements on pages 6 to 22 present fairly, in all material respects, the ?nancial position of the Group as at 31 March 2016, and its ?nancial performance and cash ?ows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards Reduced Disclosure Regime. Restriction on Use of our Report This report is made solely to the Company?s shareholders, as a body, in accordance with the Companies Act 1993. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditors? report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company?s shareholders, as a body, for our audit work, for this report or for the opinions we have formed. pnauai'VhovterCogyf/b Chartered Accountants Auckland 29 June 2016 VODAFONE NEW ZEALAND LIMITED APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 The directors are pleased to present the consolidated ?nancial statements of Vodafone New Zealand Limited for the year ended 31 March 2016 on pages 6 to 22. A shareholder's resolution has been passed by the shareholder of the Company whereby it agrees, pursuant to section 211(3) of the Companies Act .1993, that the Annual Report of Vodafone New Zealand Limited need not comply with section 211(1)(a) and to and section 211(2) of that Act. Stanners Director Director For and on behalf of the Board of Directors, who authorised the issue of the ?nancial statements on: Note Revenue Cost of sales Gross Pro?t Operating expenses Operating pro?t 4 VODAFONE NEW ZEALAND LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2016 Finance income Finance costs 17 Finance costs - net Share of loss of investments accounted for using the equity method 8 Loss before income tax Income tax credit 19 Loss for the year Other comprehensive income Total comprehensive loss for the year 2016 2015 million million 1,998.9 1,964.5 (954.2) (911.6) 1,044.7 1,052.9 (994.5) (1 .0351) 50.2 17.2 11.0 11.2 (82.7) (137.3) (71.7) (126.1) (1.9) (1 .0) (23.4) (109.9) 5.1 19.4 (18.3) (90.5) (18.3) (90.5) The notes to the ?nancial statements (pages 10-22) form an integral part of these consolidated ?nancial statements. VODAFONE NEW ZEALAND LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2016 Note 2016 2015 million 5 million Current assets Cash and cash equivalents (excluding bank overdrafts) 13.2 8.6 inventories 17.2 16.5 Trade and other receivables 5 487.2 586.1 Tax receivable 18.8 20.2 Deferred tax assets 19 18.2 5.3 554.6 636.7 Non-current assets Property, plant and equipment 6 1,001.9 1,036.8 Intangible assets 7 500.9 546.4 Investments accounted for using the equity method 8 2.7 3.6 1,505.5 1,586.8 Total assets 2,060.1 2,223.5 Current liabilities Trade creditors 137.2 125.2 Other liabilities 9 296.0 1,780.7 Provisions 1 1 7.0 2.2 440.2 1,908.1 Non-current liabilities Other liabilities 10 1,152.1 128.2 Provisions 1 1 22.2 24.8 1 .174.3 1 53.0 Total liabilities 1,614.5 2,061.1 Net assets 445.6 162.4 Equ?y Share capital 12 454.6 154.6 Reserves 13 (9.0) 7.8 Total equity 445.6 162.4 The notes to the ?nancial statements (pages 10-22) form an integral part of these consolidated ?nancial statements. En VODAFONE NEW ZEALAND LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2016 Share Share Retained Total Capital Based Earnings equity Payment Reserve Note million million million million Balance as 'at 1 April 2014 154.6 8.5 90.5 253.6 Loss for the year - - (90.5) (90.5) Total comprehensive loss for the year - - (90.5) (90.5) Share based payments reserves 18 - (0.7) - Balance as at 31 March 2015 154.6 7.8 - 162.4 Balance as at 1 April 2015 154.6 7.8 - 162.4 Loss for the year - - (18.3) (18.3) Total comprehensive loss for the year - - (18.3) 144.1 Share based payments reserves 18 - 1.5 - 1.5 Shares issued to parent company 12 300.0 - 300.0 Balance as at 31 March 2016 454.6 9.3 (18.3) 445.6 The notes to the ?nancial statements (pages 10-22) form an integral part of these consolidated ?nancial statements. VODAFONE NEW ZEALAND LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2016 Note 2016 2015 million million Cash ?ows from operating activities Cash generated from operations 272.6 295.8 income tax paid (6.4) (0.1) Net cash generated from operating activltles 266.2 295.7 Cash ?ows from investing activities Acquisition of business 15 (20.6) - Acquisition of investments accounted for using the equity method 8 (1.0) (2.5) Purchases of property, plant and equipment (177.3) (203.4) Purchases of intangible assets (63.4) (119.8) Loans granted to related parties (0.6) - Interest received 0.3 1.5 Net cash used in investing activities (262.6) (324.2) Net increasel(decrease) in cash and cash equivalents 3.6 (28.5) Cash and cash equivalents at beginning of year 8.6 36.5 Exchange gains on cash and cash equivalents 0.1 0.6 Cash and cash equivalents at end of year 1 12.3 8.6 1 Cash and cash equivalents at end of year include bank overdrafts of $0.9m (2015: nil) (note 9). 2 During the 2016 ?nancial year. $300m share capital was issued to Vodafone Europe B.V. (note 12). In addition, $1.1 billion was drawn down. as a loan repayable to Vodafone Overseas Finance Limited (note 10) and $1.5 billion was repaid to Vodafone Group (note 9). These have been classi?ed as non-cash transactions in the ?nancial statements as they are recorded within receivables from Vodafone Group entities (note 5). The notes to the ?nancial statements (pages 10-22) form an integral part of these consolidated ?nancial statements. VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 1. General information These ?nancial statements are for Vodafone New Zealand Limited (the company) and its subsidiaries (together, the group). They provide telecommunications services. During the year, the company acquired the business of Woddexchange Communications Limited. a uni?ed communications provider operating in New Zealand. 2. Summary of signi?cant accountin policies The principal accounting policies applied in the preparation of these consolidated ?nancial statements are set out below. These policies have been consistently applied in all years, unless otherwise stated. 2.1. Basis of preparation The consolidated ?nancial statements of Vodafone New Zealand Limited have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). Vodafone New Zealand Limited is a for-pro?t entity for the purposes of complying with NZ GAAP. The consolidated ?nancial statements comply with New Zealand equivalents to International Financial Reporting Standards Reduced Disclosure Regime (NZ IFRS RDR) and other applicable Financial Reporting Standards as appropriate for for-pro?t entities. The group is eligible to apply Tier 2 for-pro?t Accounting Standards (NZ IFRS RDR) on the basis that it does not have public accountability and is not a large for-pro?t public sector entity. The group has elected to report in accordance with N2 IFRS RDR and has applied disclosure concessions. Application of First-time adoption of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS 1) The group's consolidated ?nancial statements for the year ended 31 March 2016 are the ?rst annual ?nancial statements that comply with N2 IFRS RDR and NZ IFRS 1 has been applied in their preparation. The group's consolidated ?nancial statements for the year ended 31 March 2015 had been prepared in accordance with previous New Zealand Financial Reporting standards, under the NZ IFRS Differential Reporting Regime (NZ IFRS Diff Rep). The group?s transition date is 1 April 2014. The group prepared its opening NZ IFRS RDR statement of ?nancial position at that date. The reporting date of these ?nancial statements is 31 March 2016. The group's NZ IFRS RDR adoption date is 1 April 2015. In preparing these ?nancial statements in accordance with NZ IFRS 1, the group has applied all the mandatory exceptions but neither of the optional exemptions from full retrospective application of NZ IFRS RDR. NZ IFRS Diff Rep differs in certain respects from NZ IFRS RDR. 0n transition to NZ IFRS RDR, adjustments to equity arising from recognition of deferred tax as at 1 April 2014 and 31 March 2015 were made, for the amounts of and $5.3m respectively, with $30.2m of deferred tax credit recognised directly in the statement of comprehensive income for the year ended 31 March 2015. Total equity reported under N2 IFRS Diff Rep as at 1 April 2014 and 31 March 2015 was $278.5m and $157.1 respectively. In addition, when preparing the consolidated ?nancial statements for the year ended 31 March 2016, management has prepared a statement of cash ?ows which includes comparative ?gures to comply with N2 IFRS RDR. There have been no other signi?cant impacts on the ?nancial statements on transition to NZ IFRS RDR, except for disclosure changes to some notes as a result of the removal of NZ IFRS Diff Rep disclosure concessions. Statutory base The ?nancial statements have been prepared in accordance with the requirements of the Financial Reporting Act 2013 and the Companies Act 1993. Historical cost convention The consolidated ?nancial statements have been prepared under the historical cost convention, except for the revaluation of certain ?nancial instruments. The preparation of ?nancial statements in conformity with N2 IFRS RDR requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas 10 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signi?cant to the consolidated ?nancial statements are disclosed in note 3. 2.2 Consolidation Subsidiaries A subsidiary is an entity controlled by the group. The group controls an entity when the group is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of the subsidiaries acquired or disposed during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the consolidated ?nancial statements of subsidiaries to bring their accounting policies in line with those used by the group.A l intra?group transactions, balances, incomes and expenses are eliminated on consolidation. Associates An associate is an entity over which the group has signi?cant in?uence and that is neither a subsidiary nor an interest in joint venture. Signi?cant in?uence is the power to participate in the ?nancial and operating policy decisions of the investee but is not control orjoint contml over those policies. The accounts of associated companies and other investments have been re?ected in the consolidated ?nancial statements on an equity accounting basis that shows the share of surpluses/losses in the consolidated statement of comprehensive income and the share of post-acquisition increases/decreases in net assets in the consolidated statement of ?nancial position. 2.3 Foreign currency transactions All foreign currency transactions during the year have been brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date. Exchange differences are brought to account in the consolidated statement of comprehensive income in the period in which they arise. 2.4 Property, plant and equipment Property, plant and equipment are initially stated at cost and depreciated as outlined below. Where appropriate, the cost of property, plant and equipment includes site preparation costs, installation costs, unrecovered operating costs incurred during planned commissioning and the cost of obtaining initial resource consents. Where an item of property, plant and equipment is disposed of, the gain or loss recognised in the consolidated statement of comprehensive income is calculated as the difference between the sale price and the carrying amount of the item. Depreciation is provided on property, plant and equipment excluding land. Depreciation is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful life. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. The following estimated useful lives are used in the calculation of depreciation for property, plant and equipment: Fixtures, ?ttings and improvements 4 - 8 years Network 3 - 8 years Customer premises equipment 1 - 4 years Fibre cables ducting 25 or lease term ifshorter IT equipment 3 - 5 years Assets are depreciated from the date they are brought into service, or in respect of internally constructed assets, from the time an asset is completed and held ready for use. Construction in progress is accounted for at cost- and capitalised to property, plant and equipment as projects are completed. Depreciation is accmed based on the in-service date. 11 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 2.5 Intangible assets Goodwill Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the group's interest in the net fair value of the identi?able assets. liabilities and contingency liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested annually for impairment where impairment indicators are noted. Any impairment is recognised immediately in the consolidated statement of comprehensive income and is not subsequently reversed. Computer software and licenses The amounts paid for network licenses and additional spectrum licenses are amortised over the period of the licenses on a straight line basis. The amortisation commences from the date of network acceptance, which is when the network is technically ready to operate the commercial service. Where a network is progressively brought into full service over a period of time. the initial amortisation is in proportion to the capacity of the network compared to that expected at network maturity. Software is amortised on a straight line basis over the useful lives between 3 to 5 years. Customer base is amortised on a sum of digit basis over the estimated useful lives of underlying customers, which is between 7 to 9 years. Radio spectrum licences are amortised over the legal lives of the underlying spectrum management rights as at acquisition date. The average legal lives range from 15 to 20 years. 2.6 Impairment of non-?nancial assets Intangible assets that have an inde?nite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identi?able cash in?ows known as cash-generating units. If the recoverable amount of the cash generating unit (CGU) is less than the carrying amount of the unit, the impairment loss is allocated ?rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit. 2.7 Financial assets Financial assets are classi?ed into the following speci?ed categories: at fair value through pro?t or loss and loans and receivables. The classi?cation depends on purpose for which the ?nancial assets were acquired and is determined at the time of initial recognition. Financial assets at fair value through pro?t or loss Financial assets at fair value through pro?t or loss are ?nancial assets held for trading. A ?nancial asset is classi?ed in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classi?ed as current assets if expected to be settled within 12 months, othenivise they are classi?ed as non-current. Loans and receivables Loans and receivables are non-derivative ?nancial assets with ?xed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classi?ed as non-current assets. The group's loan and receivables comprise 'trade and other receivables? (note 5). and ?cash and cash equivalents' in the consolidated statement of ?nancial position. Financial assets carried at fair value through pro?t or loss are initially recognised at fair value, and transaction costs are expensed in the pro?t and loss component of the consolidated statement of comprehensive income. Financial assets are derecognised when the rights to receive cash ?ows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards or ownership. Financial assets at fair value through pro?t and loss are subsequently canted at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Financial assets and ?nancial liabilities have been presented on a net basis in the consolidated ?nancial statements where there is legal right to offset. 12 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 2.8 Impairment of ?nancial assets For ?nancial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of the estimated future cash ?ows, discounted at the original effective interest rate. The carrying amount of the ?nancial asset is reduced by the impairment loss directly for all ?nancial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectable, it is written off against the allowance account. A trade receivable is deemed to be uncollectable upon noti?cation of insolvency of the debtor or upon receipt of similar evidence that the group will be unable to collect the trade receivable. Changes in the carrying amount of the allowance account are recognised in the pro?t and loss component of the consolidated statement of comprehensive income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed. In respect of ?nancial assets carried at amortised cost, with the exception of trade receivables, the impairment loss is reversed through the pro?t and loss component of the statement of comprehensive income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Subsequent recoveries of trade receivables previously written off are credited to operating expenses in the consolidated statement of comprehensive income. 2.9 Inventories Inventories are valued at the lower of cost and net realisable value. Costs are assigned to inventory on hand using the weighted average basis. 2.10 Trade receivables, other receivables and loans Trade receivables, other receivables and loans that have ?xed or determinable payments that are not quoted in an active market are classi?ed as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. 2.11 Cash and cash equivalents In the consolidated statement of cash ?ows, cash and cash equivalents includes cash in hand, deposits held at call with banks and bank overdrafts. In the consolidated statement of ?nancial position, bank overdrafts are shown within current liabilities. 2.12 Trade and other payables Trade and other payables are recognised when the group becomes obliged to make future payments resulting from the purchase of goods and services. 2.13 Borrowings Borrowings are initially measured at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a ?nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the ?nancial liability, or, where appropriate, a shorter period. General and speci?c borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. 2.14 Financial instruments issued by the group Debt and equity instruments are classi?ed as either liabilities or as equity in accordance with the substance of the contractual arrangement. Interest and dividends are classi?ed as expenses or as distributions of pro?t consistent with the consolidated statement of ?nancial position classi?cation of the related debt or equity instruments. 2.15 Current and deferred income tax The tax expense for the period comprises current and deferred tax. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance date where the group operates and generates taxable income. 13 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ?nancial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 2.16 Employee bene?ts An accrual is made for bene?ts accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. Accruals are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Contributions to de?ned contribution superannuation plans are expensed when incurred. Accruals made in respect of employee bene?ts which are not expected to be settled within 12 months are measured as the present value of the estimated future cash out?ows to be made by the group in respect of services provided by employees up to reporting date. 2.17 Share-based payments The group issues equity-set?ed share-based payments to certain employees under retention and incentive schemes, in the form of both restricted and unrestricted shares in the ultimate parent company, Vodafone Group PLC. 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 net effect of non-market- based vesting conditions. A corresponding increase in retained earnings is also recognised. Fair value is measured by deducting the present value of expected dividend cash ?ows over the life of the awards from the share price as at the grant date. The fair value of awards of non-vested shares is equal to the closing price of Vodafone Group shares on the date of grant. adjusted for the present value of the delay in receiving dividends where appropriate. 2.18 Provisions Provisions are recorded at the best estimate of the expenditure required to settle the obligation at balance date.Where the effect is material, the expected expenditures are discounted to their present value using a pre-tax discount rate. Provisions expected to be settled within 12 months are measured at their nominal values. 2.19 Revenue recognition Revenue from the sale of goods and other assets is recognised when the group has passed control of the goods to the buyer. Revenue from subscribers is recognised when the services are provided. Revenue received in advance is initially deferred and recognised when the goods or services are provided. 2.20 Leases Leases in which a signi?cant portion of the risks and rewards of ownership are retained by the lessor are classi?ed as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the pro?t and loss component of the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. Leases where the group has substantially all the risks and rewards of ownership are classi?ed as ?nance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. 2.21 Government grants Government grants whose primary condition is that the group should purchase, construct or otherwise acquire non-current assets are recognised by deducting the amount from the net carrying value of the asset in the consolidated statement of ?nancial position. Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions attaching to them and that the grants will be received. 14 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 3. Critical accounting estimates, assumptions and judgements The preparation of the ?nancial statements requires judgements, estimates and assumptions. Application is based on future expectations as well as historical experience and other factors, as appropriate to the particular circumstances. 3.1 Revenue recognition In revenue arrangements where more than one good or service is provided to the customer, customer consideration is allocated between the goods and services using relative fair value principles. The fair values determined for deliverables may impact the timing of recognition of revenue. Determining the fair value of each deliverable can require complex estimates. The group generally determines the fair value of individual elements based on prices at which the deliverable is regularly sold on a stand- alone basis after considering volume discounts where appropriate. 3.2 Business combinations and goodwill When the group completes a business combination, the fair values of the identi?able assets and liabilities acquired, including intangible assets, are recognised. The determination of the fair values of acquired assets and liabilities are based, to some extent, on management's judgement. If the purchase consideration exceeds the fair values of the net assets acquired then the incremental amount paid is recognised as goodwill. If the purchase price consideration is lower than the fair value of assets acquired then the difference is recorded as a gain in the pro?t and loss component of the consolidated statement of comprehensive income. Allocation of the purchase price between ?nite lived assets and inde?nite lived assets such as goodwill affects the subsequent results of the group as ?nite lived intangible assets are amortised, whereas inde?nite lived intangible assets, including goodwill, are not amortised. 3.3 Impairment reviews For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identi?able cash inflows known as cash-generating units. Management has identi?ed the entire group as the smallest identi?able cash- generating unit. 3.4 Property, plant and equipment The depreciation charge for an asset is derived using estimates of its expected useful life and expected residual value, which are reviewed annually. Management determines the useful lives and residual values for assets when they are acquired, based on experience with similar assets and taking into account other relevant factors such as any expected changed in technology. 3.5 Finite lived intangible assets Other intangible assets include amounts spent by the group acquiring licenses and spectrum, customer bases and the costs of purchasing and developing computer software. The useful life over which intangible assets are amortised depends on management?s estimate of the period over which economic bene?t will be derived from the asset. Useful lives are periodically reviewed to ensure that they remain appropriate. 3.6 Provisions In the course of the group's activities, a number of sites and other assets are utilised which are expected to have costs associated with decommissioning. The associated cash out?ows are substantially expected to occur at the end of the life of the relevant assets. 15 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 4. Operatin pro?t Detailed below are the key amounts recognised in arriving at operating pro?t: Share based payments Employee bene?ts Amount paid to auditors for audit fees Amount paid to auditors for other assurance services Operating lease payments Bad and doubtful debts Loss on disposal of property, plant and equipment Net loss/(gain) on foreign exchange Depreciation Amortisation 2016 million 7.2 281.0 0.7 0.1 73.7 11.8 0.7 5.6 206.1 135.8 2015 million 6.6 295.5 0.7 0.1 81.5 13.0 1.7 (0.9) 243.3 152.6 Audit fees for 2016 comprised $0.5m (2015: $0.5m) paid to New Zealand and $0.2m (2015: $0.2m) paid to UK. 5. Trade and other receivables Trade receivables Less: allowance for doubtful debts Trade receivables net Other receivables Receivables from related parties Receivable from Vodafone Group Pie The allowance for doubtful debts in relation to trade receivables is provided for based on estimated irrecoverable amounts determined by reference to current customer circumstances and past default experience. Receivable from Vodafone Group is payable on demand. 16 2016 2015 million million 149.6 148.5 (8.0) (5.6) 141.6 142.9 79.1 74.8 5.4 5.3 261.1 363.1 487.2 586.1 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 6. Property, plant and equipment Fixtures, Communication . Fittins a. Network Total million Improvements equipment In pmgress At 1 April 2015 Cost 101.3 2,676.5 77.1 2,854.9 Accumulated depreciation (73.9) (1,744.2) - (1,818.1) Net book value 27.4 932.3 77.1 1,036.8 Year ended 31 March 2016 Opening net book value 27.4 932.3 77.1 1,036.8 Additions acquisition (note 15) 0.4 0.4 - 0.8 Additions - - 171.0 171.0 Transfer from construction in progress 5.4 192.3 (197.7) - Disposals (0.1) (0.5) - (0.6) Depreciation charge (6.5) (199.6) - (206.1) Closing net book value 26.6 924.9 50.4 1,001.9 At 31 March 2016 Cost 106.6 2,858.9 50.4 3,015.9 Accumulated depreciation (80.0) (1,934.0) (2,014.0) Net book value 26.6 924.9 50.4 1,001.9 All additions are made through construction in progress. As at 31 March 2016 Vodafone New Zealand has claimed a total of $56.6m (2015: $46.2m) in government grant monies. This has been offset against the costs of building the cell sites to reduce the carrying value of the assets. 7. Intangible assets Goodwill Radio Software Customer Construction Total . . spectrum base in progress mm'o" licenses At 1 April 2015 Cost 143.1 225.4 745.8 105.8 34.2 1,254.3 Accumulated amortisation and impairment - (64.9) (591.6) (51.4) - (707.9) Net book value 143.1 160.5 154.2 54.4 34.2 546.4 Year ended 31 March 2016 Opening net book value 143.1 160.5 154.2 54.4 34.2 546.4 Additions acquisition (note 15) 8.4 - 11.9 - - 20.3 Additions - - - - 70.1 70.1 Transfer from construction in progress - - 98.1 - (98.1) - Disposals - - (0.1 - - (0.1 Amor?sation charge - (15.2) (104.2) (16.4) - (135.8) Closing net book value 151.5 145.3 159.9 38.0 6.2 500.9 At 31 March 2016 Cost 151.5 225.4 794.1 105.8 6.2 1,283.0 Accumulated amortisation and impairment - (80.1) (634.2) (67.8) (782.1) Net book value 151.5 145.3 159.9 38.0 6.2 500.9 All additions are made through construction in progress. An impairment review was performed for the year ended 31 March 2016 and the result indicated no goodwill impairment is required (2015: nil). 17 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 201 6 2015 8. Investments accounted for using the equity method million million Opening balance 3.6 2.1 Additions 1 .0 2.5 Share of losses (1.9) (1.0) Closing balance 2.7 3.6 Nature of investment in associates: Name of entity Country of incorporation ownership interest Measurement method Centurion GSM Limited New Zealand 25.0 Equity TNAS Limited New Zealand 50.0 Equity TSM NZ Limited New Zealand 32.5 Equity 2016 2015 9. Other liabilities - current 8 million million Loan from Vodafone Group 806.6 Accumulated interest on loan 699.7 - 1,506.3 Revenue received in advance 78.6 79.1 Bank overdraft 0.9 - Other payables accruals 193.0 181.7 Related party payables 23.5 13.6 296.0 1,780.7 201 6 2015 10. Other liabilities - Non-current million million Loan from Vodafone Overseas Finance Limited 1,152.1 128.2 1 ,152.1 128.2 The Vodafone Overseas Finance Limited payable is an interest bearing loan denominated in GBP. There were no defaults or breach of covenants by the group on any borrowing arrangement during the current year (2015: none). 2016 2015 11. Provisions million 5 million At 1 April 2015 27.0 27.2 Additional provisions/(unused amounts reversed) 2.2 (0.2) At 31 March 2016 29.2 27.0 Current 7.0 2.2 Non-current 22.2 24.8 29.2 27.0 18 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 201 6 2015 12. Share capital 6 million million Ordinary shares 454.6 154.6 454.6 154.6 0n 1 July 2015, Vodafone New Zealand issued $300m ordinary shares to Vodafone Europe B.V. Share capital comprises 454,600,000 (2015:154,600,000) ordinary shares fully paid. All ordinary shares have equal rights to share of dividends and surpluses upon liquidation. 2016 2015 13. Reserves 5 million 3 million At 1 April 2015 7.8 99.0 Total comprehensive loss for the year (18.3) (90.5) Share based payments reserves movement 1.5 (0.7) At 31 March (9.0) 7.8 Dividend per share was nil (2015: nil). 14. Financial assets and liabilities 2016 2015 million 5 million Total ?nancial assets 470.6 563.4 Financial assets comprise cash and cash equivalents and trade and other receivables (excluding prepayments). Total ?nancial liabilities 1,506.8 1,954.9 This consists of trade creditors, current other liabilities (excluding revenue received in advance), and non-current other liabilities. In 2016 and 2015 all ?nancial assets are classi?ed as loans and receivables and all ?nancial liabilities are classi?ed as ?nancial liabilities measured at amortised cost. 15. Business combinations On 31 July 2015, the group acquired the business of Worldexchange Communications Limited a uni?ed communications provider operating in New Zealand, for a cash consideration of $20.6m. The assets and liabilities recognised in the acquisition were: Fair value million Property, plant and equipment 0.8 Intangible assets - Software 11.9 Trade and other receivables 1.3 Trade creditors and other liabilities (1.8) Fair value of net identi?able assets acquired 12.2 Goodwill 8.4 Total consideration paid in cash 20.6 19 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 16. Subsidiaries The group has the following subsidiaries at 31 March 2016: Name Country of Nature of business Proportion of ordinary shares incorporation and directly held by parent place of business Vodafone New Zealand New Zealand Non-trading trustee of the Vodafone 100 Foundation Limited New Zealand Foundation Vodafone Mobile NZ Limited New Zealand Holds management rights to 100 spectrum assets Vodafone Next Generation New Zealand Provider of uni?ed communication 100 Services Limited services (manages acquired business of 17. Related parties The parent entity in the consolidated entity, and the ultimate New Zealand entity, is Vodafone New Zealand Limited. The immediate parent entity of Vodafone New Zealand Limited is Vodafone Europe BV. The ultimate parent entity, of the parent and the wholly-owned group, is Vodafone Group Plc. Unless othenrvise stated, related parties are under common controls of the ultimate parent entity. During the year the group entered into the following transactions with related parties. Key management personnel comprise the executive directors. Transaction type Related party 2016 2015 million million Purchases of goods and services Vodafone Group entities (182.2) (153.1) Sale of goods and services Vodafone Group entities 9.6 14.0 Finance charges Vodafone Group entities (82.7) (137.3) Interest received Vodafone Group entities 10.7 9.7 Total compensation paid Key management personnel (7.5) (11.2) Other transactions with related parties and Vodafone Group entities are disclosed in notes 5, 9, 10 and 12. 18. Share based payments Share plans Under the Vodafone Global Incentive Plan awards of shares are granted to Directors and certain employees. The release of these shares is conditional upon continued employement and for some awards achievement of certain performance targets measured over a three year period. Movements in non-vested shares are as follows: 2016 2015 Number of Weighted average fair Number of Weighted average fair shares value at grant date shares value want date 1 April 4,485,712 $3.70 5,376,117 $3.24 Granted during the year 1,063,1 13 $4.14 2,018,309 $3.80 Forfeited during the year (666,851) $3.82 (1,133,759) $3.09 Exercised during the year (791,702) $3.80 (1,774,955) $2.82 Expired during the year - - 31 March 4,090,272 $3.96 4,485,712 $3.70 20 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 19. Income tax 2016 2015 million million Income tax recognised in pro?t or loss Tax expense/(credit) comprises: Current tax expense 10.7 5.7 Under I (over) provision in previous years (3.0) 5.1 Deferred income tax (12.8) (30.2) Total tax expensel(credit) (5.1) (19.4) Income tax expense on pre-tax accounting pro?t from operations reconciles to the income tax expense in the ?nancial statements as follows: Loss before income tax (23.4) (109.9) Income tax credit calculated at 28% (2015: 28%) (6.5) (30.8) Non-deductible expenses 4.4 6.3 Under I (over) provision in previous years (3.0) 5.1 Tax chargel(credit) (5.1) (19.4) Deferred income tax Share Option Scheme - 0.4 Total income tax (chargedycredited directly to equity - 0.4 Deferred tax assetsl(liabilities) Property, plant Provisions Other Intangible Total 3 million and equipment and assets accruals At 1 April 2014 (8.4) 20.2 3.7 (40.6) (25.1) Recognised in the income statement 11.6 3.8 (0.8) 15.6 30.2 Recognised directly in equity - - 0.2 - 0.2 At 31 March 2015 3.2 24.0 3.1 (25.0) 5.3 Recognised in the income statement 9.4 (3.0) 0.1 6.3 12.8 Acquired in business combinations - 0.1 - - 0.1 At 31 March 2016 12.6 21.1 3.2 (18.7) 18.2 20. Imputation credits 2016 2015 million million Imputation credits available for use 171.9 165.5 The availability of imputation credits for use is subject to New Zealand tax legislation. 21 VODAFONE NEW ZEALAND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 2016 2015 21. Commitments million million Capital commitments 32.5 15.6 32.5 1 5.6 Capital commitments of $10m related to construction of a high capacity ?bre optic submarine cable between New Zealand and Australia (Tasman Global Access System) have not been included in the capital commitments disclosure above as this project is fully funded by Vodafone Group. Future minimum lease payments: Within one year 53.2 52.3 Later than one year but not later than ?ve years 109.6 81.6 Later than ?ve years 73.4 25.8 236.2 159.7 The group holds commercial operating leases on properties, network infrastructure, motor vehicles and other items of equipment. 22. Contingencies A contingent payment of $9m is payable to the former shareholders of in the period to 31 July 2018, subject to satisfying performance conditions. There are no other signi?cant contingent liabilities as at 31 March 2016 (2015: nil). 23. Events after the reportin period On 8 June 2016. Vodafone Group and Sky Network Television Limited (Sky) announced a potential merger of their New Zealand operations. Sky proposes to acquire all of the shares in Vodafone New Zealand from Vodafone Europe B.V. for a total purchase price of $3.44 billion, paid for through a mixture of cash consideration of $1 .25 billion and Sky shares valued at $2.19 billion. The issue of shares will result in Vodafone Europe B.V. owning 51% of the total number of shares in Sky. The proposed transaction is still subject to shareholder and regulatory approvals. There were no other events subsequent to 31 March 2016 requiring disclosure or qualifying for recognition (adjusting event). 22