This excerpt taken from the VOD 20-F filed Jun 14, 2007.
The Group considers its maximum exposure to credit risk to be as follows:
The majority of the Groups trade receivables are due for maturity within 90 days and largely comprise amounts receivable from consumers and business customers.
Concentrations of credit risk with respect to trade receivables are limited due to the Groups customer base being large and unrelated. Due to this, management believes there is no further credit risk provision required in excess of the normal provision for bad and doubtful receivables (note 17).
Notes to the Consolidated Financial Statements
24. Borrowings continued
The deposits shown in the table equate to the principal of the amount deposited. The foreign exchange transactions and interest rate swaps shown in the table have been marked-to-market.
In respect of financial instruments used by the Groups treasury function, the aggregate credit risk the Group may have with one counterparty is
limited by reference to the long term credit ratings assigned for that counterparty by Moodys, Fitch Ratings and Standard & Poors. While these counterparties may expose the Group to credit losses in the event of non-performance, it considers the possibility of material loss to be acceptable because of this policy.
The Group targets low single A long term credit ratings. Credit ratings are not a recommendation to purchase, hold or sell securities, in as much as ratings do not comment on market price or suitability for a particular investor, and are subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently.
The principal defined benefit pension scheme of the Group is in the United Kingdom. In addition, the Group operates defined benefit schemes in Germany, Greece, Ireland, Italy, Turkey and the United States. Defined contribution pension schemes are provided in Australia, Egypt, Germany, Greece, Hungary, Ireland, Italy, Malta, the Netherlands, New Zealand, Portugal, Spain, the United Kingdom and the United States. There is a post retirement medical plan in the United States for a small closed group of participants. The Group also operated a defined benefit scheme for employees of its operation in Japan. Both the Japanese operation and the related pension obligations were disposed of on 27 April 2006.
The Group accounts for its pension schemes in accordance with IAS 19, Employee Benefits (IAS19). Scheme liabilities are assessed using the projected unit funding method and applying the principal actuarial assumptions set out below. Assets are valued at market value.
The measurement date for the Groups pension assets and obligations is 31 March. The measurement date for the Groups net periodic cost is
31 March of the previous year. The Group has chosen to recognise actuarial gains and losses in the period in which they arise through the statement of recognised income and expense. Payments to defined contribution schemes are charged as an expense as they fall due.
In the UK, the majority of the UK employees are members of the Vodafone Group Pension Scheme (the main scheme), which was closed to new entrants from 1 January 2006. This is a tax approved final salary defined benefit scheme, the assets of which are held in an external trustee-administered fund. The investment policy and strategy of the scheme is the responsibility of the plan trustees, who are required to consult with the Company as well as take independent advice on key investment issues. In setting the asset allocation, the trustees take into consideration a number of criteria, including the key characteristics of the asset classes, expected risk and return, the structure and term of the member liabilities, diversification of assets, minimum funding and solvency requirements, as well as the Companys input on contribution requirements. The plan has a relatively low level of pensioner liabilities already in payment, meaning that the overall duration of plan liabilities is long term. The plans target asset allocation is 80% in equity investments (half of which is to be in UK equities) and 20% in corporate bonds.
The main scheme is subject to quarterly funding updates by independent actuaries and to formal actuarial valuations at least every three years. The most recent formal triennial valuation of this scheme was carried out as at 31 March 2004. The triennial valuation of the scheme as at 31 March 2007 is currently in progress.
Income statement expense
Defined benefit schemes