ACCT 500
FINANCIAL & MANAGERIAL ACCOUNTING
Assignment – Part 2

:

Dr. Hellal Abdulwahab AlHellall -

Gulf University
For Science & Technology

1. Draw up a Common Size Consolidated Income Statement for Vodafone for 2012, 2013 and 2014. You should base your work on the Smith and Nephew class example. The Consolidated Income Statement itself is on page 96 of the Vodafone report.

2014 (£m)

2013 Restated (£m)
2012 Restated (£m)
2014 (£m) %

2013 Restated (£m) %
2012 Restated (£m) %
Revenue
38,346
38,041
38,821
100.00
100.00
100.00
Cost of sales
-27,942
-26,567
-27,201
-72.87
-69.84
-70.07
Gross profit
10,404
11,474
11,620
27.13
30.16
29.93
Selling and distribution expense
-3,033
-2,860
-2,755
-7.91
-7.52
-7.10
Administrative expenses
-4,245
-4,159
-4,031
-11.07
-10.93
-10.38
Share of results of equity accounted associates and joint ventures
278
575
1,129
0.72
1.51
2.91
Impairment losses
-6,600
-7,700
-4,050
-17.21
-20.24
-10.43
Other income and expense
-717
468
3,705
-1.87
1.23
9.54
Operating (loss)/profit
-3,913
-2,202
5,618
-10.20
-5.79
14.47
Non-operating income and expense
-149
10
-162
-0.39
0.03
-0.42
Investment income
346
305
456
0.90
0.80
1.17
Financing costs
-1,554
-1,596
-1,768
-4.05
-4.20
-4.55
(Loss)/profit before taxation
-5,270
-3,483
-4,144
-13.74
-9.16
-10.67
Income tax credit/(expense)
16,582
476
705
43.24
1.25
1.82
Profit/(loss) for the financial year from continuing operations
11,312
3,959
3,439
29.50
10.41
8.86
Profit for the financial year from discontinued operations
48,108
4,616
3,555
125.46
12.13
9.16
Profit for the financial year
59,420
657
6,994
154.96
1.73
18.02

2. Outline the three most important points – in your opinion – to emerge from your Common Size Consolidated Income Statements. You should write about 3-5 sentences per individual point (5 sentences is the absolute maximum).
Common size consolidated income statement analysis:
1. Vodafone should take necessary actions to manage the negative values regarding profits before interest and tax figures through 2013 ~ 2014, also working more on their net profit is very important since the big improvement happened in 2014 was a result of selling assets in united states, so they need to work harder on their operating profits.

2. Vodafone should take necessary actions to reduce the overall cost of goods sold as one of main elements to increase the net profit and this can be done by finding more suppliers who could provide Vodafone with better prices or at least variety of products with different prices based on the service nature. 3. Vodafone has clear issue due to impairment loss percentage starting from 2012 then big change by almost the double in 2013 then smaller percentage through 2014 which is raising a big question regarding the long term investment strategy for Vodafone.

3. Draw up a Common Size Consolidated Statement of Financial Position for Vodafone for 2012, 2013 and 2014. You should base your work on the Smith and Nephew class example. The Consolidated Statement of Financial Position itself is on page 98 of the Vodafone report. You do not need to look at prior year annual reports – the comparative figures given on that page are sufficient.
Common size SOFP assets

Common Size

2014 (£m)
2013 Restated (£m)
2012 Restated (£m)

2014 (£m) %
2013 Restated (£m) %
2012 Restated (£m) %
Non-Current assets

Goodwill
23,315
24,390
27,816

19.14
17.63
20.54
Other intangible assets
23,373
19,749
18,762

19.18
14.28
13.85
Property, plant and equipment
22,851
17,584
16,008

18.75
12.71
11.82
Investments in associates and joint ventures
114
46,447
47,682

0.09
33.58
35.20
Other investments
3,553
773
790

2.92
0.56
0.58
Deferred tax assets
20,607
2,848
1,894

16.91
2.06
1.40
Post-employment benefits
35
52
31

0.03
0.04
0.02
Trade and other receivables
3,270
4,832
3,436

2.68
3.49
2.54
Total Non-Current assets
97,118
116,675
116,419

79.71
84.35
85.95

Current assets