Unilever 2001 Annual Report Download - page 55
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Please find page 55 of the 2001 Unilever annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Unilever Annual Report & Accounts and Form 20-F 2001
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ACCOUNTING INFORMATION AND POLICIES
Unilever Group
United Kingdom Financial Reporting Standard 19 ‘Deferred
tax’ becomes mandatory for accounting periods ending on
or after 23 January 2002 and requires that full provision be
made for certain timing differences between the recognition
of profits for accounting purposes and the recognition of
profits for tax purposes. As indicated above, Unilever already
uses a form of full provisioning for such timing differences
and therefore it is anticipated that the standard, together
with its disclosure requirements, will be adopted by Unilever
for the year ending 31 December 2002, with no material
impact on reported results.
Recent changes in reporting requirements under US GAAP
are discussed on page 96.
OECD Guidelines
In preparing its Annual Review and Annual Report &
Accounts and Form 20-F Unilever adheres to the disclosure
recommendations of the OECD Guidelines for
Multinational Enterprises.
Group companies
Group companies are those companies in whose share
capital NV or PLC holds an interest directly or indirectly,
and whose consolidation is required for the accounts to
give a true and fair view.
In order that the consolidated accounts should present
a true and fair view, it is necessary to differ from the
presentational requirements of the United Kingdom
Companies Act 1985 by including amounts attributable
to both NV and PLC shareholders in the capital and reserves
shown in the balance sheet. The Companies Act would
require presentation of the capital and reserves attributable
to NV and PLC shareholders as minority interests in the
respective consolidated accounts of NV and PLC. This
presentation would not give a true and fair view of the
effect of the Equalisation Agreement, under which the
position of all shareholders is as nearly as possible the
same as if they held shares in a single company.
Net profit and profit of the year retained are presented on
a combined basis on page 54, with the net profit attributable
to NV and PLC shareholders shown separately. Movements
in profit retained are analysed between those attributable
to NV and PLC shareholders in note 21 on page 75.
Foreign currencies
Exchange differences arising in the accounts of individual
companies are dealt with in their respective profit and loss
accounts. Those arising on trading transactions are taken
to operating profit; those arising on cash, current
investments and borrowings are classified as interest.
In preparing the consolidated accounts, the profit and loss
account, the cash flow statement and all other movements
in assets and liabilities are translated at annual average rates
of exchange. The balance sheet, other than the ordinary
share capital of NV and PLC, is translated at year-end rates
of exchange. In the case of hyper-inflationary economies,
the accounts are adjusted to remove the influences of
inflation before being translated.
The ordinary share capital of NV and PLC is translated
at the rate contained in the Equalisation Agreement of
£1 = Fl. 12 (equivalent to 5.445). The difference between
this and the value derived by applying the year-end rate
of exchange is taken to other reserves (see note 22 on
page 75).
The effects of exchange rate changes during the year on
net assets at the beginning of the year are recorded as a
movement in profit retained, as is the difference between
profit of the year retained at average rates of exchange
and at year-end rates of exchange.
Goodwill and intangible assets
No value is attributable to internally generated intangible
assets. Goodwill (being the difference between the fair value
of consideration paid for new interests in group companies,
joint ventures and associated companies and the fair value
of the Group’s share of their net assets at the date of
acquisition) and identifiable intangible assets purchased after
1 January 1998 are capitalised and amortised in operating
profit over the period of their expected useful life, up to
a maximum of 20 years. Periods in excess of five years are
used only where the directors are satisfied that the life of
these assets will clearly exceed that period. Goodwill and
intangible assets purchased prior to 1 January 1998 were
written off in the year of acquisition as a movement in
profits retained.
On disposal of a business acquired prior to 1 January 1998,
purchased goodwill written off on acquisition is reinstated
in arriving at the profit or loss on disposal.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided on a straight-line basis at
percentages of cost based on the expected average useful
lives of the assets. Estimated useful lives by major class of
assets are as follows:
Freehold buildings 33-40 years
(no depreciation on freehold land)
Leasehold land and buildings *33-40 years
Plant and equipment 3-20 years
Motor vehicles 3-6 years
* or life of lease if less than 33 years
Current cost information is given in note 10 on page 65.
Fixed assets are subject to review for impairment in
accordance with United Kingdom Financial Reporting
Standard 11 ‘Impairment of Fixed Assets and Goodwill’,
and US SFAS 121. Any impairment in the value of such
fixed assets is charged to the profit and loss account as
it arises.
Fixed investments
Joint ventures are undertakings in which the Group has
a long-term participating interest and which are jointly
controlled by the Group and one or more other parties.
Associated companies are undertakings in which the
Group has a participating interest and is able to exercise
significant influence.