Unilever 2002 Annual Report Download - page 124

Pensions
Under Unilever´s accounting policy the expected costs of providing retirement pensions are charged to the profit and loss account
over the periods benefiting from the employees´ services. Variations from expected cost are similarly spread. Under US GAAP, pension
costs and liabilities are calculated in accordance with SFAS 87, which requires the use of a prescribed actuarial method and a
prescribed set of measurement principles.
Under US GAAP an additional minimum liability is recognised and a charge made to other comprehensive income when the accumulated
benefit obligation exceeds the fair value of plan assets to the extent that this amount is not covered by the net liability recognised in the
balance sheet.
With effect from 1 January 2002, and for the purposes of determining the expected return on plan assets, Unilever changed the method of
valuing its pension plan assets from a market related value calculated by smoothing gains and losses over a five year period to an actual fair
value at the balance sheet date. Management believe that the actual fair value methodology provides a better representation of the financial
position and results of Unilever’s pension plans.
The impact of this change in methodology on reported results under US GAAP is given in the table below:
€million €million
2001 2000
Net income under US GAAP 1 506 1 266
Change in basis of expected return on plan assets calculation 86 210
Adjusted net income under US GAAP 1 592 1 476
Euro per 0.51 Euro cents per 1.4p
2001 2000 2001 2000
Adjusted net income per share 1.57 1.45 23.52 21.71
Adjusted diluted net income per share 1.52 1.41 22.89 21.18
As required under US APB 20 for a change in accounting policy, a cumulative effect adjustment has been calculated to record the impact of
the change as if the fair value methodology had been the accounting policy from the initial adoption of SFAS 87 by Unilever. The cumulative
effect adjustment net of tax is 522 million in 2002.
Investments
Unilever accounts for current investments, which are liquid funds temporarily invested, at their market value, which is consistent with
UK GAAP.
Unilever accounts for changes in the market value of current investments as interest receivable in the profit and loss account for the year.
Under US GAAP, such current asset investments are classified as ‘available for sale securities’ and changes in market values, which represent
unrealised gains or losses, are excluded from earnings and taken to stockholders’ equity. Unrealised gains and losses arising from changes in
the market values of securities available for sale are not material.
Unilever accounts for fixed investments other than in joint ventures and associates at cost less any amounts written off to reflect a
permanent impairment. Under US GAAP such investments are held at fair value. The difference is not material.
Dividends
The proposed final ordinary dividends are provided for in the Unilever accounts in the financial year to which they relate. Under US GAAP
such dividends are not provided for until they become irrevocable.
Deferred taxation
Unilever has restated its deferred tax charge for the year ended 31 December 2000, and its deferred tax balances as at 31 December 2001
to comply with the new UK accounting standard FRS 19, as described in note 18 on page 94. Under FRS 19, deferred tax is not recognised
on fair value adjustments made to assets acquired; under US GAAP, deferred tax is recorded on all fair value adjustments. Also, as described
on page 94, FRS 19 has changed the treatment of deferred tax on tax-deductible goodwill previously written off to reserves. Such goodwill
is reinstated, net of amortisation, under US GAAP, and the tax effect of such restatement has been adjusted accordingly.
Unilever Annual Report & Accounts and Form 20-F 2002
Financial Statements
Additional information for US investors 121
Unilever Group