Unilever 2002 Annual Report Download - page 69

Unilever Annual Report & Accounts and Form 20-F 2002
66 Accounting information and policies
Unilever
The two parent companies, NV and PLC, together with their
group companies, operate as nearly as is practicable as a
single entity (the Unilever Group, also referred to as Unilever
or the Group). NV and PLC have the same directors and are
linked by a series of agreements, including an Equalisation
Agreement, which are designed so that the position of the
shareholders of both companies is as nearly as possible the
same as if they held shares in a single company.
The Equalisation Agreement provides for both companies
to adopt the same accounting principles and requires as
ageneral rule the dividends and other rights and benefits
(including rights on liquidation) attaching to each Fl. 12
(5.445) nominal of ordinary share capital of NV to be
equal in value at the relevant rate of exchange to the
dividends and other rights and benefits attaching to each
£1 nominal of ordinary share capital of PLC, as if each such
unit of capital formed part of the ordinary capital of one
and the same company. For additional information please
refer to ‘Control of Unilever’ on page 138.
Basis of consolidation
Because of the operational and contractual arrangements
referred to above and the internal participating interests set
out in note 21 on page 97, NV and PLC and their group
companies constitute a single group under Netherlands and
United Kingdom legislation for the purposes of presenting
consolidated accounts. Accordingly, the accounts of the
Unilever Group are presented by both NV and PLC as
their respective consolidated accounts. These accounts are
supplemented in notes 22 and 23 on page 98 and note 30
on page 112 by additional information for the NV and PLC
parts of the Group in which group companies are
consolidated according to respective ownership.
Companies legislation
The consolidated accounts of the Unilever Group comply
with Book 2 of the Civil Code in the Netherlands and the
United Kingdom Companies Act 1985. The consolidated
accounts of the Unilever Group also comply with accounting
standards generally accepted in the United Kingdom, as
allowed by Article 362.1 of Book 2 of the Civil Code in the
Netherlands, unless such standards conflict with the Civil
Code in the Netherlands which would in such case prevail.
The company accounts, the notes to those accounts and
the further statutory information given for each of NV
and PLC comply with legislation in the Netherlands and the
United Kingdom respectively. As explained under ‘Group
companies’ below and on page 67, in order to give a true
and fair view, the presentation of the consolidated capital
and reserves differs from that specified by the United
Kingdom Companies Act 1985.
Accounting standards
The accounts are prepared under the historical cost convention
and comply in all material respects with legislation in the
Netherlands and with United Kingdom Accounting Standards.
The accounting policies of the Unilever Group are set out
on pages 66 to 68. Our accounting policy for the treatment
of exceptional items is given on page 77. Material variations
from United States generally accepted accounting principles
are set out on pages 118 to 127.
United Kingdom Urgent Issues Task Force Abstracts 13 and
17 (UITFs 13 and 17) require that NV or PLC shares held by
employee trusts to satisfy options should be classified by the
sponsoring company as fixed assets, and, as explained in
note 29 on page 111, that certain costs in relation to these
shares be recognised in the profit and loss account.
Netherlands law requires such shares and certain related
costs to be accounted for within capital and reserves. In
order to comply with Netherlands law and the Equalisation
Agreement, the requirements of UITF 13 and certain aspects
of UITF 17 have not been followed. All shares held internally
are accounted for in accordance with Netherlands law. The
effects of this departure are shown in note 23 on page 98
and note 29 on page 111.
United Kingdom Financial Reporting Standard 17
‘Retirement Benefits’ (FRS 17) mandates that certain
disclosures relating to retirement benefits be made in
financial statements for accounting periods ending on or
after 22 June 2001. These disclosures are shown in note 17
on page 89. Unilever will adopt the full requirements of the
standard, which will change the basis of accounting for
retirement benefits, from 1 January 2003. This will have
asignificant impact on Unilever’s reported results.
United Kingdom Financial Reporting Standard 19 (FRS 19)
‘Deferred Tax’ requires that full provision be made for most
timing differences between the recognition of profits for
accounting purposes and the recognition of profits for tax
purposes. Prior to the implementation of the standard,
Unilever used a form of full provisioning for such timing
differences and therefore the standard has been adopted
by the Group for the year ended 31 December 2002 with
no material impact on reported net profit. The effect of
the implementation of this standard on the balance sheet
is shown in note 18 on page 94 and note 20 on page 96.
Recent changes in reporting requirements under US GAAP
are discussed on page 122.
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
atrue 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