Unilever 2002 Annual Report Download - page 70

Unilever Annual Report & Accounts and Form 20-F 2002
Financial Statements
Accounting information and policies 67
to NV and PLC shareholders as minority interests in the
respective consolidated accounts of PLC and NV. 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 result for the year retained are presented on
acombined basis on page 69, 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 22 on page 98.
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 23 on
page 98).
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 attributed 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 the profit
and loss account 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.
The treatment of goodwill and intangibles under US GAAP is
discussed on pages 118 to 120.
Goodwill and intangible assets are subject to review for
impairment in accordance with United Kingdom Financial
Reporting Standard (FRS) 11 ‘Impairment of Fixed Assets and
Goodwill’ and United States Statement of Financial
Accounting Standards (SFAS) 142 ‘Goodwill and Other
Intangible Assets’. Any impairment is charged to the profit
and loss account as it arises.
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
Tangible fixed assets are subject to review for impairment
in accordance with FRS 11 and United States SFAS 144
‘Accounting for the Impairment or Disposal of Long-Lived
Assets’. Any impairment is charged to the profit and loss
account as it arises.
Current cost information is given in note 10 on page 81.
Fixed investments
Joint ventures are undertakings in which the Group has
along-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.
Interests in joint ventures and associated companies are
stated in the consolidated balance sheet at the Group’s
share of their aggregate assets and liabilities.
Other fixed investments are stated at cost less any amounts
written off to reflect a permanent impairment.
Current assets
Stocks are valued at the lower of cost and estimated net
realisable value. Cost is mainly average cost, and comprises
direct costs and, where appropriate, a proportion of
production overheads.
Debtors are stated after deducting adequate provision for
doubtful debts.
Current investments are liquid funds temporarily invested
and are stated at their realisable value. The difference
between this and their original cost is taken to interest
in the profit and loss account.