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112 Unilever Annual Report and Accounts 2005
Notes to the consolidated accounts
Unilever Group
19 Financial instruments (continued)
Fair values of financial assets and financial liabilities
The following table summarises the fair values and carrying amounts of the various classes of financial assets and financial liabilities. All trade
and other receivables and trade payables and other liabilities (other than finance lease creditors) and provisions have been excluded from the
analysis below and from the interest rate and currency profiles in note 17 on page 106 and note 18 on page 109, as their carrying amounts are
a reasonable approximation of their fair value.
€ million € million € million € million
Fair Fair Carrying Carrying
value value amount amount
2005 2004 2005 2004
Financial assets
Non-current investments 720 728 720 698
Cash and cash equivalents 1 529 1 590 1 529 1 590
Other financial assets 335 1 013 335 1 013
Derivatives related to borrowings 250 n/a 250 n/a
2 834 3 331 2 834 3 301
Financial liabilities
Bank loans and overdrafts (1 456) (1 583) (1 456) (1 583)
Bonds and other loans (11 255) (10 907) (10 819) (10 465)
Finance lease creditors (225) (218) (217) (218)
Preference shares (124) n/a (124) n/a
(13 060) (12 708) (12 616) (12 266)
The fair values and the carrying amount of listed investments included in financial assets and preference shares included in financial liabilities are
based on their market values. Cash and cash equivalents, other financial assets, bank loans and overdrafts have fair values that approximate to
their carrying amounts because of their short-term nature. The fair values of listed bonds are based on their market value, non-listed bonds and
other loans are based on the net present value of the anticipated future cash flows associated with these instruments. Fair value for finance
lease creditors have been assessed by reference to current market rates for comparable leasing arrangements.
Collateral
In November 2001, NV entered into a forward purchase contract with a counterparty bank to buy 10 000 000 PLC shares at 559p per share
in November 2006. Depending on the market value of this forward purchase contract, a cash collateral at a minimum of €8 million must be
placed with the counterparty bank. At 31 December 2005 €16 million (2004: €24 million) was so deposited. At 31 December 2005 the market
value of the forward purchase contract was €(7) million (2004: €(14) million).
Counterparties have deposited securities with a market value of €275 million (2004: €589 million) as collateral for their obligations in respect of
derivative financial instruments. Such collateral is not regarded as an asset of Unilever and is excluded from the balance sheet.
Currency exposures
Unilever’s foreign exchange policies are described in note 2 on page 86. These policies require operating companies to manage trading and
financial exposures within prescribed limits. At the end of 2005, there was no material exposure from companies holding assets and liabilities
other than in their functional currency.
Commodity contracts
Unilever purchases forward contracts to hedge future requirements for certain raw materials, almost always for physical delivery. Futures
contracts may also be used to hedge future price movements, however the amounts are not material. For further details please refer to
page 32.
Additional disclosures relating to 2004
As noted on page 110, 2004 figures in this note are presented under the accounting policies which applied prior to the adoption of IAS 39.
The following additional disclosures relate to the presentation of amounts for 2004.
Nominal values of interest rate derivatives and cross currency swaps are shown in the table below. These nominal values do not reflect the
actual level of use of financial instruments when compared with the nominal value of the underlying debt. This is because certain financial
instruments have consecutive strike and maturity dates on the same underlying debt in different time periods. Whilst the nominal amounts
reflect the volume of activity, they are not indicative of the amount of credit risk to which the Group is exposed.
€ million
Nominal amounts at
31 December 2004
Interest rate derivatives and cross currency swaps 5 903