Unilever 2005 Annual Report Download - page 117

114 Unilever Annual Report and Accounts 2005
Notes to the consolidated accounts
Unilever Group
21 Restructuring and other provisions
Provisions are recognised when either a legal or constructive obligation, as a result of a past event, exists at the balance sheet date and where
the amount of the obligation can be reasonably estimated.
€ million € million
Restructuring and other provisions 2005 2004
Due within one year
Restructuring provisions 391 660
Other provisions 253 139
644 799
Due after one year
Restructuring provisions 63 50
Net liability of associate 37 16
Other provisions 632 499
732 565
Total restructuring and other provisions 1 376 1 364
€ million € million € million € million
Restructuring Net liability Other
Movements during 2005 provisions of associate provisions Total
31 December 2004 710 16 638 1 364
Disposal of group companies (6) – – (6)
Income statement:
New charges 304 – 245 549
Releases (82) – (67) (149)
Change in liability during year –18 –18
Utilisation (506) – (44) (550)
Reclassification as held for sale (2) – – (2)
Currency retranslation 36 3 113 152
31 December 2005 454 37 885 1 376
Restructuring provisions primarily relate to early retirement and redundancy costs.
Other provisions include provisions for sales tax and other indirect taxes in Brazil, environmental provisions in the United States, and various
other legal, environmental and other exposures.
22 Pensions and similar obligations
Description of plans
In many countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service. The
majority of these plans are externally funded. The Group also provides other post-employment benefits, mainly post-employment medical plans
in the United States. These plans are predominantly unfunded. The Group also operates a number of defined contribution plans, the assets of
which are held in external funds.
Accounting policies
Operating and financing costs of defined benefit plans are recognised separately in the income statement; service costs are systematically spread
over the service lives of employees, and financing costs are recognised in the periods in which they arise. Variations from expected costs, arising
from the experience of the plans or changes in actuarial assumptions, are recognised immediately in the statement of recognised income and
expense. The costs of individual events such as past service benefit enhancements, settlements and curtailments are recognised immediately in
the income statement. The liabilities and, where applicable, the assets of defined benefit plans are recognised at fair value in the balance sheet.
The fair value of plan liabilities includes allowance for expected increases in retirement pensions where these are either required by law or by the
plan rules, or where such increases are regularly awarded. The charges to the income statement for defined contribution plans are the company
contributions payable and the assets of such plans are not included in the Group balance sheet.
All defined benefit plans are subject to regular actuarial review using the projected unit method, either by external consultants or by actuaries
employed by Unilever. Group policy is that the most important plans, representing over 75% of the defined benefit liabilities, are formally
valued every year; other principal plans, accounting for approximately a further 15% of liabilities, have their liabilities updated each year. Group
policy for the remaining plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year.
Healthcare
In December 2003 the Medicare Prescription Drug, Improvement and Modernisation Act became law in the US. Under the provisions of this
Act, the Group’s US healthcare benefit plans are able to benefit from a subsidy towards the cost of prescription drugs. Following a review
of our healthcare plans in 2004, we determined that the benefits of this legislation were immediately available to all except one of our plans
without any amendment to those plans. During 2005 it has been established that the remaining plan also benefits. As a consequence, a
reduction in liability of €52 million was recognised in the statement of recognised income and expense in 2004 and a further €13 million in
2005. The impact on the ongoing service cost is a reduction by an immaterial amount.