Unilever 2005 Annual Report Download - page 171

Unilever Annual Report and Accounts 2005 171
Financial Statements
Notes to the company accounts
Unilever N.V.
Accounting information and policies
Basis of preparation
The accounts have been prepared in accordance with applicable
United Kingdom accounting standards as allowed by Article 362.1 of
Book 2 of the Civil Code in the Netherlands.
The accounts are prepared under the historical cost convention as
modified by the revaluation of financial assets classified as 'available-
for-sale investments', 'financial assets at fair value through profit or
loss', and 'derivative financial instruments' in accordance with the
accounting policies set out below which have been consistently
applied except as highlighted in the ‘Prior year adjustment’ note
below.
Accounting policies
The principal accounting policies are as follows:
Fixed investments
Shares in group companies are stated at cost less any amounts written
off to reflect a permanent impairment. Any impairment is charged to
the profit and loss account as it arises. In accordance with Article
385.5 of Book 2 of the Civil Code in the Netherlands, Unilever N.V.
shares held by Unilever N.V. subsidiaries are deducted from the
carrying value of those subsidiaries. This differs from the accounting
treatment under UK GAAP (UITF 37) which would require these
amounts to be included within fixed investments.
Financial instruments and derivative financial instruments
The company’s accounting policies under United Kingdom generally
accepted accounting principles (UK GAAP) namely FRS 25 ‘Financial
Instruments: Disclosure and Presentation’ and FRS 26 ‘Financial
Instruments: Measurement’ are the same as the Unilever Group’s
accounting policies under International Financial Reporting Standards
(IFRSs) namely IAS 32 ‘Financial Instruments: Disclosure and
Presentation’ and IAS 39 ‘Financial Instruments: Recognition and
Measurement’. These standards are effective from 1 January 2005 and
the policies are set out under the heading ‘Financial instruments’ in
note 1 to the consolidated accounts on page 83. Unilever NV is taking
the exemption for not providing all the financial instruments
disclosures, because IAS 32 disclosures are given in note 19 to the
consolidated accounts on pages 110 to 113. The changes to
preference share capital, share premium account and profit retained in
this regard are set out in the following notes and further described in
the notes to the consolidated accounts.
Deferred taxation
Full provision is made for deferred taxation on all significant timing
differences arising from the recognition of items for taxation purposes
in different periods from those in which they are included in the
company's accounts. Full provision is made at the rates of tax
prevailing at the year end unless future rates have been enacted or
substantively enacted. Deferred tax assets and liabilities have not been
discounted.
Own shares held
Own shares held by the company are accounted for in accordance
with Netherlands law and United Kingdom UITF 37. All differences
between the purchase price of the shares held to satisfy options
granted and the proceeds received for the shares, whether on exercise
or lapse, are charged to reserves.
Retirement benefits
Unilever N.V. has accounted for pensions and similar benefits under
the United Kingdom Financial Reporting Standard 17 'Retirement
benefits' (FRS 17). The operating and financing costs of defined
benefit plans are recognised separately in the profit and loss account;
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 total recognised gains and losses. The
costs of individual events such as past service benefit enhancements,
settlements and curtailments are recognised immediately in the profit
and loss account. The liabilities and, where applicable, the assets of
defined benefit plans are recognised at fair value in the balance sheet.
The charges to the profit and loss account for defined contribution
plans are the company contributions payable and the assets of such
plans are not included in the company balance sheet.
Prior year adjustment
Financial Reporting Standard 21 (FRS 21) 'Events after the Balance
Sheet Date' has been adopted for the first time in the year ended
31 December 2005. Under FRS 21, proposed dividends do not meet
the definition of a liability until such time as they have been approved
by shareholders at the Annual General Meeting. Therefore, Unilever
N.V. no longer recognises a liability in any period for dividends that
have been proposed but will not be approved until after the balance
sheet date. This holds for external dividends as well as intra-group
dividends paid to the parent company.
The effect for the company of implementing FRS 21 has been to
increase retained profits by €729 million in the current period (2004:
decrease of €646 million), decrease dividend creditors due within one
year by €729 million (2004: decrease by €696 million), decrease inter-
group debtors due within one year by € nil (2004: €1 274 million) and
increase inter-group creditors due within one year by € nil (2004:
€67 million). The impact of the FRS 21 implementation on profits for
the years 2004 and 2005 is explained in the notes under the heading
‘Profit retained’.
The comparative amounts for the year ended 31 December 2004 have
been restated accordingly.
Fixed investments € million € million
2005 2004
Shares in group companies 11 082 11 024
Book value of PLC shares held in
connection with share options 432 445
Less NV shares held by group companies (238) (236)
11 276 11 233
Movements during the year:
1 January 11 233 11 161
Movement in PLC shares held in connection
with share options (13) 64
Movement in NV shares held by group companies (2) (8)
Additions 89 16
Decreases (31) –
31 December 11 276 11 233
Debtors € million € million
2005 2004
Restated
Loans to group companies 22 460 14 056
Other amounts owed by group companies 3 771 2 433
Amounts owed by undertakings in which
the company has a participating interest 15 15
Prepayments and accrued income 587 98
Other 65 21
26 898 16 623
Of which due after more than one year 6 645 710