Unilever 2006 Annual Report Download - page 81

78 Unilever Annual Report and Accounts 2006
Financial Statements (continued)
Notes to the consolidated accounts Unilever Group
1Accounting information and policies (continued)
Taxation
The Group is subject to taxes in numerous jurisdictions. Significant
judgement is required in determining worldwide provision for taxes.
There are many transactions and calculations during the ordinary
course of business for which the ultimate tax determination is
uncertain. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such
determination is made.
Provisions
Provision is made, among other reasons, for legal matters, disputed
indirect taxes, employee termination costs and restructuring where
alegal or constructive obligation exists at the balance sheet date and
areliable estimate can be made of the likely outcome. The nature of
these costs is such that judgement has to be applied to estimate the
timing and amount of cash outflows.
Recent accounting developments
IFRS 7, ‘Financial Instruments: Disclosures’, (effective from 1 January
2007), introduces significant new disclosures to improve the
information about financial instruments. It requires the disclosures
of qualitative and quantitative information about exposure to risks
arising from financial instruments, including specified minimum
disclosures about credit risk, liquidity risk and market risk, including
analysis of sensitivity to market risk. It replaces disclosure requirements
in IAS 32, ‘Financial Instruments: Disclosure and Presentation’.
In addition an amendment has been issued to IAS 1 ‘Presentation of
Financial Statements’ which requires Unilever to make new disclosures
to enable the users of financial statements to evaluate the Group’s
objectives, policies and processes for managing capital.
Unilever will apply IFRS 7 and the amendment to IAS 1 from
January 2007.
IFRS 8 ‘Operating Segments’ (effective from 1 January 2009)
introduces a management reporting approach to segment reporting.
The information reported would be that which management uses
internally for evaluating the performance of operating segments
and allocating resources to those segments. It replaces disclosure
requirements in IAS 14 ‘Segment Reporting’ and its impact is currently
being assessed by the Group.
The following interpretations, relevant to Unilever, have been released
and will be adopted by Unilever on the dates as noted. Adoption is
not expected to have a material effect on the consolidated results of
operations or financial position of Unilever.
•IFRIC 7, ‘Applying the Restatement Approach’ under IAS 29
‘Financial Reporting in Hyperinflationary Economies’ (effective for
Unilever from 1 January 2007) provides guidance on how to apply
the requirements of IAS 29 in a reporting period in which an entity
identifies the existence of hyperinflation in the economy when that
economy was not hyperinflationary in the prior period.
•IFRIC 9 ‘Reassessment of embedded derivatives’ (effective for
Unilever from 1 January 2007) requires an entity to assess whether
acontract contains an embedded derivative at the date an entity
first becomes a party to the contract and prohibits reassessment
unless there is a change to the contract that significantly modifies
the cash flows.
•IFRIC 10 ‘Interim Financial Reporting and Impairment’ (effective for
Unilever from 1 January 2007) states that any impairment loss
recognised for goodwill and equity instruments classified as
available for sale in an interim period may not be reversed in
subsequent interim periods.