Unilever 2014 Annual Report Download - page 72

15 APITAL AND FUNDIN
ORDINARY SHARES
Ordnary shares are classfed as equty Incremental costs drectly attrbutable to the ssue of ordnary shares are recognsed
as a deducton from equty, net of any tax effects
INTERNAL HOLDINS
The ordnary shares numbered 1 to 2,400 (nclusve) n NV (‘Specal Shares’) and deferred stock of PL are held as to one half
of each class by NV Elma – a subsdary of NV – and one half by Unted Holdngs Lmted – a subsdary of PL Ths captal s
elmnated on consoldaton
SHAREBASED OMPENSATION
The roup operates a number of share-based compensaton plans nvolvng optons and awards of ordnary shares of NV and PL
Full detals of these plans are gven n note 4 on pages 98 and 99
OTHER RESERVES
Other reserves nclude the far value reserve, the foregn currency translaton reserve, the captal redempton reserve and
treasurystock.
SHARES HELD BY EMPLOYEE SHARE TRUSTS AND ROUP OMPANIES
Certain PLC trusts, NV and group companies purchase and hold NV and PLC shares to satisfy performance shares granted, share
options granted and other share awards (see note 4C). The assets and liabilities of these trusts and shares held by group companies
are included in the consolidated financial statements. The book value of shares held is deducted from other reserves, and trusts’
borrowings are included in the Group’s liabilities. The costs of the trusts are included in the results of the Group. These shares are
excluded from the calculation of earnings per share.
FINANIAL LIABILITIES
Financial liabilities are initially recognised at fair value, less any directly related transaction costs. Certain bonds are designated
as being part of a fair value hedge relationship. In these cases, the bonds are carried at amortised cost, adjusted for the fair value
of the risk being hedged, with changes in value shown in profit and loss. Other financial liabilities, excluding derivatives, are
subsequently carried at amortised cost.
DERIVATIVE FINANIAL INSTRUMENTS
The Group’s use of, and accounting for, derivative instruments is explained in note 16 on page 114 and on pages 118 to 119.
The Group’s Treasury activities are designed to:
• maintain a competitive balance sheet in line with A+/A1 rating (see below);
• secure funding at lowest costs for the Group’s operations, M&A activity and external dividend payments (see below);
• protect the Group’s financial results and position from financial risks (see note 16);
• maintain market risks within acceptable parameters, while optimising returns (see note 16); and
• protect the Group’s financial investments, while maximising returns (see note 17).
The Treasury department provides central deposit taking, funding and foreign exchange management services for the Group’s
operations. The department is governed by standards and processes which are approved by Unilever Leadership Executive (ULE).
Inaddition to guidelines and exposure limits, a system of authorities and extensive independent reporting covers all major areas
of activity. Performance is monitored closely by senior management. Reviews are undertaken periodically by corporate audit.
Key instruments used by the department are:
• short-term and long-term borrowings;
• cash and cash equivalents; and
• plain vanilla derivatives, including interest rate swaps and FX contracts.
The Treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved
by the Chief Financial Officer. The use of leveraged instruments is not permitted.
109Unilever Annual Report and Accounts 2014 Financial statements