Unilever 2014 Annual Report Download - page 88

20 OMMITMENTS AND ONTINENT LIABILITIES ONTINUED
The roup has sublet part of the leased propertes under operatng leases Future mnmum sublease payments of 7 mllon
(2013 12 mllon) are expected to bereceived.
Other commitments principally comprise commitments under contracts to purchase materials and services. They do not include
commitments for capital expenditure, which are reported in note 10 on page 105.
Contingent liabilities arise in respect of litigation against group companies, investigations by competition, regulatory and fiscal
authorities and obligations arising under environmental legislation. The estimated total of such contingent liabilities at
31 December 2014 was €1,406 million (2013: €719 million) of which €1,250 million (2013: €561 million) represents the maximum
exposure related to assessments in Brazil regarding a local corporate reorganisation in 2001, as explained further below. The Group
does not believe that any of these contingent liabilities will result in a material loss.
LEAL PROEEDINS
The Group is involved from time to time in legal and arbitration proceedings arising in the ordinary course of business.
As previously disclosed, along with other consumer products companies and retail customers, Unilever is involved in a number of ongoing
investigations by national competition authorities. These proceedings and investigations are at various stages and concern a variety of
product markets. In the second half of 2013 Unilever recognised provisions of €120 million related to these cases, disclosed within
non-core items. In the second half of 2014 these provisions were increased by a further €30 million.
Ongoing compliance with competition laws is of key importance to Unilever. It is Unilever’s policy to co-operate fully with competition
authorities whenever questions or issues arise. In addition, the Group continues to reinforce and enhance our internal competition law
compliance programme on an ongoing basis. As disclosed above, where specific issues arise provisions are made and contingent
liabilities disclosed to the extent appropriate.
During 2004 in Brazil, and in common with many other businesses operating in that country, one of our Brazilian subsidiaries received a
notice of infringement from the Federal Revenue Service. The notice alleges that a 2001 reorganisation of our local corporate structure
was undertaken without valid business purpose. The 2001 reorganisation was comparable with restructurings done by many companies
in Brazil. The original dispute was resolved in the courts in the Group’s favour. However, in 2013 a new assessment was raised in respect of
a similar matter. Additionally, during the course of 2014 another notice of infringement was issued based on the same grounds argued in
the previous assessments. The Group believes that the likelihood of a successful challenge by the tax authorities is low, however, there can
be no guarantee of success in court.
In many markets, there is a high degree of complexity involved in the local tax regimes. In common with other businesses operating in this
environment, the Group is required to exercise judgement in the assessment of any potential exposures in these areas. Where appropriate,
the Group will make provisions or disclose contingencies in accordance with the relevant accounting principles.
21 AQUISITIONS AND DISPOSALS
Business combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at
which control is transferred to the Group.
Goodwill is measured at the acquisition date as the fair value of consideration transferred, plus non-controlling interests and the fair
value of any previously held equity interests less the net recognised amount (which is generally fair value) of the identifiable assets
and liabilities assumed. Consideration transferred does not include amounts related to settlement of pre-existing relationships.
Such amounts are generally recognised in net profit.
Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities. Any contingent
consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent
consideration are recognised in net profit.
Changes in ownership that do not result in a change of control are accounted for as equity transactions and therefore do not have
any impact on goodwill. The difference between consideration and the non-controlling share of net assets acquired is recognised
within equity.
2014
On 16 January 2014 the Group signed an agreement to sell its Royal pasta brand in the Philippines to RFM Corporation, for
US $48 million.
On 7 March 2014 the Group acquired a 55% equity stake in the Qinyuan Group, a leading Chinese water purification business for an
undisclosed amount.
On 1 April 2014 the Group completed the sale of its meat snacks business, including the Bifi and Peperami brands, to Jack Link’s
for an undisclosed amount.
125Unilever Annual Report and Accounts 2014 Financial statements