Unilever 2003 Annual Report Download - page 102

Unilever Annual Report & Accounts and Form 20-F 2003 99
Notes to the consolidated accounts
Unilever Group
16 Trade and other creditors
€ million € million
2003 2002
Restated
Due within one year:
Trade creditors 3 707 4 341
Social security and sundry taxes 346 458
Accruals and deferred income 2 548 2 889
Taxation on profits 728 857
Dividends 1 125 1 138
Others 1 186 1 335
9 640 11 018
Due after more than one year:
Accruals and deferred income 207 147
Taxation on profits 330 365
Others 127 129
664 641
Total trade and other creditors 10 304 11 659
17 Pensions and similar obligations
Description of Plans
In most 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
With effect from 1 January 2003, the Group accounts for pensions and similar benefits under the United Kingdom Financial Reporting Standard
17 (FRS 17). Figures for prior years have been restated. In accordance with the new standard, 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
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 and other principal plans accounting for approximately a further 15% of liabilities have their liabilities updated each year. Group
policy for other plans requires a full actuarial valuation at least every three years. Asset values for all plans are updated every year.
Prior to 1 January 2003, the Group accounted for pensions and similar obligations under the UK accounting standard SSAP 24. The objective
of that standard was to spread pension costs systematically over the service lives of employees and for the regular costs to be a reasonably
stable percentage of pay. In line with the accounting objectives, assumptions were generally set reflecting long-term expectations and with
asset values smoothed relative to market values. Under SSAP 24, unlike FRS 17, all components of pension expense were recognised in
operating profit. Had the Group continued to account for pensions and similar obligations in 2003 under SSAP 24, the charge to operating
profit would have been €561 million (2002: €416 million; 2001: €326 million), there would have been no charge to financing cost and the
charge to profit after tax would have been €361 million (2002: €261 million; 2001: €205 million). No gains or losses would have been
recognised in the statement of recognised gains and losses.
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 plan will be able to benefit from a subsidy towards the cost of prescription drugs. In order to be eligible
to receive this subsidy it is expected that we will need to make minor changes to the rules of the Group’s US plan. Until these changes are
made, no recognition of the drug subsidy is reflected in the Group accounts. Preliminary estimates indicate that once eligible, the Group’s
liability will reduce by approximately €55 million and the ongoing service cost would reduce by an immaterial amount.