Unilever 2003 Annual Report Download - page 138

Unilever Annual Report & Accounts and Form 20-F 2003 135
Additional information for US investors
Unilever Group
The impact of this change in methodology on reported results under US GAAP is given in the table below:
€ million
2001
Restated
Net income under US GAAP 1 446
Change in basis of expected return on plan assets calculation 86
Adjusted net income under US GAAP 1 532
Euro per € 0.51 Euro cents per 1.4p
2001 2001
Adjusted net income per share 1.51 22.60
Adjusted diluted net income per share 1.47 21.99
As required under US APB 20 for a change in accounting policy, a cumulative effect adjustment has been calculated to record the impact of the
change as if the fair value methodology had been the accounting policy from the initial adoption of SFAS 87 by Unilever. The cumulative effect
adjustment net of tax was €522 million in 2002.
Investments
Unilever accounts for current investments, which are liquid funds temporarily invested, at their market value, which is consistent with UK GAAP.
Unilever accounts for changes in the market value of current investments as interest receivable in the profit and loss account for the year. Under
US GAAP, such current asset investments are classified as ‘available for sale securities’ and changes in market values, which represent unrealised
gains or losses, are excluded from earnings and taken to stockholders’ equity unless such losses are deemed to be other than temporary at
which time they are recognised through the profit and loss account. Unrealised gains and losses arising from changes in the market values of
securities available for sale are not material.
Unilever accounts for fixed investments other than in joint ventures and associates at cost less any amounts written off to reflect a permanent
impairment. Under US GAAP such investments are held at fair value. The difference is not material.
Dividends
The proposed final ordinary dividends are provided for in the Unilever accounts in the financial year to which they relate. Under US GAAP such
dividends are not provided for until they become irrevocable.
Deferred taxation
Following the adoption of the new pension accounting standard (FRS 17) with effect from 1 January 2003, Unilever has restated its deferred
tax charge for the years ended 31 December 2001 and 2002 together with its deferred tax balances as at 31 December 2002. Corresponding
changes are therefore needed to the deferred tax charges and balances in the Group accounts and in the reconciliation to US GAAP.
In addition, deferred tax balances in respect of pensions are now reported as a separate component of the pensions balances and no longer
aggregated with the rest of the deferred tax balances. A full description of FRS 17 is given in note 17 on page 99.
Under FRS 19, deferred tax is not recognised on fair value adjustments made to assets acquired; under US GAAP, deferred tax is recorded
on all fair value adjustments. Also, FRS 19 changed the treatment of deferred tax on tax-deductible goodwill previously written off to reserves.
Such goodwill is reinstated, net of amortisation, under US GAAP, and the tax effect of such restatement has been adjusted accordingly.
Classification differences between UK and US GAAP
Revenue recognition
Under US GAAP, certain sales incentive expenses which have been included in operating costs under Unilever’s accounting would be deducted
from turnover. The decrease in turnover for the years to 31 December 2003, 2002 and 2001 is €1 238 million, €1 337 million and
€1 279 million respectively. There is no impact on Unilever’s net profit.
Cash flow statement
Under US GAAP, various items would be reclassified within the consolidated cash flow statement. In particular, interest received, interest
paid and taxation would be part of net cash flow from operating activities, and dividends paid would be included within net cash flow from
financing. In addition, under US GAAP, cash and cash equivalents comprise cash balances and current investments with an original maturity
at the date of investment of less than three months. Under Unilever’s presentation, cash includes only cash in hand or available on demand
less bank overdrafts. Cash flows from movements in bank overdrafts would be classified as part of cash flows from financing activities
under US GAAP. Cash flows from movements in bank overdrafts were €58 million for the year ended 31 December 2003 (2002: €(86) million;
2001: €(19) million). Movements in those current investments which are included under the heading of cash and cash equivalents under
US GAAP form part of the movement entitled ‘Management of liquid resources’ in the cash flow statement. At 31 December 2003, the
balance of such investments was €3 million (2002: €45 million).
Long leasehold interests in land
Under UK GAAP, Unilever treats the cost of acquiring a long leasehold interest in land as a fixed asset, and depreciates the cost of that asset
over the lease term. Under US GAAP, the cost of long leasehold interests would be deferred within ‘Other assets’ and recognised on a straight-
line basis over the lives of the leases as operating lease rentals. The balance of such assets were €58 million as at 31 December 2003
(2002: €63 million). In all other respects, there are no differences in accounting for these arrangements between UK and US GAAP.