Unilever 2004 Annual Report Download - page 162

Unilever Annual Report and Accounts 2004 159
Additional information for US investors (continued)
Unilever Group
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 €43 million as at 31 December 2004
(2003: €58 million). In all other respects, there are no differences in accounting for these arrangements between UK and US GAAP.
Equity in earnings related to investments in joint ventures and associated companies
Under US GAAP, equity in earnings related to investments in joint ventures and associated companies would be disclosed on a single line
within the income statement. In particular, our share of the interest and taxation arising in respect of joint ventures and associated companies
would be reported on this line, rather than as part of the total interest and taxation charge for the Group. US GAAP equity in earnings related
to investments in joint ventures and associated companies were €(57) million for the year ended 31 December 2004 (2003: €(48) million;
2002: €(54) million).
Recently issued accounting pronouncements
In January 2003, the FASB issued Financial Interpretation No. 46 (FIN 46), ’Consolidation of Variable Interest Entities’ and in December 2003
issued a revised interpretation FIN 46(R). Under these interpretations, certain entities known as variable interest entities must be consolidated
by the primary beneficiary of the entity. During 2004, Unilever reviewed its contractual arrangements with potential variable interest entities
and identified certain arrangements that qualify as variable interest entities under FIN 46(R). These variable interest entities relate to certain
leasing, manufacturing and distribution agreements. Unilever is not the primary beneficiary of any of these entities. The total maximum loss
exposure relating to these entities is not material.
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Medicare Act) became law in the United
States. The Medicare Act provides for two new prescription drug benefit features under Medicare. Unilever provides post-retirement healthcare
benefits to its United States employees so the benefits provided are impacted by the Medicare Act. In May 2004, the FASB issued FSP 106-2,
‘Accounting and Disclosure Modernization Act of 2003’ to provide guidance on accounting for the effects of the Medicare Act. FSP 106-2 is
effective for Unilever’s 2004 financial statements. The expected subsidy reduced Unilever’s accumulated benefit obligation by approximately €52
million, which Unilever recognised in the statement of total recognised gains and losses. The impact on the ongoing service cost is a reduction
by an immaterial amount.
In December 2004, the FASB issued FASB Statement No.123 (Revised), ‘Share-Based Payments’ which provides guidance on how companies
must measure compensation cost relating to share-based payment transactions in their financial statements. FASB No.123 (Revised) is effective
for Unilever’s 2005 financial statements. FASB No.123 (Revised) is not expected to have a significant impact on the consolidated results of
operations or financial position of Unilever as Unilever adopted the fair value measurement provisions of FASB Statement No.123 in 2003.
In November 2004, the FASB issued FASB Statement No.151, ‘Inventory Costs – an amendment of ARB 43’ to clarify the existing requirements
in ARB No. 43 by adopting language similar to that used in IAS 2. The guidance is effective for inventory costs incurred during fiscal years
beginning after 15 June 2003. FAS 151 does not have an impact on the results of operations or financial position of Unilever since the key
elements are already applied in Unilever’s financial statements.
In March 2004, the EITF reached consensus on Issue No. 03-01, ’The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments’ (EITF 03-01). EITF 03-01 provides guidance on other-than-temporary impairment models for marketable debt and equity
securities and non-marketable securities accounted for under the cost method. In September 2004, the FASB delayed the effective date for
the recognition and measurement guidance in EITF 03-01, until certain implementation issues are addressed. The disclosure requirements in
EITF 03-01 remain effective. When issued, EITF 03-01 is not expected to have a material impact on Unilever’s financial position or results of
operations.
Documents on display in the United States
Unilever files and furnishes reports and information with the United States Securities and Exchange Commission (SEC), and such reports and
information can be inspected and copied at the SEC’s public reference facilities in Washington DC, Chicago and New York. Certain of our
reports and other information that we file or furnish to the SEC are also available to the public over the internet on the SEC’s website at
www.sec.gov.