Unilever 2004 Annual Report Download - page 99

96 Unilever Annual Report and Accounts 2004
Accounting information and policies
Unilever
The two parent companies, NV and PLC, together with their
group companies, operate as nearly as is practicable as a single
entity (the Unilever Group, also referred to as Unilever or the
Group). NV and PLC have the same Directors and are linked by a
series of agreements, including an Equalisation Agreement, which
are designed so that the position of the shareholders of both
companies is as nearly as possible the same as if they held shares
in a single company.
The Equalisation Agreement provides for both companies
to adopt the same accounting principles and requires as a general
rule the dividends and other rights and benefits (including rights
on liquidation) attaching to each Fl. 12 (€5.445) nominal of
ordinary share capital of NV to be equal in value at the relevant
rate of exchange to the dividends and other rights and benefits
attaching to each £1 nominal of ordinary share capital of PLC, as
if each such unit of capital formed part of the ordinary capital of
one and the same company. For additional information please
refer to Corporate governance on page 52.
Basis of consolidation
Due to the operational and contractual arrangements referred to
above ensuring unity of management of NV and PLC and the
internal participating interests set out in note 22 on page 132, NV
and PLC and their group companies constitute a single group
under Netherlands and United Kingdom legislation for the
purposes of presenting consolidated accounts. Accordingly, the
accounts of the Unilever Group are presented by both NV and
PLC as their respective consolidated accounts. These accounts are
supplemented in notes 23 and 24 on page 133 and note 32 on
page 148 by additional information for the NV and PLC parts of
the Group in which group companies are consolidated according
to respective ownership.
Companies legislation
The consolidated accounts of the Unilever Group comply with
Book 2 of the Civil Code in the Netherlands and the United
Kingdom Companies Act 1985. The consolidated accounts of the
Unilever Group also comply with accounting standards generally
accepted in the United Kingdom, as allowed by Article 362.1
of Book 2 of the Civil Code in the Netherlands, unless such
standards conflict with the Civil Code in the Netherlands which
would in such case prevail. The company accounts, the notes to
those accounts and the further statutory information given for
each of NV and PLC comply with legislation in the Netherlands
and the United Kingdom respectively. As explained under ‘Group
companies’ below, in order to give a true and fair view, the
presentation of the consolidated capital and reserves differs from
that specified by the United Kingdom Companies Act 1985.
Accounting standards
The accounts are prepared under the historical cost convention
and comply in all material respects with legislation in the United
Kingdom and the Netherlands and with United Kingdom
Accounting Standards.
The accounting policies of the Unilever Group are set out
on pages 96 to 98. Material variations from United States
generally accepted accounting principles are set out on
pages 154 to 159.
Recent changes in reporting requirements under US GAAP are
discussed on page 159.
OECD Guidelines
In preparing its Annual Review and Annual Report and Accounts
Unilever adheres to disclosure recommendations of the OECD
Guidelines for Multinational Enterprises.
Group companies
Group companies are those companies in whose share capital
NV or PLC holds an interest directly or indirectly, and whose
consolidation is required for the accounts to give a true and
fair view.
In order that the consolidated accounts should present a true and
fair view, it is necessary to differ from the presentational
requirements of the United Kingdom Companies Act 1985 by
including amounts attributable to both NV and PLC shareholders
in the capital and reserves shown in the balance sheet. The
Companies Act would require presentation of the capital and
reserves attributable to NV and PLC shareholders as minority
interests in the respective consolidated accounts of PLC and NV.
This presentation would not give a true and fair view of the effect
of the Equalisation Agreement, under which the position of all
shareholders is as nearly as possible the same as if they held
shares in a single company.
Net profit and result for the year retained are presented on a
combined basis on page 99, with the net profit attributable to
NV and PLC shown separately. Movements in profit retained are
analysed between those attributable to NV and PLC in note 23
on page 133.
Foreign currencies
Exchange differences arising in the accounts of individual
companies are dealt with in their respective profit and loss
accounts. Those arising on trading transactions are taken
to operating profit; those arising on cash, current investments
and borrowings are classified as interest.
In preparing the consolidated accounts, the profit and loss
account, the cash flow statement and all other movements in
assets and liabilities are translated at annual average rates
of exchange. The balance sheet, other than the ordinary share
capital of NV and PLC, is translated at year-end rates of exchange.
In the case of hyper-inflationary economies, which are those in
which inflation exceeds 100% cumulatively over a three-year
period, the accounts are adjusted to reflect current price levels
and remove the influences of inflation before being translated.
The ordinary share capital of NV and PLC is translated at the
rate contained in the Equalisation Agreement of £1 = Fl. 12
(equivalent to €5.445). The difference between this and the value
derived by applying the year-end rate of exchange is taken to
other reserves (see note 24 on page 133).