Unilever 2008 Annual Report Download - page 115

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Notes to the consolidated accounts Unilever Group
112 Unilever Annual Report and Accounts 2008
Financial statements
17 Financial instruments and treasury risk management (continued)
Of the fair values disclosed above, the fair value of financial liability-related derivatives at 31 December 2008 amounted to €539 million
(2007: €320 million) of which €501 million (2007: €78 million) is included under other financial assets and €38 million (2007: €242 million) is
included under financial liabilities as a positive amount partly offsetting the €(257) million (2007: €(337) million) included under financial
liabilities relating to the fair values of derivatives used as net investment hedges. The remaining balances are shown under trade and other
receivables and other liabilities.
Sensitivity to not applying hedge accounting
Derivatives have to be reported at fair value. Those derivatives used for cash flow hedging and net investment hedging for which we do not
apply hedge accounting will cause volatility in the income statement. Such derivatives did not have a material impact on the 2008 income
statement.
Embedded derivatives
In accordance with IAS 39, 'Financial instruments: Recognition and Measurement', Unilever has reviewed all contracts for embedded derivatives
that are required to be separately accounted for if they do not meet specific requirements set out in the standard; no material embedded
derivatives have been identified.
Fair values of financial assets and financial liabilities
The following table summarises the fair values and carrying amounts of the various classes of financial assets and financial liabilities. All trade
and other receivables and trade payables and other liabilities have been excluded from the analysis below and from the interest rate and
currency profiles in note 15 on page 104 and note 16 on page 107, as their carrying amounts are a reasonable approximation of their fair
value, because of their short-term nature.
€ million € million € million € million
Fair Fair Carrying Carrying
value value amount amount
2008 2007 2008 2007
Financial assets
Other non-current assets 891 733 904 738
Cash and cash equivalents 2 561 1 098 2 561 1 098
Other financial assets 35 138 35 138
Derivatives related to financial liabilities 597 78 597 78
4 084 2 047 4 097 2 052
Financial liabilities
Bank loans and overdrafts (1 377) (1 212) (1 377) (1 212)
Bonds and other loans (9 488) (8 073) (9 278) (7 907)
Finance lease creditors (222) (313) (207) (311)
Preference shares (102) (114) (124) (124)
Derivatives related to financial liabilities (219) (95) (219) (95)
(11 408) (9 807) (11 205) (9 649)
The fair values and the carrying amount of listed investments included in financial assets and preference shares included in financial liabilities are
based on their market values. Cash and cash equivalents, other financial assets, bank loans and overdrafts have fair values that approximate to
their carrying amounts because of their short-term nature. The fair values of listed bonds are based on their market value; non-listed bonds and
other loans are based on the net present value of the anticipated future cash flows associated with these instruments. Fair values for finance
lease creditors have been assessed by reference to current market rates for comparable leasing arrangements.
Commodity contracts
The Group uses commodity forward contracts and futures to hedge against price risk in certain commodities. All commodity forward contracts
and futures hedge future purchases of raw materials. Settlement of these contracts will be in cash or by physical delivery. Those contracts that
will be settled in cash are reported in the balance sheet at fair value and, to the extent that they are considered as an effective hedge under
IAS 39, fair value movements are recognised in the cash flow reserve.