Unilever 2008 Annual Report Download - page 42

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Unilever Annual Report and Accounts 2008 39
Report of the Directors
Financial Review continued
Pensions and similar obligations
The assets and liabilities of pension plans are recognised at fair
values in the balance sheet.
Pension accounting requires certain assumptions to be made in
order to value our obligations and to determine the charges to
be made to the income statement. These figures are particularly
sensitive to assumptions for discount rates, inflation rates,
mortality rates and expected long-term rates of return on assets.
Information about sensitivity to certain of these assumptions is
given in note 20 on page 115 and 116.
The following table sets out these assumptions (except for
mortality rates), as at 31 December 2008, in respect of the four
largest Unilever pension plans. Further details of assumptions
(including mortality rates) made are given in note 20 on
page 117.
%%%%
Nether- United
UK lands States Germany
Discount rate 6.5 5.9 5.6 5.9
Inflation 2.8 2.0 2.1 2.0
Expected long-term rate of return:
Equities 7.8 7.2 6.0 7.2
Bonds 5.0 5.0 5.1 4.2
Property 6.0 5.7 4.5 5.7
Others 5.6 5.6 1.2 4.4
These assumptions are set by reference to market conditions at
the valuation date. Actual experience may differ from the
assumptions made. The effects of such differences are recognised
through the statement of recognised income and expense.
Demographic assumptions, such as mortality rates, are set having
regard to the latest trends in life expectancy, plan experience and
other relevant data. The assumptions are reviewed and updated
as necessary as part of the periodic actuarial valuation of the
pension plans. Mortality assumptions for the four largest plans
are given in more detail in note 20 on page 117.
Provisions
Provision is made, amongst other reasons, for legal matters,
disputed indirect taxes, employee termination costs and
restructuring where a legal or constructive obligation exists at the
balance sheet date and a reliable estimate can be made of the
likely outcome.
Taxation
Full provision is made for deferred and current taxation at the
rates of tax prevailing at the year end unless future rates have
been substantively enacted, as detailed in note 12 on page 102.
Deferred tax assets are regularly reviewed for recoverability, and a
valuation allowance is established to the extent that recoverability
is not considered likely.