Unilever 2009 Annual Report Download - page 111

Download and view the complete annual report

Please find page 111 of the 2009 Unilever annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 153

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153

Notes to the consolidated financial statements Unilever Group
108 Unilever Annual Report and Accounts 2009
Financial statements
15 Financial instruments and treasury risk management (continued)
Of the fair values of natural hedges disclosed above, the fair value of financial liability-related derivatives at 31 December 2009 amounted to
€132 million (2008: €539 million) of which €139 million (2008: €501 million) is included under other financial assets and €(7) million
(2008: €38 million) is included under financial 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 2009 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 14 on pages 102 to 103, 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
2009 2008 2009 2008
Financial assets
Other non-current assets 485 891 485 904
Cash and cash equivalents 2,642 2,561 2,642 2,561
Other financial assets 701 35 701 35
Derivatives related to financial liabilities 271 597 271 597
4,099 4,084 4,099 4,097
Financial liabilities
Bank loans and overdrafts (1,419) (1,377) (1,415) (1,377)
Bonds and other loans (8,569) (9,488) (8,113) (9,278)
Finance lease creditors (218) (222) (212) (207)
Preference shares (118) (102) (124) (124)
Derivatives related to financial liabilities (107) (219) (107) (219)
(10,431) (11,408) (9,971) (11,205)
The fair values of the financial assets and liabilities are included at the amount at which the instruments could be exchanged in a current
transaction between willing parties other than in a forced or liquidation sale. The following methods and assumptions were used to estimate
the fair 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 value of unquoted available-for-sale assets is based on recent trades in liquid markets, observable market rates and statistical
modelling techniques such as Monte Carlo simulation.
• The fair values and the carrying amounts of all other listed investments included in financial assets and preference shares included in financial
liabilities are based on their market values.
• 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
using rates currently available for debt on similar terms, credit risk and remaining maturities.
• Fair values for finance lease creditors have been assessed by reference to current market rates for comparable leasing arrangements.
• The Group enters into derivative financial instruments with various counterparties. Derivatives valued using valuation techniques with
market observable inputs are mainly interest rate swaps, foreign exchange forward contracts and commodity forward contracts. The models
incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and
forward rate curves of the underlying commodity. In the balance sheet the value of bonds and other loans is shown at amortised cost unless
the bonds are part of an effective fair value hedge accounting relationship, in which case the value of the bond is adjusted with the market
value of the related derivative.