Unilever 2010 Annual Report Download - page 104

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Unilever Annual Report and Accounts 2010 101
Financial statements
15 Financial instruments and treasury risk management (continued)
The impact of exchange rate movements on the fair value of forward exchange contracts used to hedge net investments is recognised in reserves.
Derivatives for which hedge accounting is not applied
This relates to derivatives that hedge a balance sheet item. Both the derivative and hedged item revalue through profit or loss. This also relates
tocertain commodity derivatives that are entered into for risk management purposes but that cannot be brought under hedge accounting due
tothe strict requirements in IAS 39, ‘Financial instruments: Recognition and Measurement’.
The following table shows the fair value of derivatives outstanding at year end for which hedge accounting is not applied.
€ million € million € million € million
Assets Assets Liabilities Liabilities
Fair values of derivatives for which hedge accounting is not applied 2010 2009 2010 2009
Current
Interest rate derivatives – 1 – 1
Commodity contracts 1 – – –
Cross-currency swaps – – 6 4
Foreign exchange derivatives 172 267 210 117
173 268 216 122
Non-current
Interest rate derivatives – – 1 1
Cross-currency swaps – – 23 13
–
173
– 24 14
268 240 136
Of the fair values of derivatives disclosed above, the fair value of financial liability-related derivatives at 31 December 2010 amounted to
€(63)million (2009: €132 million) of which €164 million (2009: €139 million) is included under other financial assets and €(227) million
(2009:€(7)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 2010 income statement.
Embedded derivatives
In accordance with IAS 39, 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 96 to 97, 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
2010 2009 2010 2009
Financial assets
Other non-current assets 511 485 511 485
Cash and cash equivalents 2,316 2,642 2,316 2,642
Other financial assets 147 701 147 701
Derivatives related to financial liabilities
Financial liabilities
403
3,377
271 403 271
4,099 3,377 4,099
Bank loans and overdrafts (1,678) (1,419) (1,678) (1,415)
Bonds and other loans (7,775) (8,569) (7,255) (8,113)
Finance lease creditors (220) (218) (208) (212)
Preference shares (116) (118) (90) (124)
Derivatives related to financial liabilities
(303)
(10,092)
(107) (303) (107)
(10,431) (9,534) (9,971)