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104 Unilever Annual Report and Accounts 2010
Financial statements
Notes to the consolidated financial statements Unilever Group
15 Financial instruments and treasury risk management (continued)
Income statement sensitivity to changes in foreign exchange rates
The values of debt, investments and related hedging instruments, denominated in currencies other than the functional currency of the entities
holding them, are subject to exchange rate movements. The translation risk on the foreign exchange receivables and payables is excluded from this
sensitivity analysis as the risk is considered to be immaterial because positions will remain within prescribed limits (see currency risks on page 98).
The remaining unhedged foreign exchange positions at 31 December 2010 amount to €52 million (2009: €2 million). A reasonably possible 10%
change in rates would lead to a €5 million movement in the income statement (2009: €0.2 million), based on a linear calculation of our exposure.
Income statement sensitivity to changes in interest rate
Interest rate risks are presented by way of sensitivity analysis. As described on page 98, Unilever has an interest rate management approach aimed
at optimising net interest cost and reducing volatility in the income statement. As part of this approach, part of the financial assets and financial
liabilities have fixed interest rates and are no longer exposed to changes in the floating rates. The remaining floating part of our financial assets
and financial liabilities (see interest rate profile tables on pages 96 for the assets and 97 for the liabilities) is exposed to changes in the floating
interest rates.
The analysis below shows the sensitivity of the income statement to a reasonably possible one percentage point increase in floating interest rates
on a full-year basis.
Sensitivity to a reasonably possible
one percentage point increase in
floating rates as at 31 December
€ million € million
Financial assets
2010
109
2009
92
Financial liabilities (126) (91)
A reasonably possible one percentage point decrease in floating interest rates on a full-year basis would have the equal but opposite effect.
Net investment hedges: sensitivity relating to changes in foreign exchange rates
To reduce the re-translation risk of Unilever’s investments in foreign subsidiaries, Unilever uses net investment hedges. The fair values of these net
investment hedges are subject to exchange rate movements and changes in these fair values are recognised directly in equity and will offset the
re-translation impact of the related subsidiary.
At 31 December 2010 the nominal value of these net investment hedges amounted to €4.4 billion (2009: €4.9 billion) mainly consisting of US $/€
contracts. Areasonably possible 10% strengthening of the euro against all other currencies would lead to a fair value movement of €395 million
(2009: €486 million). A reasonably possible 10% weakening of the euro against all other currencies would have the equal but opposite effect.
Thefair value movement would be fully offset by an opposite movement on the re-translation of the book equity of the foreign subsidiary.
Cash flow hedges: sensitivity relating to changes in interest rates and foreign exchange rates
Unilever uses on a limited scale both interest rate and forex cash flow hedges. The fair values of these instruments are subject to changes in
interest rates and exchange rates. Because of the limited use of these instruments and the amount of Unilever’s equity, possible changes in interest
rates and exchange rates will not lead to fair value movements that will have a material impact on Unilever’s equity.
16 Trade payables and other liabilities
€ million € million
Trade and other payables 2010 2009
Due within one year
Trade payables 6,017 3,982
Accruals 3,318 3,504
Social security and sundry taxes 402 342
Others 489 585
10,226 8,413
Due after more than one year
Accruals 109 104
Others 186 144
Total trade payables and other liabilities
295
10,521
248
8,661
The amounts shown above do not include any payables due after more than five years. Trade payables and other liabilities are valued at historic
cost, which where appropriate approximates their amortised cost.