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97
16B. Treasury risk management continued
The following table shows cash flows of those derivatives for which cash flow hedge accounting is applied. These derivatives are
expected to impact profit and loss in the same periods as the cash flows occur.
€ million
Due
within
1 year
€ million
Due
between
1 and 2
years
€ million
Due
between
2 and 3
years
€ million
Due
between
3 and 4
years
€ million
Due
between
4 and 5
years
€ million
Due
after
5 years
€ million
Total
€ million
Net
carrying
amount as
shown in
balance
sheet
2011
Foreign exchange cash inflows 779 – – – – – 779
Foreign exchange cash outflows (519) – – – – – (519) 3
Interest rate cash flows – – (17) (41) (57) (170) (285) (27)
Commodity contracts cash flows (356) – – – – – (356) (2)
2010
Foreign exchange cash inflows 844 – – – – – 844
Foreign exchange cash outflows (411) – – – – – (411) (14)
Interest rate cash flows – (27) (37) (51) (51) (88) (254) (9)
Commodity contracts cash flows (317) – – – – – (317) 59
c) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty fails to meet its contractual obligations. Additional
information in relation to credit risk on trade receivables is given in note 13. These risks are generally managed by local controllers with
additional regional oversight. Credit risk related to the use of treasury instruments is managed on a Group basis. This risk arises from
transactions with financial institutions involving cash and cash equivalents, deposits and derivative financial instruments. To reduce
this risk, Unilever has concentrated its main activities with a limited number of counterparties which have secure credit ratings.
Individual risk limits are set for each counterparty based on financial position, credit rating and past experience. Credit limits and
concentration of exposures are actively monitored by the Group’s treasury department. Netting agreements are also put in place with
Unilever’s principal counterparties. In the case of a default, these arrangements would allow Unilever to net assets and liabilities
across transactions with that counterparty. To further reduce the Group’s creditexposures on derivative financial instruments, Unilever
has collateral agreements with Unilever’s principal counterparties in relation to derivative financial instruments. Under these
arrangements, counterparties are required to deposit securities and/or cash as a collateral for their obligations in respect of derivative
financial instruments. At 31 December 2011 the collateral held by Unilever under such arrangements amounted to€88 million
(2010:€58 million), of which €43 million (2010: €38 million) was in cash, and €45 million (2010: €20 million) was in the form of bond
securities. The non-cash collateral has not been recognised as an asset in the Group’s balance sheet.
The carrying amount of financial assets best represents the Group’s exposure to credit risk at the reporting date, excluding the impact
of any collateral held or other credit enhancements. These amounts are summarised in note 13 and note 15A.
16C. Financial instruments fair value risk
The Group is exposed to the risks of changes in fair value of its financial assets and liabilities. The following table summarises the fair
values and carrying amounts of financial instruments.
Fair values of financial assets and financial liabilities
€ million
Fair
value
2011
€ million
Fair
value
2010
€ million
Carrying
amount
2011
€ million
Carrying
amount
2010
Financial assets
Cash and cash equivalents 3,484 2,316 3,484 2,316
Loans and receivables 932 5932 5
Available-for-sale financial assets 720 533 720 533
Financial assets at fair value through profit or loss:
Derivatives 208 403 208 403
Other 71 120 71 120
5,415 3,377 5,415 3,377
Financial liabilities
Preference shares (102) (116) (68) (90)
Bank loans and overdrafts (2,737) (1,678) (2,737) (1,678)
Bonds and other loans (11,605) (7,775) (10,585) (7,255)
Finance lease creditors (231) (220) (204) (208)
Derivatives (124) (303) (124) (303)
(14,799) (10,092) (13,718) (9,534)
The fair value of trade receivables and payables is considered to be equal to the carrying amount of these items due to their short-term nature.
Unilever Annual Report and Accounts 2011
Financial statements