Unilever 2011 Annual Report Download - page 72

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Critical accounting estimates and judgements
The preparation of financial statements requires management to
make judgements, estimates and assumptions in the application
of accounting policies that affect the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and judgements are continuously
evaluated and are based on historical experience and other
factors, including expectations of future events that are believed
to be reasonable. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in
any future period affected.
Information about critical judgements in applying accounting
policies, as well as estimates and assumptions that have the most
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year, are
included in the following notes:
• Separate presentation of items in the income statement
– note 3
• Measurement of defined benefit obligations – note 4B
• Key assumptions used in discounted cash flow projections
– note 9
• Utilisation of tax losses and recognition of other deferred tax
assets – note 6B
• Likelihood of occurrence of provisions and contingencies,
including tax investigations and audits – notes 17 and 20
• Measurement of consideration and assets and liabilities
acquired as part of business combinations – note 21
Recent accounting developments
Adopted by the Group
The following amended standards are relevant to the Group and
have been adopted for the first time in these financial statements,
with no material impact:
• Amendments to IAS 1 ‘Presentation of financial statements’
• Amendments to IFRS 3 ‘Business combinations’
• Amendments to IFRS 7 ‘Financial instruments disclosures’
• IAS 24 ‘Related party disclosures (Revised)’
• Amendments to IFRIC 14 ‘Prepayments of a minimum funding
requirement’
Not adopted by the Group
The Group is currently assessing the impact of the following new
standards and amendments that are not yet effective.
The Group does not currently believe adoption of these standards
would have a material impact on the consolidated results or
financial position of the Group. All of the following new standards
and amendments are effective from 1 January 2013 unless
otherwise stated. Standards have not yet been endorsed by the EU
unless otherwise stated.
Unilever Annual Report and Accounts 2011
Financial statements
• IFRS 9 ‘Financial instruments’, replaces the current
classification and measurement models for financial assets
with two classification categories: amortised cost and fair
value. Classification is driven by the business model for
managing the assets and the contractual cash flow
characteristics. Financial liabilities are not affected by the
changes. Effective from 1 January 2015.
• IFRS 10 ‘Consolidated financial statements’ replaces current
guidance on control and consolidation. The core principle that
a consolidated entity presents a parent and its subsidiaries as
if they were a single entity remains unchanged, as do the
mechanics of consolidation.
• IFRS 11 ‘Joint arrangements’ requires joint arrangements
tobeaccounted for as a joint operation or as a joint venture
depending on the rights and obligations of each party to the
arrangement. Equity accounting for joint ventures, already
used by Unilever, will become mandatory.
• IFRS 12 ‘Disclosure of interests in other entities’ requires
enhanced disclosures of the nature, risks and financial effects
associated with the Group’s interests in subsidiaries,
associates, joint arrangements and unconsolidated structured
entities.
• IFRS 13 ‘Fair value measurement’ explains how to measure
fair value and enhances fair value disclosures. The standard
does not significantly change the measurement of fair value
but codifies it in one place.
• IAS 19 ‘Employee benefits (Revised)’ changes a numberof
disclosure requirements for post-employment arrangements
and restricts the accounting options available for defined
benefit pension plans. The return on pension plan assets and
finance charge will be replaced by a net interest expense or
income, calculated by applying the liability discount rate to the
net defined benefit asset or liability. The Group expects this
change will result in an increase in finance costs but will not
impact the group’s net assets.
• Amendments to IAS 1 ‘Presentation of items of other
comprehensive income’ will result in items of other
comprehensive income that may be reclassified to profit or
loss being presented separately from items that would never
be reclassified. Effective from 1 July 2012.
• IAS 27 ‘Separate financial statements (Revised)’. The standard
is revised to reflect the issue of IFRS 10.
• IAS 28 ‘Investments in associates and joint ventures (Revised)’.
The standard is revised to reflect the issue of IFRS 11.
• Amendments to IAS 32 ‘Financial instruments: Presentation’
(Effective from 1 January 2014) and IFRS 7 ‘Financial
instruments: Disclosures’ (Effective from 1 January 2013)
provide additional guidance on when financial assets and
liabilities may be offset.