Unilever 2013 Annual Report Download - page 118

15 APITAL AND FUNDIN
ORDINARY SHARES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
INTERNAL HOLDINS
The ordinary shares numbered 1 to 2,400 (inclusive) in NV (‘Special Shares’) and deferred stock of PLC are held as to one half of each
class by N.V. Elma – a subsidiary of NV – and one half by United Holdings Limited – a subsidiary of PLC. This capital is eliminated on
consolidation.
For information on the rights related to the aforementioned ordinary shares, see the Corporate overnance report on page 42
Thesubsidiaries mentioned above have waived their rights to dividends on their ordinary shares in NV.
SHAREBASED OMPENSATION
The Group operates a number of share-based compensation plans involving options and awards of ordinary shares of NV and PLC.
Full details of these plans are given in note 4C on pages 104 and 105.
OTHER RESERVES
Other reserves include the fair value reserve, the foreign currency translation reserve, the capital redemption reserve and
treasurystock.
SHARES HELD BY EMPLOYEE SHARE TRUSTS AND ROUP OMPANIES
Certain PLC trusts, NV and Group companies purchase and hold NV and PLC shares to satisfy performance shares granted, share
options granted and other share awards (see note 4C). The assets and liabilities of these trusts and shares held by Group companies
are included in the consolidated financial statements. The book value of shares held is deducted from other reserves, and trusts’
borrowings are included in the Group’s liabilities. The costs of the trusts are included in the results of the Group. These shares are
excluded from the calculation of earnings per share.
FINANIAL LIABILITIES
Financial liabilities are initially recognised at fair value, less any directly related transaction costs. Certain bonds are designated as
being part of a fair value hedge relationship. In these cases, the bonds are carried at amortised cost, adjusted for the fair value of
the risk being hedged, with changes in value shown in profit and loss. Other financial liabilities, excluding derivatives, are
subsequently carried at amortised cost.
DERIVATIVE FINANIAL INSTRUMENTS
The Group’s use of, and accounting for, derivative instruments is explained in note 16 on page 120 and on pages 124 to 125.
The Group’s Treasury activities are designed to:
• maintain a competitive balance sheet in line with A+/A1 rating (see below);
• secure funding at lowest costs for the Group’s operations, M&A activity and external dividend payments (see below);
• protect the Group’s financial results and position from financial risks (see note 16);
• maintain market risks within acceptable parameters, while optimising returns (see note 16); and
• protect the Group’s financial investments, while maximising returns (see note 17).
The treasury department provides central deposit taking, funding and foreign exchange management services for the Group’s
operations. The department is governed by standards and processes which are approved by Unilever Leadership Executive (ULE).
Inaddition to guidelines and exposure limits, a system of authorities and extensive independent reporting covers all major areas of
activity. Performance is monitored closely by senior management. Reviews are undertaken periodically by internal audit.
Key instruments used by the department are:
• short-term and long-term borrowings;
• cash and cash equivalents; and
• plain vanilla derivatives, including interest rate swaps and FX contracts.
The treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved by the
Chief Financial Officer. The use of leveraged instruments is not permitted.
115Unlever Annual Report and Accounts 2013 Fnancal statements