Unilever 2013 Annual Report Download - page 130

17A. FINANCIAL ASSETS CONTINUED
ash and cash equvalents reconclaton to the cash flow statement
 mllon
2013
€ million
2012
Cash and cash equivalents per balance sheet 2,285 2,465
Less: bank overdrafts (241) (248)
Cash and cash equivalents per cash flow statement 2,044 2,217
17B. CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counter-party 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.
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 counter-parties which have secure credit ratings. Individual risk limits are set
for each counter-party 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 counter-
parties. In the case of a default, these arrangements would allow Unilever to net assets and liabilities across transactions with that
counter-party. To further reduce the Group’s creditexposures on derivative financial instruments, Unilever has collateral agreements
with Unilever’s principal counter-parties in relation to derivative financial instruments. Under these arrangements, counter-parties are
required to deposit securities and/or cash as a collateral for their obligations in respect of derivative financial instruments.
At 31 December 2013 the collateral held by Unilever under such arrangements amounted to€9 million (2012:€6 million), of which €5
million (2012: €6 million) was in cash, and €4 million (2012: €nil) was in the form of bond securities. The non-cash collateral has not
been recognised as an asset in the Group’s balance sheet.
Further details in relation to the Group’s exposure to credit risk are shown in note 13 and note 16A.
18 FINANIAL 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.
Far values of fnancal assets and fnancal labltes
 mllon
Far
value
2013
€ million
Fair
value
2012
 mllon
arryng
amount
2013
€ million
Carrying
amount
2012
Fnancal assets
Cash and cash equivalents 2,285 2,465 2,285 2,465
Held-to-maturity investments 75 29 75 29
Loans and receivables 104 3104 3
Available-for-sale financial assets 760 687 760 687
Financial assets at fair value through profit or loss:
Derivatives 294 170 294 170
Other 32 47 32 47
3,550 3,401 3,550 3,401
Fnancal labltes
Preference shares (114) (112) (68) (68)
Bank loans and overdrafts (1,067) (1,347) (1,067) (1,346)
Bonds and other loans (10,162) (9,458) (9,594) (8,479)
Finance lease creditors (217) (233) (204) (202)
Derivatives (299) (126) (299) (126)
Other financial liabilities (269) –(269) –
(12,128) (11,276) (11,501) (10,221)
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.
FAIR VALUE HIERARHY
The fair values shown above have been classified into three categories depending on the inputs used in the valuation technique.
Thecategories used are as follows:
• Level 1: quoted prices for identical instruments;
• Level 2: directly or indirectly observable market inputs, other than Level 1 inputs; and
• Level 3: inputs which are not based on observable market data.
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Unlever Annual Report and Accounts 2013 Fnancal statements