Unilever 2013 Annual Report Download - page 97

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FOREIN URRENIES
The consoldated fnancal statements are presented n euros
Thefunctional currencies of NV and PLC are euros and sterling
respectively. Items included in the financial statements of
individual group companies are recorded in their respective
functional currency which is the currency of the primary
economic environment in which each entity operates.
Foreign currency transactions in individual group companies are
translated into functional currency using exchange rates at the
date of the transaction. Foreign exchange gains and losses from
settlement of these transactions, and from translation of
monetary assets and liabilities at year-end exchange rates, are
recognised in the income statement except when deferred in
equity as qualifying hedges.
In preparing the consolidated financial statements, the balances
in individual group companies are translated from their functional
currency into euros. The income statement, the cash flow
statement and all other movements in assets and liabilities are
translated at average rates of exchange as a proxy for the
transaction rate, or at the transaction rate itself if more
appropriate. Assets and liabilities are translated at year-end
exchange rates.
The ordinary share capital of NV and PLC is translated in
accordance with the Equalisation Agreement. The difference
between the value for PLC and the value by applying the year-end
rate of exchange is taken to other reserves (see note 15B on
page117).
The effect of exchange rate changes during the year on net assets
of foreign operations is recorded in equity. For this purpose net
assets include loans between group companies and any related
foreign exchange contracts where settlement is neither planned
nor likely to occur in the foreseeable future.
The Group applies hedge accounting to certain exchange
differences arising between the functional currencies of a foreign
operation and NV or PLC as appropriate, regardless of whether
the net investment is held directly or through an intermediate
parent. Differences arising on retranslation of a financial liability
designated as a foreign currency net investment hedge are
recorded in equity to the extent that the hedge is effective. These
differences are reported within profit or loss to the extent that the
hedge is ineffective.
Cumulative exchange differences arising since the date of
transition to IFRS of 1 January 2004 are reported as a separate
component of other reserves. In the event of disposal or part
disposal of an interest in a group company either through sale or
as a result of a repayment of capital, the cumulative exchange
difference is recognised in the income statement as part of the
profit or loss on disposal of group companies.
RITIAL AOUNTIN ESTIMATES AND JUDEMENTS
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.
1 AOUNTIN INFORMATION
AND POLIIES
The accounting policies adopted are the same as those which
were applied for the previous financial year, except as set out
below under the heading ‘Recent accounting developments’.
UNILEVER
The two parent companies, NV and PLC, together with their group
companies, operate as a single economic entity (the Unilever
Group, also referred to as Unilever or the Group). NV and PLC
have the same Directors and are linked by a series of agreements,
including an Equalisation Agreement, which are designed so that
the positions of the shareholders of both companies are as closely
as possible the same as if they held shares in a single company.
The Equalisation Agreement provides that both companies adopt
the same accounting principles. It also requires that dividends
and other rights and benefits attaching to each ordinary share of
NV, be equal in value to those rights and benefits attaching to
each ordinary share of PLC, as if each such unit of capital formed
part of the ordinary share capital of one and the same company.
BASIS OF ONSOLIDATION
Due to the operational and contractual arrangements referred to
above, NV and PLC form a single reporting entity for the purposes
of presenting consolidated financial statements. Accordingly, the
financial statements of Unilever are presented by both NV and
PLC as their respective consolidated financial statements. Group
companies included in the consolidation are those companies
controlled by NV or PLC. Control exists when the Group has the
power to direct the activities of an entity so as to affect the return
on investment.
The net assets and results of acquired businesses are included in
the consolidated financial statements from their respective dates
of acquisition, being the date on which the Group obtains control.
The results of disposed businesses are included in the
consolidated financial statements up to their date of disposal,
being the date control ceases.
Intra-group transactions and balances are eliminated.
The company income statement for NV is included in the
consolidated financial statements. An abbreviated income
statement has been disclosed in the NV company accounts on
page 137 in accordance with Section 402, Book 2, of the
Netherlands Civil Code.
OMPANIES LEISLATION AND AOUNTIN STANDARDS
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU), IFRIC Interpretations and in
accordance with Part 9 of Book 2 of the Civil Code in the Netherlands
and the UK Companies Act 2006 applicable to companies reporting
under IFRS. They are also in compliance with IFRS as issued by the
International Accounting Standards Board (IASB).
These financial statements are prepared under the historical cost
convention unless otherwise indicated.
AOUNTIN POLIIES
Accounting policies are included in the relevant notes to the
consolidated financial statements. These are presented as text
highlighted in grey on pages 96 to 133. The accounting policies
below are applied throughout the financial statements.
94 Unlever Annual Report and Accounts 2013Fnancal statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNILEVER GROUP