Notes to the company accounts – Unilever N.V.
Accounting information and policies
Basis of preparation
The company accounts of Unilever N.V. comply in all material respects with legislation in the Netherlands. As allowed by Article 362.1 of Book 2 of the Civil Code in the Netherlands, the company accounts are prepared in accordance with United Kingdom accounting standards, unless such standards conflict with the Civil Code in the Netherlands which would in such case prevail.
The accounts are prepared under the historical cost convention as modified by the revaluation of financial assets classified as 'available-for-sale investments', 'financial assets at fair value through profit or loss', and 'derivative financial instruments' in accordance with the accounting policies set out below which have been consistently applied.
Accounting policies
The principal accounting policies are as follows:
Fixed investments
Shares in group companies are stated at cost less any amounts written off to reflect a permanent impairment. Any impairment is charged to the profit and loss account as it arises. In accordance with Article 385.5 of Book 2 of the Civil Code in the Netherlands, Unilever N.V. shares held by Unilever N.V. subsidiaries are deducted from the carrying value of those subsidiaries. This differs from the accounting treatment under UK GAAP, which would require these amounts to be included within fixed investments.
Financial instruments and derivative financial instruments
The company's accounting policies under United Kingdom generally accepted accounting principles (UK GAAP) namely FRS 25 'Financial Instruments: Presentation', FRS 26 'Financial Instruments: Measurement' and FRS 29 'Financial Instruments: Disclosures' are the same as the Unilever Group's accounting policies under International Financial Reporting Standards (IFRS) namely IAS 32 'Financial Instruments: Presentation', IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS 7 'Financial Instruments: Disclosures'. The policies are set out under the heading 'Financial instruments' in note 1 to the consolidated accounts. NV is taking the exemption for not providing all the financial instruments disclosures, because IFRS 7 disclosures are given in note 17 to the consolidated accounts.
Deferred taxation
Full provision is made for deferred taxation on all significant timing differences arising from the recognition of items for taxation purposes in different periods from those in which they are included in the company's accounts. Full provision is made at the rates of tax prevailing at the year end unless future rates have been enacted or substantively enacted. Deferred tax assets and liabilities have not been discounted.
Own shares held
Own shares held by the company are accounted for in accordance with Dutch law and UK GAAP, namely FRS 25 'Financial Instruments: Presentation'. All differences between the purchase price of the shares held to satisfy options granted and the proceeds received for the shares, whether on exercise or lapse, are charged to reserves.
Retirement benefits
Unilever N.V. has accounted for pensions and similar benefits under the United Kingdom Financial Reporting Standard 17 'Retirement benefits' (FRS 17). The operating and financing costs of defined benefit plans are recognised separately in the profit and loss account; service costs are systematically spread over the service lives of employees, and financing costs are recognised in the periods in which they arise. Variations from expected costs, arising from the experience of the plans or changes in actuarial assumptions, are recognised immediately in the statement of total recognised gains and losses. The costs of individual events such as past service benefit enhancements, settlements and curtailments are recognised immediately in the profit and loss account. The liabilities and, where applicable, the assets of defined benefit plans are recognised at fair value in the balance sheet. The charges to the profit and loss account for defined contribution plans are the company contributions payable and the assets of such plans are not included in the company balance sheet.
Dividends
Under Financial Reporting Standard 21 'Events after the Balance Sheet Date' (FRS 21), proposed dividends do not meet the definition of a liability until such time as they have been approved by shareholders at the Annual General Meeting. Therefore, we do not recognise a liability in any period for dividends that have been proposed but will not be approved until after the balance sheet date. This holds for external dividends as well as intra-group dividends paid to the parent company.
| Fixed investments | € million 2007 |
€ million 2006 |
|---|---|---|
| Shares in group companies | 24 428 | 26 241 |
| PLC shares held in connection with | ||
| share options | 184 | 375 |
| Less NV shares held by group companies | (189) | (211) |
| 24 423 | 26 405 | |
| Movements during the year: | ||
| 1 January | 26 405 | 11 276 |
| PLC shares held in connection | ||
| with share options | (191) | (57) |
| NV shares held by group companies | 22 | 27 |
| Additions(a) | 4 966 | 15 342 |
| Decreases | (6 779) | (183) |
| 31 December | 24 423 | 26 405 |
(a) In 2006 Unilever decided to transfer its group financing activities into a separate financing entity, Unilever Finance International B.V., a 100% subsidiary of NV based in the Netherlands. The transfer was executed as a contribution in kind on issued shares.
| Debtors | € million 2007 |
€ million 2006 |
|---|---|---|
| Loans to group companies | 2 262 | 3 269 |
| Other amounts owed by group companies | 847 | 2 288 |
| Amounts owed by undertakings in which | ||
| the company has a participating interest | – | 43 |
| Taxation | 38 | – |
| Prepayments and accrued income | 12 | 335 |
| Other | 56 | 72 |
| 3 215 | 6 007 | |
| Of which due after more than one year | 2 250 | 2 312 |
Cash at bank and in hand
At 31 December 2007 there is no cash at bank and in hand for which payment notice is required (2006: nil)
| Creditors | € million 2007 |
€ million 2006 |
|---|---|---|
| Due within one year: | ||
| Other amounts owed to group companies | 15 743 | 17 244 |
| Loans from group companies | 1 258 | 1 248 |
| Bonds and other loans | – | 1 503 |
| Taxation and social security | 16 | 48 |
| Accruals and deferred income | 58 | 400 |
| Other | 88 | 203 |
| 17 163 | 20 646 | |
| Due after more than one year: | ||
| Bonds and other loans | 2 244 | 746 |
| Loans from group companies | – | 1 521 |
| Accruals and deferred income | 52 | 60 |
| Preference shares(a) | 124 | 124 |
| 2 420 | 2 451 |
(a) Information on the euro conversion of the preference shares is given in note 16 to the consolidated accounts.
Creditors due after five years amount to €870 million (2006: €1 630 million) (Article 375.2 of Book 2 of the Civil Code in the Netherlands).
Ordinary share capital
Shares numbered 1 to 2 400 are held by a subsidiary of NV and a subsidiary of PLC, each holding 50%. Additionally, 122 296 247 (2006: 72 484 322) €0.16 ordinary shares are held by NV and other group companies. Full details as well as information on the euro conversion and subsequent split of ordinary shares are given in note 22 to the consolidated accounts.
Share premium account
The share premium shown in the balance sheet is not available for the issue of bonus shares or for repayment without incurring withholding tax payable by the company. This is despite the change in tax law in the Netherlands, as a result of which dividends received from 2001 onwards by individual shareholders who are resident in the Netherlands are no longer taxed.
| Other reserves | € million 2007 |
€ million 2006 |
|---|---|---|
| 1 January | (1 228) | (1 321) |
| Change in own shares held | (1 209) | 93 |
| 31 December | (2 437) | (1 228) |
| Profit retained | € million 2007 |
€ million 2006 |
|---|---|---|
| 1 January | 9 755 | 9 463 |
| Profit for the year | 1 406 | 1 847 |
| Ordinary dividends – final 2005 | – | (729) |
| Ordinary dividends – interim 2006 | – | (382) |
| One-off dividend 2006 | – | (432) |
| Ordinary dividends – final 2006 | (775) | – |
| Ordinary dividends – interim 2007 | (404) | – |
| Taxation charge | 3 | – |
| Fair value adjustments for cash flow hedges | – | (4) |
| Realised profit/(loss) on shares/certificates held | ||
| to meet employee share options | 15 | (6) |
| Changes in present value of net pension liability | 9 | (2) |
| 31 December | 10 009 | 9 755 |
Profit retained shown in the company accounts and the notes thereto differs from the amount shown in note 24 to the consolidated accounts mainly because of certain inter-company transactions which are eliminated in the consolidated accounts.
| € million 2007 |
€ million 2006 |
|
|---|---|---|
| Difference as at 1 January | 1 351 | 742 |
| Changes in equity of consolidated participations | (3 305) | (1 667) |
| Changes in accumulated intercompany results | 1 560 | 2 276 |
| Difference as at 31 December | (394) | 1 351 |
Provisions for liabilities and charges (excluding pensions and similar obligations)
| € million 2007 |
€ million 2006 |
|
|---|---|---|
| Preference shares provision | 3 | 300 |
| Deferred taxation and other provisions | 37 | 36 |
| 40 | 336 | |
| Of which due within one year | 40 | 332 |
Contingent liabilities
Contingent liabilities are not expected to give rise to any material loss and include guarantees given for group companies. The estimated total of such liabilities as at 31 December 2007 was some €5 204 million (2006: €4 635 million) of which €3 706 million (2006: €3 203 million) was also guaranteed by PLC. The fair value of such guarantees was not significant in either 2006 or 2007. The guarantees issued to other companies were immaterial.
NV has issued joint and several liability undertakings, as defined in Article 403 of Book 2 of the Civil Code in the Netherlands, for almost all Dutch group companies. These written undertakings have been filed with the office of the Company Registry in whose area of jurisdiction the group company concerned has its registered office.
