Report & accounts 2002 in full - Unilever

17 Pensions and similar obligations
Unilever Annual Report & Accounts and Form 20-F 2002
Notes to the consolidated accounts 87
Unilever Group
Description of Plans
In most countries the Group operates defined benefit pension plans based on employee pensionable remuneration and length of service.
The majority of these plans are externally funded; for the unfunded plans, provisions are maintained in the Group balance sheet. The Group
also provides other post-retirement benefits, mainly post-retirement medical benefits in the United States. These plans are predominantly
unfunded, with provisions maintained in the Group balance sheet.
The Group also operates a number of defined contribution plans, the assets of which are held in independently administered funds.
The pension costs charged to the profit and loss account in respect of these plans represent the contributions payable by the Group to
these funds.
Accounting policies
The Group currently accounts for pensions under the United Kingdom accounting standard SSAP 24. The objective of the standard is to
spread pension costs systematically over the service lives of employees and for the regular costs to be a reasonably stable percentage of pay.
Other post-retirement arrangements are currently accounted for in accordance with United States accounting standards SFAS 106 and SFAS
112 which apply principles similar to those for pensions in the UK. All plans are subject to regular actuarial review using the projected unit
method, either by external consultants or by actuaries employed by Unilever. The actuarial assumptions used to calculate the benefit
obligations vary according to the country in which the plan is situated. In line with the accounting objective, assumptions are generally set
reflecting long-term expectations and asset values are smoothed relative to market values.
The UK Accounting Standards Board also requires companies to provide disclosures based on FRS 17, the objective of which is to present
the pension and other post retirement benefit plans’ assets and liabilities at their fair value at the balance sheet date. Unilever will fully
adopt FRS 17 as the basis for pension accounting from 1 January 2003. FRS 17 disclosures are given on pages 89 to 91.
SSAP 24 – Pension and similar obligations
€ million € million € million
Profit and loss account 2002 2001 2000
Charged to operating profit in staff costs:
Defined benefit plans
Regular costs (354) (381) (324)
Special termination benefits (96) (78) (88)
Exceptional increase in irrecoverable surplus (46) – –
Financing charge on pension provisions (136) (110) (117)
Amortisation of surplus/deficits 339 370 309
Defined contribution plans (26) (24) (8)
Other post-retirement benefits (97) (103) (77)
Total pensions and other post-retirement benefits 3 (416) (326) (305)
Pension costs, and contributions paid by the Group to the funded plans, have been reduced in recent years, mainly due to surpluses in the
Group’s two biggest funds. These surpluses are recognised by amortisation through the profit and loss account using the mortgage method.
Balance Sheet
Pensions and similar obligations in the balance sheet are predominantly long-term liabilities comprising:
€ million € million
2002 2001
Unfunded pension plans 1 320 1 414
Funded pension plans 987 987
Other post-retirement benefit plans 1 073 1 284
SSAP 24 pre-tax net liability 3 380 3 685
Comprising:
Asset balances reclassified as debtors due after more than one year 13 (840) (917)
Provisions for liabilities and charges 4 220 4 602
Movements during the year:
1 January 4 602
Currency retranslation (258)
Profit and loss account 416
Payments (400)
Acquisitions/disposals (74)
Other adjustments (66)
31 December 4 220
Financial Statements