Report & accounts 2002 in full - Unilever

94 Notes to the consolidated accounts
Unilever Group
18 Deferred taxation
United Kingdom Financial Reporting Standard 19 (FRS 19) ’Deferred Tax’, which requires full provision to be made for deferred taxes, has
been adopted with effect from 1 January 2002. The impact on the balance sheet of adoption of this standard has been reflected in all
periods covered by these accounts by means of a prior period adjustment. As Unilever has previously provided for deferred taxes on a full
provision basis in accordance with Netherlands law, FRS 19 does not have a material impact on reported net profit.
FRS 19 does not allow deferred tax to be provided on the revaluation of fixed assets and therefore deferred tax so provided in respect of
the revaluation of Bestfoods’ tangible fixed assets has been adjusted against goodwill in the comparative figures. Deferred tax was provided
in respect of the planned remittance of unremitted earnings of Bestfoods’ subsidiaries; FRS 19 does not allow such provision unless the
dividend has been declared. These deferred tax liabilities have also been adjusted against goodwill in the comparative figures. In addition,
where (prior to 1998) tax-deductible goodwill was written off directly to reserves, FRS 19 does not allow a deferred tax asset to be created
at acquisition. Instead, a deferred tax liability must be created over the life of the goodwill. The consequent reversal of deferred tax assets
and creation of deferred tax liabilities has been adjusted in the comparative figures. These two adjustments result in a reduction of
shareholders’ equity as at 31 December 2001 of € 202 million.
The implementation of FRS 19 has also changed the accounting treatment in the year ended 31 December 2000 for our (then) anticipated
disposal of Elizabeth Arden. The effect of implementing FRS 19 means that operating profit for that year is reduced by €121 million, whilst
the tax charge on ordinary activities is also reduced by €121 million. This adjustment has been made in the comparative figures for the year
ended 31 December 2000. There is no impact on reported net profit.
Capital and reserves at 31 December 2001 have been reduced in aggregate by €202 million (2000: €195 million). In the 2001 closing
balance sheet, goodwill has been reduced by €133 million (2000: €77 million) while debtors have been reduced by €60 million
(2000: €91 million) through a reduction in deferred tax assets. Deferred tax liabilities at the end of 2001 have been increased by €9 million
(2000: €27 million).
There are no material unrecognised deferred tax assets.
€ million € million
2002 2001
Deferred taxation on:
Accelerated depreciation 877 1 009
Stock reliefs 41 55
Pension and similar provisions (691) (843)
Short-term and other timing differences (1 015) (921)
(788) (700)
Less asset balances reclassified as debtors
due after more than one year 13 1 292 1 610
Movements in deferred taxation:
1 January 910
Currency retranslation 187
Acquisition/disposal of group companies 17
Profit and loss account (292)
Other movements (318)
31 December 504
Unilever Annual Report & Accounts and Form 20-F 2002
504 910