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64 Unilever Annual Report on Form 20-F 1999 Financial Statements
Unilever Group Accounting information and policies
On disposal of a business acquired prior to 1 January
1998, purchased goodwill written off on acquisition is
reinstated in arriving at the profit or loss on disposal.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided on a straight-line basis at
percentages of cost based on the expected average useful
lives of the assets. Estimated useful lives by major class of
assets are as follows:
Freehold buildings 33-40 years
(no depreciation on freehold land)
Leasehold land and buildings *33-40 years
Plant and equipment 3-20 years
Motor vehicles 3-6 years
*or life of lease if less than 33 years
Current cost information is given in note 9 on page 74.
Fixed investments
Joint ventures are undertakings in which the Group has
a long-term participating interest and which are jointly
controlled by the Group and one or more other parties.
Associated companies are undertakings in which the
Group has a participating interest and is able to exercise
significant influence.
Interests in joint ventures and associated companies are
stated in the consolidated balance sheet at the Group’s
share of their underlying net assets.
Other fixed investments are stated at cost less any
amounts written off to reflect a permanent diminution
in value.
Current assets
Stocks are valued at the lower of cost and estimated
net realisable value. Cost is mainly average cost, and
comprises direct costs and, where appropriate, a
proportion of production overheads.
Debtors are stated after deducting adequate provision for
doubtful debts.
Current investments are liquid funds temporarily invested
and are stated at their realisable value. The difference
between this and their original cost is taken to interest in
the profit and loss account.
Retirement benefits
The expected costs of providing retirement pensions under
defined benefit plans, as well as the costs of other postretirement
benefits, are charged to the profit and loss
account over the periods benefiting from the employees’
services. Variations from expected cost are normally
spread over the average remaining service lives of
current employees.
Contributions to defined contribution pension plans are
charged to the profit and loss account as incurred.
Liabilities arising under defined benefit plans are either
externally funded or provided for in the consolidated
balance sheet. Any difference between the charge to the
profit and loss account in respect of funded plans and the
contributions payable to each plan is recorded in the
balance sheet as a prepayment or provision.
Deferred taxation
Full provision is made for deferred taxation, at the rates
of tax prevailing at the year-end unless future rates have
been enacted, on all significant timing differences arising
from the recognition of items for taxation purposes in
different periods to those in which they are included in
the Group accounts.
Provision is not made for taxation which would become
payable if retained profits of group companies and joint
ventures were distributed to the parent companies, as it
is not the intention to distribute more than the dividends,
the tax on which is included in the accounts.
Derivative financial instruments
The types of derivative financial instruments used by
Unilever are described in note 29 on page 88 and in the
Financial review on page 37.
Changes in the value of forward foreign exchange
contracts are recognised in the results in the same period
as changes in the values of the assets and liabilities they
are intended to hedge. Interest payments and receipts
arising from interest rate derivatives such as swaps and
forward rate agreements are matched to those arising
from underlying debt and investment positions.
Payments made or received in respect of the early
termination of derivative financial instruments are spread
over the original life of the instrument so long as the
underlying exposure continues to exist.