Financial Statement Analysis Case Unilever Group Unilever Group (GBR and NLD) is ranked at 135 in the Fortune 500. It is a leading international company in the nutrition, hygiene, and personal-care product lines. Information related to Unilever’s property, plant, and equipment in its 2012 annual report is shown in the notes to the financial statements as follows.

Unilever provided the following selected information in its 2012 cash flow statement.

Instructions

(a) What was the carrying value of land, buildings, and equipment at the end of 2012?

(b) Does Unilever use a conservative or liberal method to depreciate its property, plant, and equipment?

(c) What was the actual interest expense and preference dividends paid by the company in 2012?

(d) What is Unilever’s free cash flow? From the information provided, comment on Unilever’s financial flexibility.

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10. Property, Plant and Equipment Property, plant and equipment is measured at cost including eligible borrowing costs less depreciation and accumulated Impairment losses. Depreciation is provided on a straight-line basis over the expected average useful lives of the assets. Residual values are reviewed at least annually. Estimated useful lives by major class of assets are as follows: Freehold buildings [no depreciation on freehold land] Leasehold land and buildings Plant and equipment 40 years 40 years [or life of lease if less] 2-20 years Property, plant and equipment is subject to review for Impairment if triggering events or circumstances indicate that this is necessary. If an Indication of Impairment exists, the asset or cash generating unit recoverable amount is estimated and any Impairment loss is charged to the income statement as it arises. Movements during 2012 million Land and buildings million Plant and equipment million Total Cost 1 January 2012 Acquisitions 3,875 12,592 16,467 1 1 Disposals of group companies (52) (52) Additions 293 1,694 1,987 Disposals (65) (516) (581) Currency retranslation (52) (181) (233) Reclassification as held for sale (50) (77) (127) Other adjustments 5 42 47 31 December 2012 4,006 13,503 17,509 Depreciation 1 January 2012 (1,237) (6,456) (7,693) Disposals of group companies 9 9 Depreciation charge for the year (121) (865) (966) Disposals 40 448 488 Currency retranslation 13 71 84 Reclassification as held for sale 22 64 86 Other adjustments (3) (49) (52) 31 December 2012 (1,286) (6,778) (8,064) Net book value 31 December 2012 2,720 6,725 9,445 Includes payments on account and assets in course of construction 188 1,343 1,531