Financial Reporting: Impairment & Post-Employment Benefits at Unilever Caribbean, Slides of Accounting

Download Financial Reporting: Impairment & Post-Employment Benefits at Unilever Caribbean and more Slides Accounting in PDF only on Docsity!

Financial Statements of

UNILEVER CARIBBEAN LIMITED

December 31, 20 21

(Expressed in Trinidad and Tobago Dollars)

UNILEVER CARIBBEAN LIMITED

• Statement of Management Responsibilities Contents Page
• Independent Auditors’ Report 2 -
• Statement of Financial Position
• Statement of Profit or Loss
• Statement of Comprehensive Income
• Statement of Changes in Equity
• Statement of Cash Flows
• Notes to the Financial Statements 15 -

Independent Auditors’ Report

To the Shareholders of Unilever Caribbean Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of Unilever Caribbean

Limited (“the Company”), which comprise the statement of financial position as at

December 31, 202 1 , the statement of profit or loss, statement of comprehensive

income, statement of changes in equity, and statement of cash flows for the year

then ended, and notes to the financial statements, including a summary of

significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements present fairly, in all material

respects, the financial position of the Company as at December 31, 202 1 , and its

financial performance and its cash flows for the year then ended in accordance

with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing

(ISAs). Our responsibilities under those standards are further described in the

Auditors’ Responsibilities for the Audit of the Financial Statements section of our

report. We are independent of the Company in accordance with the International

Ethics Standards Board for Accountants International Code of Ethics for

Professional Accountants (including International Independence Standards)

(IESBA Code) together with the ethical requirements that are relevant to our audit

of the financial statements in the Republic of Trinidad and Tobago and we have

fulfilled our other ethical responsibilities in accordance with these requirements

and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate

to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of

most significance in our audit of the financial statements of the current period.

These matters were addressed in the context of our audit of the financial

statements as a whole, and in forming our opinion thereon, and we do not provide

a separate opinion on these matters.

Independent Auditors’ Report (continued)

Key Audit Matters (continued)

Measurement of the retirement benefit obligation

Assumptions and estimation uncertainty disclosure Note 3(A)(ii), accounting

policy disclosure Note 4(m) and accompanying Note 9 in the financial

statements. The aggregated obligation of the pension plan schemes totals to

$237,593 thousand (2020 $239,461 thousand)

The Company operates four (4) pension plan schemes as outlined below:

• Monthly-Rated Employees’ Pension Fund
• Hourly-Rated Employees’ Pension Plan
• Termination Lump Sum Plan (TLS)
• Supplementary Pension Scheme

The estimation of the retirement benefit obligation is based on significant

assumptions and judgements that are disclosed in Note 3(A)(ii) and Note 9 to

the financial statements, small changes in these assumptions can have a

material impact on the measurement of the retirement benefit obligation.

Of the assumptions disclosed in Note 9, the key assumption is in relation to the

judgement applied by the third-party actuary around the discount rate used which

has the most significant impact on the measurement of the retirement benefit

obligation.

The use of significant assumptions and judgments increases the risk that the

estimate of the retirement benefit obligation can be materially misstated and

therefore required special audit consideration.

The quality of disclosure is also deemed an area of increased levels of audit

focus. The notes to the financial statements regarding the Company’s application

of the accounting standard, and disclosures around sensitivity of assumptions,

are key to explaining the key judgements made by management.

How our audit addressed the key audit matter

Our audit procedures comprised but was not limited to the following:

• The testing of the design and implementation of the Company’s controls

applicable to the basis of arriving at the estimate of the retirement benefit

obligation.

• Assessing the reasonableness of the data used in the estimate by selecting

a sample of the underlying data and agreeing the items back to the

underlying source records.

Independent Auditors’ Report (continued)

Key Audit Matters (continued)

Revenue Recognition (continued)

How our audit addressed the key audit matter

Our audit procedures comprised but was not limited to the following:

• Assessing the design, implementation and operating effectiveness of key

internal controls over the recognition of revenue;

• Involving our internal IT specialists in assessing the operating effectiveness

of those IT controls which we considered to be critical to the recognition of

revenue;

• Reviewing sales contracts with both local and foreign customers to

understand the terms and conditions of the sales transactions in order to

determine if the Company’s revenue recognition criteria is consistent with the

requirements of the relevant accounting standards;

• Inspecting a sample of journal entries affecting revenue raised during the

financial year, which met certain risk-based criteria, enquiring of

management the reasons for such entries and comparing the details of the

entries with relevant underlying supporting documentation; and

• Selecting a sample of sales transactions and credit notes around the

financial year end and assessing the timing of revenue recognition by

comparing details of the sales with underlying supporting documentation.

Valuation of Assets Held for Sale

Accounting policy disclosure Note 4(c) and accompanying Note 8 and Note 29

in the financial statements

During 2021 , the Company engaged a third-party valuation expert, to determine

the fair value of its plant and machinery classified as held for sale.

We identified the valuation to be a key audit matter because of the inherent

uncertainty and judgement involved in determining the appropriate assumptions

and the significance of the value of the assets to these financial statements.

Independent Auditors’ Report (continued)

Key Audit Matters (continued)

Valuation of Assets Held for Sale (continued)

How our audit addressed the key audit matter

Our audit procedures comprised but were not limited to the following:

• Assessing the design and implementation of applicable controls over

the estimation of fair value for these assets.

• Involving our own valuation specialists, to independently challenge,

assess the methods, assumptions and judgments adopted by the

Company, to develop the estimate. Some of the key challenges related

to the following:

o Challenging the assumptions used in the depreciable cost

models by forming an expectation of the assumptions in light of

our knowledge of the Company and experience of the industry

in which it operates.

o Comparing the Company’s accounting policies and disclosures

with the requirements of relevant accounting standards.

o Evaluating the adequacy of financial statement disclosures.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

Auditors’ Responsibilities for the Audit of the Financial Statements (continued)

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate treats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner in charge of the audit resulting in this independent auditors’ report is Dushyant Sookram. Chartered Accountants Port of Spain Trinidad and Tobago March 28 , 202 2

UNILEVER CARIBBEAN LIMITED

Statement of Profit or Loss

Year ended December 31, 20 21

(Expressed in Trinidad and Tobago Dollars)

Notes 2021 2020

Continuing operations

Revenue 17 233,186 290 ,

Cost of sales ( 12 7,20 8 ) ( 15 9,643)

Gross profit 105, 978 1 30, 366

Expenses

Selling and distribution costs (62, 936 ) (83, 850 )

Administrative expenses (17,615) (25, 858 )

Impairment reversal on trade receivables 12 18 1,

Gain on disposal of plant and equipment - 185

Operating profit 25,445 2 2, 019

Restructuring cost 18 (5,568) ( 555 )

Operating profit after restructuring costs 19,877 2 1, 464

Finance expense – net 20 (635) (239)

Other income 19 5,391 3,72 4

Profit before tax 24,633 2 4,94 9

Taxation expense 21 (7, 702 ) (6,342)

Profit from continuing operations 16 , 931 18, 607

Profit from discontinued operations, net of tax 30 171, 881 -

Profit for the year 18 8,812 18,

The notes are an integral part of these financial statements.

UNILEVER CARIBBEAN LIMITED

Statement of Comprehensive Income

Year ended December 31, 2 021

(Expressed in Trinidad and Tobago Dollars)

Notes 2021 2020

Profit for the year 188 , 812 18 , 607

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation of property 8 - 1,

Tax on revaluation of property 10 - (397)

Re-measurements of retirement and termination benefit

obligation 9 (iv) 2 5,055 16,

Tax on re-measurement of retirement and termination

benefit obligations 10 (7, 516 ) (5, 067 )

Other comprehensive income for the year, net of tax 17, 539 1 2,74 7

Total comprehensive income for the year 206, 351 3 1, 354

Earnings per share for profit attributable to the

equity holders of the Company during the year

Basic and diluted earnings per share

- Continuing operations $0. 65 $0.

- Discontinued operations $6.5 4 -

- Basic and diluted earnings per ordinary share 22 $7. 19 $0.

The notes are an integral part of these financial statements.

UNILEVER CARIBBEAN LIMITED

Statement of Cash Flows

Year ended December 31, 20 21

(Expressed in Trinidad and Tobago Dollars)

Notes 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year 188 , 812 18, 607 Adjustments for: Depreciation 8 5,375 10, Interest expense 20 642 392 Loss (gain) on disposal of and impairment losses on property, plant and equipment 2,145 ( 9 ,634) Gain on sale of discontinued operations 30 (a) (16 4 , 423 ) - Net pension cost 9 (1,469) 861 Contributions paid 9 (3,383) (3,875) Interest income 20 (7) (153) Taxation expense 21 1 0, 940 6, Operating profit before working capital changes 38 , 632 2 3,30 8 Changes in:

• Inventories (1, 051 ) 19 , 243
• Trade and other receivables (11,111) 1 8,
• Due from related companies (135,280) 59 ,
• Trade and other payables 9, 880 ( 26 , 662 )
• Provisions for other liabilities 3 , 439 (29,317)
• Due to related companies (7, 867 ) 1, Cash from operating activities (103,358) 66 , 290 Interest paid 20 ( 642 ) (392) Taxation paid(net) ( 3 ) ( 1 , 773 ) Net cash (used in)/generated from operating activities (10 4 ,003) 64 , 125 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 7 153 Purchase of plant and equipment 8 (96) (2,106) Proceeds from sale of property, plant and equipment 2,466 29 Proceeds from sale of discontinued operation 30 (b) 169, 846 - Net cash generated from/(used in) investing activities 172, 223 (1,924) CASH FLOWS FINANCING ACTIVITIES Dividends paid 23 (20,995) - Payment of lease liabilities 27 (4,477) (10, 522 ) Net cash used in financing activities (25,472) (10, 522 ) Increase in cash and cash equivalents 4 2,74 8 51,67 9 Cash and cash equivalents at beginning of year 75,384 23, Cash and cash equivalents at end of year 118, 132 75, Represented By: Cash at bank and in hand 118, 132 75, The notes are an integral part of these financial statements.

UNILEVER CARIBBEAN LIMITED

Notes to the Financial Statements

December 31, 2021

(Expressed in Trinidad and Tobago Dollars)

1. General Information

Unilever Caribbean Limited (‘the Company’) was incorporated in the Republic of Trinidad and

Tobago in 1929, and its registered office is located at Eastern Main Road, Champs Fleurs. The

Company is a public limited liability company and is listed on the Trinidad and Tobago Stock

Exchange. The principal business activity is the sale of home care, personal care and food

products. The Company is a subsidiary of Unilever Overseas Holdings AG (50.01% of shares

held), which is a wholly owned subsidiary of Unilever PLC, a company incorporated in the

United Kingdom.

Discontinued operations are excluded from the results of the continuing operations and presented

as profit and loss from discontinued operations (Note 30 ).

2. Basis of Accounting

These financial statements have been prepared in accordance with International Financial

Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee

(IFRIC) applicable to companies reporting under IFRS. The financial statements have been

prepared under the historical cost convention, modified as follows:

- The revaluation of freehold properties

- Net defined benefit asset (obligation) recognised net of the fair value of plan assets,

adjusted by re-measurements through other comprehensive income (OCI), less the

present value of the defined benefit obligation adjusted by experience gains (losses)

on revaluation, limited as explained in Note 4(m) and Note 9

- Assets held for sale are recognised at fair value

These financial statements have been prepared on a going concern basis which assumes that the

Company will be able to meet the mandatory repayment terms of its current liabilities. The

Company has recognised income of $ 16 ,931 thousand after tax (Continuing Operations) for the

year ended December 31, 2021 , and as at that date, current assets exceed current liabilities by

$ 372 , 2 00 thousand.

UNILEVER CARIBBEAN LIMITED

Notes to the Financial Statements

December 31, 2021

(Expressed in Trinidad and Tobago Dollars)

3. Use of Accounting Estimates and Judgements (continued)

A. Assumptions and estimation uncertainties (continued)

(ii) Valuation of non-current assets

Determination of the recoverable amount for the non-current assets is based on

significant unobservable inputs and key assumptions that are subjective and

complex, which result in an increased estimation uncertainty.

Additional information is disclosed in Note 8 and Note 29.

(iii) Assets held for sale

The determination of fair value minus costs to sell for assets classified as held for

sale is based on unobservable inputs and assumptions that are subjective and

complex in nature. This leads to increased uncertainties in their valuation. This is

especially the case with Level 3 Inputs, which uses significant unobservable inputs,

to the extent that relevant observable inputs are not always available.

Additional information is disclosed in Note 8, Note 29 and Note 31.

UNILEVER CARIBBEAN LIMITED

Notes to the Financial Statements

December 31, 2021

(Expressed in Trinidad and Tobago Dollars)

4. Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set

out below. These policies have been consistently applied to all the years presented, except if

mentioned otherwise (Note 5).

(a) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of the Company are presented in Trinidad

and Tobago dollars, which is the Company’s functional currency. All amounts have

been rounded to the nearest thousand, unless otherwise indicated.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions. Foreign exchange gains and

losses resulting from the settlement of such transactions and from the translation at

year-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognised in profit or loss. Foreign exchange gains and losses that

relate to cash and cash equivalents are presented in profit or loss within

administration expenses.

(b) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting

provided to the chief operating decision-maker. The chief operating decision-maker, who

is responsible for allocating resources and assessing performance of the operating

segments, has been identified as the management committee that makes strategic decisions.

(c) Property, plant and equipment

Cost or revaluation

Freehold land and buildings are shown at fair value, based on valuations performed by

external independent valuers periodically and with sufficient frequency, less subsequent

depreciation for buildings. Additions to freehold land and buildings subsequent to the date

of revaluation are shown at cost. Any accumulated depreciation at the date of revaluation

is eliminated against the gross carrying amount of the asset, and the net amount is adjusted

to the revalued amount of the asset. All other property, plant and equipment are stated at

historical cost less depreciation. Historical cost includes expenditure that is directly

attributable to the acquisition of items.