Trade Payables and Other Liabilities

12 Months Ended

Dec. 31, 2020

Trade payables

Trade payables are initially recognised at fair value less any directly attributable transaction costs. Trade payables are subsequently measured at amortised cost, using the effective interest method.

Other liabilities

Other liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent measurement depends on the type of liability:

•

accruals are subsequently measured at amortised cost, using the effective interest method;

•

social security and sundry taxes are subsequently measured at amortised cost, using the effective interest method;

•

deferred consideration is subsequently measured at fair value with changes in the income statement as explained below; and

•

others are subsequently measured either at amortised cost, using the effective interest method or at fair value, with changes being recognised in the income statement.

Deferred Consideration

Deferred consideration represents any payments to the sellers of a business that occur after the acquisition date. These typically comprise contingent consideration and fixed deferred consideration:

•

fixed deferred consideration is a payment with a due date after acquisition that is not dependent on future conditions; and

•

contingent consideration is a payment which is dependent on certain conditions being met in the future and is often variable.

All deferred consideration is initially recognised at fair value as at the acquisition date, which includes a present value discount. Subsequently, deferred consideration is measured to reflect the unwinding of discount on the liability, with changes recognised in finance cost within the income statement. In the balance sheet it is remeasured to reflect the latest estimate of the achievement of the conditions on which the consideration is based; changes in value other than the discount unwind are recognised as acquisition and disposal-related costs within

non-underlying

items in the income statement.

We do not consider the fair values of trade payables and other liabilities to be significantly different from their carrying values.


Trade payables and other liabilities	€ million 2020		€ million 2019
Current: due within one year
Trade payables (a)		8,375		9,190
Accruals		4,266		4,153
Social security and sundry taxes		401		507
Deferred consideration		43		39
Others		1,047		879

		14,132		14,768

Non-current: due after more than one year
Accruals		81		117
Deferred consideration		121		169
Others		33		53
		235		339

Total trade payables and other liabilities		14,367		15,107

(a)

2020 includes €5 million (2019: €359 million) due to KKR as a result of an arrangement following the sale of the global spreads business (excluding Southern Africa). Unilever provided services to KKR for two years from completion of the disposal and paid KKR for amounts collected on its behalf. See also trade receivables on page 141.

Included within trade payables and other liabilities are discounts due to our customers of €1,770 million (2019: €1,053 million). The increase from 2019 is primarily driven by differences in the timing of promotional activities and the settlement of customer invoices compared to last year.

Included within others are IT and consulting services.

Deferred Consideration

At 31 December 2020 the total balance of deferred consideration for acquisitions is €164 million (2019: €208 million), which includes contingent consideration of €140 million (2019: €154 million). These contingent consideration payments are dependent on acquired businesses achieving contractually agreed financial targets (mainly relates to cumulative increases in turnover and profit before tax) and fall due up until 2025, with a maximum contractual amount of €718 million.

Supplier financing arrangements for trade payables

Some of our suppliers elect to factor some of their receivables from the Group with financial institutions. In some instances we provide suppliers and/ or banks with visibility of invoices approved for payment, which helps them receive cash from the bank before the invoice due date, if they choose to do so. Payment dates and terms for Unilever do not vary based on whether the supplier chooses to factor their receivable. If a receivable is purchased by a third party bank, that third party bank does not benefit from additional security when compared to the security originally enjoyed by the supplier. The Group evaluates these arrangements to assess if the payable holds the characteristics of a trade payable or should be classified as a financial liability. At 31 December 2020 and 31 December 2019 all such liabilities were classified as trade payables.