Unilever Group (GBR and NLD) 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 2018 annual report is shown in the notes to the financial statements as follows.

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] ....... 40 years
Leasehold land and buildings ................................................ 40 years [or life of lease if less] 

Plant and equipment ................................................................. 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.

The Group has committed capital expenditure of €324 million (2017: €323 mllion). Unilever provided the following selected information in its 2018 cash flow statement.

Instructions

a. What was the carrying value of land, buildings, and equipment at the end of 2018?

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

c. What were the actual interest expense and preference dividends paid by the company in 2018?

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

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€ million Land € million Plant € million and buildings and equipment Movements during 2018 Total Cost 1 January 2018 4,462 14,936 19,398 Hyperinflation restatement to 1 January 2018 37 182 219 Acquisitions of group companies 11 31 42 Additions 249 1,091 1,340 Disposals (97) (607) (704) Hyperinflationary adjustment 49 93 142 Currency retranslation (91) (351) (442) Reclassification as held for sale (17) (54) (71) 31 December 2018 4,603 15,321 19,924 Accumulated depreciation 1 January 2018 (1,429) (7,558) (8,987) Hyperinflation restatement to 1 January 2018 (10) (106) (116) Depreciation charge for the year (125) (1,066) (1,191) Disposals 62 529 591 Hyperinflationary adjustment (7) (53) (60) Currency retranslation 15 128 143 Reclassification as held for sale 10 33 43 31 December 2018 (1,484) (8,093) (9,577) Net book value 31 December 2018 3,119 7,228 10,347 Includes capital expenditure for assets under construction 130 956 1,086