84 Heineken N.V. Annual Report 2004 Financial Statements 2004 Notes to the Consolidated Balance Sheet,
Profit and Loss Account and Cash Flow Statement for 2004
The following interests were expanded in 2004:
Expanded from
Brau Union Aktiengesellschaft (BUAG), Austria,
with operations in Austria, Poland, Romania, Hungary
and the Czech Republic, from 60.3% to 100%
Dinal LLP, Kazakhstan, from 51% to 99.99%
15 May 2004
31 August 2004
Foreign currency and financial instruments
Hedging transactions to limit exchange risks are entered into only in respect of actual amounts
receivable and payable and highly probable future cash flows in foreign currencies. The instruments
used are forward contracts and options. Before such contracts are entered into, cash in- and outflows
in a particular currency are netted off at group level as far as possible. Where foreign currency
balance sheet positions have been hedged, they are translated at the exchange rate of the hedge.
Recognition of results arising from hedging operations relating to future foreign currency cash flows
is deferred until the relevant cash flows are accounted for. Other foreign currency transactions in
the profit and loss account are recognised at spot rates unless forward contracts have been entered
into in connection with these transactions, in which case the forward rate applies.
The financial statements of non-euro zone companies are translated into euros. Assets and
liabilities are translated at exchange rates on the balance sheet date. Profit and loss account items
are translated at the average monthly exchange rates. The difference between the net profit based
on average exchange rates and the net profit based on the exchange rates on balance sheet date is
accounted for in shareholders' equity. The profit and loss accounts of companies in hyperinflation
countries are translated at exchange rates prevailing on the balance sheet date.
Differences in book value arise from translation into euros of the opening balance of the share
holders' equity of the non-euro zone consolidated companies plus intra-group long-term loans granted
to these companies. These differences are treated as revaluations and are credited or debited directly
to group equity, with due allowance for taxation. Other differences due to exchange rate movements
are accounted for directly in the profit and loss account.
Intangible fixed assets
Goodwill is calculated as the difference between the cost of an acquisition and its net asset value.
In the case of acquisition of beverage wholesalers, the acquisition cost is almost entirely determined
by the customer base, and this element is treated as goodwill.
As of 2003, goodwill is carried at cost less accumulated amortisation and impairment. Amortisation
is calculated by the straight-line method based on the expected economic life of the assets concerned,
subject to a maximum of 20 years.
Other intangible fixed assets, such as software, satisfying the applicable criteria are capitalised and
amortised by the straight-line method over three years. If the net realisable value of intangible fixed
assets is less than the carrying amount, a diminution in value is applied. Costs of internally developed
brands, patents and licences and research and development are expensed.
Brands, patents and licences purchased with acquisitions are treated as part of the goodwill paid.
Tangible fixed assets
Except for land, which is not depreciated, tangible fixed assets are stated at replacement cost less
accumulated depreciation. The following average useful lives are used for depreciation purposes:
Buildings
Plant and equipment
Other fixed assets
30-40 years
10-30 years
5-10 years
