86 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
Employee benefits
Employee benefits are accounted for on the basis of GAR 271 Employee benefits, which is based
on IAS 19.
Funded liabilities concern plans which are not administered by the company. Unfunded liabilities
concern plans administered by the company.
The pension costs of pension rights granted are made up of that part of the movement in the net
present value of the pension rights granted, accrued interest, the expected income from fund invest
ments plus rights to fees, actuarial gains and losses, charges in respect of the period of service and
the effect of any restrictions on plans or the termination of plans. Contributions to pension plans by
employees are deducted from the increase in the net present value of pension rights in the profit and
loss account. The discount factor used for the net present value calculations is based on interest rates
on corporate bonds with maturities approximately corresponding to the timing of the pension obliga
tions. The unrecognised actuarial gains and losses falling outside the 'corridor' are attributed to the
average remaining period of service of employees. Actuarial calculations are performed each year
by external actuaries.
Contributions to defined contribution pension plans are charged to the profit and loss account
in the year in which they are payable.
Long-term borrowings
Long-term interest-bearing loans are included at face value taking into account any discounts or
premiums and associated transaction costs. Discounts and premiums plus costs are charged to the
profit and loss account as interest expenses over the period of the loan. Other long-term borrowings
are stated at face value.
Current liabilities
Current liabilities are stated at face value.
Determination of results
Income and expenses are accounted for in the profit and loss account at the time of supply of the
relevant goods or services and transfer of title to the purchaser.
Net turnover means the proceeds from sales of products and services supplied to third parties,
net of sales taxes, direct customer discounts and excise duties.
Raw materials and consumables are stated at replacement cost in the profit and loss account.
Depreciation charges based on replacement cost are calculated on a straight-line basis according
to the estimated useful lives of the assets concerned.
The results of non-consolidated participating interests consist of dividends made payable during
the year by companies carried at cost and Heineken's share of the net profits of companies carried at
net asset value. The share of the results of companies carried at net asset value is calculated as far as
possible in accordance with group accounting policies for the determination of results, taking account
of taxation and minority interests.
Interest expenses are allocated to the periods to which they relate. Results arising from operations
involving interest rate hedging instruments are also accounted for as interest. Such instruments are
used to hedge the risk of a reduction in interest income on surplus funds temporarily invested in bank
deposits due to falling interest rates and higher interest charges on interest-bearing liabilities due to
interest rate rises. Interest rate hedging instruments are not used without a corresponding underlying
position.
Taxation on profits is calculated on the profit shown in the financial statements by applying the
standard tax rates, taking into account tax payable by the group on profit distributions by participating
interests and applicable tax facilities. Differences between the amount thus calculated and the tax
actually payable for the year are accounted for in the provision for deferred tax liabilities.
