68. Notes to the consolidat continued
Year end
Werage
In EUR
2005
2004
2005
2004
CLP
EGP
NGN
PLN
RUB
SGD
USD
0.001651 0.001314
0.148588 0.120482
0.006464 0.005527
0.259081 0.243902
0.029416 0.026428
0.510204 0.449035
0.845380 0.732332
0.001442 0.001321
0.139265 0.129895
0.006137 0.005985
0.248562 0.221158
0.028442 0.027959
0.483394 0.476624
0.804366 0.805224
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
consolidation, are translated to the functional currency at foreign exchange rates ruling at the balance
sheet date. The revenues and expenses of foreign operations are translated to the functional currency
at rates approximating the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on translation are recognised directly in equity as a separate
component.
(Hi) Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations are taken
to the translation reserve. They are released into the income statement on disposal. Any differences that
have arisen since 1 January 2004, the date of transition to IFRS, are presented as a separate component
of equity. The cumulative translation differences at the date of transition to IFRS are deemed to be zero.
(e) Derivative financial instruments
Heineken uses derivative financial instruments to hedge its exposure to foreign exchange and interest
rate risks arising from operational, financing and investment activities, in accordance with its treasury
policy, derivatives for which hedge accounting is not applied are accounted for as trading instruments.
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair
value is recognised immediately in the income statement. However, where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged
(refer accounting policy f).
The fair value of interest rate swaps is the estimated amount that Heineken would receive or pay to terminate
the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness
of the swap counter parties. The fair value of forward exchange contracts is their calculated market price
at the balance sheet date, being the present value of the quoted forward price.
(f) Hedging
(i) Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a
recognised asset or liability, a firm commitment or a highly probable forecasted transaction, the effective
part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the firm
commitment or forecasted transaction results in the recognition of a non-financial asset or liability, the
cumulative gain or loss is removed from equity and included in the initial measurement of the asset or liability.
Otherwise the cumulative gain or loss is removed from equity and recognised in the income statement
at the same time as the hedged transaction effects the consolidated income statement. The effectiveness
Heineken N.V. - Annual Report 2005
