72. Notes to the consolidated financial statements
(j) Inventories
(i) General
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(ii) Finished products and work in progress
Finished products and work in progress are stated at manufacturing cost taking into account the production
stage reached. Costs include an appropriate share of direct production overheads based on normal
operating capacity.
(Hi) Other inventories and spare parts
The cost of other inventories is based on weighted averages and includes expenditure incurred in acquiring
the inventories and bringing them to their existing location and condition.
Spare parts are valued at the lower of cost or net realisable value. Value reductions and usage of parts
are charged to the income statement. Spare parts are acquired as part of an equipment purchase
and will only be used in connection with this specific equipment are initially capitalised and amortised
as part of the equipment.
(k) Trade and other receivables
Long-term trade receivables, trade and other receivables are stated at (amortised) cost less impairment
losses (refer accounting policy m).
(I) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable
on demand and form an integral part of Heineken's cash management are included as a component
of cash and cash equivalents for the purpose of the statement of cash flows.
(m) Impairment
(i) General
The carrying amounts of Heineken's assets other than, inventories (refer accounting policy j) and deferred
tax assets (refer accounting policy u), are reviewed at each balance sheet date to determine whether there
is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
For goodwill, the recoverable amount is estimated at each balance sheet date. An impairment loss is
recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income statement. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated
to cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a
pro rata basis.
Goodwill is tested annually and was also tested for impairment at 1 January 2004, the date of transition
to IFRS.
When a decline in the fair value of an available-for-sale financial asset has been recognised directly
in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been
recognised directly in equity is recognised in the income statement even though the financial asset
has not been derecognised. The amount of the cumulative loss that is recognised in the income
statement is the difference between the acquisition cost and current fair value, less any impairment
loss on that financial asset previously recognised in the income statement.
Heineken N.V. - Annual Report 2005