74. continued
(p) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the
income statement as incurred.
(ii) Defined benefit plans
Heineken's net obligation in respect of defined benefit pension plans is calculated separately for each
plan by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods; that benefit is discounted to determine the present value, and the fair
value of any plan assets is deducted. The discount rate is the yield at balance sheet date on high-quality
credit rated bonds that have maturity dates approximating the terms of Heineken's obligations.
The calculations are performed by qualified actuaries using the projected unit credit method.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service
by employees is recognised as an expense in the income statement on a straight-line basis over the
average period until the benefits become vested. To the extent that the benefits vest immediately,
the expense is recognised immediately in the income statement.
All actuarial gains and losses as at 1 January 2004, the date of transition to IFRS, were recognised in equity.
In respect of actuarial gains and losses that arise subsequent to 1 January 2004 in calculating Heineken's
obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds
ten percent of the greater of the present value of the defined benefit obligation and the fair value of plan
assets, that portion is recognised in the income statement over the expected average remaining working
lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.
Where the calculation results in a benefit to Heineken, the recognised asset is limited to the net total
of any unrecognised actuarial losses and past service costs and the present value of any future refunds
from the plan or reductions in future contributions to the plan.
(Hi) Other long-term employee benefits
Heineken's net obligation in respect of long-term employee benefits, other than pension plans, is the
amount of future benefit that employees have earned in return for their service in the current and
prior periods. The obligation is calculated using the projected unit credit method and is discounted
to its present value and the fair value of any related assets is deducted. The discount rate is the yield
at balance sheet date on high quality credit rated bonds in the appropriate currency that have maturity
dates approximating the terms of Heineken's obligations.
(iv) Long-term incentive plan (equity compensation benefits)
At 1 January 2005 Heineken established a share plan for the Executive Board members, see note 26.
The fair value of the share rights granted is recognised as personnel expenses with a corresponding
increase in equity. The fair value is measured at grant date using the Monte Carlo model taking into
account the terms and conditions of the plan. The costs of the plan are spread evenly over the
performance period.
Heineken N.V. - Annual Report 2005
