76. Notes to the consolidated financial statements
(iii) Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the effective interest rate
method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and
gains and losses on hedging instruments that are recognised in the income statement (refer accounting
policy f).
Interest income is recognised in the income statement as it accrues, taking into account the effective yield
on the asset. Dividend income is recognised in the income statement on the date that the dividend is declared.
The interest expense component of finance lease payments is recognised in the income statement using
the effective interest rate method.
(u) Income tax
Income tax in the income statement for the year comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items recognised directly to
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not provided for: goodwill not
deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that
it is no longer probable that the related tax benefit will be realised.
(v) Segment reporting
A segment is a distinguishable component that is engaged either in providing products or services
(business segment), or in providing products or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that are different from those of other
segments.
Segment information is presented in respect of Heineken's geographical segments, which is based
on Heineken's management and internal reporting structure
Segment results, assets and liabilities include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly deferred tax, interest-bearing
loans, borrowings and expenses. Corporate assets and income and expenses are included in Western
Europe. Segment capital expenditure is the total cost incurred during the period to acquire segment
assets that are expected to be used for more than one period.
Inter-segment pricing is determined on an arm's-length basis.
Heineken N.V. - Annual Report 2005