3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements and have been applied consistently by Heineken entities.
The adoption in 2005 of IAS 32 and 39 financial instruments by Heineken and its effect on the balance
sheet as at 1 January 2005 is disclosed in note 24.
Certain comparative amounts have been reclassified to conform with current year's presentation of
geographical segmentation (see note 5) and of gains and losses on sale of property, plant equipment,
intangible assets and subsidiaries, joint ventures and associates (see note 7).
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by Heineken. Control exists when Heineken has the power, directly
or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that presently are exercisable or convertible are
ta\en into account. The financial statements of subsidiaries are included in the consolidated financial
st tements from the date that control commences until the date that control ceases. Accounting
policies have been changed where necessary to ensure consistency with the policies adopted
by Heineken.
(ii, Associates
A ociates are those entities in which Heineken has significant influence, but not control, over the
fi ancial and operating policies. The consolidated financial statements include Heineken's share of the
tc al recognised income and expenses of associates on an equity-accounted basis, from the date that
s lificant influence commences until the date that significant influence ceases. When Heineken's share
o osses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and
r ognition of further losses is discontinued except to the extent that Heineken has an obligation
0 nas made a payment on behalf of the associate.
(i Joint ventures
J( at ventures are those entities over whose activities Heineken has joint control, established by
c tractual agreement and requiring unanimous consent for strategic financial and operating
d isions. The consolidated financial statements include Heineken's proportionate share of the
e ties' assets, liabilities, revenue and expenses with items of a similar nature on a line-by-line basis,
f m the date that joint control commences until the date that joint control ceases.
Transactions eliminated on consolidation
1 a-Heineken balances and transactions, and any unrealised gains and losses or income and
e enses arising from intra-Heineken transactions, are eliminated in preparing the consolidated
f ncial statements. Unrealised income arising from transactions with associates and joint ventures
a eliminated to the extent of Heineken's interest in the entity. Unrealised expenses are eliminated
i he same way as unrealised income, but only to the extent that there is no evidence of impairment.
oreign currency
oreign currency transactions
I nsactions in foreign currencies are translated to the respective functional currencies of Heineken
e ities at the exchange rates at the dates of the transactions. Monetary assets and liabilities
c lominated in foreign currencies at the balance sheet date are retranslated to the functional
c rency at the exchange rate at that date. The foreign currency gain or loss arising on monetary
ns is the difference between amortised cost in the functional currency at the beginning of the
t iod, adjusted for effective interest and payments during the period, and the amortised cost in
1 eign currency translated at the exchange rate at the end of the period. Non-monetary assets and
ilities denominated in foreign currencies that are measured at fair value are retranslated to the
f ctional currency at the exchange rate at the date that the fair value was determined. Foreign
c rency differences arising on retranslation are recognised in the income statement, except for
Heineken N.V. "7*5
Annual Report 2006 I 3
