Financial Statements cont lued
Notes to the consolidated financial statements
continued
3 Significant accounting policies
(iii) Software, research and development and other intangible assets
Purchased software is measured at cost less accumulated amortisation (refer v) and impairment losses
(refer accounting policy 3h(ii)). Expenditure on internally developed software is capitalised when the
expenditure qualifies as development activities, otherwise it is recognised in the income statement
when incurred.
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge
and understanding, is recognised in the income statement when incurred.
Development activities involve a plan or design for the production of new or substantially improved
products and processes. Development expenditure is capitalised only if development costs can be
measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and Heineken intends to and has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour
and overhead costs that are directly attributable to preparing the asset for its intended use. Other
development expenditure is recognised in the income statement when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation (refer v)
and accumulated impairment losses (refer accounting policy 3h(ii)).
Other intangible assets that are acquired by Heineken are measured at cost less accumulated
amortisation (refer v) and impairment losses (refer accounting policy 3h(ii)). Expenditure on internally
generated goodwill and brands is recognised in the income statement when incurred.
(iv) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure is expensed when incurred.
(v) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives
of intangible assets, other than goodwill, from the date they are available for use. The estimated useful
lives are as follows:
Brands 15-25 years
Software 3 years
Capitalised development costs 3 years
(vi) Gains and losses on sale
Gains and losses on sale of intangible assets, are presented in the income statement as other income.
Gains and losses are recognised in the income statement when the significant risks and rewards
of ownership have been transferred to the buyer, recovery of the consideration is probable, the
associated costs can be estimated reliably, and there is no continuing management involvement
with the intangible assets.
(g) Inventories
(i) General
Inventories are measured at the lower of cost and net realisable value, based on the First In First Out
principle and includes expenditure incurred in acquiring the inventories and bringing them to their
existing location and condition. 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 measured at manufacturing cost based on weighted
averages and takes into account the production stage reached. Costs include an appropriate share
of direct production overheads based on normal operating capacity.
"7Q Heineken N.V.
I O Annual Report 2006
