Notes to the consolidated financial statements
78 Financial statements
3. Significant accounting policies
(vi) Gains and losses on sale
Gains on sale of intangible assets are presented in the income statement as other income. Gains 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.
(h) 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.
(iii) Other inventories and spare parts
The cost of other inventories is based on weighted averages. Spare parts are valued at the lower of
cost and net realisable value. Value reductions and usage of parts are charged to the income statement.
Spare parts that are acquired as part of an equipment purchase and only to be used in connection with
this specific equipment are initially capitalised and amortised as part of the equipment.
(i) Impairment
(i) Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence
that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one
or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale
financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the income statement. Any cumulative loss in respect of an
available-for-sale financial asset recognised previously in equity is transferred to the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale
financial assets that are debt securities, the reversal is recognised in the income statement. For
available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.
Heineken N.V. Annual Report 2007
