Notes to the consolidated financial statements
80 Financial statements
3. Significant accounting policies
(ii) Defined benefit plans
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined
benefit plans define an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation. 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 its present value. Any unrecognised past service
costs and the fair value of any plan assets are deducted. The discount rate is the yield at balance sheet
date on AA-rated bonds that have maturity dates approximating the terms of Heineken's obligations and
that are denominated in the same currency in which the benefits are expected to be paid.
The calculations are performed annually by qualified actuaries using the projected unit credit method.
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.
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.
In respect of actuarial gains and losses that arise, Heineken applies the corridor method in calculating
the obligation in respect of a plan. To the extent that any cumulative unrecognised actuarial gain or loss
exceeds 10 per cent 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.
(iii) 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; that benefit is discounted to determine 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 that
have maturity dates approximating the terms of Heineken's obligations. The obligation is calculated using
the projected unit credit method. Any actuarial gains or losses are recognised in profit or loss in the
period in which they arise.
(iv) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
Termination benefits are recognised as an expense when Heineken is demonstrably committed to
either terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage
voluntary redundancy. Termination benefits for voluntary redundancies are recognised if Heineken has
made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably.
Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.
Heineken N.V. Annual Report 2007