84 FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS X» flNUED
HEINEKEN N.V. ANNUAL REPORT 20
3. Significant accounting policies
(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 the income statement 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.
(v) Share-based payment plan (long-term incentive plan)
As from 1 January 2005 Heineken established a share plan for the Executive Board members and as from
1 January 2006 Heineken also established a share plan for senior management members (see note 27). The
share plan for the Executive Board is fully based on external performance conditions, while the plan for senior
management members is for 25 per cent based on external market performance conditions and for 75 per
cent on internal performance conditions.
The grant date fair value of the share rights granted is recognised as personnel expenses with a corresponding
increase in equity (equity-settled), over the period that the employees become unconditionally entitled to the
share rights. The costs of the share plan for both the Executive Board and senior management members are
spread evenly over the performance period.
At each balance sheet date, Heineken revises its estimates of the number of share rights that are expected
to vest, only for the 75 per cent internal performance conditions of the share plan of the senior management
members. It recognises the impact of the revision of original estimates, if any, in the income statement, with
a corresponding adjustment to equity. The fair value is measured at grant date using the Monte Carlo model
taking into account the terms and conditions of the plan.
(vi) Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided.
A liability is recognised for the amount expected to be paid under short-term benefits if the Group has
a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.