3. Significant accounting policies
(j) Inventories
(k) Impairment
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Financial Statements
Notes to the consolidated financial statements
(i) General
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
weighted average cost formula, and includes expenditure incurred in acquiring the inventories, production or
conversion costs and other costs incurred in 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) 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 other comprehensive income and presented in the fair value
reserve 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 in other comprehensive income.
Annual Report 2009 - Heineken N.V.
