4. Determination of fair values
98 Annual Report 2009 - Heineken N.V.
Notes to the consolidated financial statements
A number of Heineken's accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable, further information about the
assumptions made in determining fair values or for the purpose of impairment testing is disclosed in
the notes specific to that asset or liability.
(ii) Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on the
quoted market prices for similar items when available and replacement cost when appropriate.
(iii) Intangible assets
The fair value of brands acquired in a business combination is based on the 'relief of royalty' method. The fair
value of customer relationships acquired in a business combination is determined using the multi-period excess
earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are
part of creating the related cash flows. The fair value of other intangible assets is based on the discounted cash
flows expected to be derived from the use and eventual sale of the assets.
The fair value of inventories acquired in a business combination is determined based on its estimated selling
price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit
margin based on the effort required to complete and sell the inventories.
(v) Investments in equity and debt securities
The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-
for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date. The
fair value of held-to-maturity investments is determined for disclosure purposes only. In case the quoted price
does not exist at the date of exchange or in case the quoted price exists at the date of exchange but was not
used as the cost, the investments are valued indirectly based on discounted cash flow models.
(vi) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted
at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.
(vii) Derivative financial instruments
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market
price is not available, then fair value is in general estimated by discounting the difference between the
contractual forward price and the current forward price for the residual maturity of the contract using a
risk-free interest rate (based on inter-bank interest rates). The fair value of interest rate swaps is estimated
by discounting the difference between cash flows resulting from the contractual interest rates of both legs
of the transaction, taking into account current interest rates and the current creditworthiness of the swap
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk
of the Group entity and counterparty when appropriate.