Financial statements Notes to the consolidated financial statements
32. Financial risk management and financial instruments
Trade and other receivables
Heineken's local management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Under
the credit policies all customers requiring credit over a certain amount are reviewed and new customers are analysed individually
for creditworthiness before Heineken's standard payment and delivery terms and conditions are offered. Heineken's review include
external ratings, where available, and in some cases bank references. Purchase limits are established for each customer and these
limits are reviewed regularly. As a result of the deteriorating economic circumstances in 2008 and 2009, certain purchase limits
have been redefined. Customers that fail to meet Heineken's benchmark creditworthiness may transact with Heineken only on
a prepayment basis.
In monitoring customer credit risk, customers are, on a country base, grouped according to their credit characteristics, including
whether they are an individual or legal entity, which type of distribution channel they represent, geographic location, industry,
ageing profile, maturity and existence of previous financial difficulties. Customers that are graded as 'high risk' are placed on
a restricted customer list, and future sales are made on a prepayment basis only with approval of Management.
Heineken has multiple distribution models to deliver goods to end customers. Deliveries are done in some countries via own
wholesalers, in other markets directly and in some others via third parties. As such distribution models are country specific and
on consolidated level diverse, as such the results and the balance sheet items cannot be split between types of customers on
a consolidated basis. The various distribution models are also not centrally managed or monitored.
Heineken establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other
receivables and investments. The components of this allowance are a specific loss component and a collective loss component.
Advances to customers
Advances to customers relate to an upfront cash-discount to customers, for which the amortised amounts are deducted from the
revenue on a straight-line basis.
In monitoring customer credit risk, refer to the paragraph above relating to trade and other receivables.
Heineken limits its exposure to credit risk by only investing available cash balances in liquid securities and only with counterparties
that have a credit rating of at least single A or equivalent for short-term transactions and AA- for long-term transactions. Heineken
actively monitors these credit ratings.
Heineken's policy is to avoid issuing guarantees where possible unless this leads to substantial savings for the Group. In cases
where Heineken does provide guarantees, such as to banks for loans (to third parties), Heineken aims to receive security from
the third party.
Heineken N.V. has issued a joint and several liability statement to the provisions of Section 403, Part 9, Book 2 of the Dutch Civil
Code with respect to legal entities established in the Netherlands.