Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment
losses. Included in non-derivative financial instruments are advances to customers. Subsequently, the advances are amortised over
the term of the contract as a reduction of revenue.
(d) Derivative financial instruments (including hedge accounting)
Heineken uses derivatives in the ordinary course of business in order to manage market risks. Generally Heineken seeks to apply
hedge accounting in order to minimise the effects of foreign currency, interest rate or commodity price fluctuations in profit or loss.
Derivatives that can be used are interest rate swaps, forward rate agreements, caps and floors, commodity swaps, spot and forward
exchange contracts and options. Transactions are entered into with a limited number of counterparties with strong credit ratings.
Foreign currency, interest rate and commodity hedging operations are governed by internal policies and rules approved and
monitored by the Executive Board.
Derivative financial instruments are recognised initially at fair value, with attributable transaction costs recognised in profit or loss
a incurred. Derivatives for which hedge accounting is not applied are accounted for as instruments at fair value through profit or
less. When derivatives qualify for hedge accounting, subsequent measurement is at fair value, and changes therein accounted for
a described 3b(iii), 3d(ii) and 3d(iii).
I Cash flow hedges
C anges in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive
:ome and presented in the hedging reserve within equity to the extent that the hedge is effective. To the extent that the hedge
leffective, changes in fair value are recognised in profit or loss.
he hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge
counting is discontinued and the cumulative unrealised gain or loss previously recognised in other comprehensive income and
csented in the hedging reserve in equity, is recognised in profit or loss immediately, or when a hedging instrument is terminated,
t the hedged transaction still is expected to occur, the cumulative gain or loss at that point remains in other comprehensive
ome and is recognised in accordance with the above-mentioned policy when the transaction occurs. When the hedged item is a
r n-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when
s recognised. In other cases the amount recognised in other comprehensive income is transferred to the same line of profit or
>s in the same period that the hedged item affects profit or loss.
Fair value hedges
C anges in the fair value of a derivative hedging instrument designated as a fair value hedge are recognised in profit or loss,
e hedged item also is stated at fair value in respect of the risk being hedged; the gain or loss attributable to the hedged risk
ecognised in profit or loss and adjusts the carrying amount of the hedged item.
It he hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which
t 2 effective interest method is used is amortised to profit or loss over the period to maturity.
ineken N.V. Annual Report 2010