Financial statements Notes to the consolidated financial statements
3. Significant accounting policies
(k) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan (pension plan) under which the Group pays fixed contributions into
a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the current and prior periods.
Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or los
in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that
a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than
12 months after the end of the period in which the employee renders the service are discounted to their present value.
(ii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan (pension plan) that is not a defined contribution plan. Typically defined
benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more
factors such as age, years of service and compensation.
Heineken's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amou it
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. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discou it
rate is the yield at balance sheet date on AA-rated bonds that have maturity dates approximating the terms of Heineken's obligatio is
and that are denominated in the same currency in which the benefits are expected to be paid.
The calculations are performed annually by qualified actuaries using the projected unit credit method. When the calculation result
in a benefit to Heineken, the recognised asset is limited to the net total of any unrecognised actuarial gains and losses and any
unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the
plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration
is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if
it is realisable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised
as an expense in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that
the benefits vest immediately, the expense is recognised immediately in profit or loss.
In respect of actuarial gains and losses that arise, Heineken applies the corridor method in calculating the obligation in respect
of a plan. To the extent that any cumulative unrecognised actuarial gain or loss exceeds ten per cent of the greater of the present
value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in profit or loss over the expecte i
average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.
(Hi) 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 and losses are recognised in profit or loss in the period
in which they arise.