Financial statements I Notes to the consolidated financial statements continued
15. Intangible assets continued
The key assumptions used for the value-in-use calculations are as follows:
Cash flows were projected based on actual operating results and the three-year business plan. Cash flows for a further seven-year period were
extrapolated using expected annual per country volume growth rates, which are based on external sources. Management believes that this
forecasted period is justified due to the long-term nature of the beer business and past experiences.
The beer price growth per year after the first three-year period is assumed to be at specific per country expected annual long-term inflation,
based on external sources.
Cash flows after the first ten-year period were extrapolated using a perpetual growth rate equal to the expected annual long-term inflation,
in order to calculate the terminal recoverable amount.
A per CGU-specific pre-tax Weighted Average Cost of Capital (WACC) was applied in determining the recoverable amount of the units.
The values assigned to the key assumptions used for the value in use calculations are as follows:
Expected annual Expected volume
long-term inflation growth rates
8.3% 2.1% (0.4)%
12.3% 2.7% 1.7%
14.8% 4.8% 1.9%
10.1% 2.5% 1.8%
16.1% 4.3% 3.0%
10.7-21.4% 2.7-8.4% 1.1-5.9%
8.3-12.6% 2.1-3.6% (0.4)-2.4%
Central and Eastern Europe (excluding Russia)
The Americas (excluding Brazil)
Africa and Middle East
Head Office and others
The values assigned to the key assumptions represent management's assessment of future trends in the beer industry and are based on both
external sources and internal sources (historical data).
HEINEKEN applied its methodology to determine CGU specific WACC's to perform its annual impairment testing on a consistent basis. The trend
and outcome of several WACC's, for amongst others the Western Europe CGU, turned out lower than expected based on the current economic
climate and associated outlooks. H EINEKEN does not believe the risk profile in Western Europe is significantly lower than in prior years. The lower
WACC for 2011 is mainly driven by lower observed risk-free rates reflecting the capital flee towards safer deemed economies. H EINEKEN performed
an additional impairment sensitivity calculation and concluded that applying a different WACC would not result in a materially different outcome.
The WACC's disclosed are based on our internal consistent methodology.
Sensitivity to changes in assumptions
Limited headroom is available in our CGU's Russia and Brazil, however the outcome of a sensitivity analysis of a 100 basis points adverse change
in key assumptions (lower growth rates or higher discount rates respectively) did not result in a materially different outcome of the impairment test.
Heineken N.V. Annual Report 2011