Financial statements I Notes to the consolidated financial statements continued
32. Financial risk management and financial instruments :ontinued
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 includes 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 since 2008, 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. The advances are amortised over the term of the contract as a reduction
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. H EINEKEN actively monitors
these credit ratings.
HEINEKEN's policy is to avoid issuing guarantees where possible unless this leads to substantial benefits 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.
Heineken N.V. Annual Report 2011