Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly
attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described hereafter.
If HEINEKEN has a legal right to offset financial assets with financial liabilities and if HEINEKEN intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously then financial assets and liabilities are presented in the statement of financial position as a net amount.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts form an integral part of HEINEKEN's cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Accounting policies for interest income, interest expenses and other net finance income and expenses are discussed in note 3r.
(ii) Held-to-maturity investments
If HEINEKEN has the positive intent and ability to hold debt securities to maturity, they are classified as held-to-maturity. Debt securities are loans
and long-term receivables and are measured at amortised cost using the effective interest method, less any impairment losses. Investments
held-to-maturity are recognised or derecognised on the day they are transferred to or by HEINEKEN.
(Hi) Available-for-sale investments
HEINEKEN's investments in equity securities and certain debt securities are classified as available-for-sale. Subsequent to initial recognition, they are
measured at fair value and changes therein - other than impairment losses (see note 3i(i)), and foreign currency differences on available-for-sale
monetary items (see note 3b(i)) - are recognised in other comprehensive income and presented within equity in the fair value reserve. When these
investments are derecognised, the relevant cumulative gain or loss in the fair value reserve is transferred to profit or loss.
Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the profit or loss. Available-for-
sale investments are recognised or derecognised by HEINEKEN on the date it commits to purchase or sell the investments.
(iv) Investments at fair value through profit or loss
An investment is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition.
Investments are designated at fair value through profit or loss if H EINEKEN manages such investments and makes purchase and sale decisions
based on their fair value in accordance with HEINEKEN's documented risk management or investment strategy. Upon initial recognition, attributable
transaction costs are recognised in profit or loss as incurred.
Investments at fair value through profit or loss are measured at fair value, with changes therein recognised in profit or loss as part of the other net
finance income/(expenses). Investments at fair value through profit and loss are recognised or derecognised by HEINEKEN on the date it commits
to purchase or sell the investments.
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.
Heineken N.V. Annual Report 2011