Financial statements I Notes to the consolidated financial statements continued
3. Significant accounting policies continued
Derivative financial instruments are recognised initially at fair value, with attributable transaction costs recognised in profit or loss as incurred.
Derivatives for which hedge accounting is not applied are accounted for as instruments at fair value through profit or loss. When derivatives qualify
for hedge accounting, subsequent measurement is at fair value, and changes therein accounted for as described in 3b(iv), 3d(ii) and 3d (iii).
(ii) Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive income and
presented in the hedging reserve within equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair
value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is
discontinued and the cumulative unrealised gain or loss previously recognised in other comprehensive income and presented in the hedging reserve
in equity, is recognised in profit or loss immediately, or when a hedging instrument is terminated, but the hedged transaction still is expected to occur,
the cumulative gain or loss at that point remains in other comprehensive income and is recognised in accordance with the above-mentioned policy
when the transaction occurs. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred
to the carrying amount of the asset when it is recognised. In other cases the amount recognised in other comprehensive income is transferred to the
same line of profit or loss in the same period that the hedged item affects profit or loss.
(iii) Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognised in profit or loss. The hedged item also
is stated at fair value in respect of the risk being hedged; the gain or loss attributable to the hedged risk is recognised in profit or loss and adjusts the
carrying amount of the hedged item.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective
interest method is used is amortised to profit or loss over the period to maturity.
(iv) Separable embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet
the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable
embedded derivatives are recognised immediately in profit or loss.
(e) Share capital
(i) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from
equity, net of any tax effects.
(ii) Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any
tax effects recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own shares.
When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase inequity, and the resulting surplus or deficit
on the transaction is transferred to or from retained earnings.
Dividends are recognised as a liability in the period in which they are declared.
Heineken N.V. Annual Report 2011