Financial statements I Notes to the consolidated financial statements continued
3. Significant accounting policies continued
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost formula, and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing
location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.
(ii) Finished products and work in progress
Finished products and work in progress are measured at manufacturing cost based on weighted averages and takes into account the production
stage reached. Costs include an appropriate share of direct production overheads based on normal operating capacity.
(Hi) Other inventories and spare parts
The cost of other inventories is based on weighted averages. Spare parts are valued at the lower of cost and net realisable value. Value reductions
and usage of parts are charged to profit or loss. Spare parts that are acquired as part of an equipment purchase and only to be used in connection
with this specific equipment are initially capitalised and depreciated as part of the equipment.
(i) Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is
considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the
present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-
sale financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively
in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously
in other comprehensive income and presented in the fair value reserve in equity is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For
available-for-sale financial assets that are equity securities, the reversal is recognised in other comprehensive income.
(ii) Non-financial assets
The carrying amounts of HEINEKEN's non-financial assets, other than inventories (refer accounting policy (h) and deferred tax assets (refer accounting
policy (s)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the
asset's recoverable amount is estimated. For goodwill and intangible assets that are not yet available for use, the recoverable amount is estimated
each year at the same time.
The recoverable amount of an asset or CGU is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the 'CGU').
Heineken N.V. Annual Report 2011