Financial statements I Notes to the consolidated financial statements continued
3. Significant accounting policies continued
HEINEKEN's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present
value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at balance sheet date
on AA-rated bonds that have maturity dates approximating the terms of HEINEKEN's obligations and that are denominated in the same currency
in which the benefits are expected to be paid.
The calculations are performed annually by qualified actuaries using the projected unit credit method. When the calculation results in a benefit to
HEINEKEN. the recognised asset is limited to the net total of any unrecognised past service costs and the present value of economic benefits available
in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic
benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the
Group if it is realisable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense
in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately,
the expense is recognised immediately in profit or loss.
HEINEKEN recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses
related to defined benefit plans in personnel expenses in profit or loss.
(iii) Other long-term employee benefits
HEINEKEN's net obligation in respect of long-term employee benefits, other than pension plans, is the amount of future benefit that employees
have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value
of any related assets is deducted. The discount rate is the yield at balance sheet date on high-quality credit-rated bonds that have maturity dates
approximating the terms of HEINEKEN's obligations. The obligation is calculated using the projected unit credit method. Any actuarial gains and
losses are recognised in other comprehensive income in the period in which they arise.
(iv) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for these benefits.
Termination benefits are recognised as an expense when HEINEKEN is demonstrably committed to either terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made
to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised if H EINEKEN has made an offer encouraging
voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.
Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.
(v) Share-based payment plan (LTV)
As from 11anuary2005 HEINEKEN established ashare plan forthe Executive Board and as from 1 lanuary 2006 HEINEKEN also established
a share plan for senior management (see note 29).
The grant date fair value of the share rights granted is recognised as personnel expenses with a corresponding increase in equity (equity-settled),
over the period that the employees become unconditionally entitled to the share rights. The costs of the share plan for both the Executive Board
and senior management members are spread evenly over the performance period.
At each balance sheet date, HEINEKEN revises its estimates of the number of share rights that are expected to vest, for the 100 per cent internal
performance conditions of the share plan 2010 - 2012 and the share plan 2011- 2013 of the senior management members and the Executive
Board and for the 75 per cent internal performance conditions of the share plan 2008- 2010 and 2009 - 2011 of the senior management members.
It recognises the impact of the revision of original estimates - only applicable for internal performance conditions, if any, in profit or loss, with
a corresponding adjustment to equity. The fair value for the share plan 2009 - 2011 is measured at grant date using the Monte Carlo model taking
into account the terms and conditions of the plan.
Heineken N.V. Annual Report 2011