Notes to the consolidated financial statements continued
15. Intangible assets continued
The key assumptions used for the value-in-use calculations are as follows:
Cash flows were projected based on actual operating results and the three-year business plan. Cash flows for a further seven-year period were
extrapolated using expected annual per country volume growth rates, which are based on external sources. Management believes that this
forecasted period is justified due to the long-term nature of the beer business and past experiences.
The beer price growth per year after the first three-year period is assumed to be at specific per country expected annual long-term inflation,
based on external sources.
Cash flows after the first ten-year period were extrapolated using a perpetual growth rate egual to the expected annual long-term inflation,
in order to calculate the terminal recoverable amount.
A per CGU-specific pre-tax Weighted Average Cost of Capital (WACC) was applied in determining the recoverable amount of the units.
The values assigned to the key assumptions used for the value in use calculations are as follows:
Central and Eastern Europe (excluding Russia)
The Americas (excluding Brazil)
Africa and the Middle East
The values assigned to the key assumptions represent management's assessment of future trends in the beer industry and are based on both external
sources and internal sources (historical data).
HEINEKEN applied its methodology to determine CGU specific WACC's to perform its annual impairment testing on a consistent basis. The trend and
outcome of several WACC's. for amongst others the Western Europe CGU. turned out lower than expected based on the current economic climate and
associated outlooks. EIEINEKEN does not believe the risk profile in Western Europe is significantly lower than in prior years. EIEINEKEN decided to adjust
the risk-free rates for this observation.
Sensitivity to changes in assumptions
Limited headroom is available in some of ourCGU'sin the region Africa and Middle East, however the outcome of the sensitivity analysis of a 100 basis
points adverse change in key assumptions (lower growth rates and higher discount rates respectively) would not result in a materially different outcome
of the impairment test.
Heineken N.V. Annual Report 2012