Notes to the consolidated financial statements continued
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3. Significant accounting policies
(v) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
All other expenditure is expensed when incurred.
(vi) Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Intangible assets with a finite
life are amortised on a straight-line basis over their estimated useful lives, other than goodwill, from the date they are available for use, since
this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful
lives are as follows:
Strategic brands 40-50 years
Other brands 15-25 years
Customer-related and contract-based intangibles 5-20 years
Reacquired rights 3-12 years
Software 3-7 years
Capitalised development costs 3 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(vii) Gains and losses on sale
Net gains on sale of intangible assets are presented in profit or loss as other income. Net losses on sale are included in amortisation. Net gains
and losses are recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, recovery of
the consideration is probable, the associated costs can be estimated reliably, and there is no continuing management involvement with the
intangible assets.
(h) Inventories
(i) General
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.
(iii) 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) Impairment
(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.
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default
or delinquency in interestor principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where
observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Heineken N.V. Annual Report 2014