Notes to the Consolidated Financial Statements continued
Reportofthe Reportofthe Financial Other
Contents Overview Executive Board Supervisory Board Statements Information
32. Financial risk management and financial instruments continued
Loans to customers
HEINEKEN's exposure to credit risk is mainly influenced by the individual characteristics of each customer. HEINEKEN's held-to-maturity investments
include loans to customers, issued based on a loan contract. Loans to customers are ideally secured by. among others, rights on property or intangible
assets, such as the right to take possession of the premises of the customer. Interest rates calculated by HEINEKEN are at least based on the risk-free rate
plus a margin, which takes into account the risk profile of the customer and value of security given.
HEINEKEN establishes an allowance for impairment of loans that represents its estimate of incurred losses. The main components of this allowance are
a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar customers in
respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics.
In a few countries, the issuance of new loans is outsourced to third parties. In most cases. HEINEKEN issues guarantees to the third party for the risk of
default by the customer.
Trade and other receivables
HEINEKEN's local management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Under the credit policies,
all customers reguiring credit over a certain amount are reviewed and new customers are analysed individually for creditworthiness before HEINEKEN's
standard payment and delivery terms and conditions are offered. HEINEKEN's review includes external ratings, where available, and in some cases bank
references. Purchase limits are established for each customer and these limits are reviewed regularly. Customers that fail to meet HEINEKEN's benchmark
creditworthiness may transact with HEINEKEN only on a prepayment basis.
In monitoring customer credit risk customers are. on a country basis, grouped according to their credit characteristics, including whether they are an
individual or legal entity, which type of distribution channel they represent, geographic location, industry, ageing profile, maturity and existence of previous
financial difficulties. Customers that are graded as high risk are placed on a restricted customer list, and future sales are made on a prepayment basis only
with approval of management.
HEINEKEN has multiple distribution models to deliver goods to end customers. Deliveries are done in some countries via own wholesalers, in other
markets directly and in some others via third parties. As such distribution models are country-specific and diverse across HEINEKEN. the results and the
balance sheet items cannot be split between types of customers on a consolidated basis. The various distribution models are also not centrally managed
or monitored.
HEINEKEN establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and
investments. The components of this allowance are a specific loss component and a collective loss component.
116 Helneken N.V. Annual Report 2015