Notes to the Consolidated Financial Statements continued
Reportofthe Reportofthe Financial Other
Contents Overview Executive Board Supervisory Board Statements Information
3. Significant accounting policies continued
(iii) Available-for-sale investments
HEINEKEN's investments in equity securities and certain debt securities are classified as available-for-sale. Subsequent to initial recognition, they are
measured at fair value and changes therein - other than impairment losses (see note 3i(i)) and foreign currency differences on available-for-sale monetary
items (see note 3b(i)) - are recognised in other comprehensive income and presented within equity in the fair value reserve. When these investments are
derecognised, the relevant cumulative gain or loss in the fair value reserve is transferred to profit or loss.
Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss. Available-for-sale
investments are recognised or derecognised by HEINEKEN on the date it commits to purchase or sell the investments.
(iv) Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Included in
non-derivative financial instruments are advances to customers. Subsequently, the advances are amortised over the term of the contract as a reduction
of revenue.
(d) Derivative financial instruments (including hedge accounting)
(i) General
HEINEKEN uses derivatives in the ordinary course of business in order to manage market risks. Generally, HEINEKEN applies hedge accounting in order to
minimise the effects of foreign currency, interest rate or commodity price fluctuations in profit or loss.
Derivatives that can be used are interest rate swaps, forward rate agreements, caps and floors, commodity swaps, spot and forward exchange contracts
and options. Transactions are entered into with a limited number of counterparties with strong credit ratings. Foreign currency, interest rate and commodity
hedging operations are governed by internal policies and rules approved and monitored by the Executive Board.
Derivative financial instruments are recognised initially at fair value, with attributable transaction costs recognised in profit or loss as incurred. Derivatives
for which hedge accounting is not applied are accounted for as instruments at fair value through profit or loss. When derivatives qualify for hedge
accounting, subsequent measurement is at fair value, and changes therein accounted for as described in 3b(iii), 3d(ii) or 3d(iii).
(ii) Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive income and
presented in the hedging reserve within equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are
recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued.
The cumulative unrealised gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity is recognised in
profit or loss immediately. When a hedging instrument is terminated, but the hedged transaction still is expected to occur, the cumulative gain or loss at
that point remains in other comprehensive income and is recognised in accordance with the above-mentioned policy when the transaction occurs. When
the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when it
is recognised. In other cases, the amount recognised in other comprehensive income is transferred to the same line of profit or loss in the same period that
the hedged item affects profit or loss.
(iii) Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognised in profit or loss. The hedged item also is stated
at fair value in respect of the risk being hedged; the gain or loss attributable to the hedged risk is recognised in profit or loss and adjusts the carrying
amount of the hedged item.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest
method is used is amortised to profit or loss over the period to maturity.
72 Helneken N.V. Annual Report 2015