Notes to the Consolidated Financial Statements (continued)
Loans to customers
Trade and other receivables
Report of the
Report of the
Annual Report 2016
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.
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 requiring 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.
HEINEKEN limits its exposure to credit risk by only investing available cash balances in deposits and liquid securities and only with counterparties
that have strong credit ratings. HEINEKEN actively monitors these credit ratings.
HEINEKEN's policy is to avoid issuing guarantees where possible unless this leads to substantial benefits for HEINEKEN. In cases where HEINEKEN
does provide guarantees, such as to banks for loans (to third parties), HEINEKEN aims to receive security from the third party
Heineken N.V. has issued a joint and several liability statement to the provisions of Section 403, Part 9, Book 2 of the Dutch Civil Code with respect
to legal entities established in the Netherlands. Refer to note 42 of the Company financial statements.