Independent Auditor's Report (continued)
Scope of the group audit
Our key audit matters
Report of the Report of the Financial Sustainability
Introduction Executive Board Supervisory Board Statements Review
4 rr Heineken NV.
I OO Annual Report 2016
Heineken N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements
of Heineken NV
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this
respect we have determined the nature and extent of the audit procedures to be carried out for the group entities (components). Decisive were size
and/or risk profile of the components. On this basis, we selected components for which an audit or review had to be carried out on the complete
set of financial information or specific items.
Our group audit mainly concentrated on significant components in terms of size and financial interest or where significant risks or complex activities
were present, leading to full scope audits performed for 25 components.
We have performed audit procedures ourselves at corporate entities and the operations in the Netherlands. Furthermore, we performed audit
procedures at group level on areas such as consolidation, disclosures, goodwill, intangible assets, joint ventures, financial instruments, acquisitions
and divestments. Specialists were involved amongst others in the areas of treasury, information technology, tax, accounting, pensions and valuation.
For selected component audit teams, the group audit team provided detailed written instructions, which, in addition to communicating the
requirements of component audit teams, detailed significant audit areas and information obtained centrally relevant to the audit of individual
components including awareness for risk related to management override. Furthermore, we developed a plan for overseeing each component audit
team based on its relative significance to the Company and certain other risk characteristics. This included procedures such as visiting components
(Mexico, D.R.Congo, Brazil, China, Vietnam, Italy, HGSS Poland, France, Austria, Papua New Guinea, New Zealand, Nigeria, South Africa, Russia,
Jamaica and Chile) during the year, performing file reviews, holding conference calls, attending meetings and reviewing component audit team
deliverables to gain sufficient understanding of the work performed. For smaller components we have performed review procedures or specific
By performing the procedures mentioned above we have been able to obtain sufficient and appropriate audit evidence on the group's financial
information to provide an opinion on the consolidated financial statements.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have
communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Revenue recognition - Accruals for promotional allowances and volume rebates
Accounting for promotional allowances and volume rebates impacts the amounts of revenue recognized during the period. The revenue accounting
policies are specified in note 3 to the financial statements. Significant management judgement is required to estimate the values of promotional
allowances and volume rebates. This estimate is considered to be a key audit matter relevant to our audit of the financial statements.
Our audit procedures included, amongst others, evaluating controls relating to management's process for determining the value of promotional
allowances and the volume rebates. In addition we performed substantive testing and analytical procedures to test the accuracy and completeness
of the underlying calculation of the accruals. These procedures included challenging the appropriateness of management's assumptions and
estimates and agreeing input data, including pricing and allowance data to underlying agreements with customers.
Intangible assets (including goodwill) and property, plant and equipment impairment test - Management assessment of recoverability
Intangible assets (including goodwill) and property, plant and equipment represent 68% of the consolidated statement of financial position.
Procedures over management's annual impairment test were significant to our audit because the assessment process is complex and the test
relies on estimates and assumptions. Intangibles and property, plant and equipment are allocated to Cash Generating Units (CGUs) and groups
of CGUs. The Company uses assumptions in respect of future market and economic conditions such as economic growth, expected inflation rates,
demographic developments, expected market share, revenue and margin development. The details on the accounting for intangibles and property,
plant and equipment and disclosure requirements under IAS 36 Impairment of assets are included in notes 3, 14 and 15 to the financial statements.
For our audit we assessed and tested the assumptions, the discount rates, methodologies and data used by the Company, for example by comparing
them to external data such as expected inflation rates, external market growth expectations and by analysing sensitivities in the Company's
valuation model. We included valuation specialists in our team to assist us in these audit activities. We specifically focused on the sensitivity in the
available headroom of CGUs and whether a reasonably possible change in assumptions could cause the carrying amount to exceed its recoverable
amount. We also assessed the historical accuracy of management's estimates. We assessed the adequacy of the Company's disclosure notes 14 and
15 in the financial statements about those assumptions to which the outcome of the impairment test is most sensitive.