Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(k) Employee benefits (continued)
(vi) Matching share entitlement
(m) Loans and borrowings
Report of the
Report of the
Annual Report 2016
(v) Share-based payment plan (LTV)
As from 1 January 2005, HEINEKEN established a share plan for the Executive Board and, as from 1 January 2006, HEINEKEN also established
a share plan for senior management (refer to note 27).
The grant date fair value, adjusted for expected dividends, of the share rights granted is recognised as personnel expenses with a corresponding
increase in equity (equity-settled) over the period that the employees become unconditionally entitled to the share rights. The costs of the share
plan for both the Executive Board and senior management members are spread evenly over the performance period, during which vesting conditions
are applicable subject to continued services. The total amount to be expensed is determined taking into consideration the expected forfeitures.
At each balance sheet date, HEINEKEN revises its estimates of the number of share rights that are expected to vest, for the 100% internal
performance conditions of the running share plans for the senior management members and the Executive Board. It recognises the impact of
the revision of original estimates (only applicable for non-market performance conditions, if any) in profit or loss, with a corresponding adjustment
As from 21 April 2011, HEINEKEN established a matching share entitlement for the Executive Board. The grant date fair value of the matching
shares is recognised as personnel expenses in the income statement as it is deemed an equity-settled share-based payment.
(vii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability
is recognised for the amount expected to be paid under short-term benefits if HEINEKEN has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the obligation can be estimated reliably.
A provision is recognised if, as a result of a past event, HEINEKEN has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the present value of
the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as part of net finance expenses.
A provision for restructuring is recognised when HEINEKEN has approved a detailed and formal restructuring plan, and the restructuring has either
commenced or has been announced publicly. Future operating losses are not provided for. The provision includes the benefit commitments in
connection with early retirement and redundancy schemes.
(iii) Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by HEINEKEN from a contract are lower than the
unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost
of terminating the contract and the expected net cost of continuing with the contract and taking into consideration any reasonably obtainable
sub-leases for onerous lease contracts. Before a provision is established, HEINEKEN recognises any impairment loss on the assets associated with
The other provisions, not being provisions for restructuring or onerous contracts, consist mainly of surety and guarantees, litigation and claims
and environmental provisions.
Loans and borrowings are recognised initially at fair value, net of transaction costs incurred. Loans and borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the
period of the borrowings using the effective interest method. Loans and borrowings included in a fair value hedge are stated at fair value in respect
of the risk being hedged.
Loans and borrowings for which HEINEKEN has an unconditional right to defer settlement of the liability for at least 12 months after the balance
sheet date are classified as non-current liabilities.