115
Notes to the Consolidated Financial Statements (continued)
Fair value hedges
Net investment hedges
Capital management
Fair values
Basis for determining fair values
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
The following table indicates the carrying amount of derivatives and the periods in which all the cash flows associated with derivatives that are fair
value hedges are expected to occur:
2017
Carrying Expected cash Less than More than
In millionsof amount flows 1 year 1-2years 2-5 years 5years
Cross-currency interest rate swaps
Assets
481
12
12
35
422
Liabilities
(48)
(463)
(463)
(48)
18
12
12
35
(41)
In 2017 HEINEKEN has entered into several cross-currency interest rate swaps which have been designated as fair value hedges to hedge the
foreign exchange rate risk on the principal amount and future interest payments of its certain US dollar borrowings. The borrowings and the
cross-currency interest rate swaps have the same critical terms.
The loss arising on derivatives as designated hedging instrumentsin fair value hedges amounts to €48 million. The gain arising on the adjustment
for the hedged item attributable to the hedged risk in a designated fair value hedge accounting relationship amounts to €48 million.
HEINEKEN hedges its investments in certain subsidiaries by entering into local currency denominated borrowings and cross-currency interest rate
swaps, which mitigate the foreign currency translation risk arising from the subsidiaries net assets. These borrowings and swaps are designated as
net investment hedges and fully effective as such there was no ineffectiveness recognised in profit and loss in 201 7 (2016: nil). The fair value of
these borrowings at 31 December 2017 was €475 million (2016: €506 million) and the market value of these swaps at 31 December 2017 was
€8 million negative (2016: nil).
There were no major changes in HEINEKEN's approach to capital management during the year. The Executive Board's policy is to maintain a
strong capital base so asto maintain investor, creditor and market confidence and to sustain future development of the business and acquisitions.
Capital is herein defined as equity attributable to equity holders of the Company (total equity minus non-controlling interests).
HEINEKEN is not subject to externally imposed capital requirements otherthan the legal reserves explained in note 22. Shares are purchased to
meet the requirements of the share-based payment awards, as further explained in note 27.
For bank loans and finance lease liabilities the carrying amount is a reasonable approximation of fair value. The fair value of the unsecured
bond issues as at 31 December 2017 was€12,660 million (2016: €11,292 million) and the carrying amount was €11,948 million
(2016: €10,683 million). The fair value of the other interest-bearing liabilities as at 31 December 201 7 was €1,535 million (2016: €1,662 million)
and the carrying amount was €1,515 million (2016: €1,597 million).
The significant methods and assumptions used in estimating the fair values of financial instruments are discussed in note 4.
