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Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(b) Foreign currency
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Heineken N.V. Annual Report 2017
(v) Interests in equity-accounted investees
HEINEKEN's investments in associates and joint ventures are accounted for using the equity method of accounting. Investments in associates are
those entities in which HEINEKEN has significant influence, but no control or joint control, overthe financial and operating policies. Joint ventures
are the arrangements in which HEINEKEN has joint control, whereby HEINEKEN has rights to the net assets of the arrangement, rather than rights
to its assets and obligations for its liabilities.
Investments in associates and joint ventures are recognised initially at cost. The cost of the investment includes transaction costs.
The consolidated financial statements include HEINEKEN's share of the profit or loss and other comprehensive income, after adjustments to align
the accounting policies with those of HEINEKEN, from the date that significant influence or joint control commences until the date that significant
influence or joint control ceases.
When HEINEKEN's share of losses exceeds the carrying amount of the associate or joint venture, including any long-term investments, the carrying
amount is reduced to nil and recognition of further losses is discontinued except to the extent that HEINEKEN has an obligation or has made a
payment on behalf of the associate or joint venture.
(vi) Transactions eliminated on consolidation
Intra-HEINEKEN balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-HEINEKEN
transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted
associates and JVs are eliminated against the investment to the extent of HEINEKEN's interest in the investee. Unrealised losses are eliminated in
the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of HEINEKEN entities at the exchange rates at the dates of
the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency
at the exchange rate at that date. The foreign currency gain or loss arising on monetary items is the difference between amortised cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost
in foreign currency translated at the exchange rate at the end of the reporting period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency
at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured at cost are
translated into the functional currency using the exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-
for-sale (equity) investments and foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net
investment, which are recognised in other comprehensive income.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Euro at
exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies,
are translated to Euro at exchange rates approximating to the exchange rates ruling at the dates of the transactions. Group entities, with a
functional currency being the currency of a hyperinflationary economy, first restate their financial statements in accordance with IAS 29, Financial
Reporting in Hyperinflationary Economies. The related income, costs and balance sheet amounts are translated at the foreign exchange rate ruling
at the balance sheet date. In 2017 HEINEKEN did not have any foreign operations in hyperinflationary economies.
Foreign currency differences are recognised in other comprehensive income and are presented within equity in the translation reserve. However,
if the operation is not a wholly owned subsidiary, the relevant proportionate share of the translation difference is allocated to the non-controlling
interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the
translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When HEINEKEN disposes
of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount
is reattributed to non-controlling interests. When HEINEKEN disposes of only part of its investment in an associate or joint venture that includes
a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit
or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in
other comprehensive income, and are presented within equity in the translation reserve.
