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Notes to the Consolidated Financial Statements (continued)
(h) Inventories
(i) Impairment
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
(vi) Amortisation
Amortisation is calculated overthe cost of the asset, or other amount substituted for cost, less its residual value. Intangible assets with a finite life
are amortised on a straight-line basis over their estimated useful lives from the date they are available for use, since this most closely reflects the
expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives are as follows:
- Strategic brands 40-50 years
-Other brands 15-25 years
- Customer-related and contract-based intangibles 5-20 years
- Reacquired rights 3-12 years
- Software 3-7 years
- Capitalised development costs 3 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
(vii) Gains and losses on sale
Net gains on sale of intangible assets are presented in profit or loss as other income. Net losses on sale are included in amortisation. Net gains
and losses are recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, recovery of
the consideration is probable, the associated costs can be estimated reliably, and there is no continuing management involvement with the
intangible assets.
(i) General
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost formula, and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing
location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.
(ii) Finished products and work in progress
Finished products and work in progress are measured at manufacturing cost based on weighted averages and taking into account the production
stage reached. Costs include an appropriate share of direct production overheads based on normal operating capacity
(iii) Other inventories and spare parts
The cost of other inventories is based on weighted averages. Spare parts are valued at the lower of cost and net realisable value. Value reductions
and usage of parts are charged to profit or loss. Spare parts that are acquired as part of an equipment purchase and only to be used in connection
with this specific equipment are initially capitalised and depreciated as part of the equipment.
(i) Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is
considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably
Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default
or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where
observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the
present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-
sale financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively
in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously
in other comprehensive income and presented in the fair value reserve in equity is transferred to profit or loss.