73
Notes to the Consolidated Financial Statements (continued)
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
HEINEKEN's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present
value. The fair value of any defined benefit plan assets is deducted. The discount rate is the yield at balance sheet date on high-quality credit-rated
bonds that have maturity dates approximating to the terms of HEINEKEN's obligations and that are denominated in the same currency in which
the benefits are expected to be paid.
The calculations are performed annually by qualified actuaries using the projected unit credit method. When the calculation results in a benefit to
HEINEKEN, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or
reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum
funding requirements that apply to any plan in HEINEKEN. An economic benefit is available to HEINEKEN if it is realisable during the life of the
plan, or on settlement of the plan liabilities.
When the benefits of a plan are changed, the expense or benefit is recognised immediately in profit or loss.
HEINEKEN recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all
expenses related to defined benefit plans in personnel expenses and other net finance income and expenses in profit or loss.
(iii) Other long-term employee benefits
HEINEKEN's net obligation in respect of long-term employee benefits, other than pension plans, is the amount of future benefit that employees
have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value
of any related assets is deducted. The discount rate is the yield at balance sheet date on high-quality credit-rated bonds that have maturity dates
approximating to the terms of HEINEKEN's obligations. The obligation is calculated using the projected unit credit method. Any actuarial gains and
losses are recognised in profit or loss in the period in which they arise.
(iv) Termination benefits
Termination benefits are payable when employment is terminated by HEINEKEN before the normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange forthese benefits.
Termination benefits are recognised as an expense when HEINEKEN is demonstrably committed to either terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised if HEINEKEN has made an offer encouraging
voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably
Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.
(v) Share-based payment plan (LTV)
HEINEKEN has a performance-based share plan (Long-Term Variable award (LTV)) for both the Executive Board and 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 per cent 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
to equity
(vi) Matching share entitlement
The Executive Board is entitled to matching shares (referto note 33). 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 forthe 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
