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Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(l) Provisions
(m) Loans and borrowings
(n) Revenue
Report of the
Report of the
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Sustainability
Other
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Executive Board
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Information
Heineken N.V. Annual Report 2017
(i) General
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.
(ii) Restructuring
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 that contract.
(iv) Other
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.
(i) Products sold
Revenue relates to the sale and delivery of products (own-produced finished goods and goods for resale) in the ordinary course of business. The product
portfolio of HEINEKEN mainly consists of beer, soft drinks and cider. Revenue is recognised in the income statement when all significant risks and rewards
have been transferred to the customer and when the income can be reliably measured and no significant uncertainties remain regarding recovery of the
consideration due, associated costs or the possible return of goods, and there is no continuing management involvement with the goods. For the majority
of the sales transactions, the risks and rewards are transferred to the buyer on delivery of the products. Revenue from the sale of goods is measured at the
fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates, discounts for cash payments and
excise taxes.
If it is probable that discounts will be granted and the amount can be measured reliably, the discount is recognised as a reduction of revenue as the
sales are recognised.
(ii) Other revenue
Other revenues are proceeds from royalties, rental income, pub management services and technical services to third parties, net of sales tax.
Royalties are recognised in profit or loss on an accrual basis in accordance with the relevant agreement. Rental income, pub management services
and technical services are recognised in profit or loss when the services have been delivered.