3
Notes to the Consolidated Financial Statements (continued)
4 Changes in accounting policies
(a) Changed accounting policies in 2018
O Q,
Introduction Report of the Executive Board Report of the Supervisory Board
The following new standards have been adopted in 2018 and reflected in the consolidated
financial statements:
IFRS 9 Financial Instruments
IFRS 9 includes revised guidance on classification and measurement of financial instruments, including
a new expected credit loss model for calculating impairment of financial assets, and new general hedge
accounting requirements. The standard replaces existing guidance in IAS 39 Financial Instruments:
Recognition and Measurement. HEINEKEN has implemented IFRS 9 per 1 January 2018 using the
modified retrospective approach, meaning that the 2017 comparative financial information is not
restated. Any impact of IFRS 9 as of 1 January 2018 is recognised directly in equity.
HEINEKEN has reviewed the impact of this new standard and has concluded that the impact is limited:
- With regard to the revised classification and measurement principles, IFRS 9 contains three classification
categories: 'measured at amortised cost', 'fair value through other comprehensive income' (FVOCI)
and 'fair value through profit and loss' (FVPL). The standard eliminates the existing IAS 39 categories:
'loans and receivables', 'held to maturity' and 'available-for-sale'. For HEINEKEN this new classification
only means that the assets currently classified as available-for-sale will be measured at FVOCI which
constitutes no significant change, except for the accounting for cumulative gains or losses when equity
securities measured at FVOCI are disposed of. These cumulative gains or losses are not recognised in
the income statement upon disposal but kept in the fair value reserve. HEINEKEN has no investments
classified as held to maturity and the other categories involve no change in measurement for HEINEKEN.
- With regard to the impact of the expected loss model on trade receivables and both advances and
loans to customers HEINEKEN concluded that the impact is immaterial. The impact on HEINEKEN's
future consolidated income statement is also expected to be immaterial as the standard requires
provisions to be recorded earlier and the initial impact of this timing difference is recorded in equity
upon implementation.
- For the new hedging requirements of IFRS 9 HEINEKEN concluded that all current hedging relationships
continue to qualify as hedging relationships upon application of IFRS 9. For existing hedges HEINEKEN
excludes the foreign currency basis spread from the hedge relation only when this improves hedge
effectiveness by applying the cost of hedging approach. HEINEKEN has applied cost of hedging for these
hedges using the modified retrospective approach and has recognised the initial impact directly in equity
in the cost of hedging reserve.
Heineken N.V. Annual Report 2018
Financial Statements
Sustainability Review
Other Information
IFRS 15 Revenue from Contracts with Customers
HEINEKEN adopted IFRS 15 'Revenue from Contracts with Customers' as per 1 January 2018.
For implementation the full retrospective method is applied, meaning that the 2017 comparative financial
information has been restated. HEINEKEN concluded that IFRS 15 did not impact the timing of revenue
recognition. However, the amount of recognised revenue is impacted by payments to customers and
excise taxes as explained below. HEINEKEN has evaluated the available practical expedients for application
of the standard and concluded that these options have no significant impact on HEINEKEN's revenue
recognition. The practical expedients have therefore not been applied.
The adoption of IFRS 15 has changed the accounting for certain payments to customers, such as listing
fees and marketing support expenses. Most of these payments were recorded as operating expenses, but
are now considered to be a reduction of revenue. Only when these payments relate to a distinct service the
amounts continue to be recorded as operating expenses.
IFRS 15 has also changed the accounting for excise tax. Based on IAS 18 different policies were applied by
peers in our industry. Some companies included all excises in revenue, some recorded excise only for specific
countries and some, like HEINEKEN, excluded all excise from revenue. The clarifications to IFRS 15 describe
that an 'all or nothing' approach is no longer possible and an assessment of the excise tax needs to be
performed on a country by country basis.
Excise taxes are very common in the beverage industry, but levied differently amongst the countries
HEINEKEN operates in. HEINEKEN performed a country by country analysis to assess whether the excise
taxes are sales-related or effectively a production tax. In most countries excise taxes are effectively a
production tax as excise becomes payable when goods are moved from bonded warehouses and are
not based on the sales value. In these countries, increases in excise tax are not always (fully) passed on
to customers and HEINEKEN cannot, or can only partly, reclaim the excise tax in the case products are
eventually not sold to customers. Excise tax is borne by HEINEKEN for these countries and included in
revenue. Only for those countries where excise is levied at the moment of the sales transaction and excise
is based on the sales value, the excise taxes are collected on behalf of a tax authority and consequently
excluded from revenue.
Due to the complexity and variety in tax legislations, significant judgement is applied in the assessment
whether taxes are borne by HEINEKEN or collected on behalf of a third party
To provide full transparency on the impact of the accounting for excise, HEINEKEN presents the excise tax
expense on a separate line below revenue in the consolidated income statement. A new subtotal called
'Net revenue' is added. This 'Net revenue' subtotal is 'revenue' as defined in IFRS 15 (after discounts) minus
the excise tax expense for those countries where the excise is borne by HEINEKEN. HEINEKEN furthermore
discloses the excise collected on behalf of third parties, which is excluded from revenue, in note 6.1
Operating segments.
