Notes to the Consolidated Financial Statements (continued)
O Q,
Introduction Report of the Executive Board Report of the Supervisory Board
HEINEKEN has multiple distribution models to deliver goods to end customers. There is no reliance on
major clients. Deliveries to end consumers are done in some countries via own wholesalers or own pubs, in
other markets directly and in some others via third parties. As such, distribution models are country-specific
and diverse across HEINEKEN. In addition, these various distribution models are not centrally managed or
monitored. Consequently, the Executive Board is not allocating resources and assessing the performance
based on business type information and therefore no segment information is provided on business type.
Inter-segment transfers or transactions are determined on an arm's length basis. As net finance expenses
and income tax expenses are monitored on a consolidated level (and not on an individual regional basis)
and regional presidents are not accountable for that, net finance expenses and income tax expenses are
not provided for the reportable segments.
Revenue
The majority of HEINEKEN's revenue is generated by the sale and delivery of products to customers.
The product portfolio of HEINEKEN mainly consists of beer, soft drinks and cider. Products are mostly
own-produced finished goods from HEINEKEN's brewing activities, but also contain purchased goods for
resale from HEINEKEN's wholesale activities. HEINEKEN's customer group can be split between on-trade
customers like cafés, bars and restaurants and off-trade customers like retailers and wholesalers. Due to
HEINEKEN's global footprint its revenue is exposed to strategic and financial risks that differs per region.
Revenue is recognised when control over products has transferred and HEINEKEN fulfilled its performance
obligation to the customer. For the majority of the sales, control is transferred either at delivery of the
products or upon pickup by the customer from HEINEKEN's premises.
Revenue recognised is based on the price specified in the contract, net of returns, discounts, sales taxes
and excise taxes collected on behalf of third parties.
Other revenues include rental income from pubs bars, royalties, income from wholesale activities, pub
management services and technical services to third parties. Royalties are sales-based and recognised
in profit or loss (consolidated income statement) on an accrual basis in accordance with the relevant
agreement. Rental income, income from wholesale activities, pub management services and technical
services are recognised in profit or loss when the services have been delivered.
Discounts
HEINEKEN uses different types of discounts depending on the nature of the customer. Some discounts
are unconditional, like cash discounts, early payment discounts and temporary promotional discounts.
Unconditional discounts are recognised at the same moment of the related sales transaction.
HEINEKEN also provides conditional discounts to customers. These contractually agreed conditions
include volume and promotional rebates. Conditional discounts are recognised based on estimated target
realisation. The estimation is based on accumulated experience supported by historical and current sales
information. A discount accrual is recognised at each reporting date for discounts payable to customers
based on their expected or actual volume up to that date.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2018
Other Information
Other discounts include listing and shelving visibility fees charged by the customer whereby the
payments to customers are closely related to the volumes sold. HEINEKEN assesses the substance of
contracts with customers to determine the classification of payments to customers as either discounts
or marketing expenses.
Discounts are accounted for as a reduction of revenue. Only when these payments to customers relate to
a distinct service, the amount is classified as operating expense.
Excise tax expense
Local tax authorities impose multiple taxes, duties and fees. These include excise on sale or production of
alcoholic beverages, environmental taxes on the use of certain raw materials or packaging materials, or the
energy consumption in the production process. Excise duties are very common in the beverage industry,
but levied differently amongst the countries HEINEKEN operates in. HEINEKEN performs a country by
country analysis to assess whether the excise duty are sales-related or effectively a production tax. In most
countries excise duties are effectively a production tax as excise duties become payable when goods are
moved from bonded warehouses and is not based on the sales value. In these countries, increases in excise
duty are not always (fully) passed on to customers and HEINEKEN cannot, or can only partly, reclaim the
excise duty in the case products are eventually not sold to customers. Excise tax is borne by HEINEKEN
for these countries and shown as expenses. 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 duties are collected on behalf
of a tax authority and consequently deducted 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.
