s
Notes to the Consolidated Financial Statements (continued)
O Q,
Introduction Report of the Executive Board Report of the Supervisory Board
Accounting estimates and judgements
The cash flow projections used in the value in use calculations for goodwill impairment testing contains
various judgements and estimations as described in the key assumptions for the value in use calculations.
For intangible assets, other than goodwill, estimates are required to determine the (remaining) useful lives.
Useful lives are determined based on the market position (for brands), estimated remaining useful life of
the customer relationships or the period of the contractual arrangements, or estimates on technical and
commercial developments (for software/development expenditure).
Amortisation is charged to profit or loss on a straight-line basis over the estimated useful life.
HEINEKEN believes that straight-line depreciation most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the intangible asset.
Accounting policies
Goodwill
Goodwill represents the difference between the fair value of the net assets acquired and the transaction
price of the acquisition. Goodwill arising on the acquisition of associates and joint ventures is included in
the carrying amount of the associates and joint ventures.
Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to individual
or groups of CGUs for the purpose of impairment testing and is tested annually for impairment.
Negative goodwill is recognised directly in profit or loss as other income. An impairment loss in respect
of goodwill can not be reversed.
Brands, customer-related and contract-based intangibles
Brands, customer-related and contract-based intangibles acquired as part of a business combination are
recognised at fair value. Otherwise they are recognised at cost and amortised over the estimated useful
life of the individual brand, respectively over the remaining useful life of the customer relationships or the
period of the contractual arrangements.
Strategic brands are well-known international/local brands with a strong market position and an
established brand name.
Software, research and development and other intangible assets
Purchased software is measured at cost less accumulated amortisation. Expenditure on internally
developed software is capitalised when the expenditure qualifies as development activities, otherwise
it is recognised in profit or loss when incurred.
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge,
is recognised in profit or loss when incurred.
Heineken N.V. Annual Report 2018 8
Financial Statements
Sustainability Review
Other Information
Amortisation
Amortisation is calculated over the cost of the asset 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. The estimated useful lives are as follows:
- Strategic brands 40-50 years
- Other brands 15-25 years
- Customer-related and contract-based intangibles 5-30 years
- Re-acquired rights 3-12 years
- Software 3-7 years
- Capitalised development costs 3 years
The amortisation method, useful lives and residual values are reassessed annually. Changes in useful lives
or residual value are recognised prospectively
Derecognition of intangible assets
Intangible assets are derecognised when disposed or sold. Gain on sale of intangibles are presented
in profit or loss as other income (refer note 6.2); losses on sale are included in depreciation. Goodwill is
derecognised when the related CGU is sold.
Impairment of non-financial assets
Each reporting date HEINEKEN reviews the carrying amounts of its non-financial assets (except for
inventories and deferred tax assets) to determine whether there is any indication of impairment. If any
such indication exists, the recoverable amount is estimated.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use. The cash-generating unit for other non-financial assets is
often the operating company on country level. The recoverable amount of an asset or CGU is the higher of
an asset's fair value less costs of disposal and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and risks specific to the asset or CGU.
An impairment loss is recognised in profit or loss if the carrying amount of an asset or its CGU exceeds
its recoverable amount. Impairment losses are first allocated to goodwill and then to the other assets
in the unit on a pro rata basis. In respect of other assets, impairment losses recognised in prior periods
are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
