O Q, Notes to the Consolidated Financial Statements (continued) 9.3 Contingencies Tax Other contingencies Guarantees Guarantees Introduction Report of the Executive Board Report of the Supervisory Board Accounting estimates In determining the likelihood and timing of potential cash out flows, HEINEKEN needs to make estimates. For claims, litigation and tax provisions HEINEKEN bases its assessment on internal and external legal assistance and established precedents. For large restructurings, management assesses the timing of the costs to be incurred, which influences the classification as current or non-current liabilities. Accounting policies A provision is a liability of uncertain timing or amount. A provision is recognised when HEINEKEN has a present legal or constructive obligation as a result of past events that can be estimated reliably, and it is probable 50%) that an outflow of economic benefits will be required to settle the obligation. In case of accounting for business combinations, provisions are also recognised when the likelihood is less than probable, but more than remote 5%). 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 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. 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. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be received by HEINEKEN 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. The latter takes 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. HEINEKEN's contingencies are mainly in the area of tax, civil cases (part of other contingencies) and guarantees. The tax contingencies mainly relate to tax positions in Latin America and include a large number of cases with a risk assessment lower than probable but possible. Assessing the amount of tax contingencies is highly judgemental, and the timing of possible outflows is uncertain. The best estimate of tax related contingent liabilities is €937 million (2017: €897 million), out of which €171 million (2017: €170 million) qualifies for Financial Statements Heineken N.V. Annual Report 201819 Sustainabil ity Review Other Information indemnification. For several other tax contingencies that were part of acquisitions, an amount of €369 million (2017: €382 million) has been recognised as provisions and other non current liabilities in the balance sheet (refer to note 9.2). The other contingencies relate to civil cases in Brazil. Management's best estimate of the financial effect for these cases is €64 million (2017: €57 million). For the other contingencies that were part of acquisitions, an amount of €31 million (2017: €49 million) has been recognised as provisions in the balance sheet (refer to note 9.2). In millions of Total 2018 Less than 1 year 1-5 years More than 5 years Total 2017 Guarantees to banks for loans (to third parties) 325 46 268 11 307 Other guarantees 959 472 213 274 978 1,284 518 481 285 1,285 Guarantees to banks for loans relate to loans and advances to customers, which are given to external parties in the ordinary course of business of HEINEKEN. HEINEKEN provides guarantees to the banks to cover the risk related to these loans. Accounting estimates and judgements HEINEKEN operates in a high number of jurisdictions, and is subject to a wide variety of taxes per jurisdiction. Tax legislation can be highly complex and subject to interpretation. As a result, HEINEKEN is required to exercise significant judgement in the recognition of taxes payable and determination of tax contingencies. Also for the other contingencies, HEINEKEN is required to exercise significant judgement to determine whether the risk of loss is possible but not probable. Contingencies involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Accounting policies A contingent liability is a liability of uncertain timing and amount. Contingencies are not recognised in the balance sheet because the existence can only be confirmed by occurrence or non-occurrence of one or more uncertain future events not wholly within the control of HEINEKEN or because the risk of loss is estimated to be possible (>5%) but not probable (<50%) or because the amount cannot be measured reliably

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