tiï O Q, Notes to the Consolidated Financial Statements (continued) 11 Financing and capital structure 11.1 Net finance income and expense Interest income Interest expenses 11.2 Cash and cash equivalents Introduction Report of the Executive Board Report of the Supervisory Board HEINEKEN's investments in associates and joint ventures are accounted for using the equity method of accounting, meaning they are initially recognised at cost. The consolidated financial statements include HEINEKEN's share of the net profit or loss of the associates and JVs whereby the result is determined using the accounting policies of HEINEKEN. When HEINEKEN's share of losses exceeds the carrying amount of the associate or joint venture, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that HEINEKEN has an obligation or has made a payment on behalf of the associate or joint venture. Interest expenses are mainly related to interest charges over the outstanding bonds and bank loans (refer to note 11.3). Other net finance income and expenses comprises dividend income, fair value changes of financial assets and liabilities measured at fair value, transactional foreign exchange gains and losses (on net basis), unwinding of discount on provisions and interest on the net defined benefit obligation. In millions of Note 2018 2017 62 72 (493) (468) Dividend income from fair value through OCI investments2 16 10 Net change in fair value of derivatives 71 (149) Net foreign exchange gain/floss)1 (102) 56 Unwinding discount on provisions 9.2 (17) (14) Interest on the net defined benefit obligation 9.1 (31) (33) Other (1) 7 Other net finance income/(expenses) (64) (123) Net finance income/(expenses) (495) (519) 1 Transactional foreign exchange effects of working capital and foreign currency denominated loans, the latter being offset by net change in fair value of derivatives. 2 In 2017 these investments were classified as available-for-sale investments. Heineken N.V. Annual Report 2018 Financial Statements Sustainability Review Other Information Accounting policies Interest income and expenses are recognised as they accrue, using the effective interest method. Dividend income is recognised in the income statement on the date that HEINEKEN's right to receive payment is established, which is the ex-dividend date in the case of quoted securities. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts and commercial paper form an integral part of HEINEKEN's cash management and are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. In millions of Note 2018 2017 Cash and cash equivalents 2,903 2,442 Bank overdrafts and commercial paper 11.3 (655) (1,265) Cash and cash equivalents in the statement of cash flows 2,248 1,177 The following table presents the recognised 'Cash and cash equivalents' and 'Bank overdrafts and commercial paper' and the impact of netting on the gross amounts. The column 'Net amount' shows the impact on HEINEKEN's balance sheet if all amounts subject to legal offset rights had been netted. In millions of Gross amounts Gross amounts offset in the statement of financial position Net amounts presented in the statement of financial position Amounts subject to legal offset rights Net amount Balance as at 31 December 2018 Assets Cash and cash equivalents 3,241 (338) 2,903 (260) 2,643 Liabilities Bank overdrafts and commercial paper (993) 338 (655) 260 (395)

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