Notes to the Consolidated Financial Statements (continued)
13 Other
13.1 Fair value
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Fair value through OCI investments based on level 3
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Accounting estimates
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
In this note more information is disclosed regarding the fair value and the different methods of determining
fair values.
Financial instruments - hierarchy
The financial instruments included on the HEINEKEN statement of financial position are measured at either fair
value or amortised cost. To measure the fair value, HEINEKEN generally uses external valuations with market
inputs. The measurement of fair value can be subjective in some cases and may be dependent on inputs used
in the calculations. The different valuation methods are called 'hierarchies' as described below
- Level 1 - The fair value is determined using quoted prices (unadjusted) in active markets for identical
assets or liabilities.
- Level 2 - The fair value is calculated using inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
- Level 3 - The fair value is determined using inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The following table shows the carrying amounts and fair values of financial assets and liabilities according
to their fair value hierarchy.
As at 31 December
Carrying amount
Fair value
In millions of
Level 1
Level 2
Level 3
Fair value through OCI investments
408
283
125
Non-current derivative assets
2
2
Current derivative assets
28
28
Total 2019
438
283
30
125
Total 2018
572
410
71
91
Non-current derivative liabilities
(22)
(22)
Borrowings1
(13,435)
(13,824)
(646)
Current derivative liabilities
(69)
(69)
Total 2019
(13,526)
(13,824)
(737)
Total 2018
(13,756)
(13,470)
(606)
1 Borrowings excluding lease liability, deposits, bank overdrafts and commercial paper.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019B110
Other Information
During the period ended 31 December 2019 there were no significant transfers between the three levels
of the fair value hierarchy.
Refer to the table below for detail of the determination of level 3 fair value measurements as at 31 December:
In millions of
2019
2018
Balance as at 1 January
91
84
Fair value adjustments recognised in other comprehensive income
34
3
Transfer to associate
4
Balance as at 31 December
125
91
The fair values for the level 3 fair value through OCI investments are based on the financial performance
of the investments and the market multiples of comparable equity securities.
The different methods applied by HEINEKEN to determine the fair value require the use of estimates.
Investments in equity securities
The fair value of financial assets at fair value through profit or loss and fair value through OCI is determined
by reference to their quoted closing bid price at the reporting date or, if unquoted, determined using an
appropriate valuation technique. These valuation techniques maximise the use of observable market
data where available.
Derivative financial instruments
The fair value of derivative financial instruments is based on their listed market price, if available. If a listed
market price is not available, fair value is in general estimated by discounting the difference between the cash
flows based on contractual price and the cash flows based on current price for the residual maturity of the
contract using observable interest yield curves, basis spread and foreign exchange rates. These calculations
are tested for reasonableness by comparing the outcome of the internal valuation with the valuation
received from the counterparty. Fair values include the instrument's credit risk and adjustments to take
account of the credit risk of the HEINEKEN entity and counterparty when appropriate.
Non-derivative financial instruments
Fair value, which is determined for disclosure purposes or when fair value hedge accounting is applied, is
calculated based on the present value of future principal and interest cash flows, discounted at the market
rate of interest at the reporting date. Fair values include the instrument's credit risk and adjustments to
take account of the credit risk of the HEINEKEN entity and counterparty when appropriate.
