Independent Auditors Report (continued)
Provisions for uncertain tax positions and valuation of deferred tax assets
Internal controls over financial reporting
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
Risk The Company operates across several tax jurisdictions and is subject to periodic challenges
by local tax authorities during the normal course of business. In those cases where the
amount of tax payable or recoverable is uncertain, the Company establishes provisions
based on its judgement of the probable amount of the tax liability.
Deferred tax assets are recognised to the extent that it is probable that future taxable
income will be available, against which unused tax losses can be utilised. For payments
related to the contingent tax liabilities specifically, the Company changed its accounting
policy in response to the IFRIC agenda decision on Deposits Relating to Taxes other
than Income Tax. These payments are now recognised as an asset on the balance sheet
when it is probable that the Company will recover the payment. In the identification and
accounting for payments relating to contingent liabilities significant judgement is applied
by the Company.
The accounting for tax assets and uncertain tax positions, as detailed in notes 12 and 9.3 to
the financial statements, is significant to our audit because of the level of judgement that is
applied in quantifying appropriate provisions (including assessing probable outcomes) for
uncertain tax positions, and in determining the recoverability of tax assets.
We obtained a detailed understanding of the Company's tax process and controls to
identify exposures including uncertainties related to excises, sales taxes and corporate
income taxes. Involving our own in-country tax specialists, we assessed tax risks, legislative
developments and the status of ongoing local tax authority audits. We evaluated
and challenged the Company's judgements in respect of estimates of tax exposures,
recoverable amounts and contingencies. We considered correspondence with tax
authorities, case law and assessed opinions from third party tax advisors.
More specifically, for tax assets recognised, we evaluated the Company's recoverability
assessment including the likelihood of generating sufficient future taxable income. Finally
we considered the adequacy of the Company's disclosures in notes 3, 12 and 9.3 regarding
payments to contingent liabilities, uncertain tax positions and recognized tax assets.
Observation We have evaluated the provisions for uncertain tax positions and the valuation of tax assets
as well as the related disclosure in notes 3, 12 and 9.3 and have no reportable findings.
How the scope
of our audit
responded
to the risk
Heineken N.V. Annual Report 2019
Financial Statements
Sustainability Review
Other Information
Risk The Company has implemented a control framework and operates various processes and
procedures that are important for reliable financial reporting. These processes are operated
both centrally as well as locally.
We identified the Company's internal controls over financial reporting as an area of focus as
we consider internal controls over financial reporting as a basis for designing our procedures
for the audit. In those instances where accounting procedures, associated IT and process
level controls are not designed and/or operating effectively, there are risks associated with
financial reporting to which we need to tailor our audit procedures.
How the scope We have performed audit procedures on both the centrally and locally established
of our audit process level controls of the Company, including those relating to the various information
responded technology platforms. We performed walkthroughs to gain an understanding of the entity
to the risk and to identify relevant controls. We have tested the design of those controls and, where
effective for the audit, we also tested their operating effectiveness. In cases of deficiencies,
we have evaluated the compensating controls and measures of the Company and/or
tailored procedures our procedures to address the risk.
We are however not required nor engaged to perform an audit of internal controls over
financial reporting. Accordingly, we do not express an opinion on the effectiveness of the
Company's internal controls over financial reporting.
Observation We have communicated our observations on internal controls over financial reporting to
the company's audit committee. Where deemed necessary, we have mitigated the effect
of internal control observations through testing alternative controls or by extending our
substantive audit procedures. Overall, we have obtained sufficient and appropriate evidence
in response to the related financial reporting risks.
