Notes to the Consolidated Financial Statements (continued)
4 Changes in accounting policies
(a) Changed accounting policies in 2019
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
The following accounting policy changes have been adopted in 2019 and are reflected in the consolidated
financial statements:
IFRS 16 Leases
HEINEKEN has implemented IFRS 16 'Leases' as at 1 January 2019, replacing existing guidance on leases
(including IAS 1 7). The adoption of IFRS 16 has changed the accounting for leases as under the new
standard all operating lease contracts are recognised on HEINEKEN's statement of financial position
('balance sheet') by recognising a right of use (ROU) asset and a lease liability, except for short-term and
low value leases. Lease expenses previously recorded in the income statement are replaced by depreciation
and interest expenses for all lease contracts in scope of the standard. Refer to notes 8.2 Property, plant and
equipment and 11.3 Borrowings for the accounting policy on leases.
HEINEKEN has implemented IFRS 16 as at 1 January 2019 by applying the modified retrospective method,
meaning that the 2018 comparative numbers are not restated. HEINEKEN has around 30,000 operating
leases mainly relating to stores, pubs, offices, warehouses, cars and (forklift) trucks.
In some countries, HEINEKEN is operating both as a lessee (referred to as head lease contracts) and a lessor
(referred to as sublease contracts) for pubs. HEINEKEN has analysed the sublease contracts and concluded
that under the new standard these contracts are treated as a finance lease, where under the previous
standard these same leases were treated as an operating lease.
In the transition to IFRS 16, HEINEKEN applied the following transition expedients:
- Use the option to grandfather the lease classification for existing contracts.
- Use the transition option for leases with a remaining contract period of less than one year, meaning that
these leases will not be recorded on balance and the payments will be expensed in the income statement
on a straight-line basis.
- Measure the ROU asset based on the lease liability recognised.
As a result of applying IFRS 16, HEINEKEN recognised €1,034 million of ROU assets, €252 million of lease
receivables and €1,252 million of lease liabilities as at 1 January 2019. A net amount of €31 million of lease
prepayments, lease accruals and onerous lease provisions has been included in ROU assets as at 1 January
2019. An amount of €3 million has been recorded in retained earnings. The ROU assets are included in
Property, plant and equipment. The lease receivables are included under Other non-current assets and Trade
and other receivables. The lease liabilities are included under current and non-current Borrowings. As at
1 January 2019, deferred tax assets of €291 million related to lease liabilities, and deferred tax liabilities of
€291 million related to ROU assets and lease receivables have been recognised. These deferred tax positions
are offset and reported on a net basis in the statement of financial position.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019
Other Information
When measuring the lease liability, HEINEKEN discounted the lease payments using the incremental
borrowing rate as at 1 January 2019. The weighted average incremental borrowing rate applied is 4.3%.
During 2019, HEINEKEN reported €238 million depreciation and impairment of ROU assets and €55 million
interest costs on lease liabilities. In 2018, operating lease expenses were reported under Raw materials,
consumables and services and Personnel expenses. No material impact on tax expenses.
As a result of the treatment of subleases as a finance lease, revenue decreased with approximately
€54 million. The decrease in revenue is fully offset by a decrease in expenses on the head leases and
primarily impacts the Netherlands and Belgium.
The lease payments are reported under 'Interest paid' (2019: €55 million) and 'Payment of lease commitments'
(2019: €259 million) in the cash flow statement. In 2018, all lease payments were included in the cash flow
from operations.
As at 31 December 2018, HEINEKEN reported total off-balance sheet commitments for leases of
€2,013 million. The difference between the opening balance sheet impact as at 1 January 2019 and the
off-balance sheet commitments is primarily due to discounting of future lease payments and low value
and short-term lease commitments, which are not included in the lease liability. Refer to the table below
for the reconciliation:
In millions of
Operating lease commitments disclosed at 31 December 2018
2,013
Impact of discounting using the incremental borrowing rate as at 1 January 2019
(615)
Short-term leases not recognised as a liability
(36)
Low value leases not recognised as a liability
(116)
Other reconciling items
6
Lease liability recognised as at 1 January 2019
1,252
Payments relating to contingent liabilities (IAS 37)
Following the IFRS Interpretations Committee agenda decision in January 2019 regarding tax deposits
(relating to taxes other than income tax), HEINEKEN has changed its accounting policy with regards to
payments relating to contingent liabilities.
Payments relating to contingent liabilities are now, in accordance with the conceptual framework, recognised
as an asset on the balance sheet when it is probable (>50%) that HEINEKEN will recover the payment.
Previously, these payments were contingent assets under IAS 37, and recognised if the recovery was virtually
certain (>95%). Judgement is applied for estimating the likelihood, determining the timing of potential cash
inflows and the recoverability
This change in accounting policy has been recognised retrospectively and increased equity as at 1 January
2018 by €157 million. The impact on 2018 profit amounts to €10 million (increase). The cash flow statement
has been restated within the cash flow from operations.
