Notes to the Consolidated Financial Statements (continued)
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O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
Goodwill impairment testing
For the purpose of impairment testing, goodwill in respect of Europe, Americas (excluding Brazil) and Asia
Pacific is allocated and monitored on a regional basis. For Brazil and subsidiaries within Africa, Middle East
Eastern Europe and Head Office, goodwill is allocated and monitored on an individual country basis.
The total amount of goodwill of €11,465 million (2018: €11,194 million) is allocated to each (group of)
Cash Generating Unit (CGU) as follows:
Goodwill per (group of) CGU
6,000
Europe Americas Brazil Africa, Middle East Asia Pacific Head Office
(excluding Brazil) Eastern Europe
2019 2018
The carrying amount of a CGU is compared to the recoverable amount of the CGU. The recoverable
amounts of the (group of) CGUs are based on the higher of the fair value less costs of disposal (FVLCD)
and value in use calculations. For CGUs representing more than 95% of goodwill, the recoverable amount
is based on a value in use model. Value in use is determined by discounting the future cash flows generated
from the continuing use of the unit using a pre-tax discount rate.
The key assumptions used for the value in use calculations are as follows:
- Cash flows are projected based on actual operating results and the three-year business plan. Cash flows
for a further seven-year period (except for Europe, where a further two-year period was applied) were
extrapolated using expected annual per country volume growth rates, which are based on external sources.
Management believes that this period is justified due to the long-term development of the local beer
business and past experiences.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019 O
Other Information
- The beer price growth per year after the first three-year period is assumed to be at specific per country
expected annual long-term inflation, based on external sources.
- Cash flows after the first ten-year period (Europe five-year) are extrapolated using a perpetual growth rate
equal to the expected annual long-term inflation, in order to calculate the terminal recoverable amount.
- A per CGU-specific pre-tax Weighted Average Cost of Capital (WACC) was applied in determining the
recoverable amount of the units.
The values assigned to the key assumptions used for the value in use calculations are as follows:
In
Pre-tax WACC
Expected
annual
long-term
inflation
2023-2029
Expected
volume
growth rates
2023-2029
Europe
8.5
2.0
0.9
Americas (excluding Brazil)
12.1
2.9
2.7
Brazil
17.0
3.6
Africa, Middle East Eastern Europe
22.7-35.3
6.9-8.7
0.0-2.9
Asia Pacific
13.5
3.4
3.9
Head Office
7.9
2.0
0.9
CGUs for which the recoverable amount is based on a FVLCD model represent less than 5% of goodwill.
The outcome of goodwill impairment tests in 2019 resulted in impairment losses of €6 million (2018: nil).
Sensitivity to changes in assumptions
The outcome of a sensitivity analysis of a 100 basis points adverse change in key assumptions (lower
growth rates or higher discount rates respectively) did not result in a materially different outcome of the
impairment test.
Brands, customer-related and contract-based intangibles
The main brands capitalised are the brands acquired in various acquisitions. The main customer-related
and contract-based intangibles relate to customer relationships (constituted either by way of a contractual
agreement or by way of non-contractual relations) and re-acquired rights.
