Notes to the Consolidated Financial Statements (continued)
Goodwill
O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
Accounting estimates and judgements
The cash flow projections used in the value in use calculations for goodwill impairment testing contain
various judgements and estimations as described in the key assumptions for the value in use calculations.
For intangible assets, other than goodwill, estimates are required to determine the (remaining) useful lives.
Useful lives are determined based on the market position (for brands), estimated remaining useful life of
the customer relationships or the period of the contractual arrangements, or estimates on technical and
commercial developments (for software/development expenditure).
Amortisation is charged to profit or loss on a straight-line basis over the estimated useful life.
HEINEKEN believes that straight-line depreciation most closely reflects the expected pattern of consumption
of the future economic benefits embodied in the intangible asset.
Accounting policies
Goodwill represents the difference between the fair value of the net assets acquired and the transaction
price of the acquisition. Goodwill arising on the acquisition of associates and joint ventures is included in the
carrying amount of the associates and joint ventures.
Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to individual or groups
of CGUs for the purpose of impairment testing and is tested annually for impairment. Negative goodwill
is recognised directly in profit or loss as other income. An impairment loss in respect of goodwill cannot
be reversed.
Brands, customer-related and contract-based intangibles
Brands, customer-related and contract-based intangibles acquired as part of a business combination are
recognised at fair value. Otherwise these acquired intangibles are recognised at cost and amortised over
the estimated useful life of the individual brand, respectively over the remaining useful life of the customer
relationships or the period of the contractual arrangements.
Strategic brands are well-known international/local brands with a strong market position and an established
brand name.
Software, research and development and other intangible assets
Purchased software is measured at cost less accumulated amortisation. Expenditure on internally developed
software is capitalised when the expenditure qualifies as development activities, otherwise it is recognised in
profit or loss when incurred.
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge, is
recognised in profit or loss when incurred.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019
Other Information
Amortisation
Amortisation is calculated over the cost of the asset less its residual value. Intangible assets with a finite life
are amortised on a straight-line basis over their estimated useful lives from the date they are available for
use. The estimated useful lives are as follows:
- Strategic brands 40-50 years
- Other brands 15-25 years
- Customer-related and contract-based intangibles 5-30 years
- Re-acquired rights 3-12 years
- Software 3-7 years
- Capitalised development costs 3 years
The amortisation method, useful lives and residual values are reassessed annually. Changes in useful lives
or residual value are recognised prospectively.
De-recognition of intangible assets
Intangible assets are derecognised when disposed or sold. Gains on sale of intangibles are presented in
profit or loss as other income (refer to note 6.2); losses on sale are included in depreciation. Goodwill is
derecognised when the related CGU is sold.
Impairment of non-financial assets
At each reporting date HEINEKEN reviews the carrying amounts of its non-financial assets (except for
inventories and deferred tax assets) to determine whether there is any indication of impairment. If any
such indication exists, the recoverable amount is estimated.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that
generates cash inflows from continuing use. The CGU for other non-financial assets is often the operating
company on country level. The recoverable amount of an asset or CGU is the higher of an asset's FVLCD and
value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and risks
specific to the asset or CGU.
An impairment loss is recognised in profit or loss if the carrying amount of an asset or its CGU exceeds its
recoverable amount. Impairment losses are first allocated to goodwill and then to the other assets in the
unit on a pro rata basis. In respect of other assets, impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.