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Notes to the Consolidated Financial Statements
1 f\Q Heineken N.V. Report of the Report of the Financial Sustainability Other
J-V./7 Annual Report 2020 Introduction Executive Board Supervisory Board Statements Review Information
Generally, HEINEKEN seeks to apply hedge accounting or make use of natural hedges in order to
minimise profit and loss or cash flow volatility. Refer to the table below for derivatives that are used in
hedge accounting:
In millions of
2020
2019
Asset
Liability
Asset
Liability
No hedge accounting - CCIRS
3
(16)
No hedge accounting - Other
9
(12)
4
(10)
Cash flow hedge - Forwards
46
(37)
11
(31)
Cash flow hedge - Commodity forwards
21
(3)
15
(20)
Fair value hedge - CCIRS
(35)
(7)
Net investment hedge - CCIRS
18
(5)
Net investment hedge - Forwards
1
(2)
98
(87)
30
(91)
Cash flow hedges
The hedging of future, highly probable forecasted transactions are designated as cash flow hedges. Cash flow
hedges are entered into to cover commodity price risk and transactional foreign exchange risk.
Net investment hedges
HEINEKEN hedges its investments in certain subsidiaries by entering into local currency denominated
borrowings, forward contracts and cross-currency interest rate swaps, which mitigate the foreign currency
translation risk arising from the subsidiaries net assets. These borrowings, forward contracts and swaps are
designated as net investment hedges and fully effective, as such there was no ineffectiveness recognised in
profit and loss in 2020 (2019: nil). As at 31 December 2020 the fair value of these borrowings was €200 million
(2019: €288 million), the market value of forward contracts was €1 million positive (2019: €2 million negative)
and the market value of these swaps was €18 million positive (2019: €5 million negative).
Fair value hedges
HEINEKEN has entered into several cross-currency interest rate swaps (CCIRS) which have been designated
as fair value hedges to hedge the foreign exchange rate risk on the principal amount and future interest
payments of certain US Dollar borrowings. The borrowings and the cross-currency interest rate swaps have
the same critical terms. The accumulated loss arising on derivatives as designated hedging instruments in
fair value hedges amounts to €38 million as at 31 December 2020 (2019: €11 million). The gain arising on the
adjustment for the hedged item attributable to the hedged risk in a designated fair value hedge accounting
relationship also amounts to €38 million as at 31 December 2020 (2019: €11 million).
Hedge effectiveness
Hedge effectiveness is determined at the start of the hedge relationship and periodically through a
prospective effectiveness assessment to ensure that an economic relationship exists between the hedged
item and hedging instrument. This assessment is done qualitatively by comparing the critical terms, and if
needed quantitative assessments are done using hypothetical derivatives. For the current hedges no hedge
ineffectiveness is expected.
Accounting policies
Derivative financial instruments are recognised initially at fair value. Subsequent accounting for derivatives
depends on whether or not the derivatives are designated as hedging instrument in a cash flow, fair value or
net investment hedge. Derivatives with positive fair values are recorded as assets and negative fair values as
liabilities. Refer to note 13.1 for fair value measurements.
Cash flow hedge
Changes in the fair value are recognised in other comprehensive income and presented in the hedging reserve
within equity to the extent that the hedge is effective. The ineffective part is recognised as other net finance
income/(expense). When the hedged risk impacts the profit or loss, the amounts previously recognised in
other comprehensive income are recycled through other comprehensive income and transferred to the same
item in the profit or loss as the hedged item. When the hedged risk subsequently results in a non-financial
asset or liability (e.g. inventory or P,P&E), the amount previously recognised in the cash flow hedge reserve is
directly included in its carrying amount and does not affect other comprehensive income.
Fair value hedge
The fair value changes of derivatives used in fair value hedges are recognised in profit or loss.
Net investment hedge
The fair value changes of derivatives used in net investment hedges are recognised in other comprehensive
income and presented within equity in the translation reserve. Any ineffectiveness is recognised in profit
or loss.
