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Independent Auditor's Report
Heineken N.V.
Annual Report 2020
Introduction
Report of the
Executive Board
Report of the
Supervisory Board
Financial
Statements
Sustainability
Review
Other
Information
Impairment testing of intangible assets and property, plant and equipment -
Refer to Notes 8.1, 8.2 and 8.3 to the financial statements
How the scope Our audit procedures related to the projected cash flows and discount rates used by
of our audit
responded
to the risk
management included the following, among others:
- We obtained an understanding of management's process over the impairment trigger
tests and the impairment tests.
- We evaluated management's ability to accurately forecast by comparing actual results to
management's historical forecasts.
- We evaluated sensitivities in management's projections that could cause a substantial
change to the impairments recorded, and or cause headroom to change in an impairment.
- We evaluated projected cash flows and reviewed management's scenario-analyses by:
- Comparing the projections (and scenarios) to historical forecasts and information
included in HEINEKEN's internal communications to the management and the
Executive Board.
- Challenging and comparing the estimated sales volumes and revenues to, for example,
external economic outlook data, external market data on the beer market and expected
inflation rates.
- With the assistance of our fair value specialists, we evaluated the reasonableness of
discount rates, including testing the source information underlying the determination of
the discount rates, testing the mathematical accuracy of the calculation, and developing
a range of independent estimates and comparing those to the discount rates selected
by management.
Observation Applying the aforementioned materiality, we did not identify any reportable matters
in management's assessment of the recoverability of intangible assets and property
plant and equipment, the impairments recorded and the disclosures in Note 8.1 and 8.2
(including further disclosures on key uncertainties and scenarios assumed in management
impairment testing).
Management judgement related to the provisions for uncertain tax positions and recoverability of
deferred tax assets - Refer to Notes 9.3 and 12 to the financial statements
Risk HEINEKEN 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, management establishes provisions
based on its judgement of the probable amount of the tax liability. Deferred tax assets are
only recognised to the extent that it is probable that future taxable income will be available,
against which unused tax losses can be utilised. This assessment is performed annually and
based on budgets and business plans for the coming years, including planned commercial
initiatives and the impact of COVID-19.
The accounting for uncertain tax positions and deferred tax assets, as detailed in notes 9.3
and 12 to the financial statements, inherently requires management to apply judgement in
quantifying appropriate provisions (including assessing probable outcomes) for uncertain
tax positions, and in determining the recoverability of deferred tax assets. Given the
significant judgement applied by management, performing procedures to evaluate the
reasonableness of probable outcomes for uncertain tax positions and the recoverability of
deferred tax assets based on budgets and business plans, required a higher degree of auditor
judgement and a need to involve our own in-country tax specialists.
How the scope Our audit procedures to address management's judgement's related to the provisions for
of our audit uncertain tax positions and recoverability of deferred tax assets included the following,
responded amongst others:
to the risk
- We obtained an understanding of management's tax process related to the valuation
uncertain tax positions and the recoverability of deferred tax assets.
- We involved our own in-country tax specialists to assess tax risks, tax carry forward
facilities, legislative developments and the status of ongoing local tax authority audits.
- We challenged management's judgement applied in quantifying provisions for tax
uncertainties and assessing probable outcomes based on correspondence with tax
authorities, case law and opinions from management's tax expert.
- We evaluated management's ability to forecast taxable income by comparing prior
forecasts on future taxable income with the actual income for the year.
- We evaluated management's recoverability assessment including the likelihood of
generating sufficient future taxable income based on budgets, business plans and tax
losses carry forward facilities in the various tax jurisdictions (including expiry dates).
Observation Applying the aforementioned materiality, we have audited the provisions for uncertain tax
positions and the valuation of deferred tax assets as well as the related disclosure in Notes 3,
12 and 9.3 and have no reportable findings.
