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Notes to the Consolidated Financial Statements
Heineken N.V.
Annual Report 2020
Introduction
Report of the
Executive Board
Report of the
Supervisory Board
Financial
Statements
Sustainability
Review
Other
Information
HEINEKEN has multiple distribution models to deliver goods to end customers. There is no reliance on major
clients. Deliveries to end consumers are country dependent and include deliveries via own wholesalers and
pubs, direct to customers and via third party distribution. As such, distribution models are country-specific
and diverse across HEINEKEN. In addition, these various distribution models are not centrally managed or
monitored. Consequently, the Executive Board does not allocate resources or assess the performance based
on business type information. Accordingly, no segment information on business type is provided.
Inter-segment transfers or transactions are determined on an arm's length basis. As net finance expenses
and income tax expenses are monitored on a consolidated level (and not on an individual regional basis)
and Regional Presidents are not accountable for that, net finance expenses and income tax expenses are not
provided for the reportable segments.
Revenue
The majority of HEINEKEN's revenue is generated by the sale and delivery of products to customers.
The product portfolio of HEINEKEN mainly consists of beer, soft drinks and cider. Products are mostly
own-produced finished goods from HEINEKEN's brewing activities, but also contain purchased goods for
resale from HEINEKEN's wholesale activities. HEINEKEN's customer group can be split between on-trade
customers like cafés, bars and restaurants and off-trade customers like retailers and wholesalers. Due to
HEINEKEN's global footprint, its revenue is exposed to strategic and financial risks that differ per region.
Revenue is recognised when control over products has transferred and HEINEKEN fulfilled its performance
obligation to the customer. For the majority of the sales, control is transferred either at delivery of the
products or upon pickup by the customer from HEINEKEN's premises.
Revenue recognised is based on the price specified in the contract, net of returns, discounts, sales taxes and
excise taxes collected on behalf of third parties.
Other revenues include rental income from pubs and bars, royalties, income from wholesale activities, pub
management services and technical services to third parties. Royalties are sales-based and recognised in
profit or loss (consolidated income statement) on an accrual basis in accordance with the relevant agreement.
Rental income, income from wholesale activities, pub management services and technical services are
recognised in profit or loss when the services have been delivered.
Discounts
HEINEKEN uses different types of discounts depending on the nature of the customer. Some discounts
are unconditional, like cash discounts, early payment discounts and temporary promotional discounts.
Unconditional discounts are recognised at the same moment of the related sales transaction.
HEINEKEN also provides conditional discounts to customers. These contractually agreed conditions include
volume and promotional rebates. Conditional discounts are recognised based on estimated target realisation.
The estimation is based on accumulated experience supported by historical and current sales information.
A discount accrual is recognised at each reporting date for discounts payable to customers based on their
expected or actual volume up to that date.
Other discounts include listing and shelving visibility fees charged by the customer whereby the
payments to customers are closely related to the volumes sold. HEINEKEN assesses the substance of
contracts with customers to determine the classification of payments to customers as either discounts or
marketing expenses.
Discounts are accounted for as a reduction of revenue. Only when these payments to customers relate to a
distinct service, the amount is classified as operating expense.
Excise tax expense
Local tax authorities impose multiple taxes, duties and fees. These include excise on sale or production of
alcoholic beverages, environmental taxes on the use of certain raw materials or packaging materials, or the
energy consumption in the production process. Excise duties are common in the beverage industry, but
levied differently amongst the countries HEINEKEN operates in. HEINEKEN performs a country by country
analysis to assess whether the excise duty are sales-related or effectively a production tax. In most countries
excise duties are effectively a production tax as excise duties become payable when goods are moved from
bonded warehouses and are not based on the sales value. In these countries, increases in excise duties are
not always (fully) passed on to customers and HEINEKEN cannot, or can only partly, reclaim the excise
duty in the case products are eventually not sold to customers. Excise tax is borne by HEINEKEN for these
countries and shown as expenses. Only for those countries where excise is levied at the moment of the sales
transaction and excise is based on the sales value, the excise duties are collected on behalf of a tax authority
and consequently deducted from revenue. Due to the complexity and variety in tax legislations, significant
judgement is applied in the assessment whether taxes are borne by HEINEKEN or collected on behalf of a
third party.
To provide transparency on the impact of the accounting for excise, HEINEKEN presents the excise tax
expense on a separate line below revenue in the consolidated income statement. A subtotal called 'Net
revenue' is therefore included in the Income Statement. This 'Net revenue' subtotal is 'revenue' as defined
in IFRS 15 (after discounts) minus the excise tax expense for those countries where the excise is borne
by HEINEKEN.