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Notes to the Consolidated Financial Statements
9.2 Provisions
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Q Heineken N.V. Report of the Report of the Financial Sustainability Other
s Annual Report 2020 Introduction Executive Board Supervisory Board Statements Review Information
The calculations are performed annually by qualified actuaries using the projected unit credit method.
When the calculation results in a benefit to HEINEKEN, the recognised asset is limited to the present
value of economic benefits available in the form of any future refunds from the plan or reductions in
future contributions to the plan. In order to calculate the present value of economic benefits, consideration
is given to any minimum funding requirements that apply to any plan in HEINEKEN. An economic
benefit is available to HEINEKEN if it is realisable during the life of the plan, or on settlement of the plan
liabilities. When the benefits of a plan are changed, the expense or benefit is recognised immediately in profit
or loss.
HEINEKEN recognises all actuarial gains and losses arising from defined benefit plans immediately in other
comprehensive income and all expenses related to defined benefit plans in personnel expenses and other net
finance income and expenses in profit or loss.
Provisions within HEINEKEN mainly relate to restructuring, and claims and litigation that arise in the
ordinary course of business. The outcome depends on future events, which are by nature uncertain.
In millions of
Claims
and
litigation
Taxes
Restruc
turing
Onerous
contracts
Other
Total
Balance as at 1 January 2020
339
337
154
30
80
940
Transfers
8
8
Provisions made during the year
86
44
359
21
100
610
Provisions used during the year
(11)
(1)
(76)
(1)
(14)
(103)
Provisions reversed during the year
(45)
(85)
(15)
(20)
(27)
(192)
Effect of movements in exchange rates
(125)
(41)
(2)
(3)
(171)
Unwinding of discounts
11
1
12
Balance as at 31 December 2020
255
255
422
28
144
1,104
Non-current
229
201
175
18
65
688
Current
26
54
247
10
79
416
Claims and litigation
The provisions for claims and litigation of €255 million (2019: €339 million) mainly relate to civil and labour
claims in Brazil.
Taxes
The provisions for taxes of €255 million (2019: €337 million) do not relate to income tax within the scope of
IAS 12 and mainly relate to Brazil. Tax legislation in Brazil is highly complex and subject to interpretation,
therefore the timing of the cash outflows for these provisions is uncertain.
Restructuring
On 28 October 2020, HEINEKEN announced a review of the effectiveness and efficiency of the organisations
at Head Office, regional offices and each of its local operations as a part of its EverGreen strategic review.
The increase in the provisions for restructuring of €268 million is related to the productivity programme part
of EverGreen.
Other provisions
Included are, among others, provisions for credit risk on surety and guarantees issued of €57 million
(2019: €42 million).
Accounting estimates
In determining the likelihood and timing of potential cash out flows, HEINEKEN needs to make estimates.
For claims, litigation and tax provisions, HEINEKEN bases its assessment on internal and external legal
assistance and established precedents. For large restructuring, management assesses the timing of the costs
to be incurred, which influences the classification as current or non-current liabilities.
Accounting policies
A provision is a liability of uncertain timing or amount. A provision is recognised when HEINEKEN has
a present legal or constructive obligation as a result of past events that can be estimated reliably, and it
is probable (>50%) that an outflow of economic benefits will be required to settle the obligation. In case
of accounting for business combinations, provisions are also recognised when the likelihood is less than
probable, but more than remote (>5%).
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation, using a pre-tax rate that reflects the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognised as part of net finance expenses.
Restructuring
A provision for restructuring is recognised when HEINEKEN has approved a detailed and formal
restructuring plan, and the restructuring has either commenced or has been announced publicly.
Future operating losses are not provided for. The provision includes the benefit commitments in connection
with early retirement and redundancy schemes.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be received by HEINEKEN are
lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at
the present value of the lower of the expected cost of terminating the contract, and the expected net cost of
continuing with the contract. Before a provision is established, HEINEKEN recognises any impairment loss
on the assets associated with that contract.
