201
Independent Auditor’s Report
Introduction
Observation
Sustainability
Review
Other
Information
Financial
Statements
Report
of the
Supervisory
Board
Report
of the
Executive
Board
of our audit
responded to
the key audit
matter
Key audit
matter
On 14 April 2023, HEINEKEN obtained a controlling stake of 59.4% in Namibia Breweries Limited
(NBL) and on 26 April 2023, HEINEKEN fully acquired the remaining operations of Distell Group
Holdings Limited (Distell) post the carve-out of their whiskey and gin activities.
Accounting for these acquisitions in accordance with IFRS 3 requires management to apply
estimates to determine the fair value of the identifiable assets and liabilities. The purchase price
allocation resulted in the recognition of goodwill (€656 million), intangible assets other than
goodwill (€775 million), a non-controlling interest (€557 million), and a gain on previously held
equity interest (€14 million).
Applying the aforementioned materiality, we did not identify any reportable findings in
management's accounting for the acquisition of Distell and Namibia Breweries and the
determination and recognition of the fair value of assets and liabilities and the disclosures in
Note 10.1.
Given the significance of the acquisition transaction, the complexity of accounting for business
combinations, and the significant management assumptions in the valuation of the (intangible)
assets identified, performing procedures to evaluate the purchase price allocation required higher
degree of auditor judgement and a need to involve valuation, real estate and tax specialists.
Further details on the accounting and disclosures under IFRS 3 Business Combinations are
included in note 10.1 to the financial statements.
Key audit
matter
In view of the inherent uncertainties, including those related to the current macro-economic
environment, the projection of sales volumes, revenues, margins, and discount rates in
management's impairment tests, involved an increased level of judgement for certain CGUs.
As a result of impairment testing for the current year, management concluded on
impairment losses of €783 million, of which €491 million is related to the impairment loss
recorded for the newly established HEINEKEN Beverages CGU, and €10 million for Russia
(excluding €209 million for CTA recycling). A reversal of €103 million was recorded during
the year for the impairment of €11 3 million recorded at HY1 2023 for Russia that was
classified as a disposal group held for sale. Further details on the accounting and disclosures
under IAS 36 Impairment of Assets are included in notes 8.1 and 8.2 to the financial
statements. Further details on the accounting and disclosure under IFRS 5 Non-current
Assets Held for Sale are included in note 10.2 to the financial statements. Further details on
the accounting and disclosure under IAS 28 Investments in Associates and Joint Ventures
are included in note 10.3 to the financial statements.
Intangible assets (including goodwill), property, plant and equipment and investments in
associates and joint ventures amounted to €40,683 million on 31 December 2023 and
represented 93 percent of the consolidated total assets.
For purposes of impairment testing, goodwill is allocated and monitored on a (group of)
Cash Generating Unit ('CGU') level. Other intangibles and property, plant, and equipment,
are grouped to CGUs. For goodwill, management is required to assess the recoverable
amount of the respective CGUs (or groups of CGUs). Recoverable amounts of other non
current assets are assessed upon the existence of a triggering event. Investments in
associates are accounted for using the equity method of accounting, meaning they are
initially recognized at cost. The consolidated financial statements include HEINEKEN’s share
of the net profit or loss of the associates and joint ventures whereby the result is determined
using the accounting policies of HEINEKEN. Triggers for the impairment of investments in
associates, are amongst others, a prolonged and significant decline in the fair value of the
equity instrument. For assets or disposal groups held for sale, an impairment loss is
recognised should the carrying amount exceed the fair value less cost to sell.
Given the high level of judgement made by management to estimate the recoverable
amounts used in management’s impairment tests for intangible assets (including goodwill)
and property, plant and equipment, procedures to evaluate the reasonableness of projected
sales volumes, revenue and discount rates required a high degree of auditor judgement and
an increased extent of effort, including the need to involve our valuation specialists.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key
audit matters are not a comprehensive reflection of all matters discussed.
The below identified key audit matters were addressed in the context of our audit of the financial statements as
a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Heineken
N.V.
Annual
Report
2023
Accounting for the acquisition of Distell and Namibia Breweries Refer to Note 10.1 to the
financial statements
How the scope Our audit procedures to address management's judgements related to the accounting for the
acquisition of Distell and Namibia Breweries included the following, amongst others:
- We have gained an understanding of the main processes and procedures in place at the
company for acquisitions that are relevant for our audit.
- We assessed and evaluated the purchase consideration of Distell (€1.2 billion) and NBL
(€358 million) and evaluated management’s accounting assessment for the valuation of
the previously held equity interest in NBL, the recognition of related gains (€14 million)
and the accounting policy choice of applying the partial goodwill method.
- We involved our valuation, real estate and tax specialists for the evaluation and challenge
of management’s position regarding the methodology and valuation of brands, property,
plant equipment, and tax positions.
- We challenged the business assumptions used in the forecast period underlying the
valuation of the (in)tangible fixed assets (revenue, EBITDA, cash flow projections, royalty,
synergies) including the useful lives of the (in)tangible assets, by management.
- We assessed the integration of the acquired companies with HEINEKEN South Africa into
the new established company HEINEKEN Beverages and challenged management on the
CGU identification. For the outcome of impairment testing related to the HEINEKEN
Beverages CGU we refer to the KAM Impairment of intangible assets (including goodwill),
property, plant, and equipment, investments in associates and assets or disposal groups
held for sale.
Impairment of intangible assets (including goodwill), property, plant and equipment, investments
in associates, and assets or disposal groups held for sale Refer to Notes 8.1,8.2, 10.2, 10.3 and
13.5 to the financial statements
