202
Independent Auditor’s Report
Introduction
Observation
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
Applying the aforementioned materiality, we did not identify any reportable findings in
management's assessment of the recoverability of intangible assets (including goodwill) and
property, plant and equipment, investments in associates and assets or disposal groups held
for sale, the impairments recorded and the disclosures in Notes 8.1,8.2, 10.2, 10.3 and 13.5.
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, an increased extent of effort and a need to involve our in-country tax specialists.
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 9.2
and 12 and have no reportable findings.
uncertain tax positions and recoverability of deferred tax assets included the following,
amongst others:
- We obtained an understanding of management's tax process related to the assessment
of uncertain tax positions and the recoverability of deferred tax assets.
- We involved our 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, with the help of our tax specialists, 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 experts.
- We evaluated management's ability to forecast taxable income accurately 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).
- We challenged, with the support of our tax specialist and local component team,
management's judgement applied in the timing of deferred tax recognition, the
underlying profit forecast, and the potential effects of Pillar Two.
Heineken
N.V.
Annual
Report
2023
How the scope Our audit procedures related to the projection of sales volumes, revenue, margins, and discount
rates used by management included the following, amongst others:
- We obtained an understanding of management's process over the impairment trigger
tests and the resulting 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, including those potentially related
to climate risk factors, which could cause a substantial change to the impairments
recorded, and or cause headroom to change in an impairment.
- We evaluated projected cash flows by:
- Comparing the projections to historical forecasts, historical growth rates,
including assessing the effects of the current macro-economic and geopolitical
climate, and information included in HEINEKEN's internal communications to the
management and the Executive Board.
- Challenging management's ability to price adjust for expected inflation rates and
comparing projected sales volumes, revenue, and margins to, for example,
external economic outlook data, analyst reports and external market data on the
beer market.
- For HEINEKEN Beverages we challenged the key business assumptions used in the
impairment model which are related to volume growth, which is driven by sourcing costs
and returnable bottle introductions.
- With the assistance of our valuation 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.
- We assessed whether a decline in available quoted market price investments in associates
is either prolonged or significant and any impairment loss should be recognized.
How the scope Our audit procedures to address management's judgements related to the provisions for
of our audit
responded to
the key audit
matter
Management judgement related to the provisions for uncertain tax positions and the
recoverability of deferred tax assets Refer to Notes 9.2 and 12 to the financial statements
Key audit HEINEKEN operates across several tax jurisdictions and is subject to periodic challenges by
matter local tax authorities during the normal course of business. In those cases where the amount of
tax payable is uncertain, management establishes provisions based on its judgement of the
probable amount of the related tax liability. Deferred tax assets are only recognized to the
extent that it is probable that future taxable income will be available, against which unused tax
losses can be utilized. This assessment is performed annually and based on budgets and
business plans for the coming years, including planned commercial initiatives and the impact
of macro-economic uncertainties. HEINEKEN reported provisions for uncertain tax positions
and deferred tax assets for an amount of €397 million and €1,292 million, respectively, as of
31 December 2023. Deferred tax assets significantly increased to €775 million, this includes
newly recorded amounts of €751 million following a corporate restructuring, the recent win of
the lawsuit regarding goodwill deduction and higher forecasted taxable profits.
The accounting for uncertain tax positions and deferred tax assets, as detailed in Notes 9.2
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.
