93
Notes to the Consolidated Financial Statements
Goodwill per (group of) CGU
10,000
In
9.8
2.0
1.2
4,919 4,905
5,000
2,910 3,019
9.5
2.9
1.9
15.5
3.2
2.5
Introduction
197
0
Brazil
Europe
India
21.1 - 29.0
6.2 - 9.0
1.6 - 4.4
16.3
4.9
1.9
15.5
3.4
3.8
13.3
3.4
2.4
In 2023, there has been a general decrease in the WACC applied across most CGUs, due to decreased interest rates.
2023
2022
The key assumptions used for the value in use calculations are as follows:
Sustainability
Review
Financial
Statements
Other
Information
Report
of the
Supervisory
Board
Report
of the
Executive
Board
Goodwill impairment testing
For impairment testing, goodwill in respect of Europe, Americas (excluding Brazil) and Asia Pacific (excluding
India) is allocated and monitored on a regional basis. For Brazil, India, Heineken Beverages and other subsidiaries
within Africa, Middle East Eastern Europe and Head Office, goodwill is allocated and monitored on an
individual or combined country basis. The total amount of goodwill of €12,238 million (2022: €12,250 million) is
allocated to each (group of) Cash Generating Unit (CGU) as follows:
The net decrease in goodwill of €12 million compared to 2022 mainly relates to an impairment loss of €491
million for Heineken Beverages, a negative movement in exchange rates of €190 million, partially offset by the
initial goodwill of €656 million recognised for Heineken Beverages (refer to note 10.1).
The carrying amount of a CGU is compared to the recoverable amount of the CGU. The recoverable amounts of
the (group of) CGUs are based on the higher of the fair value less costs of disposal (FVLCD) and value in use (VIU)
calculations. CGUs for which the recoverable amount is based on a VIU model represent 95% of goodwill. VIU is
determined by discounting the future cash flows generated from the continuing use of the CGU using a pre-tax
discount rate.
- Cash flows are projected based on actual operating results and the approved business plan. Cash flows thereafter
are extrapolated up to a 10-year period (Europe 5-year) using an expected annual volume growth rate per
country, which is based on external sources. The extrapolated cash flows are therefore projected using steady or
progressively declining net cash flow growth rates. Based on past experience, management considers this period
to reflect the long-term development of the local beer business.
- The beer price growth per year, after the forecast period, is assumed to be the expected country-specific
annual long-term inflation, which is based on external sources.
In the current year, Distell and NBL have been combined with Heineken South Africa into a new HEINEKEN business
‘Heineken Beverages’ (refer to note 10.1), which is considered the CGU for goodwill impairment testing purposes.
Americas
(excluding
Brazil)
Africa,
Middle East
Eastern
Europe
(excluding
Heineken
Beverages)
Heineken
Beverages
Asia Pacific
(excluding
India)
Head
Office
Impairmen t losses
The annual goodwill impairment test resulted in an impairment loss of €491 million (2022: nil) for the current
year. The goodwill impairment relates to Heineken Beverages, which is included in the Africa, Middle East
Eastern Europe operating segment.
The impairment for Heineken Beverages is recorded on the line 'amortisation, depreciation and impairments'
in the income statement. The lower current valuation of the business, relative to the time of the announced
acquisition, reflects predominantly the increase in the weighted average cost of capital over this time period
used for impairment testing. In addition, inflationary pressures and higher brand support levels to address a
more challenging competitive environment impacted the valuation.
The determination of the recoverable amount of Heineken Beverages is based on a VIU valuation and amounts
to €2.6 billion, which is based on a discounted 10-year cash flow forecast. The key assumptions used to
determine the cash flows are based on market expectations and management's best estimate. Cash flows
thereafter are extrapolated using a perpetual growth rate equal to the expected 30-year compounded average
inflation, to calculate the terminal recoverable amount.
Europe
Americas (excluding Brazil)
Brazil
Africa, Middle East and Eastern Europe (excluding Heineken
Beverages)
Heineken Beverages
Asia Pacific (excluding India)
Head Office
Heineken
N.V.
Annual
Report
2023
Pre-tax
WACC
MP
O
c
- Cash flows after the first 10-year period (Europe 5-year) are extrapolated using a perpetual growth rate equal to
the expected 30-year average inflation to calculate the terminal recoverable amount. For Europe, a return on
inflation-linked bond rates is used to extrapolate cash flows.
- A CGU-specific pre-tax weighted average cost of capital (WACC) was applied per CGU in determining the
recoverable amount of the units.
The values assigned to the key assumptions used for the VIU calculations are as follows:
Expected annual
long-term Expected volume
inflation growth rates
applied for years applied for years
2027-2033 2027-2033
480 480
345 419
2,298 2,337
481 457
608 633
