94
Notes to the Consolidated Financial Statements
See the table below for the key assumptions:
In
16.3
16.3
4.9
4.9
9.1
1.9
Introduction
Pre-tax WACC (in local currency)
Expected annual long-term inflation
Expected volume growth
Sustainability
Review
Financial
Statements
Other
Information
Report
of the
Supervisory
Board
Report
of the
Executive
Board
Accounting estimates and judgements
The cash flow projections used in the VIU calculations for goodwill impairment testing contain various judgements
and estimations as described in the key assumptions for the VIU calculations. Such judgements and estimates
are subject to change because of changing economic conditions and climate impact and actual cash flows may
differ from forecasts. The below additional considerations have been applied by HEINEKEN regarding the
potential financial impact of the macro-economic environment and uncertainties including increasing
inflationary pressures worldwide:
- Changes in the interest rate environment are taken into consideration when determining the discount rates
- Terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding
any increased inflation growth experiences in the short-term
- Sensitivity scenarios are applied to the key assumptions used in the impairment testing
Sensitivity to changes in assumptions
Following the goodwill impairment recognised for Heineken Beverages, the CGU is sensitive to changes in key
assumptions applied. HEINEKEN assesses that a reasonably possible adverse change in a key assumption
(i.e. lower growth rates or higher discount rates respectively) would cause the carrying amount to exceed the
recoverable amount. Excluding Heineken Beverages, the outcome of a sensitivity analysis of a 200 basis
points adverse change in key assumptions did not result in a materially different outcome for the goodwill
impairment test.
Brands, customer-related and contract-based intangibles
The main brands capitalised are the brands acquired in various acquisitions. The main customer-related and
contract-based intangibles relate to customer relationships (constituted either by way of a contractual
agreement or by way of non-contractual relations) and re-acquired rights.
The impact of climate change risk on future cash flows have also been considered at an CGU and asset level,
including committed capex and operational expenditure. No material financial impacts to the current year
impairment assessment were identified.
For intangible assets, other than goodwill, estimates are required to determine the (remaining) useful lives.
Useful lives are determined based on the market position (for brands), estimated remaining useful life of the
customer relationships or the period of the contractual arrangements, or estimates on technological and
commercial developments (for software/development expenditure).
Amortisation is charged to profit or loss on a straight-line basis over the estimated useful life. HEINEKEN believes
that straight-line depreciation most accurately reflects the expected pattern of consumption of the future
economic benefits embodied in the intangible asset.
Accounting policies
Goodwill
Goodwill represents the difference between the fair value of the net assets acquired and the transaction price of
the acquisition. Goodwill arising on the acquisition of associates and joint ventures is included in the carrying
amount of the associates and joint ventures.
Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to individual or groups of
CGUs for impairment testing and is tested annually for impairment. Negative goodwill is recognised directly in
profit or loss as other income. An impairment loss in respect of goodwill cannot be reversed.
Brands, customer-related and contract-based intangibles
Brands, customer-related and contract-based intangibles acquired as part of a business combination are
recognised at fair value. Otherwise, these acquired intangibles are recognised at cost and amortised over the
estimated useful life of the individual brand, respectively over the remaining useful life of the customer
relationships or the period of the contractual arrangements.
Strategic brands are well-known international/local brands with a strong market position and an established
brand name.
Software, research and development and other intangible assets
Purchased software is measured at cost less accumulated amortisation. Expenditure on internally developed
software is capitalised when the expenditure qualifies as development activities, otherwise, it is recognised in
profit or loss when incurred.
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge,
is recognised in profit or loss when incurred.
40-50 years
5-2 5 years
5-2 5 years
3-1 2 years
3-7 years
3 years
Heineken
N.V.
Annual
Report
2023
In addition, the asset impairment test required as a result of the identification of impairment indicators resulted
in an impairment of €68 million on goodwill and €42 million on intangible assets other than goodwill (2022:
€189 million net impairment reversal on intangible assets other than goodwill) (refer to note 8.2).
Amortisation
Amortisation is calculated over the cost of the asset less its residual value. Intangible assets with a finite life
are amortised on a straight-line basis over their estimated useful lives from the date they are available for use.
The estimated useful lives are as follows:
- Strategic brands
- Other brands
- Customer-related and contract-based intangibles
- Re-acquired rights
- Software
- Capitalised development costs
The amortisation method, useful lives and residual values are reassessed annually. Changes in useful lives or
residual value are recognised prospectively.
De-recognition of intangible assets
Intangible assets are derecognised when disposed of or sold. Gains on sale of intangible assets are presented
in profit or loss as other income (refer to note 6.2); losses on sale are included in amortisation. Goodwill is
derecognised when the related CGU is sold.
Heineken Beverages
2024-2026 2027-2033
