Financial_Report_2009

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As a result of a share buyback program of AmBev shares in ƵƳƳƻ, ABbInBev increased its interest percentage in AmBev from ƹƴ.Ƴƴ% to ƹƴ.ƺƸ%. Other purchases of non-controlling interest relate to the buy out of ABbInBev Shiliang (Zhejiang) Brewery and to the closing of AmBev’s tender offer for Quinsa shares resulting in an increase of AmBev’s economic interest in Quinsa to ƼƼ.ƻƶ%. The increase of goodwill by ƺƳƻm USbdollar stems from these transactions for which the total cash consideration amounted to ƻƸƶm USbdollar. As the related subsidiaries were already fully consolidated, the purchases did not impact ABbInBev’s profit, but reduced the non-controlling interest and thus impacted the profit attributable to equity holders of ABbInBev. AmBev did not perform any share buybacks in ƵƳƳƼ.

The carrying amount of goodwill was allocated to the different business unit levels as follows:

In the fourth quarter of ƵƳƳƼ, ABbInBev completed its annual impairment test for goodwill and concluded, based on the assumptions described below, that no impairment charge was warranted. The company cannot predict whether an event that triggers impairment will occur, when it will occur or how it will affect the asset values reported. ABbInBev believes that all of its estimates are reasonable: they are consistent with the internal reporting and reflect management’s best estimates. However, inherent uncertainties exist that management may not be able to control. While a change in the estimates used could have a material impact on the calculation of the fair values and trigger an impairment charge, the company is not aware of any reasonably possible change in a key assumption used that would cause a business unit’s carrying amount to exceed its recoverable amount.

Goodwill, which accounted for approximately Ʒƹ% of ABbInBev’s total assets as at ƶƴbDecember ƵƳƳƼ, impairment testing relies on a number of critical judgments, estimates and assumptions. Goodwill is tested for impairment at the business unit level (that is, one level below the segments) based on a fair-value-less-cost-to-sell approach using a discounted free cash flow approach based on current acquisition valuation models. The key judgments, estimates and assumptions used in the fair-value-less-cost-to-sell calculations are as follows:

•The first year of the model is based on management’s best estimate of the free cash flow outlook for the current year;

•In the second to fourth years of the model, free cash flows are based on ABbInBev’s strategic plan as approved by key management. ABbInBev’s strategic plan is prepared per country and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions;

•For the subsequent six years of the model, data from the strategic plan is extrapolated using simplified assumptions such as constant volumes and variable cost per hectoliter and fixed cost linked to inflation, as obtained from external sources;

•Cash flows after the first ten-year period are extrapolated using expected annual long-term consumer price indices, based on external sources, in order to calculate the terminal value;

•Projections are made in the functional currency of the business unit and discounted at the unit’s weighted average cost of capital The latter ranged primarily between ƹ.Ƴ% and Ƶƴ.Ƶ% in USbdollar nominal terms for goodwill impairment testing conducted for ƵƳƳƼ;

•Cost to sell is assumed to reach Ƶ% of the entity value based on historical precedents.

ƴReclassiƮed to conform to the ƵƳƳƼpresentation.

The above calculations are corroborated by valuation multiples, quoted share prices for publicly-traded subsidiaries or other available fair value indicators.

Although ABbInBev believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these estimates under different assumptions or conditions.

ƴƸ. Intangible assets

ABbInBev is the owner of some of the world’s most valuable brands in the beer industry. As a result, certain brands and distribution rights are expected to generate positive cash flows for as long as the company owns the brands and distribution rights. Given ABbInBev’s more than ƹƳƳ-year history, certain brands and their distribution rights have been assigned indefinite lives.

In April ƵƳƳƼ, the company acquired the Budweiser distribution rights in Paraguay for an amount of ƵƷm USbdollar. These rights have been assigned an indefinite useful life.

Intangible assets with indefinite useful lives are comprised primarily of brands and certain distribution rights that ABbInBev buys back for its own products, and are tested for impairment during the fourth quarter of the year or whenever a triggering event has occurred. As of ƶƴbDecember ƵƳƳƼ, the carrying amount of the intangible assets amounted to Ƶƶ ƴƹƸm USbdollar (ƶƴbDecember ƵƳƳƻ: ƵƶbƹƺƶmbUSbdollar) of which ƵƵ ƵƹƸm USbdollar was assigned an indefinite useful life (ƶƴbDecember ƵƳƳƻ: ƵƵ ƺƼƴm USbdollar) and ƼƳƳmbUSbdollar a finite life (ƶƴbDecember ƵƳƳƻ: ƻƻƵm USbdollar).

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The carrying amount of intangible assets with indefinite useful lives was allocated to the different countries as follows:

ƴƹ. Investment in associates

ABbInBev holds a ƶƸ.ƴƵ% direct interest in Grupo Modelo, Mexico’s largest brewer, and a Ƶƶ.ƵƸ% direct interest in Diblo S.A. de C.V., Grupo Modelo’s operating subsidiary, providing ABbInBev with, directly and indirectly, a ƸƳ.Ƶ% interest in Modelo without however having voting or other control of either Grupo Modelo or Diblo. On a stand alone basis (ƴƳƳ%) under IFRS, aggregate amounts of Modelo’s assets and liabilities for ƵƳƳƼrepresented ƴƹƴƹƹm USbdollar and ƵƼƹƻm USbdollar respectively, while the ƵƳƳƼnet revenue amounted to ƸƼƺƳm USbdollar and the profit to ƴƵƶƼm USbdollar.

Disposals mainly comprise the divestiture, as part of ABbInBev’s deleveraging program, of the Ƶƺ% stake in Tsingtao Brewery Company Limited for a consideration of ƼƳƴm USbdollar. There was no capital gain recorded on this transaction as the selling price equaled the net carrying value at the date of the disposal.

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As disclosed in Note ƹAcquisition and dispositions of subsidiaries, the final purchase price allocation adjustments of the Anheuser-Busch acquisition have been applied retrospectively in accordance with IFRS ƶ. The ƵƳƳƻ deferred tax assets and liabilities have been appropriately adjusted to reflect the deferred tax impact of those purchase price allocation adjustments.

Net deferred tax assets and liabilities decreased slightly from prior year due to timing of temporary differences and the slight improvement of ABbInBev’s deferred tax rate expected to be applied when the asset or liability is realized.

On ƶƴbDecember ƵƳƳƼ, deferred tax liability of ƴƶƼm USbdollar (ƵƳƳƻ: ƶƼm USbdollar) relating to investment in subsidiaries has not been recognized because management believes that this liability will not be incurred in the foreseeable future.

Tax losses carried forward and deductible temporary differences on which no deferred tax asset is recognized amount to ƴbƳƵƸmbUSbdollar (ƵƳƳƻ: ƴƷƶƼm USbdollar). ƹƷƴm USbdollar of these tax losses do not have an expiration date, ƼƼm USbdollar, ƼƶmbUSbdollar and ƴƴƷmbUSbdollar expire within respectively ƴ, Ƶand ƶyears, while ƻƳm USbdollar has an expiration date of more than ƶyears.

Deferred tax assets have not been recognized on these items because it is not probable that future taxable profits will be available against which the unused tax losses can be utilized and the company has no tax planning strategy currently in place to utilize these tax losses.

ƴƼ. Inventories

The cost of inventories recognized as an expense in ƵƳƳƼ amounted to ƴƺ ƴƻƼm USbdollar, included in cost of sales. Last year, this expense amounted to ƴƳƶƶƹm USbdollar.

Impairment losses on inventories recognized in ƵƳƳƼamount to Ƹƻm USbdollar (ƵƳƳƻ: ƴƶm USbdollar).

ƵƳ. Trade and other receivables

Non-current trade and other receivables

For the nature of cash deposits for guarantees see Note ƶƴCollateral and contractual commitments for the acquisition of property, plant and equipment, loans to customers and other.

On ƵƷ July ƵƳƳƼ, ABbInBev completed the sale of Oriental Brewery to Kohlberg Kravis Roberts & Co. L.P and on Ƶ December, ABbInBev completed the sale of its Central European operations to CVC Capital Partners. These transactions include deferred considerations for a notional amount of ƶƳƳm USbdollar in the case of Oriental Brewery and ƶƳƳm euro in the case the Central European operations respectively (see also Note ƹAcquisition and disposal of subsidiaries). These deferred considerations are reported for a fair value amount of ƵƵƸm USbdollar and ƶƹƳm USbdollar respectively by year-end ƵƳƳƼin non-current trade and other receivables.

Current trade and other receivables

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The aging of the current trade receivables, interest receivable, other receivables and accrued income and of the current and non-current loans to customers can be detailed as follows for ƵƳƳƼand ƵƳƳƻrespectively:

In accordance with the IFRS ƺFinancial Instruments: Disclosures the above analysis of the age of financial assets that are past due as at the reporting date but not impaired also includes the non-current part of loans to customers. Past due amounts were not impaired when collection is still considered likely, for instance because the amounts can be recovered from the tax authorities or ABbInBev has sufficient collateral. Impairment losses on trade and other receivables recognized in ƵƳƳƼamount to ƻƹm USbdollar.

ABbInBev’s exposure to credit, currency and interest rate risks is disclosed in Note ƵƼRisks arising from financial instruments.

Ƶƴ. Cash and cash equivalents

As of ƶƴbDecember ƵƳƳƼ cash and cash equivalents include restricted cash of ƵƺƷm USbdollar of which Ʒƹm USbdollar reflects the outstanding consideration payable to former Anheuser-Busch shareholders whom did not yet claim the proceeds (the related payable is recognized as a deferred consideration on acquisitions – see also Note Ƶƻ Trade and other payables) and ƵƵƻm USbdollar relates to restricted cash held on escrow accounts following the disposal of the Central European subsidiaries.

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As at ƶƴbDecember ƵƳƳƼ, the total issued capital of ƴ ƺƶƵm USbdollar is represented by ƴ ƹƳƷ ƶƳƴ ƴƵƶ shares without par value, of which ƷƳƻƻƸƴƹƷƷregistered shares, ƸƶƵƸƷƸƵbearer shares and ƴƴƼƳƴƵƷƳƵƺdematerialized shares. For a total amount of capital of ƸmbUSbdollar there are still ƷƶƺƶƴƻƵof subscription rights outstanding corresponding with a maximum of ƷƶƺƶƴƻƵshares to be issued. The total of authorized, unissued capital amounts to Ƹƴm USbdollar (ƶƺm euro).

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. In respect of the company’s shares that are held by ABbInBev, rights are suspended.

Report according to article ƹƵƷ of the Belgian Companies Code – purchase of own shares Using the powers granted during the Extraordinary Shareholders Meeting of Ƶƻ April ƵƳƳƼ, the Board of directors has purchased ƻ ƶƳƳ ƳƳƳ ABbInBev shares from BrandbrewbSA, its indirectly fully owned subsidiary, in order to improve the hedging of the company’s share option programs.

The purchase was executed in a private transaction on ƴƵ November ƵƳƳƼ, just after the announcement of the third quarter results of the company. The purchase price was equal to the closing price of the ABbInBev share on ƴƵNovember ƵƳƳƼand the total purchase price amounted to ƶƺƸm USbdollar (Ƶƺƴm euro).

During the year ƵƳƳƼ, Anheuser-Busch InBev proceeded with the following sale transactions:

•Ƶ ƴƴƷ ƷƵƴ shares were sold to members of the AmBev senior management who were transferred to Anheuser-Busch InBev. The sale occurred according to a share exchange program at a price reduced with ƴƹ.ƹƹ% compared to the market price, in order to encourage management mobility;

•ƴƵƸƼƳƷƵshares were granted to executives of the group according to the company’s executive remuneration policy;

•ƸƷƳƸƳƷshares were sold to members of the Anheuser-Busch senior management. The sale occurred according to the authorization of the annual shareholders meeting of ƵƻApril ƵƳƳƼat a price reduced with ƴƹ.ƹƹ% compared to the market price, provided these managers remain in service for a period of Ƹyears;

•ƵƺƹƷƶƳƵshares were granted to executives of the company in exchange for unvested options, in order to encourage management mobility, in particular for the benefit of executives moving to the United States. The shares are subject to a lock-up period until ƶƴbDecemberbƵƳƴƻ;

•Finally, ƶƴƶƹƷƳshares were sold, as a result of the exercise of options granted to employees of the group.

At the end of the period, the company still owned ƴƶƸƺƸƶƻƵown shares.

The par value of the shares is Ƴ.ƺƺeuro. As a consequence, the shares that were repurchased during the year represent ƻbƻƹƴbƺƵƼbUSbdollar (ƹƶƼƴƳƳƳeuro) of the subscribed capital, the shares that were sold during the year ƵƳƳƼrepresent ƺbƷƹƸbƴƳƻbUSbdollar (ƸbƶƻƶbƺƺƳbeuro) of the subscribed capital and the shares that the company still owned at the end of ƵƳƳƼ represent ƴƸbƳƸƻbƹƸƸbUSbdollar (ƴƳƷƸƶƳƷƷeuro) of the subscribed capital.

Dividends On ƶ March ƵƳƴƳ, a dividend of Ƴ.ƶƻ euro per share or, approximately ƹƳƸm euro, was proposed by the board of directors. In accordance with IAS ƴƳ Events after the balance sheet date, the dividend has not been recorded in the ƵƳƳƼ financialbstatements.

Translation reserves The translation reserves comprise all foreign currency exchange differences arising from the translation of the financial statements of foreign operations. The translation reserves also comprise the portion of the gain or loss on the foreign currency liabilities and on the derivative financial instruments determined to be effective net investment hedges in conformity with the IAS ƶƼFinancial Instruments: Recognition and Measurement hedge accounting rules.

Hedging reserves The hedging reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedges to the extent the hedged risk has not yet impacted profit or loss – see also Note ƵƼRisks arising from financial instruments.

Transfers from subsidiaries The amount of dividends payable to ABbInBev by its operating subsidiaries is subject to, among other restrictions, general limitations imposed by the corporate laws, capital transfer restrictions and exchange control restrictions of the respective jurisdictions where those subsidiaries are organized and operate. Capital transfer restrictions are also common in certain emerging market countries, and may affect ABbInBev’s flexibility in implementing a capital structure it believes to be efficient.