The Best Beer Company in a Better World - Anheuser-Busch InBev

68 | Annual Report 2008 Financial Report
Cash flow, fair value or net investment hedge accounting is applied to all hedges that qualify for hedge accounting when the required hedge
documentation is in place and when the hedge relation is determined to be effective.
Cash flow hedge accounting
When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk of a firm
commitment or a highly probable forecasted transaction, the effective part of any resulting gain or loss on the derivative financial instrument is
recognized directly in equity (hedging reserves). When the firm commitment in foreign currency or the forecasted transaction results in the
recognition of a non financial asset or a non financial liability, the cumulative gain or loss is removed from equity and included in the initial
measurement of the asset or liability. When the hedge relates to financial assets or liabilities, the cumulative gain or loss on the hedging instrument
is reclassified from equity into the income statement in the same period during which the hedged risk affects the income statement (e.g. when
the variable interest expense is recognized). The ineffective part of any gain or loss is recognized immediately in the income statement.
When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or
loss (at that point) remains in equity and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged
transaction is no longer probable, the cumulative gain or loss recognized in equity is reclassified into the income statement immediately.
Fair value hedge accounting
When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability, any resulting gain or loss on the
hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged,
with any gain or loss being recognized in the income statement.
Net investment hedge accounting
When a foreign currency liability hedges a net investment in a foreign operation, exchange differences arising on the translation of the liability
to the functional currency are recognized directly in equity (translation reserves).
When a derivative financial instrument hedges a net investment in a foreign operation, the portion of the gain or the loss on the hedging
instrument that is determined to be an effective hedge is recognized directly in equity (translation reserves), while the ineffective portion is
reported in the income statement.
Investments in equity instruments or derivatives linked to and to be settled by delivery of an equity instrument are stated at cost when such
equity instrument does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value
are clearly inappropriate or unworkable.
(X) Segment reporting
AB InBev’s primary segment reporting format is geographical because our risks and rates of return are affected predominantly by the fact that
we operate in different geographical areas. The company’s management structure and internal reporting system to the board of directors is
set up accordingly. A geographical segment is a distinguishable component of the company that is engaged in providing products or services
within a particular economic environment, which is subject to risks and returns that are different from those of other segments. In accordance
with IAS 14 Segment Reporting AB InBev’s reportable geographical segments were determined as North America, Latin America North, Latin
America South, Western Europe, Central and Eastern Europe, Asia Pacific and Global Export and Holding Companies. The company’s assets
are predominantly located in the same geographical areas as its customers.
Throughout the world, AB InBev is chiefly active in the malt-based beverages business. The non-beer segment consists of AB InBev owned
non-beer, soft drinks produced, all other beverages sold by AB InBev under licensing or distribution agreements and the entertainment and
packaging business.
(Y) Discontinued operations and non-current assets held for sale
A discontinued operation is a component of the company that either has been disposed of or is classified as held for sale and represents a
separate major line of business or geographical area of operations and is part of a single co-coordinated plan to dispose of or is a subsidiary
acquired exclusively with a view to resale.
AB InBev classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale
transaction rather than through continuing use if the conditions of IFRS 5 are met. A disposal group is defined as a group of assets to be
disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be
transferred. Immediately before classification as held for sale, the company measures the carrying amount of the asset (or all the assets and
liabilities in the disposal group) in accordance with applicable IFRS. Then, on initial classification as held for sale, non-current assets and
disposal groups are recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as
held for sale are included in profit or loss. The same applies to gains and losses on subsequent re-measurement. Non-current assets classified
as held for sale are no longer depreciated or amortized.