ABEV Ambev SA

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

  Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

The accompanying notes are an integral part of these interim consolidated financial statements.

The accompanying notes are an integral part of these interim consolidated financial statements.

The accompanying notes are an integral part of these interim consolidated financial statements. The consolidated statements of comprehensive income are presented net of income tax. The income tax effects of these items are disclosed in note 8 - Deferred income tax and social contribution.

(i) As described in Note 3 - Summary of significant account policie.

(ii) As described in Note 1 - Corporate information.

The accompanying notes are an integral part of these interim consolidated financial statements.

The accompanying notes are an integral part of these interim consolidated financial statements.

(i) Net of bank overdrafts.

The accompanying notes are an integral part of these interim consolidated financial statements .

Notes to the interim consolidated financial statements:

1.     CORPORATE INFORMATION

(a)      Description of business

Ambev S.A. ( referred to as the “Company” or “Ambev”), headquartered in São Paulo, Brazil, produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, as well as the advertising of its and third party products, the sale of promotional and advertising materials and the direct or indirect exploitation of bars, restaurants, snack bars and the like, among others.

The Company’s shares and ADR’s (American Depositary Receipts) are listed on the B3 S.A.- Brasil, Bolsa, Balcão as “ABEV3” and on the New York Stock Exchange (NYSE) as “ABEV”.

The Company’s direct controlling shareholders are Interbrew International B.V. (“IIBV”), AmBrew S.A. (“Ambrew”), both subsidiaries of Anheuser-Busch InBev N.V. (“AB InBev”) and Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência (“Fundação Zerrenner”).

The interim financial statements were approved by the Board of Directors on May 08, 2018.

(b)    Major corporate events in 2017 and 2018:

In January 2018, Ambev S.A., through its subsidiaries Labatt Breweries and Ambev Luxemburgo, acquired two new loans totaling approximately R$2.0 billion, maturing in up to one year.

Renegotiation of shareholders agreement CND

On December 1st, 2017, Ambev  informed  its  shareholders  and  the  general  market  that  the  E. León Jimenes, S.A. (“ELJ”), partner of Ambev in Tenedora CND, S.A. (“Tenedora”) – a holding company headquartered in Dominican Republic, which holds almost all shares of Cervecería Nacional Dominicana, S.A – would exercise partially, as provide for in shareholders’ agreement of Tenedora, ELJ put option of approximately 30% of capital stock by Tenedora. Due the partial put exercise option, the Company will pay to ELJ the amount of USD 926.5 million and would be the holder of approximately 85% of Tenedora, and ELJ will remain with 15% interest of CND. Considering the strategic importance of alliance with the ELJ, the  Board of Directors of Ambev approved this date the change of the call option term from 2019 to 2022. The transaction was subject to certain conditions precedent that was concluded on January 18, 2018.

In January 18, 2018,  Ambev S.A., informed its investors and the market in general that, as per the notice to the market issued as of December 1st, 2017, concluded the transaction with ELJ, shareholder in Tenedora, owner of almost the totality of CND. As a result of the such transaction, the Company, directly and indirectly, became the owner of approximately 85% of Tenedora, with ELJ owning the remaining 15%, as well as the term of exercise of the call option becomes from January 2019 to January 2022.

Adherence to the Special Tax Regularization Program

During the third quarter of 2017, the Company adhere a Special Program for Tax Regularization, fixed by Provisional Measure no. 783, from May 31, 2017, extended by the Provisional Measure no. 798 (“PERT in August, 30 2017”), undertaking to pay some tax assessments that were in dispute, including debts from its subsidiaries, for a total amount of R$3.5 billion, already considering discounts according to the program, having paid the amount of approximately R$960 million in 2017 and undertaking to pay the remaining value in 145 monthly installments, with interest, starting in January, 2018, the installments owed until moment, have been paid.

Perpetual licensing agreement with Quilmes

In September 2017, AB InBev and Quilmes, a subsidiary of Ambev, entered into an agreement whereby AB InBev will grant a perpetual license to Quilmes in Argentina for Budweiser and other North American brands upon the recovery of the distribution rights by AB InBev from CCU. The agreement also foresees the transfer of the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck by AB InBev to Quilmes and the transfer of some Argentinean brands (Norte, Iguana and Baltica) and related business assets along with US$50 millions by Quilmes to CCU. The closing of the transaction was subject to the approval of the Argentinean antitrust authority and others usual closing conditions. Additional information about the closing of this transaction  are disclosed on Note 25 - Events after the reporting period .

Exchange contracts for future financial flows - Equity Swap

On May 16th, 2017, the Board of Directors of Ambev approved the execution, by and between the Company, or its subsidiaries, and financial institutions to be approved by the Board of Officers, of equity swaps, having as underlying asset the shares issued by the Company or American Depositary Receipts representing these shares (“ADRs”). The settlement of the equity swap will take place within a maximum period of 18 months from this date, and the agreements may cover an exposure of up to 80 million common shares, with a limit value of up to R$ 2.3 billion.

On December 21, 2017 Ambev's Board of Directors approved the conclusion of new equity swap contracts, without prejudice to the liquidation, within the regulatory term, of the contracts still in force. The new contracts may cover the exposure in up to 44 million common shares (of which all or part may be through ADR's), with a limit value of up to R$820 million, plus the balances of contracts executed in the context of the approval of May 16, 2017 and have not yet settled.

2.     STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared using the accounting basis of going concern and are being presented in accordance with IAS 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).

The information does not meet all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction with the consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) for the year ended December 31, 2017. To avoid duplication of disclosures which are included in the annual financial statements, the following notes were not subject to full filling:

(a)     Summary of significant accounting policies (Note 3);

(b)    Exceptional items (Note 8);

(c)     Payroll and related benefits (Note 9);

(d)    Additional information on operating expenses by nature (Note 10);

(e)     Intangible assets (Note 15);

(f)     Trade receivable (Note 19);

(g)    Changes in equity (Note 21);

(h)    Interest-bearing loans and borrowings (Note 22);

(i)      Employee benefits (Note 23);

(j)      Trade payables (Note 25);

(k)    Operating leases (Note 28);

(l)      Contingent liability (Note 30);

(m) Group Companies (Note 34);

(n)    Insurance (Note 35)

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There were no significant changes in accounting policies and calculation methods used for the interim financial statements as of March 31, 2018 in relation to those presented in the financial statements for the year ended December 31, 2017, except for the polices described below:

IFRS 9 - Financial Instruments replace IAS 39 for periods beginning on after 1 January 2018), introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more effective recognition; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of the policies and aligns the accounting treatment with risk management activities. IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value.

The company has applied IFRS 9 Financial Instruments as of the effective date, without restatement of the comparative information for the period beginning 1 January 2017. Consequently , the disclosures for the comparative periods follow the classification and measurement requirements under IAS 39. The company performed an impact assessment and concluded that IFRS 9 Financial Instruments does not impact materially its financial position, financial performance or risk management activities.

IFRS 15 - Revenue from Contracts with Customers requires revenue recognition to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. The new standard for periods beginning on after 1 January 2018 result in more and enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.

The company has applied IFRS 15 Revenue from Contracts with Customers as of the effective date in accordance with the modified retrospective application. Under this approach, the cumulative effect of initially applying IFRS 15 must be recognized as an adjustment to the opening balance of equity at the date of initial application and comparative periods are not restated. On the implementation date, the adjustment to the opening balance of equity resulted in a decrease of the Retained earning by R$355,383, to reflect the changes in accounting policies related to performance that, in accordance whit the IFRS 15, should be related of the price transaction underlying r evenue of 2017.

The other amendments to standards effective for annual periods beginning after 1 January 2018, have not been listed above because of either their non-applicability to or their immateriality to Ambev’s interim consolidated financial statements.

(a)    Basis of preparation and measurement

The interim financial statements are presented in thousands of Brazilian Real (“R$”), unless otherwise indicated, rounded to the nearest thousand indicated . Depending on the applicable IFRS requirement, the measurement basis used in preparing the interim financial statements is historical cost, net realizable value, fair value or recoverable amount.

(b)    Recently issued IFRS

The reporting standards below were published and are mandatory for future annual reporting periods . Although IFRSs anticipate early adoption, in Brazil, regulators have prevented this anticipation in order to preserve aspects of comparability. Accordingly, for the period ended March 31, 2018, these standards were not applied in the preparation of these financial statements:

IFRS 16 – Leases (effective from annual periods beginning on or after 1 January 2019) replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.

The company is in process of assessing the full impact of IFRS 16 and expects changes in the presentation of operating leases in the balance sheet.

Other Standards, Interpretations and Amendments to Standards

The other amendments to standards effective for annual periods beginning after 1 January 2018, have not been listed above because of either their non-applicability to or their immateriality to Ambev’s consolidated financial statements.

4.     USE OF ESTIMATES AND JUDGMENTS

The preparation of interim financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are not readily evident from other sources. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods.

Although each of its significant accounting policies reflects judgments, assessments or estimates, the Company believes that the following accounting practices reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results:

(i) predecessor basis of accounting;

(ii) business combinations;

(iii) impairment;

(iv) provisions;

(v) share-based payments;

(vi) employee benefits;

(vii) current and deferred tax;

(viii) joint arrangements; e

(ix) measurement of financial instruments, including derivatives.

The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed at least annually and whenever a triggering event occurs, in order to determine whether the carrying value exceeds the recoverable amount.

The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.

Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.

The company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the Company are involved in tax audits usually in relation to prior years. These audits are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time until its conclusion.

(i) The balance refers mostly to Bank Deposit Certificates - CDB, high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

(i) The balance refers substantially to Bank Deposit Certificates - CDB linked to tax incentives.

Write-offs/losses on inventories recognized in the income statement amounted to R$22,292 in the period ended in March 31, 2018 (R$11,430 in the period ended in March 31, 2017).

8.         DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

Deferred taxes for income tax and social contribution taxes are calculated on tax losses, the negative tax basis of social contributions and the temporary differences between the tax bases and the carrying amount in the interim financial statement of assets and liabilities. The rates of these taxes in Brazil, which are expected at the realization of deferred taxes, are 25% for income tax and 9% for social contribution. For the other regions, with operational activity, expected rates, are as follow:

(i) Amendments to Argentine tax legislation approved on December 29, 2017 affect tax periods beginning in October 2018 and reduce the income tax rate in the first two years from 35% to 30% and, as a after, to 25%.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available to be used to offset temporary differences / loss carry forwards based on projections of future results prepared and based on internal assumptions and future economic scenarios which may therefore change.

The amount of deferred income tax and social contribution by type of temporary difference is detailed as follows:

The Company only offsets the balances of deferred income tax and social contribution assets against liabilities when they are within the same entity and are expected to be realized in the same period.

Tax losses and negative bases of social contribution and temporary deductible differences in Brazil, on which the deferred income tax and social contribution were calculated, have no expiry date.

At March 31, 2018 the assets and liabilities deferred taxes related to combined tax losses has an expected utilization/settlement by temporary differences as follows:

(i) There is no expectation of realization that exceeds the term of 10 years.

At March 31, 2018, deferred tax assets in the amount of R$441,150 (R$427,365 in December 31, 2017) related to tax losses and temporary differences of subsidiaries abroad were not recorded as the realization is not probable.

Major part of the deferred asset amount do not have carryforward limit for utilization and the tax losses carried forward in relation to them are equivalent to R$1,764,599 in March 31, 2018 (R$1,709,461 in December 31, 2017).

The net change in deferred income tax and social contribution is detailed as follows:

Leases, capitalizes interests and fixed assets provided as security are not material.

The carrying amount of goodwill was allocated to the different cash-generating units as follows :

(i) It refers to the exchange of shareholdings operation occurred in 2013 as a result of the adoption of the predecessor basis of accounting.

(ii) The functional currency of Cuba, the Cuban convertible peso (CUC), has fixed parity with the dollar (USD) at balance sheet date.

Additional information regarding the exposure of the Company to the risks of interest rate and foreign currency are disclosed on Note 20 – Financial instruments and risks .

Contractual clauses (covenants)

As at March 31, 2018, the Company's loans had equal rights to payment without subordination clauses. Except for the credit lines due to FINAME contracted by the Company with Banco Nacional de Desenvolvimento Econômico e Social – BNDES (“BNDES”), where collateral were provided on assets acquired with the credit granted which serve as collateral; other loans and financing contracted by the Company predicted only guarantees as personal collateral or are unsecured. The most loan contracts contained financial covenants including: financial covenants, including limitation on new indebtedness; going-concern; maintenance, in use or in good condition for the business, of the Company's assets; restrictions on acquisitions, mergers, sale or disposal of its assets; disclosure of financial statements under Brazilian GAAP and IFRS; and/or no prohibition related to new real guarantees for loans contracted, except if: (i) expressly authorized under the aforementioned loan agreement, (ii) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (eg World Bank) or located in jurisdictions in which the Company operates.

As at March 31, 2018, the Company was in compliance with all its contractual obligations for its loans and financings.

12.     PROVISIONS

(a) Provision changes

(b)    Disbursement expectative

The expected settlement of provisions was based on management’s best estimate at the interim balance sheet date.

Main lawsuits with probable likelihood of loss:

(a) Income and Sales taxes

In Brazil, the Company and its subsidiaries are involved in several administrative and judicial proceedings related to Income tax, ICMS, IPI, PIS and COFINS taxes. Such proceedings include, among others, tax offsets, credits and judicial injunctions exempting tax payment.

(b) Labor

The Company and its subsidiaries are involved in labor proceedings with former employees or former employees of service providers. The main issues involve overtime and related effects and respective charges.

(c) Civil

The Company is involved in civil lawsuits considered with probable likelihood of loss. The most relevant portion of these lawsuits refers to former distributors, mainly in Brazil, which are mostly claiming damages resulting from the termination of their contracts.

The processes with possible probabilities are disclosed in Note 22 - Contingent liability .

13.     CHANGES IN EQUITY