- Obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominantly to a
variable such as a market index, or varies inversely with the value of the issuers' shares.
SFAS No. 150 does not apply to features embedded in financial instruments that are not derivatives in their entirety. In
addition to its requirements for the classification and measurement of financial instruments within its scope, SFAS No.
150 also requires disclosures about alternative ways of settling those instruments and the capital structure of entities, all
of whose shares are mandatorily redeemable. SFAS No. 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.
It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments
created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The Company is currently evaluating the impact of SFAS No. 150 on its consolidated results
of operations, financial position and cash flows.
In November 2002, the FASB published FIN 45, "Guarantor's Accounting and Disclosure requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others". FIN 45 expands on the accounting guidance of Statements
No. 5, 57, and 107 and incorporates without change the provisions of FIN 34: "Disclosure of Indirect Guarantees of
Indebtedness of Others an Interpretation of FASB Statement No. 5" which has been superseded. FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. FIN 45
also clarifies that at the time a company issues a guarantee, the Company must recognize an initial liability for the fair
value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim
and annual financial statements. The provisions of FIN 45 are required to be applied on a prospective basis to guarantees
issued or modified by the Company on January 1, 2003 and after. The expanded disclosure requirements of FIN 45 are
effective for the year ended December 29, 2002 (see Note 30).
In November 2002, the EITF of the FASB reached a consensus on Issue No. 02-16, "Accounting for Consideration
Received from a Vendor by a Customer (Including a Reseller of the Vendor's Products)" ("EITF 02-16"). This Issue
addresses the treatment of cash consideration received by a reseller, raised as a response to EITF Issue No. 01-9,
"Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)" ("EITF
01-9"). EITF Issue No. 02-16 addresses the income statement classification of consideration from a vendor, as well as the
appropriate timing and method of recognition. This issue is effective for the Company's consolidated financial statements
for the period beginning January 1, 2003. The Company has not yet determined the effect on the Company's consolidated
financial statements as a result of this issue.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities". FIN 46 introduces a new concept
of a variable interest entity ("VIE"). A VIE is an entity that meets any of the following criteria: (1) it has a total equity
investment at risk that is not sufficient to finance its activities without additional subordinated financial support from
other parties, (2) the equity owners do not have the ability to make significant decisions about the entity's activities
through voting or similar rights, (3) the equity owners do not have an obligation to absorb the entity's expected losses, or
(4) the equity owners do not have the right to receive the entity's expected residual returns. In October 2003, the FASB
issued FASB Interpretation No. 46-6, "Consolidation of Variable Interest Entities" which resulted in the acceleration of the
effective date of FIN 46 for foreign private issuers. As a result the Company should account for an interest held in a VIE,
effective fiscal 2003, that meets both of the following conditions: (i) the entity was not created to undertake a single
specified purpose and (ii) the entity has assets that are predominantly non-financial in nature.
The Company has entered into various transactions related to real estate in the U.S. and Central Europe that result in it
having interests in VIEs. In addition, the Company has purchasing arrangements with value-added service providers
("VASPs") that are VIEs. It is reasonably possible that the Company will have to consolidate some of these entities
beginning in January 2004. Consolidation of these entities is not expected to have a material adverse effect on the
Company's consolidated results of operations or financial position, including its ability to obtain financing.
Since fiscal 2000, the Company has entered into transactions involving the sale and leaseback of various properties in the
U.S. and Central Europe. For certain of these properties sold and leased back, an unaffiliated third party established a
VIE to act as buyer-lessor. Upon the initial transfer of assets to these entities, the company received total proceeds of
approximately EUR 1,255. As of December 29, 2002, the Company does not believe its maximum exposure related to
these entities would have a significant impact on the Company's financial position.
Ahold and B.V. Maatschappij tot Ontwikkeling van Middenstandsprojecten C.K.K. ("CKK") own 73% and 25% of
Schuitema N.V., respectively. CKK's creation and activities are a result of cooperation between Schuitema and its
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