00 Ahold ANNUAL REPORT 2002 107
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
Control Letters. As a result, management concluded that the Company did not control these joint ventures. Additionally,
prior to 2002, the Company had consolidated JMR. In light of the evaluation of the accounting for the other joint ventures,
the Company reconsidered its accounting for JMR and concluded that it had significant influence, but not control over
JMR. The Company concluded that consolidation of the aforementioned joint ventures was inappropriate under Dutch
GAAP and US GAAP, since the Company did not control them.
The restated financial position as of December 30, 2001 and results for fiscal 2001 and 2000 reflect adjustments to
deconsolidate the aforementioned joint ventures and account for them using the equity method of accounting, with the
exception of Bomprego, which has been consolidated since July 2000, when Ahold acquired the remaining voting shares,
obtaining majority voting control over Bomprego. DAIH has been consolidated since July 2002, when Ahold obtained
control of DAIH through the acquisition of additional DAIH shares, that it did not already own.
(b) Adjustments resulting from deconsolidation
The Company recorded restructuring accruals under purchase accounting relating to the acquisition of its 50% interests in
Paiz Ahold in December 1999 and in ICA in April 2000 and subsequent changes to such accruals in 2001 related to ICA.
Since Ahold did not obtain control over Paiz Ahold and ICA when the respective joint venture interests were acquired, it
was not appropriate to record such restructuring accruals under Dutch GAAP or US GAAP. The restated financial position
as of December 30, 2001 and results for fiscal 2001 and 2000 reflect adjustments to eliminate the restructuring
provisions recorded under purchase accounting, to record the related effect on goodwill and goodwill amortization, and to
record Ahold's share of the actual costs related with such restructurings during the respective periods. Ahold recorded its
share of restructuring costs (after taxes) in the amount of EUR 5 and EUR 10, for fiscal 2001 and 2000, respectively. As
a result of these restatements, shareholders' equity as of December 30, 2001 increased by EUR 4.
(c) Vendor allowances
As a result of the findings of the investigations at USF and Tops, the Company determined that its income from vendor
allowances for fiscal 2001 and 2000 was overstated due to the intentional and unintentional misapplication of Dutch
GAAP and US GAAP and the intentional inappropriate accounting for and mischaracterization of cash receipts which led to
the recognition of vendor allowances before it was appropriate to do so under Dutch GAAP and or selling expense, general
and administrative expenses, US GAAP. Furthermore, certain vendor allowances were misclassified as revenue instead of as
a reduction of cost of sales or selling expense, general and administrative expenses, as required under Dutch GAAP and
US GAAP.
The restated financial position and results reflect adjustments to correct overstated vendor allowance income, to correct
for the timing of the recognition of vendor allowances, and to reclassify certain vendor allowances from net sales to cost
of sales.
The Company determined that net receivables from vendors at the date of the USF acquisition in fiscal 2000 did not exist
at the time. In addition, the Company determined that, at the date of acquisition, a liability for deferred revenue related
to vendor allowances, that were not yet earned, were not recorded. Furthermore, the Company determined that a liability
should have been recognized at the date of acquisition for amounts that had been overbilled to vendors for vendor
allowances. The total amount of these adjustments led to an overstatement of net assets acquired by EUR 70.
Under Dutch GAAP and taking into consideration recent guidance under International Financial Reporting Standards
Exposure Draft No. 3 "Business Combinations", the adjustment to the vendor allowance receivable, is recorded as a
retroactive adjustment to the goodwill recorded upon acquisition, since this guidance requires an entity to account for
corrections of errors retrospectively, and to present financial statements as if the error had never occurred. Therefore, the
carrying amount of an identifiable asset that is adjusted as a result of an error correction is calculated as if its fair value at
the acquisition date had been recognized at that date. Goodwill recognized in prior periods is adjusted retrospectively by
an amount equal to the fair value at the acquisition date of the identifiable asset being adjusted. Accordingly, the Company
has restated its financial statements to reallocate the amount of consideration paid in the USF acquisition to goodwill. As
a result, the Company's shareholders equity as of December 30, 2000 under Dutch GAAP was reduced by EUR 70. Under
US GAAP, the adjustments necessary to eliminate these vendor allowance receivables were recognized immediately in the
statement of operations. For more information, see Note 31 under "USF purchase accounting adjustments".
The Company discovered various other misstatements relating to vendor allowance transactions prior to fiscal 2000
resulting of an overstatement of opening shareholders equity as of January 2, 2000 by EUR 30.
