1 Restatements, adjustments and remedial actions
00 Ahold ANNUAL REPORT 2002 23
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
Background of the restatements and adjustments
Overview
On February 24, 2003, we announced that our net earnings and earnings per share for fiscal 2002 would be significantly
lower than previously indicated and that we would be restating our financial statements for fiscal 2001 and fiscal 2000.
We indicated that these restatements were primarily related to overstatements of vendor allowance income at
USF and the deconsolidation of five current or former joint ventures (ICA, Bompreqo, DAIH, JMR and Paiz Ahold). We also
announced forensic investigations into accounting irregularities at USF and into the legality and accounting treatment of
certain questionable transactions uncovered at Disco.
In addition to the U.S. Foodservice ("USF") and Disco investigations, we commenced investigations into the facts and
circumstances surrounding certain letters that were the basis for the historical consolidation of four of the Ahold joint
ventures referred to above, and certain previously undisclosed related side letters that nullified the effect of these letters
and resulted in the decision to deconsolidate those joint ventures. On February 24, 2003, Deloitte Touche ("D&T")
indicated that its opinion on our audited financial statements for the fiscal years ended December 30, 2001, and
December 31, 2000 should no longer be relied upon. D&T suspended its audit of our fiscal 2002 financial statements
until the completion of necessary investigations. On March 24, 2003, the Audit Committee of Ahold's Supervisory Board
ordered the commencement of a series of additional investigations at 17 Ahold operating companies and real estate
companies and at the Ahold parent company to assess whether accounting irregularities, errors and/or issues existed, the
integrity of management, and the adequacy of internal controls.
The USF investigation identified accounting fraud relating to fictitious and overstated vendor allowance receivables and
improper or premature recognition of vendor allowances and an understatement of cost of goods sold. The investigation
found that certain senior officers of USF and other employees were involved in the fraud. It was also found that
inappropriate vendor allowance accounting had existed at the date of the acquisition of USF. The investigation also
identified or confirmed numerous material weaknesses in internal controls.
The Disco investigation found a series of suspicious transactions, some of which involved the use of fictitious invoices to
conceal or mischaracterize payments, or payments that were otherwise improperly documented. In addition, in some
instances these payments were improperly capitalized rather than expensed. Significant internal control weaknesses were
also found.
The investigation into the joint venture letters found that there had been concealment of side letters from Ahold's
Supervisory Board, Audit Committee and D&T and that the consolidation of these joint ventures into Ahold's financial
statements had been in error.
The additional internal investigations found accounting irregularities at Tops, consisting of intentional improper recognition
of vendor allowances and pervasive earnings management, and at Giant-Carlisle, consisting of pervasive earnings
management, although involving relatively small amounts. The investigations also concluded that certain accounting
irregularities had occurred at the Ahold parent company. In addition, these investigations found varying degrees of earnings
management and/or other accounting errors or issues at the Ahold parent company and at the other operating and real
estate companies reviewed. Further, the investigations found weaknesses in internal controls at most of the subsidiaries
reviewed.
As a consequence of the events announced on February 24, 2003, Ahold's then Chief Executive Officer and Chief
Financial Officer resigned effective March 10, 2003. Numerous other personnel changes have also been made, including
changes at USF, Disco, Tops and the Ahold parent company.
Ahold management and the Audit Committee have reviewed all of the accounting issues identified in the internal
investigations, which included 470 separately identified items. As a result of these investigations, Ahold determined that it
was necessary to make adjustments to its financial statements.
Ahold's restated and reclassified financial position as per December 30, 2001 and results for fiscal 2001 and 2000 under
Dutch GAAP and US GAAP reflect adjustments that correct accounting irregularities and other accounting errors previously
made in the application of Dutch GAAP and US GAAP. These adjustments relate to: (1) the deconsolidation of the joint
venture companies not controlled by Ahold; (2) improper or premature recognition of vendor allowances; (3) misapplication
