00 Ahold ANNUAL REPORT 2002 109
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
(f) Real estate transactions
In fiscal 2001, the Company entered into leveraged lease transactions, in the aggregate USD 638 involving the sale of its
interests in 46 separate properties in the U.S. for a total sales price of EUR 722, which generated a net gain of EUR 81,
comprising EUR 107 of gains on certain properties and EUR 26 of losses on others. The properties were sold to special
purpose entities established by unaffiliated third parties, and in conjunction with the sale were leased back by the Company.
Under Dutch GAAP and US GAAP, the Company accounted for the lease arrangements as operating leases. The Company
also deferred the EUR 81 net gain related to the sale of these properties and amortized this net gain over the respective
lease term of 20 to 25 years.
The Company has chosen to apply for Dutch GAAP the same detailed criteria for testing if a lease should be treated as an
operating lease or as a capital lease under US GAAP. Therefore the restated financial position and results for fiscal 2001
have been adjusted to reflect that the leases of seven properties that had been considered operating leases are now
considered capital leases under Dutch GAAP. As a result, these seven properties remain on the balance sheet and the
related lease obligation is recorded as a financing. The EUR 19 net gain on these properties has been appropriately
deferred over the respective lease terms of 20 to 25 years. Additionally, adjustments were made to reflect that a net gain
of EUR 62, on the sale of the remaining 39 properties, which qualified as operating leases, should have been immediately
recognized in income under Dutch GAAP and not deferred over the remaining lease term, since the sale transactions were
made at fair value.
Furthermore, the Company identified a number of other sale and leaseback transactions that occurred in fiscal 2001 and
2000, under which certain leases that had been classified as operating leases should have been classified as capital
leases or financing arrangements.
In total, shareholders' equity as of December 30, 2001 decreased by EUR 44 and net income increased by EUR 2 for
fiscal 2001 and decreased by EUR 26 for fiscal 2000.
(g) Other accounting issues and items
In connection with the review of suspicious transactions identified in the course of the investigation of Disco, the Company
has determined that certain payments were improperly capitalized as tangible fixed assets in fiscal 2001 for EUR 10.
Accordingly, the financial position and results of operations for fiscal 2001 were adjusted to appropriately expense the
capitalized amounts and record a EUR 5 related contingency provision.
Following the discovery that the Company should not have consolidated its joint venture interest in Bomprego, due to the
existence of Side Letters, management concluded that the Company did not control this joint venture prior to July 2000.
The restated financial position and results for fiscal 2001 and 2000 reflect adjustments to deconsolidate Bomprego and
account for it on an equity basis until July 2000, when Ahold acquired additional shares, thereby obtaining majority voting
control. As a result of the consolidation as of July 2000 the assets should have been recorded at fair value at that time.
The fair valuation of the assets, mainly consisting of properties, has resulted in a step-up increase in the fair value of
EUR 51, and corresponding decrease in the value of goodwill previously written off to shareholders' equity.
Ahold's subsidiary Schuitema did not consolidate its 82% interest in the net assets of C.V. Eemburg ("Eemburg"). The
Company reviewed its ability to govern strategic, operational and financial policies of Eemburg and concluded that the
Company had control and should have consolidated Eemburg. The Company's interest used to be recorded at historical
cost and the properties of Eemburg had been revalued at the end of each reporting period. Furthermore, Schuitema issues
loans to certain franchisees and fully provides for these loans, based on the assumption that the amount would not be
repaid by the franchisees. The Company treats the scheduled redemptions as a deduction to income over the period of
the loan and consequently reversed the provision for bad debts.
During the Company's evaluation of long-lived assets for impairment in fiscal 2002, management noted that there were
changes in circumstances that already existed in fiscal 2001, which indicated that the carrying amount of certain of these
assets was impaired at that time, but had not previously been recognized. The Company has determined that an
impairment of EUR 16 was required in fiscal 2001.
The adjustments described above and other individually insignificant accounting errors discovered in connection with
the Company's review of prior years' financial records, resulted in a decrease of net income by EUR 53 in fiscal 2001
and EUR 21 in fiscal 2000, respectively. These adjustments resulted in an increase in shareholder's equity as of
December 30, 2001 by EUR 30.
