Furthermore, we identified a number of other sale and leaseback transactions that occurred in fiscal 2001 and fiscal
2000, under which certain leases that had been classified as operating leases should have been classified as capitalized
leases or financing arrangements.
As a result of these adjustments, shareholders' equity as of fiscal year-end 2001 decreased by EUR 44 million and net
income increased by EUR 2 million for fiscal 2001 and decreased by EUR 26 million for fiscal 2000.
Other accounting issues and items
In connection with the review of suspicious transactions identified in the course of the investigation of Disco, we
determined that certain payments were improperly capitalized as tangible fixed assets in fiscal 2001 in the amount of
EUR 10 million. Accordingly, the financial position and results of operations for fiscal 2001 were adjusted to appropriately
expense the capitalized amounts and record a related EUR 5 million contingency provision.
As discussed in "Joint Ventures" on page 24, following the discovery of the existence of a side letter relating to Bomprego,
management concluded that we should not have consolidated our joint venture interest in Bomprego prior to July 2000.
The restated financial position and results for fiscal 2001 and fiscal 2000 reflect adjustments to deconsolidate Bomprego
and account for it on an equity basis until July 2000, when we acquired the additional shares, thereby obtaining majority
voting control. As a result of this consolidation as of July 2000, the net 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 million, and a corresponding decrease in the value of goodwill previously written off to shareholders'
equity.
One of our subsidiaries did not consolidate its 82% interest in the net assets of C.V. Eemburg ("Eemburg"), a real estate
limited partnership. We reviewed our ability to govern strategic, operational and financial policies of Eemburg and
concluded that we had control and should have consolidated Eemburg. Our interest used to be recorded at historical cost
and the properties of Eemburg had been revalued at the end of each reporting period. Furthermore, this subsidiary issues
loans to certain franchisees and provides a full allowance for these loans, based on the assumption that the amount would
not be repaid by the franchisees. We treat the repayments as a deduction in income over the period of the loan and
consequently reversed the provision for bad debts.
During our 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. We have determined that an impairment of EUR 16 million
was required in fiscal 2001.
The adjustments referred to above and other individually insignificant accounting errors discovered in connection with our
review of prior years' financial records, resulted in a decrease of our net income in fiscal 2001 and fiscal 2000 by
EUR 53 million and EUR 21 million, respectively. These adjustments resulted in an increase in shareholders' equity as of
fiscal year-end 2001 by EUR 30 million.
Fiscal 2002 correcting adjustments
Our fiscal 2002 consolidated financial statements reflects all material correcting adjustments that have been identified in
connection with the various investigations and the audit by our independent auditors. Specifically, we have made correcting
adjustments to our fiscal 2002 consolidated financial statements or improper accounting for vendor allowances totaling
EUR 269 million, which represented 79% of the total fiscal 2002 correcting adjustments.
The correcting adjustments described above affected our reported quarterly earnings for fiscal 2002 as announced in press
releases on June 6, 2002, August 29, 2002, and November 19, 2002.
(in EUR millions)
Quarter ended
April 21, 2002
Fiscal 2002
Quarter ended
July 14, 2002
Quarter ended
October 6, 2002
Net sales as previously reported
Net sales reflecting correcting adjustments
Net income (loss) as previously reported
Net income (loss) reflecting correcting adjustments
22,191
19,559
328
135
17,273
14,786
(198)
(266)
16,413
14,045
258
177
32
