Inventory
Accounts receivable
Cash and cash equivalents
Derivative financial instruments
Stock-based compensation
Pension and postretirement benefits
00 Ahold ANNUAL REPORT 2002 101
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
As of December 29, 2002 and December 30, 2001, the Company has recorded accounts receivable due from the VASPs
of EUR 116 and EUR 102, respectively, and payables to the VASPs in the amount of EUR 159 and EUR 87. Additionally,
under the SFAS No. 49 accounting approach described above, Ahold has recorded VASP inventory and related trade
payables in the amount of EUR 59 and EUR 46 at December 29, 2002 and December 30, 2001, respectively. The
Company recorded approximately EUR 2.8 billion, EUR 1.7 billion and EUR 0.9 billion, representing approximately 18%,
16% and 16% of USF's cost of sales related to purchases through VASPs in fiscal 2002, 2001 and 2000, respectively.
Inventory is stated at the lower of cost or net realizable value. Cost comprises all costs of purchase, cost of conversion and
other costs incurred in bringing the inventories to their present location and condition, net of vendor allowances applicable
to inventory. The cost of inventories is determined using the first-in, first-out (FIFO) method.
Accounts receivable are carried at estimated net realizable value. Allowances are recorded, if necessary, in an amount
considered by management to be sufficient to meet future losses related to the collectibility of the accounts receivable.
The Company sells certain customer receivables to specific non-consolidated qualifying special purpose entities in return
for cash and a participation interest in these companies. Losses on sales of receivables vary on a monthly basis and are
generally related to short-term interest rates that are charged to the Company on its participation interest. Accounts
receivable sold under these conditions are excluded from accounts receivable presented in the Company's consolidated
balance sheets. The retained interest in the qualifying special purpose entities is included in accounts receivable
presented in the Company's consolidated balance sheet.
Cash and cash equivalents include all cash on hand balances and short-term highly liquid investments with original
maturities of three months or less.
The Company utilizes derivative financial instruments to hedge its primary market risk exposures, including risks related to
foreign currency exchange rates, interest rates, and to a lesser extent, exposure to commodity price movements. Derivative
instruments designated and qualifying as hedges under applicable hedge accounting rules are not included in the
Company's balance sheet; rather, any associated gains or losses on the instruments are deferred and are recognized in the
statement of operations in the same period in which the underlying hedged exposure affects earnings. Instruments that are
not designated as hedges, or that fail to qualify for hedge accounting, are included in the Company's balance sheet at fair
value, with changes in value recognized in current period income.
The Company accounts for its stock-based compensation plans using the intrinsic-value method prescribed under Dutch
GAAP. Accordingly, the Company computes compensation costs for each employee stock option granted as the amount by
which the quoted market price of the Company's common shares on the date of grant exceeds the exercise price of the
stock option, similar to the approach under Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock
Issued to Employees" which is applicable under US GAAP. Note 11 presents pro forma disclosures of net income (loss)
and net income (loss) after preferred dividends per share as if the fair-value based method of accounting had been
applied, consistent with the disclosure requirements of SFAS No. 123 "Accounting for Stock Based Compensation".
Ahold has pension, supplemental health and welfare plans in The Netherlands, the U.S. and in other areas of its business.
The plans cover a substantial number of employees within The Netherlands, the U.S. and other areas and have been
established in accordance with applicable legal requirements, customs, and existing circumstances in each area of its
business. The plans are accounted for under the provisions of SFAS No. 87 and SFAS No. 106, in its primary financial
statements as specifically allowed under Dutch GAAP.
Under SFAS Nos. 87 and 106, the determination of the projected benefit obligation and net periodic pension/benefit cost
is dependent on the selection of assumptions by management to be used by actuaries in measuring these amounts. The
assumptions used are described in Note 22 and include, as appropriate, the discount rate, the expected long-term rate of
return on plan assets and the rates of increase in compensation and health care costs, employee turnover, mortality and
retirement ages, future salary and benefit levels, claim rates under medical plans and future medical costs. Differences
between actual results and those expected based on the assumptions are accumulated and amortized over future periods.
Net periodic pension/benefit cost primarily represents the increase in the benefit obligation attributable to service during
