The Company recognized a transitional goodwiii impairment loss of EUR 2,493, net of income tax benefit of EUR 257
upon adoption of SFAS No. 142, related to certain consolidated subsidiaries as a cumulative effect of a change in
accounting principle. The transitional goodwiii impairment loss relates to goodwiii that was not capitalized under Dutch
GAAP and was comprised of the following:
- Impairment losses amounting to EUR 136 related to one of its reporting units within the "Retail - Europe Other"
reportable segment. The impairment loss relates principally to operations in Spain.
- Impairment losses amounting to EUR 331 related to one of its reporting units within the "Retail - Latin America"
reportable segment. The impairment loss relates principally to operations in Brazil.
- Impairment losses amounting to EUR 180 related to several of its reporting units within the "Retail - Asia Pacific"
reportable segment. The impairment loss relates principally to operations in Malaysia of EUR 29 and Thailand of EUR
150.
- Impairment losses amounting to EUR 1,846, net of income tax benefit of EUR 257, related to USF, mainly as a result of
accounting errors found as a result of investigations discussed in Note 3. As a result of these accounting errors estimated
future profitability was significantly reduced.
The company recognized a transitional impairment loss of EUR 6 related to Peapod Inc's brandname, which is included in
its "Retail - U.S. Other" reportable segment. In addition to transitional impairment losses and impairment losses recorded
under Dutch GAAP, the Company recognized additional impairment losses under US GAAP related to goodwiii and other
intangible assets amounting to EUR 735 and EUR 16, respectively, during fiscal 2002 in connection with the annual
impairment test required by SFAS No. 142, primarily consisting of the following:
- Impairment losses amounting to EUR 529 related to USF. This goodwiii impairment relates to goodwiii that was not
capitalized under Dutch GAAP. The impairment resulted from a reassessment of the previously performed impairment
test, taking into account the accounting errors discussed in Note 3 and the resulting revisions to the estimated future
profitability of USF.
- Impairment losses amounting to EUR 50 related to several of its reporting units within the "Retail - U.S. Other"
reportable segment. The impairment loss related to Peapod Inc. and Bruno's Supermarkets, in an amount of EUR 43 and
EUR 7, respectively. Peapod Inc. is an on-iine grocer, and during 2002 the impairment was recognized as a result of
revised expectations of the future cash flows of Peapod's operations, due to lower expected growth of our internet grocery
sales. The impairment related to goodwiii that was not capitalized under Dutch GAAP. The additional impairment charge
recognized for Bruno's under US GAAP is the result of the higher carrying value of the goodwiii under US GAAP.
- Additional goodwiii impairment losses amounting to EUR 115 related to part of the "Retail - Europe Other" reportable
segment were the result of a higher carrying value of goodwiii under US GAAP. As described in Note 6, the impairment
was recorded as a result of lower than expected operating performance after the acquisition of Superdipio in December
2000, which is mainly the result of a slow down of the Spanish economy since the acquisition and lower than expected
cost savings from the integration of Ahoid's businesses in Spain.
- Impairment losses amounting to EUR 41 related to several of its reporting units within the "Retail - Latin America"
reportable segment was the result of an impairment of goodwiii that was not capitalized under Dutch GAAP relating to
Bomprego and a difference in the carrying value of goodwiii in Ahoid's operations in Argentina and Chiie. As discussed in
Note 6, the total impairment losses resulted principally from downward revisions to expected future cash flows resulting
from an economic downturn in Argentina, Brazil and Chiie.
- The Company recognized additional impairment losses under US GAAP amounting to EUR 16 related to impairment of
other intangible assets, relating to its "Retail - Other Europe" reportable segment.
As a result of the aforementioned Dutch GAAP and additional US GAAP impairments, total goodwiii impairment losses under
US GAAP amounted to EUR 4,766. Total impairment losses relating to other intangible assets amounted to EUR 28.
Prior to the implementation of SFAS No. 142, the Company reviewed goodwiii recorded under US GAAP for impairment
whenever facts or circumstances indicated that the carrying amounts may not have been recoverable. If an evaluation was
required, the estimated future undiscounted cash flows associated with the underlying business operations were compared
to the carrying amount of goodwiii to determine if a write-down was required. If such an assessment indicated that the
undiscounted future cash flows would not be recovered, the carrying amount was reduced to the estimated fair value.
For the periods prior to the implementation of SFAS No. 142 undiscounted cash flows exceeded the carrying amounts of
goodwiii, which had a 40 year life; accordingly, no impairment write-downs of goodwiii were recorded in the restated
consolidated financial statements under US GAAP for 2001 and 2000, respectively.
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