adopting SFAS No. 133 on January 1, 2001, representing the initial re-valuation of derivative instruments, resulted in an
unrealized loss of EUR 20 (net of income tax benefit of EUR 4) that was recognized in the consolidated statement of
operations as a cumulative effect of a change in accounting principle and an unrealized gain of approximately EUR 1
(comprising an asset of EUR 74 less a liability of EUR 79 net of income tax benefits of EUR 6) that was recognized as a
component of other comprehensive income.
SFAS No. 133 prescribes requirements for designation and documentation of hedging relationships and ongoing
retrospective and prospective assessments of effectiveness in order to qualify for hedge accounting. Hedge accounting is
considered to be appropriate if the assessment of hedge effectiveness indicates that the change in fair value of the
designated hedging instrument is 80 to 125 percent effective at offsetting the change in fair value due to the hedged risk
of the hedged item or transaction. Measurement of amounts to be recorded in income due to ineffectiveness of hedges are
based on the dollar-offset method as required by SFAS No. 133.
Contracts that do not in their entirety meet the definition of a derivative may contain embedded derivative instruments. If
certain conditions are met, SFAS No. 133 requires an embedded derivative to be separated from its host contract and
accounted for separately at fair value.
For qualifying fair value hedges, the change in the fair value of the derivative and the change in the fair value of the
hedged item that is due to the hedged risk(s) is recorded in income. If a derivative instrument qualifies as a cash flow
hedge, the effective portion of the hedging instruments gain or loss is reported in shareholders' equity as other
comprehensive income and is reclassified into earnings in the period(s) during which the transaction being hedged affects
earnings. The ineffective portion of a hedging derivative's fair value change is recorded in current earnings.
(9) Valuation of ICA Put Option
In connection with the acquisition of its 50% interest in ICA in April 2000, the Company granted the ICA Put Option to its
joint venture partners. As described in more detail in Note 30, the joint venture partners have the right to sell their shares
in ICA to Ahold. The price at which the shares can be sold to Ahold includes a premium over the value at which the
estimated price the Option Shares would be trading if ICA were deemed to be a publicly traded company, the deemed fair
market value.
Under Dutch GAAP, the ICA Put Option would only be recognized if the premium that the Company is expected to pay over
the deemed fair market value upon the exercise of the ICA Put Option is considered onerous, which is not deemed to be
the case.
Under US GAAP, the ICA Put Option is considered to be an in-the-money written put option that should be recorded at fair
value since the price at which the shares can be sold to the Company under the ICA Put Option includes a premium in
excess of the fair value of the Option shares. The fair value was estimated at approximately EUR 459 at the date the 50%
interest in ICA was purchased. Under US GAAP, EUR 459 was recorded as part of the consideration paid to acquire the
Company's 50% interest in ICA. Accordingly, the fair value of the ICA Put Option has been reflected as an increase in the
Company's investment in ICA at acquisition, resulting in an increase of goodwill with an offsetting amount recorded as a
liability. Subsequently, increases in the fair value of EUR 31, EUR 10 and EUR 40 of the ICA Put Option have been
recognized as a financial expense in fiscal 2002, 2001 and 2000, respectively. Furthermore, amortization of EUR 11 and
EUR 8 of this additional goodwill was recognized in fiscal 2001 and 2000, respectively.
(10) Other
Other includes adjustments for provisions, leases, capitalized software costs and other various insignificant items. A
summary of the components of "Other" is included in the table below:
Consolidated Consolidated
net income (loss) shareholders' equity
December 29, December 30,
Fiscal 2002 Fiscal 2001 Fiscal 2000 2002 2001
Provisions
(29)
(17)
(5)
(6)
Leases
(4)
(15)
Capitalized software costs
(3)
(5)
(5)
3
Other
5
(1)
(2)
(4)
Total
(2)
(35)
(24)
(20)
(7)
178
