Transition to International Financial Reporting Standards
Parent company statement of earnings
3 Restatements and reclassifications of the financial position and results
for 2001 and 2000 under Dutch GAAP
00 Ahold ANNUAL REPORT 2002 105
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
According to European Union ("EU") regulations, all listed companies in the EU will be obliged to apply the International
Accounting Standards and International Financial Reporting Standards of the International Accounting Standards Board
("IASB") in their financial statements by 2005. The Company is currently engaged in the transition to achieve compliance
with these standards. The change to the standards of the IASB may lead to restatement of the financial information for the
periods presented in these financial statements.
Because all financials of the parent company are included in the consolidated statements, a summarized statement of
earnings of the parent company is presented, in accordance with article 402, Book 2 of the Netherlands Civil Code.
On February 24, 2003, Ahold announced that net income and income per share would be significantly lower than previously
indicated for fiscal 2002 and that its comparative financial position as per December 31, 2001 and results for fiscal
2001 and 2000 under both Dutch and US GAAP would be restated and reclassified. Ahold indicated that these
restatements primarily related to overstatements of vendor allowance income at USF and the deconsolidation of five
current or former joint ventures: ICA Ahold AB ("ICA"), Disco Ahold International Holdings N.V. ("DAIH"), Bomprepo S.A.
("Bomprepo"), Jerónimo Martins Retail ("JMR") and Paiz Ahold N.V. ("Paiz Ahold"). Ahold also announced forensic
investigations into accounting irregularities at USF and into the legality and accounting treatment of certain questionable
transactions at Disco.
In addition to the USF and Disco investigations, the Company commenced investigations into the facts and circumstances
surrounding certain letters that were the basis for the historical consolidation of the aforementioned joint ventures (other
than JMR) (the "Control Letters"), and certain previously undisclosed related side letters that nullified the effect of the
Control Letters (the "Side Letters"), the disclosure of which resulted in the decision to deconsolidate those joint ventures.
On March 24, 2003, Ahold's Audit Committee ordered the commencement of a series of additional investigations at
17 Ahold operating companies and real estate companies and at the parent company to assess whether accounting
irregularities, errors and/or issues existed, the integrity of management, and the adequacy of internal controls.
The USF investigation identified accounting fraud relating to fictitious and overstated vendor allowance receivables,
improper or premature recognition of vendor allowances and an understatement of cost of goods sold. The investigation
found that certain senior officers of USF and other employees were involved in the fraud. It was also found that
inappropriate vendor allowance accounting had existed at the date of the acquisition of USF. The Disco investigation found
a series of suspicious transactions, some of which involved the use of fictitious invoices to conceal or mischaracterize
payments, or payments that were otherwise improperly documented. In addition, in some instances, these payments were
improperly capitalized rather than expensed.
The investigation into the Control Letters and the Side Letters found that there had been concealment of the Side Letters,
which nullified effect of the Control Letters. As a result, the Company determined that it was inappropriate to consolidate
these joint ventures into Ahold's financial statements. The additional internal investigations found accounting irregularities
at Tops, consisting of intentional improper recognition of vendor allowances and pervasive earnings management, and at
Giant-Carlisle, consisting of pervasive earnings management although involving relatively small amounts. The investigations
also concluded that certain accounting irregularities had occurred at the Ahold parent company. In addition, these
investigations found varying degrees of earnings management and/or other accounting errors or issues at the Ahold parent
company and at the other operating and real estate companies reviewed.
As a consequence of the events announced on February 24, 2003, Ahold's then Chief Executive Officer and Chief Financial
Officer resigned effective March 10, 2003. Numerous other personnel changes have also been made, including changes
at USF, Disco and Tops and at the Ahold parent company. The Company and the Audit Committee reviewed all of the
accounting issues identified in the internal investigations, which included 470 separately identified items. As a result of
this, Ahold has determined that it was necessary to make adjustments to its financial statements. The restated fiscal 2001
and 2000 financial position and results reflect these adjustments, which relate to (i) the deconsolidation of companies not
controlled by Ahold; (ii) improper or premature recognition of vendor allowances; (iii) the misapplication of accounting
