GO Ahold
Leases and sale and leaseback transactions
Tangible fixed assets
99
Trade name licences acquired separately or in business acquisitions after January 1, 2001, are capitalized and amortized
over the term of the license, generally not exceeding 10 years.
Direct costs relating to the development of software for internal use are capitalized after technological feasibility has been
established. All costs incurred prior to the establishment of technological feasibility, as well as overhead, general and
administrative and training cost incurred after the establishment of technological feasibility are expensed as incurred.
Amortization is calculated over the anticipated useful life of the software assets, ranging from three to five years.
Ahold also enters into sale and leaseback arrangements with various financial institutions, whereby the Company sells
certain of its retail properties and simultaneously leases them back from the purchaser. Generally, only minor continuing
involvement in these properties other than the required lease payments is maintained. If these transactions are established
at fair value, and substantially all risks and rewards of ownership are transferred to the buyer-lessor, the gain or loss on the
transactions is recognized in the consolidated statements of operations immediately. If not, the transactions are recorded
as financings and any gains are deferred and amortized over the term of the lease, whiler losses are recognized
immediately.
The useful life of land is considered indefinite. Interest incurred during construction is capitalized as part of the related
asset.
Customer relationships acquired in business acquisitions after January 1, 2001, have been capitalized at fair value
determined using the royalty method, whereby the fair value is based on the present value of the estimated royalty
payments that would be expected to be paid for the use of the customer relationship. Amortization of customer
relationships is calculated over their estimated useful lives, ranging from seven to ten years.
Favorable operating lease contracts acquired in business acquisitions are capitalized based on the present value of the
amount by which the contract terms are favorable relative to market prices at the date of acquisition. Favorable operating
lease contracts are amortized over the remaining duration of the lease agreements.
In some instances, Ahold incurs construction costs for properties expected to be completed and sold within one year in
sale and leaseback transactions. These construction costs are classified as other current assets until the sale and
leaseback occurs.
Stores
Other buildings
Leasehold improvements
Machinery and equipment
Other fixed assets
30 - 40 years
25 - 30 years
7 - 12 years
3 - 12 years
5 - 8 years
Ahold is the lessee of equipment and buildings under various operating and capital leases. In accordance with Dutch
GAAP, the Company classifies its leases as capital leases or operating leases based upon whether the lease agreement
transfers substantially all the risks and rewards of ownership. For leases determined to be capital leases, an asset and
liability are recognized at an amount equal to the lower of fair value of the leased asset or the present value of the
minimum lease payments during the lease term. Such assets are amortized on a straight-line basis over the shorter of the
lease term or the estimated useful life of the asset taking into account the residual value, with depreciation included in
depreciation expense. Leases that do not qualify as capital leases are classified as operating leases, and the related rental
payments are expensed on a straight-line basis over the lease term. Payments made to the Company representing
incentives to sign a new lease are recognized on a straight-line basis over the term of the new lease.
Tangible fixed assets are stated at cost or the fair value at the time they are acquired in a business acquisition, less
accumulated depreciation. Expenditures for improvements are capitalized; repairs and maintenance are expensed as
incurred. Prior to 2001, major repairs and maintenance projects were accrued as the related assets were used. Effective
January 1, 2001, upon the adoption of RJ 252, the Company began expensing the cost of major repairs and maintenance
projects as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives of the
related assets, taking into account the residual value. Depreciation of capitalized leases and leasehold improvements is
calculated over the lesser of the lease term or the estimated useful life of the asset. The estimated useful lives are:
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR RELATIONS
ANNUAL REPORT 2002
