Notes: 31
190
Ahold Annual Report 2003
Financial Statements
Dutch GAAP does not permit deferred tax assets and liabilities to be offset if they are dissimilar in nature or if the timing
in which the particular asset or liability will be settled is different. US GAAP requires these balances to be offset if they
originate within the same tax jurisdiction for a particular tax-paying component of the Company. The deferred income
taxes discussed above are classified in the condensed consolidated balance sheets under US GAAP as follows:
December 28,
December 29,
2003
2002
Non-current deferred tax assets
767
551
Non-current deferred tax liabilities
(569)
(471)
e. Recent US GAAP accounting pronouncements
In May 2003, the EITF reached a consensus on Issue No. 03-04 (EITF 03-04), "Accounting for Cash Balance
Pension Plans." This issue addresses the classification of a cash balance plan as a defined benefit plan for
purposes of applying SFAS No. 87 and the appropriate expense attribution model for cash balance pension plans.
If a company had been accounting for a cash based pension plan as a defined contribution plan prior to
EITF 03-04, the effect of adopting this issue should be accounted for as a cumulative effect of a change in
accounting principle effective as of the beginning of the year containing the next reporting period beginning after
May 28, 2003. The effect of remeasuring the pension obligation in accordance with this issue should be applied at
the plan's next measurement date after May 28, 2003, with any adjustment being treated as an actuarial gain or
loss pursuant to SFAS No. 87. The Company has determined that the adoption of EITF 03-04 will not have a
material impact on the Company's consolidated financial statements.
In November 2003, the EITF of the FASB reached a consensus on Issue No. 03-10, "Application of EITF Issue
No. 02-16, 'Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor,'
by Resellers to Sales Incentives Offered to Consumers by Manufacturers." This issue addresses the income
statement classification of consideration received by a reseller from a vendor in exchange for vendor incentives tendered
by consumers. This issue is effective to transactions with vendors from January 1, 2004 with no early adoption
or retroactive reclassification permitted. The Company has not yet determined the effect, if any, on the Company's
consolidated financial statements as a result of this issue.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46
introduced a new concept of a variable interest entity ("VIE"). A VIE is an entity that meets any of the following
criteria: (1) it has a total equity investment at risk that is not sufficient to finance its activities without additional
subordinated financial support from other parties, (2) the equity owners do not have the ability to make significant
decisions about the entity's activities through voting or similar rights, (3) the equity owners do not have an obligation
to absorb the entity's expected losses, or (4) the equity owners do not have the right to receive the entity's expected
residual returns.
In December 2003, the FASB published a revision to FIN 46 ("FIN 46R"), in part, to clarify certain of its
provisions. Among other things, FIN 46R deferred the effective date for VIEs created prior to February 1, 2003 to
the end of the first US GAAP reporting period that ends after March 15, 2004. FIN 46R addresses consolidation of
VIEs by business enterprises considered to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is
the party that absorbs a majority of the entity's expected losses, receives a majority of its expected residual returns,
or both, as a result of holding variable interests, which are the ownership, contractual, or other pecuniary interests in
an entity. Consolidation of VIEs is not determined based on the majority of voting interests approach, but instead
based on identifying the enterprise holding the controlling financial interests in the VIE. The primary beneficiary is
required to consolidate the assets, liabilities, and results of the activities of the VIE. FIN 46R requires additional
disclosures relating to transactions involving VIEs to be made by primary beneficiaries and enterprises holding
significant variable interests in VIEs.
The Company assessed its interests in entities created after January 31, 2003 to determine whether such
entities created are considered to be VIEs. The Company has concluded that, during this period, the Swedish store
development activity of ICA, an equity method investee, has led to the creation of VIEs, whereby ICA is deemed to
be the primary beneficiary through its equity ownership and the funding it provides to the new entities. The
consolidation of ICA's 2003 Swedish development projects under US GAAP has had a negative EUR 0.4 effect on
the Company's equity method earnings for the year ended 2003.
The Company had as of the end of 2003 purchasing arrangements with value-added service providers (VASPs)
that are VIEs and provide varying degrees of support to the Company in the procurement of its private label and
signature brand products. Although the Company does not have any ownership rights in respect of the VASPs, the
entities are VIEs and the Company holds a majority of the risks and rewards associated with them. The majority of
the assets and liabilities of the VASPs have been recorded in the Company's consolidated financial statements in
accordance with SFAS No. 49, "Accounting for Product Financing Arrangements" which has been disclosed in Note
28. There are no exposures to loss that currently are not reflected in the consolidated financial position of the
Company.
