2
Ahold Annual Report 2003
Financial Statements
97
Principles of Consolidation
The accompanying consolidated financial statements include the assets, liabilities and results of operations of all
subsidiaries from the date on which Ahold, either directly or indirectly obtained control. Ahold ceases consolidation
of a subsidiary from the date it surrenders control through the divestment of that subsidiary or other events.
Intercompany balances and transactions have been eliminated in the consolidation. A minority interest is recorded
in the balance sheet and the statements of operations for the minority shareholders' share in the net assets and the
income or loss of subsidiaries, respectively. Ahold does not recognize the minority shareholders' share in the loss to
the extent this would result in recording a minority interest receivable balance, unless the minority shareholder has
an obligation to fund the shareholders' deficits of the subsidiary. For 2003, 2002 and 2001, the minority interest in
the net assets and income of subsidiaries mainly relates to the minority shareholders' interest in Schuitema N.V.
("Schuitema"), in which Ahold has a 73.2% interest, and Peapod, the U.S. on-line grocer ("Peapod"), in which
Ahold had a 51% interest until August 2001, when it became a wholly-owned subsidiary.
When Ahold acquired the interest in Schuitema, Ahold agreed that Schuitema could maintain the structure
regime (governance rules applicable to large companies in The Netherlands) which provides Ahold with indirect
control over Schuitema. Under the structure regime, direct control rests with Schuitema's supervisory board through
its rights to appoint Schuitema's management, adopt the annual accounts and approve significant operating
decisions. During the periods presented, Ahold had the right to appoint two members to, and to nominate a neutral
person to serve as the chairman of, the five member supervisory board. In accordance with Schuitema's shareholder
agreement, effective until March 31, 2003, Ahold had the right to terminate or mitigate the structure regime after
having had intensive consultations with Schuitema's supervisory board and management board while considering the
perception of independence of Schuitema in the market. No prior approval of Schuitema was required for a decision
by Ahold to terminate the structure regime. Effective March 31, 2003, a new shareholders' agreement between
Ahold and Schuitema has come into effect, enhancing the influence of Schuitema's supervisory board in the decision
to terminate (or mitigate) the structure regime. This development must be weighted against legal and corporate
governance initiatives enhancing shareholder rights. If the structure regime were to be abandoned (or mitigated),
Ahold would exercise direct control over Schuitema as its majority shareholder. Based on these rights, Ahold has
had effective control over Schuitema and, accordingly, Schuitema has been consolidated for all periods presented.
Accounting for divestments and discontinuing operations
A component of Ahold meets the definition of a discontinuing operation if:
(a) the component, pursuant to a single plan is
a) disposed of substantially in its entirety, such as by selling the component in a single transaction,
by demerger or spin-off of ownership of the component;
b) disposed of piecemeal, such as by selling off the component's assets and settling its liabilities individually;
c) terminated through abandonment;
(b) it represents a separate major line of business or geographical area of operations; and
(c) it can be distinguished operationally and for financial reporting purposes.
The approval and announcement of a plan for discontinuance is considered an event that requires that the assets
attributable to the discontinuing operation are tested for impairment. Therefore, Ahold estimates the recoverable
amount of the discontinuing operation (the asset's net selling price) and recognizes an impairment loss, if, and to
the extent the carrying value of the component exceeds the net selling price.
Prior to the adoption of RJ 500 "Mergers and Acquisitions" as of December 1, 2000, Ahold charged goodwill
on acquisitions directly to shareholders' equity. In accordance with RJ 214, Ahold reverses all or a portion of the
positive goodwill that has been previously charged to shareholders' equity in income on disposal of a participating
interest. If the disposal occurs within one year of acquisition, the entire amount of the goodwill charged to
shareholders' equity is reversed. On disposal within two years, the amount of goodwill reversed is at least 80%,
within three years at least 60% and so on.
Currency translation adjustments previously recorded directly in shareholders' equity as a result of the
translation of the accounts of foreign subsidiaries are recognized in the statement of operations upon the disposal
of the subsidiary.
Foreign currency translation
Subsidiaries, joint ventures and equity investees record transactions in their functional currency, which is the principal
currency of the economic environment in which they operate. Transactions in currencies other than the functional
currency of the subsidiary, joint venture and equity investee are recorded at the rates of exchange prevailing at the date
of the transaction in the accompanying statements of operations. Monetary assets and liabilities in currencies other
than the functional currency are translated at the rates of exchange prevailing at the balance sheet date and gains and
losses are reported in the statements of operations. Goodwill and fair value adjustments rising on the acquisition of a
foreign entity are treated as assets denominated in the functional currency of the entity. Exchange gains or losses from
