Note 37
2005 1
-
-
-
Under IFRS transition rules hedge accounting was deemed to have been applied from the inception of the derivative contracts,
including 2001, to calculate the cash flow hedge reserve as of the transition date for cash flow hedges. As a result, balances
recorded in the cash flow hedging reserve under IFRS differ from the balances recorded in other comprehensive income under
US GAAP at the transition date and consequently different amounts are released from the cash flow hedge reserve under IFRS
compared to the amounts released from other comprehensive income under US GAAP. As a result EUR 58 was released from
cash flow hedge reserve in 2005 under IFRS that was not released under US GAAP. Similarly, a difference of EUR 27 exists in
comprised of the amortization relating to previously deferred gains on sale and leaseback transactions, partly offset by deferrals
of gains in connection with several new sale and leaseback transactions.
Other
This item mainly relates to accounting for leases with land and building components. Under IFRS, a finance lease that
includes both land and building is viewed as two separate components. The land component is classified as an operating lease
unless title is transferred or the lease contains a bargain purchase option. The building component is classified separately as a
finance lease. Under US GAAP, bifurcation of a finance lease including land and building is not required if the land
component is less than 25% of the total property value. The reconciling item represents the difference between the operating
lease expenses of the land recognized on a straight line basis under IFRS and the additional depreciation and interest expenses
of the land that is capitalized under US GAAP.
6 Derivative instruments and loans
RECONCILIATION OF NET INCOME (LOSS)
2004
Derivatives
86
48
Embedded derivatives
24
22
Convertible bond
29
Release from cash flow hedge reserve
58
Other
4
(3)
RECONCILIATION OF SHAREHOLDERS' EQUITY
January 1,
2006
January 2,
2005
Derivatives
50
27
Revaluation of bonds under fair value hedge
27
27
Embedded derivatives
23
(9)
Other
9
Embedded derivatives
The Company enters into lease agreements denominated in EUR and USD in Eastern Europe where the local currency is
subject to large fluctuations. Under US GAAP these contracts are considered to have de facto embedded foreign exchange
derivatives, which are required to be separately accounted for at fair value on the balance sheet with gains and losses
recognized in the consolidated statements of operations. Under IFRS, because the lease payments are denominated in a
currency that is commonly used in the economic environment in which the transactions take place, the embedded feature is
not accounted for separately. Furthermore the foreign currency forwards that are entered into to hedge the foreign currency
risks embedded in these lease contracts, which are generally accounted for as cash flow hedges under IFRS, are accounted for
as stand alone derivatives under US GAAP with fair value gains and losses recognized in the consolidated statements of
operations.
Release of cash flow hedge reserve and revaluation of bonds under fair value hedges
Ahold's reconciling differences relate to timing differences when applying IAS 39 "Financial Instruments: Recognition and
Measurement" and SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133") and SFAS
No. 149 "Amendments of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). A difference
arose between IFRS and US GAAP, since the Company was unable to apply hedge accounting under US GAAP in 2001.
AHOLD ANNUAL REPORT 2005 193
