Financial statements - Notes to the consolidated financial statements
Note 37
shareholders' equity with respect to the carrying amount of bonds due to the fact that fair value hedge accounting was not
applied under US GAAP in 2001.
Convertible bond
Under IFRS the EUR 920 convertible bond, originally maturing in May 2005, was bifurcated between the conversion feature
and the bond, resulting in the recognition of a conversion feature valued at EUR 29 in the 2004 opening balance under IFRS
and a corresponding reduction in the carrying amount of the bond as previously recognized under Dutch GAAP. In 2004 the
bond was redeemed early, resulting in a one-time loss under IFRS of EUR 20 relating to the remaining value of the conversion
feature and EUR 9 of interest expense relating to the change in the value of the conversion feature through the redemption
date of the bond. Since the bond did not have a beneficial conversion feature and the conversion option could only be
physically settled, the bond was recorded at face value under US GAAP and when redeemed at face value, the conversion
features were realized under US GAAP, resulting in an increase in US GAAP net income of EUR 29 before tax.
7 Pensions and other post-employment benefits
Under IFRS, pension costs and other post employment benefits are accounted for in accordance with IAS 19 "Employee
Benefits" (as revised in 2004) ("IAS 19"). Under US GAAP, pension costs are accounted for in accordance with SFAS No. 87
"Employers' Accounting for Pensions" ("SFAS No. 87"). Other post-employment benefits are recorded in accordance with
SFAS No. 106 "Employers' Accounting for Post-retirement Benefits other than Pensions" ("SFAS No. 106"). Curtailments,
settlements and certain other termination benefits are accounted for under SFAS No. 88 "Employer's Accounting for
settlements and Curtailments of defined Benefit Pension Plans and for Termination Benefits" ('SFAS No. 88").
Under SFAS No. 87, an additional pension liability must be recognized if the accumulated benefit obligation of a plan at the
measurement date exceeds the funded status of the plan and if the recognized accrued liability is less than the excess, or if
a prepaid cost rather than an accrued liability is recognized. In conjunction with the recognition of an additional minimum
liability for a plan, an intangible asset can be recognized equal to the unrecognized prior service cost related to that plan, but
not exceeding the amount of the recognized additional minimum liability. Any difference between the minimum liability and
the amount of the intangible asset is reflected as a charge to other comprehensive income, net of income taxes. IAS 19 does
not contain an "additional minimum pension liability" provision.
Net periodic pension expense under US GAAP differs from net periodic pension expense under IFRS due to differences in the
amortization of actuarial gains and losses, differences in the amortization of prior service cost and differences in the amounts
recognized for curtailments and settlements. Under IFRS the Company recognized all actuarial gains and losses upon transition
to IFRS on December 29, 2003, whereas under US GAAP the unrecognized gains and losses continue to be amortized.
Consequently the amounts of actuarial gains and losses included in the net periodic pension expense for a plan under IFRS,
if any, differ from those under US GAAP. Under IFRS the recognition of prior service cost in net income is deferred only where
it relates to unvested benefits, whereas under US GAAP prior service costs may be deferred that are related to both vested
and unvested benefits. Unrecognized prior service cost is amortized under IFRS over the remaining vesting period, whereas
under US GAAP unrecognized prior service cost is amortized over the remaining (average) service period. The differences
in unrecognized actuarial gains and losses and unrecognized prior service cost can result in different gains or losses on
curtailments or settlements of the plans. Lastly, the timing of curtailment gains and losses can differ based on the provisions
of IAS 19 and SFAS No. 88.
8 Share-based compensation
Under IFRS share based payments related to the Company's share option plans and performance share grant plans are required
to be recognized as an expense based on the fair value of the equity instruments granted. Ahold applies the intrinsic value
method in accordance with APB 25 "Accounting for Stock Issued to Employees" ("APB 25") under US GAAP. Share options
are generally granted at-the-money, which results in no compensation expense recognized under US GAAP. Since share options
are generally granted with an exercise price equivalent to the market value of the share at the grant date as a result of which no
compensation expense is recognized under US GAAP. Beginning in 2005, vesting of the share options granted to members of
the Corporate Executive Board is subject to certain performance criteria. As a result of the added performance criteria, the
Company is required to apply variable accounting as prescribed under US GAAP. However as of January 1, 2006, the
Company's share price did not exceed the share options grant exercise price, and as a result, no share-based compensation
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