Financial statements - Notes to the consolidated financial statements
Note 3
Segmentation
Property, plant and equipment
entity's functional currency at the then prevailing rates. Exchange differences arising on the settlement of monetary items, and
on the translation of monetary items, are included in net income for the period. Goodwill and fair value adjustments arising on
the acquisition of a foreign entity are considered as assets and liabilities of the foreign entity and are translated at the
appropriate closing rates at each balance sheet date.
Upon consolidation, the assets and liabilities of subsidiaries with a functional currency other than the euro are translated
into euros using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average
exchange rates for the respective periods. Exchange rate differences arising on consolidation are included in group equity, in
the currency translation reserve. Such translation differences are recognized in the consolidated statements of operations when
the gain or loss on disposal of the foreign operation is recognized. Intercompany loans to and from foreign entities for which
settlement is neither planned nor likely to occur in the foreseeable future are considered to increase or decrease the net
investment in that foreign entity and the exchange rate differences relating to these loans are included in group equity, in the
currency translation reserve. On the disposal of a foreign operation, the related cumulative exchange rate difference that was
included in group equity is then recognized in the consolidated statements of operations.
Ahold has determined its reportable segments based on its internal reporting practices and on how the Company's management
evaluates the performance of operations and allocates resources.
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments. A geographical segment is a group of assets and operations
engaged in providing products or services within a particular economic environment that are subject to risks and returns that
are different from segments operating in other economic circumstances.
Performance of the segments is evaluated against several measures, of which operating income is the most important.
Intersegment sales are executed under normal commercial terms and conditions that would also be available to unrelated
third parties. Net sales are attributed to countries based on the location of the store or distribution location.
Items of property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses.
Historical cost includes expenditures that are directly attributable to the acquisition or construction of an asset and may
include borrowing costs incurred during construction. Where applicable, estimated asset retirement costs are added to the
cost of an asset.
Subsequent expenditures are capitalized only when it is probable that future economic benefits associated with the item will
flow to the Company and the costs can be measured reliably. All other subsequent expenditures represent repairs and
maintenance and are expensed as incurred.
Depreciation is computed using the straight-line method based on the estimated useful lives of the items of property, plant and
equipment, taking into account the estimated residual value. Where an item of property, plant and equipment comprises major
components having different useful lives, each such part is depreciated separately. The assets' useful lives are reviewed, and
adjusted if appropriate, at each year-end balance sheet date.
The estimated useful lives of property, plant and equipment are:
Land
indefinite
Buildings
30
- 40 years
Building components
7
- 20 years
Machinery and equipment
5
- 12 years
Other
3
- 10 years
Depreciation of assets subject to finance leases and leasehold improvements is calculated on a straight-line basis over either
the lease term (including renewal periods when renewal is reasonably assured) or the estimated useful life of the asset,
whichever is the shorter.
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