Financial statements - Notes to the consolidated financial statements
Note 3
Goodwill
Other intangible assets
Goodwill represents the excess of the cost of an acquisition over the Company's interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment
losses. Goodwill on acquisitions of joint ventures and associates is included in investments in joint ventures and associates.
For the purposes of impairment testing, goodwill is allocated to cash generating units (or groups of cash generating units) that
represent the lowest level within the Company at which the goodwill is monitored for internal management purposes and that is
not larger than a segment. Cash generating units to which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the cash generating unit may be impaired. An impairment loss is recognized
for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less cost to sell and its value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. An impairment loss is allocated first to reduce the carrying amount of the goodwill
and then to the other assets of the cash generating unit pro-rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognized for goodwill is not reversed in a subsequent period.
Gains and losses on the partial or complete disposal of an entity include the carrying amount of goodwill relating to an entity
sold or part thereof.
Other intangible assets consist primarily of brand names, customer relationships and lease-related intangible assets acquired
separately or in business acquisitions. In addition, other intangible assets also consist of contractual lease rights and costs of
software, either separately acquired or developed internally. These assets are recognized at fair value determined at the date
of acquisition of the related underlying business, or at cost if they are separately acquired or represent internally developed
software.
Brand names and customer relationships acquired in business acquisitions have been capitalized at fair value determined
using an income approach. The useful lives of brand names have been determined on the basis of certain factors such as the
economic environment, the expected use of the asset and related assets or groups of assets and legal or other provisions that
might limit the useful life. Based on this assessment, the useful life is determined to be indefinite, since there is no
foreseeable limit to the period of time over which brand names are expected to contribute to the cash flows of the Company.
Ahold assesses on a quarterly basis whether there is any indication that non-current assets may be impaired. Regardless of the
existence of impairment indicators, brand names are tested for impairment at least annually.
Direct costs related to the development of software for internal use are capitalized as intangible assets after technological
feasibility has been established. All costs incurred prior to the establishment of technological feasibility, as well as overhead,
general and administrative and training costs incurred after the establishment of technological feasibility, are expensed as
incurred.
Lease-related intangible assets, consisting primarily of favorable operating lease contracts acquired in business acquisitions,
are capitalized based on the present value of the amount by which the contract terms are favorable relative to market prices at
the date of acquisition.
The estimated useful lives of other intangible assets are:
Brand names
indefinite
Customer relationships
7-10 years
Software
3-6 years
Lease related intangibles
remaining duration of the lease agreements
Other
5-10 years
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