Note 3
Investments in joint ventures and associates
Impairment of non-current assets other than goodwill
A joint venture is a contractual arrangement whereby Ahold and other parties undertake an economic activity that is subject to
joint control. Joint control exists when strategic financial and operating policy decisions relating to the activities require the
unanimous consent of the parties sharing control.
Associates are entities over which Ahold has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating
policy decisions of the entity but is not control or joint control over those policies.
The results, assets and liabilities of joint ventures and associates are accounted for by the equity method, except when the
investment is classified as held for sale, in which case it is accounted for in accordance with the Company's accounting policy
for Non-current assets held for sale and discontinued operations. Under the equity method, investments in joint ventures and
associates are carried in the consolidated balance sheets at cost as adjusted for post-acquisition changes in Ahold's share of
the net assets of the investment (net of any accumulated impairment in the value of individual investments). Losses of a joint
venture or associate in excess of Ahold's interest in that investment (including any long-term interest that, in substance, forms
part of Ahold's interest in the investment) are not recognized unless Ahold has incurred obligations or made payments on
behalf of the joint venture or associate.
Any excess of the cost of acquisition over Ahold's share of the net fair value of the identifiable assets, liabilities and contingent
liabilities of the joint venture or associate recognized at the date of acquisition is recognized as goodwill. The goodwill is
included within the carrying amount of the investments and is assessed for impairment as part of the investment. Any excess
of Ahold's share of the net fair value of the identifiable assets, liabilities and contingent liabilities recognized at the date of
acquisition over the cost of acquisition, is recognized immediately in the consolidated statements of operations.
Unrealized gains on transactions between Ahold and its joint ventures and associates are eliminated to the extent of Ahold's
interest in these investments. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment
of the assets transferred.
Where necessary, adjustments are made to the financial statements of joint ventures and associates to ensure consistency with
the accounting policies of the Company.
Ahold assesses on a quarterly basis whether there is any indication that non-current assets with finite lives may be impaired.
If indicators of impairment exist, Ahold estimates the recoverable amount of the asset. Where it is not possible to estimate the
recoverable amount of an individual asset, Ahold estimates the recoverable amount of the cash-generating unit to which it
belongs. Individual stores are considered separate cash-generating units for impairment testing purposes.
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 recognized in the
consolidated statements of operations for the amount by which the asset's (or cash generating unit's) carrying amount exceeds
its recoverable amount.
In subsequent years, Ahold assesses whether indications exist that impairment losses previously recognized for non-current
assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount
of that asset (or cash generating unit) is recalculated and its carrying amount is increased to the revised recoverable amount.
The increase is recognized in operating income. A reversal is recognized only if it arises from a change in the assumptions
used to calculate the recoverable amount. The increase in an asset's (or cash generating unit's) carrying amount due to an
impairment reversal is limited to the depreciated amount that would have been recognized had the original impairment not
occurred.
AHOLD ANNUAL REPORT 2005 97
