Note 34
Commodity price risk
Credit risk
Fair values of other financial assets and liabilities
-
-
Ahold is exposed to the risk of an increase in the prices of refined fuels that are used in transportation of the goods in U.S.
operations. Commodity derivative contracts may be utilized to hedge against fuel price risk for Ahold's expected consumption.
As of January 1, 2006, no commodity contracts were outstanding.
Ahold has no significant concentrations of credit risk. It has policies in place aimed at ensuring that wholesale sales of
products are made to customers with an appropriate credit history. Sales to retail customers are made in cash, checks, debit
cards or via major credit cards. Derivative counterparties and cash transactions are limited to high-credit-quality financial
institutions. Ahold has policies that limit the amount of credit exposure to any financial institution. The maximum amount of
loss due to credit risk Ahold would incur if financial institutions which are parties to the derivative instruments completely
failed to perform according to the terms of the contracts is EUR 141 as of January 1, 2006.
The following table presents the fair values of other financial instruments (including current portions) compared to the carrying
amounts for which these instruments are included in the balance sheets:
January 1, 2006
January 2, 2005
Carrying
amount
1 Fair value
Carrying
amount
1 Fair value
Assets
Loans receivable
102
96
139
176
Liabilities
Subordinated loans
(91)
(93)
Bonds and notes
(4,186)
(4,856)
(6,597)
(7,030)
Other loans
(372)
(384)
(395)
(405)
Financing obligations
(543)
(745)
(481)
(545)
Mortgages payable
(37)
(40)
(37)
(39)
Finance lease liabilities
(1,362)
(1,733)
(1,164)
(1,319)
Cumulative preferred financing shares
(666)
(741)
(666)
(750)
The carrying amounts of cash, cash equivalents, receivables, accounts payable and short-term borrowings approximate their fair
values because of the short-term nature of these instruments and, for receivables, because of the fact that any recoverability
loss is reflected in an impairment charge.
The fair values of subordinated loans, bonds and notes, other loans, mortgages payable and cumulative preferred financing
shares are estimated using discounted cash flow analyses based on interest rates from similar types of borrowing arrangements
or at market rates as obtained from price quotations in the financial markets. The fair values of finance lease liabilities and
financing obligations are estimated on the basis of the net present value of future cash flows, adjusted for land and building
bifurcation, where appropriate. The accrued interest is included in other current liabilities (Note 31) and not in the carrying
amounts of non-derivative liabilities. Accrued interest is included in the determination of the fair value of financial liabilities.
AHOLD ANNUAL REPORT 2005 163
