Note 4
Financial statements - Notes to the consolidated financial statements
4 ACQUISITIONS
2005 Acquisitions
Julius Meinl
such differences will impact the income tax expense and the tax positions in the period in which such determinations are
made. Information on tax assets and liabilities is disclosed in Note 11.
Accounting judgments
Leases and sale and lease back transactions
Determining whether a lease agreement is a finance or an operating lease requires judgment as to whether the agreement
transfers substantially all the risks and rewards of ownership to Ahold. Judgment is required on various aspects that include,
but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include
renewal options in the lease term and determining an appropriate discount rate to calculate the present value of the minimum
lease payments. Classification as a finance or operating lease determines whether the leased asset is treated on-balance or
off-balance.
In sale and leaseback transactions, the classification of the leaseback determines how the gain or loss on the transaction is
recognized. It is either deferred and amortized (finance lease) or recognized immediately (operating lease). In classifying the
leaseback, similar judgments have to be made as described above.
Equity method accounting of ICA
Ahold accounts for its joint venture ICA under the equity method, although its investment comprises of 60% of the shares.
The determination whether the 60% ownership constitutes control requires significant judgment. The 60% shareholding
interest in ICA does not entitle Ahold to unilateral decision-making authority over ICA due to the shareholders agreement with
the joint venture partner, which provides that certain decisions will be made only on the basis of mutual consent. On the basis
of the shareholders agreement with the joint venture partner, the Company concluded that it has no control over ICA and,
consequently, does not consolidate ICA's financial statements.
In 2005, Ahold's Central Europe Arena completed the acquisition of 58 stores in the Czech Republic from Julius Meinl a.s.
Ahold acquired 56 stores in October 2005 and 2 stores in December 2005. A framework agreement between Ahold and Julius
Meinl a.s. provides for the acquisition of up to 67 stores in total, depending on the satisfaction of certain conditions precedent.
Ahold acquired one store under this framework agreement in March 2006. As part of these store acquisitions, Ahold acquired
store related assets, assumed existing lease agreements and offered employment to the employees of those stores. No cash or
cash equivalents were acquired.
The allocation of the net assets acquired and the goodwill arising at the acquisition dates is as follows:
Fair value
Non-current assets
24
Current assets
4
Non-current liabilities
(15)
Current liabilities
(1)
Net assets acquired
12
Goodwill
20
Total purchase consideration
32
104
