-
-
The following table shows the amount of impairment losses
the Company would recognize for goodwill if it increased or
decreased the recoverable amounts by 10 percent:
The following table shows the effect on the defined benefit
obligations and on net periodic benefit cost as a result of
a 0.1 percent change in the discount rate. Dutch pension
plans and U.S. pension plans are shown in the aggregate:
EUR in millions
IFRS US GAAP
Dutch
U.S.
Actual 2006 goodwill impairment losses
3
pension
pension
Goodwill impairment losses if
In millions
plans
plans
recoverable amount increased by 10.0%
3
0.1% increase
Goodwill impairment losses if
Defined benefit obligations at year-end 2006
(39)
(21)
recoverable amount decreased by 10.0%
3
440
Net periodic benefit cost 2006
(2)
(2)
Net periodic benefit cost 2007
(5)
(1)
Pensions and other retirement benefit plans
Ahold sponsors several defined benefit plans and defined
contribution plans for employees, primarily in the
United States and the Netherlands. The defined benefit
pension plans pay benefits to employees at retirement
using formulas based on participants' years of service and
compensation. Supplemental plans are maintained for
officers and executives of Ahold's U.S. operating companies.
The Company funds these supplemental plans as claims
are incurred. Ahold provides life insurance and healthcare
benefits for certain retired employees meeting age and
service requirements at its U.S. subsidiaries. These plans
are also funded as claims are incurred. Ahold also
contributes to various multi-employer pension plans in the
United States that are administered by unions. These are
generally accounted for as defined contribution plans.
The terms of the applicable collective bargaining
agreements define the amounts that the Company must
contribute to each such plan and when it must make
these contributions.
Recognized pension and other retirement benefit liabilities
reflect the Company's best estimate of the future cost of
honoring its obligations under these benefit plans. The
Company uses actuarial calculations when accounting for
defined benefit plans. These calculations contain key
assumptions, which include discount rate, the expected
long-term rate of return on plan assets and the rates of
increase in compensation and health care costs, employee
turnover, mortality and retirement ages and claim rates
under medical plans. These assumptions are highly
uncertain and require a large degree of judgment. Each year
the Company reviews the key assumptions used in the
determination of the pension plan obligations and net
periodic pension cost. Actual experience may differ from the
assumptions made. Unless they exceed certain thresholds,
the effects of such differences are presented in the
unrecognized actuarial gains and losses and therefore do
not have an immediate effect on the pension liability. For
a full discussion of the corridor approach that the Company
uses in recognizing actuarial gains and losses, see Note 3
to the consolidated financial statements included in this
Annual Report.
0.1% decrease
Defined benefit obligations at year-end 2006 40 21
Net periodic benefit cost 2006 2 3
Net periodic benefit cost 2007 5 1
Claims and provisions
Ahold is party to a number of legal proceedings arising out of
its business operations. Such legal proceedings are subject
to inherent uncertainties. Management, where appropriate
supported by internal and external legal counsels, acts in
accordance with the following principles. Provisions for legal
claims and disputes are recorded if (i) a present legal or
constructive obligation exists as a result of past events,
(ii) it is more likely than not that an outflow of financial
resources will be required to settle such obligation and
(iii) the corresponding amount has been reliably estimated.
The provision has to be recorded at the amount for which the
obligation can likely be settled. If the amount for which the
obligation can be settled cannot sufficiently be estimated,
the relevant legal claim or dispute has to be disclosed as
a contingent liability.
Furthermore, the Company is self-insured for certain
potential losses that may arise in its U.S. operating
companies related mainly to general liability, commercial
vehicle liability and workers' com pensation. Ahold has stop-
loss coverage to limit the exposure arising from these claims.
It is the Company's policy to recognize its self-insurance
program liabilities based on claims filed, along with an
estimate of claims incurred but not yet reported as well as
expenses incurred in the claim settlement process that can
be directly associated with specific claims. Ahold recognizes
estimates for claims using actuarial information, which is
based on various assumptions that include, but are not
limited to, historical loss experience, projected loss
development factors, actual payroll costs, estimated changes
in claim reporting patterns, claim settlement patterns, judicial
decisions, legislation and economic conditions.
Vendor allowances
Ahold receives various types of vendor allowances, including
volume-based allowances and promotional allowances.
These allowances take the form of up-front payments (such
as lump sum payments or prepaid amounts), rebates (in the
form of cash or credits) or other forms of payment.
The accounting for vendor allowances requires a number of
estimates relating to sales volumes and inventory holdings.
Ahold Annual Report 2006 53
