Note 3
Financial statements - Notes to the consolidated financial statements
Pension and other post-employment benefits
The net assets and net liabilities recognized in the
consolidated balance sheets for defined benefit plans
represent the present value of the defined benefit
obligations, less the fair value of plan assets, adjusted for
unrecognized actuarial gains or losses and unamortized past
service costs. Any net asset resulting from this calculation is
limited to unrecognized actuarial losses and past service
cost, plus the present value of available refunds and
reductions in future contributions to the plan.
The defined benefit obligation is actuarially calculated at
least annually on the balance sheet date using the projected
unit credit method. The present value of the defined benefit
obligations is determined by discounting the estimated
future cash outflows using interest rates of high-quality
corporate bonds denominated in the currency in which the
benefits will be paid, and that have an average duration
similar to the expected duration of the related pension
liabilities. Actuarial gains and losses are recognized using
the corridor approach. Under this approach, if, for a specific
plan, the net unrecognized actuarial gains and losses at the
balance sheet date exceed the greater of 10 percent of the
fair value of the plan assets and 10 percent of the defined
benefit obligation, the excess is taken into account in
determining net periodic expense for the subsequent period.
The amount then expensed in the subsequent period is the
excess divided by the expected remaining average working
lives of employees covered by that plan at the balance sheet
date. Past service costs are recognized immediately to the
extent that the associated benefits are already vested, and
are otherwise amortized on a straight-line basis over the
average period until the associated benefits become vested.
Results from curtailments or settlements, including the
related portion of net unrecognized actuarial gains and
losses, are recognized immediately.
Post-employment benefits provided through industry multi
employer plans, managed by third parties, are generally
accounted for under defined contribution criteria, whereby
the annual expense typically equals the contributions paid to
the plan related to that year.
For other long-term employee benefits, such as long-service
awards, provisions are recognized on the basis of discount
rates and other estimates that are consistent with the
estimates used for the defined benefit obligations. For these
provisions the corridor approach is not applied and all
actuarial gains and losses are recognized in the consolidated
statements of operations i mmediately.
Provisions
Provisions are recognized when (i) the Company has a
present (legal or constructive) obligation as a result of past
events, (ii) it is more likely than not that an outflow of
resources will be required to settle the obligation and (iii) the
amount can be reliably estimated. The amount recognized is
the best estimate of the expenditure required to settle the
obligation. Provisions are discounted whenever the effect of
the time value of money is significant.
Restructuring provisions are recognized when the Company
has approved a detailed formal restructuring plan, and the
restructuring either has commenced or has been
announced to those affected by it. Onerous contract
provisions are measured at the amount by which the
unavoidable costs to fulfill agreements exceeds the expected
benefits from such agreements. The self-insurance program
liabilities are recorded based on claims filed and an estimate
of claims incurred but not yet reported. The provision
includes expenses incurred in the claim settlement process
that can be directly associated with specific claims. Other
expenses incurred in the claim settlement process are
expensed when incurred. The Company's estimate of the
required liability of such claims is recorded on a discounted
basis, utilizing an actuarial method, which is based upon
various assumptions that include, but are not limited to,
historical loss experience, projected loss development
factors and actual payroll costs.
New accounting policies not yet effective for 2006
In 2005, the IASB issued an amendment to IAS 1
"Presentation of Financial Statements" ("IAS 1"). The
amendment introduces requirements for all entities to
disclose (i) the entity's objectives, policies and processes for
managing capital, (ii) quantitative data about what the entity
regards as capital, (iii) whether the entity has complied with
any capital requirements and (iv) if it has not complied, the
consequences of such non-compliance. The amendment to
IAS 1 is effective for annual periods beginning on or after
January 1, 2007 and has not been early adopted by Ahold.
As the amendment to IAS 1 includes disclosure
requirements only, its adoption will not have an impact on
Ahold's financial results or position.
In 2005, the IASB issued IFRS 7 "Financial Instruments:
Disclosures" ("IFRS 7"). IFRS 7 introduces new
requirements with respect to the information on financial
instruments that is given in entities' financial statements.
IFRS 7 is effective for annual periods beginning on or
after January 1, 2007. As IFRS 7 includes disclosure
requirements only, its adoption will not have an impact
on Ahold's financial results or position.
In 2006, the IASB issued IFRS 8 "Operating Segments,"
which sets out requirements for disclosure of information
about an entity's operating segments. IFRS 8 replaces
IAS 14 "Segment Reporting" and achieves convergence with
the US GAAP standard on segment reporting, except for
minor differences. IFRS 8 is effective for annual periods
beginning on or after January 1, 2009, with earlier application
permitted. Ahold has not early adopted IFRS 8. As IFRS 8
includes disclosure requirements only, its adoption will not
have an impact on Ahold's financial results or position.
68 Ahold Annual Report 2006
