Note 35
Financial statements - Notes to the consolidated financial statements
7. Investments in joint ventures and associates
Ahold records its share in income (loss) of joint ventures and
associates under both IFRS and US GAAP using the equity
method of accounting. This adjustment reflects various
differences between Ahold's share in income (loss) of joint
ventures and associates determined under IFRS and its
share in income (loss) of joint ventures and associates
determined under US GAAP. Additionally, the difference in
shareholders' equity includes differences related to goodwill
of and on the investments in joint ventures and associates
recorded prior to December 1, 2000.
In connection with ICA's step acquisition of a 50 percent
stake in its Rimi Baltic joint venture in 2006, under IFRS the
joint venture's identifiable assets, liabilities and contingent
liabilities were remeasured to fair value at the acquisition
date, including the 50 percent stake previously held. The
adjustment to ICA's previously held 50 percent stake was
treated as a revaluation. Under US GAAP, the previously
held 50 percent stake was not revalued, thereby resulting
in a difference in shareholders' equity equal to Ahold's
proportional interest in the revaluation adjustment.
In connection with the acquisition of its 50 percent stake in
ICA in 2000, Ahold granted a put option to its joint venture
("JV") partners in ICA ("Put Option"). Under US GAAP the
Put Option was considered to be an in-the-money Put Option
that was recorded at fair value. Accordingly, Ahold recorded
the Put Option as a liability and an increase in goodwill
recorded relating to the investment in ICA. IFRS also
required that the fair value of the Put Option be recognized
as a liability. However, since goodwill was charged to
shareholders' equity under Dutch GAAP, the offset to the Put
Option liability was recorded in opening shareholders' equity
under IFRS, resulting in a decrease of group equity. IFRS
and US GAAP require that subsequent fair value changes of
the Put Option are recorded in income. In 2004, the Put
Options were exercised and waived, respectively, by the
JV partners. As a result, the Put Option liability was released
under IFRS and US GAAP. The gain on this transaction was
different under US GAAP as a result of the aforementioned
differences in the carrying amount of the goodwill on ICA.
The Company's 50 percent stake in Paiz Ahold qualified as
held for sale and was retrospectively classified as a
discontinued operation under IFRS in 2005 but not under
US GAAP. Differences in the carrying amount of the
investment and the related currency translation adjustment
results in a EUR 167 lower gain on divestments in 2005
under US GAAP than under IFRS. The Company's
49 percent stake in JMR qualified as held for sale and was
retrospectively classified as a discontinued operation in
2006 under IFRS but not under US GAAP.
8. Other
Other includes individually insignificant differences between IFRS and US GAAP, including impairment of non-current assets,
provisions, share-based compensation, consolidation of variable interest entities (FIN 46R), accounting for certain
guarantees and inventory valuation.
Effect on income (loss)
before income taxes
Effecton equity
2006
2005 2004
2006 2005
Impairment of non-current assets
FIN 46
Share based compensation
Provisions
Other
(10)
(3)
(1)
(12)
(10)
(36)
(3)
8
24
2
(19)
12
31
19
(2)
28
76
26
(6)
2
(1)
21
47
(4)
4
(5)
42
9. Income taxes
This item includes the income tax effects of reconciling
items and certain differences in the accounting for income
taxes, including (i) the reversal of tax expense recorded
under IFRS as a result of the release of income tax
contingencies set up through purchase accounting,
(ii) accounting for the effects of changes in the enacted tax
rates on deferred taxes that were originally charged or
credited to equity and (iii) differences in the accounting for
taxes on share based compensation.
Under IFRS, certain changes in the deferred tax assets and
tax contingency reserves recognized in connection with the
purchase price allocation of the acquisition of U.S.
Foodservice and Giant-Landover were recognized in the
consolidated statements of operations. These releases were
reversed to goodwill under US GAAP. The Company released
EUR 62 through its consolidated statements of operations in
2004 (2005 and 2006: nil) under IFRS that was reversed
and offset to goodwill under US GAAP.
10. Minority interests
The minority interests difference results from minority
ownership in certain subsidiaries in the Stop Shop/Giant-
Landover Arena, the Central Europe Arena and Schuitema.
The difference represents the impact of differences between
IFRS and US GAAP on the minority shareholders' share in
net income (loss) and shareholders' equity.
11. Cumulative preferred financing shares
IFRS requires the cumulative preferred financing shares to
be classified as debt instruments. The related dividends are
therefore classified as interest expense under IFRS. Under
US GAAP, the cumulative preferred financing shares are
considered equity instruments with the related dividends
charged to equity, because the shares are non-mandatorily
redeemable financial instruments and do not embody an
unconditional obligation of the Company to issue a variable
number of shares. However, since the Company is required
to offer redemption of the shares to the holders in the event
of a change in control of the Company and consequently
122 Ahold Annual Report 2006
