Notes to the consolidated financial statements
3 Significant accounting policies continued
The ultimate tax effects of some transactions can be uncertain
for a considerable period of time, requiring management to
estimate the related current and deferred tax positions. The
Company recognizes liabilities for uncertain tax positions when
it is more likely than not that additional taxes will be due. These
liabilities are presented as current income taxes payable, except
in jurisdictions where prior tax losses are being carried forward
to be used to offset future taxes that will be due; in these
instances the liabilities are presented as a reduction to deferred
tax assets.
Non-current assets held for sale and discontinued
operations
Property, plant and equipment
Items of property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition or
construction of an asset and includes borrowing costs incurred
during construction. Where applicable, estimated asset
retirement costs are added to the cost of an asset. Subsequent
expenditures are capitalized only when it is probable that future
economic benefits associated with the item will flow to the
Company and the costs can be measured reliably. All other
subsequent expenditures represent repairs and maintenance
and are expensed as incurred.
Investment property
31 www.ahold.com/reports2008
Financial statements
AHOLD ANNUAL REPORT 2008 52
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. For this to be
the case, the asset (or disposal group) must be available for
immediate sale in its present condition and its sale must be
highly probable. For the sale to be highly probable, (i) the
Corporate Executive Board must be committed to a plan to sell
the asset, (ii) an active program to locate a buyer and complete
the plan must have been initiated, (iii) the asset must be
actively marketed for sale at a price that is reasonable in
relation to its current fair value, (iv) the sale should be expected
to be completed within one year and (v) actions required to
complete the plan should indicate that it is unlikely that
significant changes to the plan will be made or that the plan will
be withdrawn. Non-current assets (or disposal groups) classified
as held for sale are measured at the lower of the asset's carrying
amount and the fair value less costs to sell. Depreciation or
amortization of an asset ceases when it is classified as held
for sale. Equity accounting ceases for an investment in a joint
venture or associate when it is classified as held for sale;
instead dividends received are recognized in the consolidated
income statement.
A discontinued operation is a component of the Company that
either has been disposed of, or that is classified as held for sale,
and represents a separate major line of business or geographical
area of operations or is part of a single coordinated plan to
dispose of a separate major line of business or geographical
area of operations. Results from discontinued operations that
are clearly identifiable as part of the component disposed of
and that will not be recognized subsequent to the disposal are
presented separately as a single amount in the consolidated
income statement. Results and cash flows from discontinued
operations are reclassified for prior periods presented in the
financial statements so that the results and cash flows from
discontinued operations relate to all operations that have
been discontinued as of the balance sheet date for the latest
period presented.
Depreciation is computed using the straight-line method based
on the estimated useful lives of the items of property, plant and
equipment, taking into account the estimated residual value.
Where an item of property, plant and equipment comprises
major components having different useful lives, each such part
is depreciated separately. The assets' useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date.
The estimated useful lives of property, plant and equipment are:
Land indefinite
Buildings 30-40 years
Building components 7-20 years
Machinery and equipment 5-12 years
Other 3-10 years
Depreciation of assets subject to finance leases and leasehold
improvements is calculated on a straight-line basis over either
the lease term (including renewal periods when renewal is
reasonably assured) or the estimated useful life of the asset,
whichever is shorter.
Investment property consists of land and buildings held by
Ahold to earn rental income or for capital appreciation, or both.
These properties are not used by Ahold in the ordinary course
of business. Ahold often owns (or leases under a finance lease)
shopping centers containing both an Ahold store and third-party
retail units. In these cases, the third-party retail units generate
rental income, but are primarily of strategic importance for
operating purposes to Ahold in its retail operations. Ahold
recognizes the part of an owned (or leased under a finance
lease) shopping center that is leased to third-party retailers as
investment property, unless it represents an insignificant portion
of the property. Land and buildings leased to franchisees are not
considered to be investment property as they contribute directly
to Ahold's retail operations. For the measurement of investment
property a reference is made to the accounting policies on
property, plant and equipment.
