O www.ahold.com/reports2009
Notes to the consolidated financial statements
3 Significant accounting policies -
continued
4 Acquisitions
Financials
Defined benefit obligations are 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, which assumes that actuarial gains and
losses may offset each other over the long term. 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 recognized 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.
Contributions to defined contribution plans are recognized as an
expense when they are due. Post-employment benefits provided
through industry multi-employer plans, managed by third parties,
are generally accounted for under defined contribution criteria.
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 income statement immediately.
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
provision for the Company's self-insurance program is 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 2009
The International Accounting Standards Board ("IASB") issued
several Standards, or revisions thereto, and Interpretations in 2009
and 2008, which have been endorsed by the European Union,
but which are not yet effective for 2009. Except as detailed below,
the Company expects these will not have a significant impact on
its financial statements.
In 2008, the IASB issued a revised IFRS 3 "Business
Combinations" and amended IAS 27 "Consolidated and Separate
Financial Statements." These standards were changed to address
guidance for applying the acquisition method of accounting for
business combinations by stressing the "economic entity" view
of the reporting entity and greater use of fair value through the
income statement. The adoption of these standards will impact
the Company's financial results or position prospectively for
business combinations occurring as from 2010.
The 2008 amendment of IAS 27 included an amendment to IAS
21 "The Effects of Changes in Foreign Exchange Rates." The
amendment to IAS 21 will change the methodology Ahold applies
in recycling its currency translation reserve to income upon the
disposal of a foreign operation and in certain intercompany
financing transactions. The adoption of this amendment to IAS 21
will impact the Company's financial results or position prospectively
as from 2010.
2009 acquisitions
Ahold completed several minor acquisitions for a total
consideration of €4 million. All acquisitions were accounted for
using the purchase method of accounting.
2008 acquisitions
In December 2008, Stop Shop completed the acquisition of
three Grand Union market stores from C&S Wholesale Grocers.
The total purchase consideration amounted to €16 million.
Intangible assets were recognized for €11 million relating to lease
rights. No goodwill was recognized on this acquisition.
Ahold completed several other minor acquisitions. All acquisitions
were accounted for using the purchase method of accounting.
Under the Purchase and Sale Agreement between Ahold,
Schuitema and CVC Capital Partners, as described in Note 5,
Ahold retained 56 Schuitema stores and transferred these to
the Albert Heijn segment. This transaction was not accounted
for as an acquisition; the assets and liabilities related to these
stores have been retained in Ahold's consolidated balance sheet
at their carrying amounts.
Ahold Annual Report 2009 68
