65
Notes to the consolidated financial statements
1 The Company and its operations
2 Basis of preparation
3 Significant accounting policies
Ahold
Annual Report 2010
Group at a glance
Performance
Governance
Financials
The principal activity of Koninklijke Ahold N.V. (Ahold or the
Company or Group or Ahold Group), a public limited liability
company with its registered seat in Zaandam, the Netherlands, and
its head office in Amsterdam, the Netherlands, is the operation of
retail stores in Europe and the United States through subsidiaries
and joint ventures. Ahold's significant subsidiaries, joint ventures
and associates are listed in Note 36.
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Historical cost is used as the measurement
basis unless otherwise indicated.
Ahold's financial year is a 52- or 53-week period ending on the
Sunday nearest to December 31. Financial year 2010 consisted
of 52 weeks and ended on January 2, 2011. The comparative
financial year 2009 consisted of 53 weeks and ended on
January 3, 2010.
These consolidated financial statements are presented in euros
The following exchange rates of the euro against the U.S. dollar
have been used in the preparation of these financial statements:
2010 2009
Average exchange rate 0.7555 0.7194
Year-end closing exchange rate 0.7474 0.6980
The preparation of financial statements requires management to
make a number of estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and expenses,
and the disclosure of contingent assets and liabilities. All
assumptions, expectations, and forecasts used as a basis for
certain estimates within these financial statements represent good
faith assessments of Ahold's future performance for which
management believes there is a reasonable basis. They involve
risks, uncertainties, and other factors that could cause the
Company's actual future results, performance, and achievements
to differ materially from those forecasted. The estimates,
assumptions, and judgments that management considers most
critical relate to:
Vendor allowances (Note 3)
Leases and sale and leaseback transactions (Note 3)
Impairments (Note 3)
Income taxes (Notes 3 and 10)
Equity method of accounting for ICA (Note 14)
Company and multi-employer pension obligations (Note 23)
Provisions and contingencies (Notes 24 and 34)
Changes in accounting policies
In 2008, the International Accounting Standards Board (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. These
standards are applicable to Ahold prospectively for business
combinations as of 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 changed 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, such as dividend payments and capital
or permanent loan repayments. This amendment to IAS 21 is
applicable to Ahold prospectively as of 2010. No significant
recycling out of the currency translation reserve has taken place
in 2010.
Segment reporting presentation
On November 5, 2009, Ahold announced a series of changes in its
European and U.S. businesses. Ahold's U.S. operations contain
four newly organized divisions: Stop Shop New England, Stop
Shop New York Metro, Giant Landover and Giant Carlisle. As of
2010, Ahold has changed its segment reporting presentation by
aggregating its U.S. operating segments into one reportable
segment, Ahold USA. This change has been applied
retrospectively.
Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries. Subsidiaries are
entities over which the Company has control. Control is defined as
the power to govern the financial and operating policies of an entity,
generally accompanying a shareholding of more than one-half of
the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when
assessing whether the Company controls another entity.
Subsidiaries are fully consolidated from the date that control
commences until the date that control ceases. All intra-group
transactions, balances, income, and expenses are eliminated upon
consolidation. Unrealized losses on intra-group transactions are
eliminated, unless the transaction provides evidence of an
impairment of the assets transferred.
Non-controlling interests are recorded, as appropriate, on the
consolidated balance sheet, in the consolidated income statement,
and in the consolidated statement of comprehensive income for the
non-controlling shareholders' share in the net assets and the
income or loss of subsidiaries. Non-controlling shareholders'
interest in an acquired subsidiary is initially measured at the non-
controlling interest's proportion of the net fair value of the assets,
liabilities, and contingent liabilities recognized.
