75
Notes to the consolidated financial statements
1 The Company and its operations
2 Basis of preparation
3 Significant accounting policies
Ahold
Annual Report 2011
Group at a glance
Performance
Governance
Investors
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 (EU) and also comply with the
financial reporting requirements included in Part 9 of Book 2 of
the Netherlands Civil Code. As the financial data of Koninklijke
Ahold N.V. (the parent company) are included in the consolidated
financial statements, the income statement in the parent company
financial statements is presented in condensed form (in accordance
with section 402, Book 2 of the Netherlands Civil Code).
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 2011 consisted
of 52 weeks and ended on January 1, 2012. The comparative
financial year 2010 consisted of 52 weeks and ended on
January 2, 2011.
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:
2011 2010
Average exchange rate 0.7189 0.7555
Year-end closing exchange rate 0.7724 0.7474
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)
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.
Foreign currency translation
The financial statements of subsidiaries, joint ventures, and
associates are prepared in their functional currencies, which are
determined based on the primary economic environment in which
they operate. Transactions in currencies other than the functional
currency are recorded at the rates of exchange prevailing on
the transaction dates. At each balance sheet date, monetary
items denominated in foreign currencies are translated into the
entity's functional currency at the then prevailing rates. Exchange
differences arising on the settlement of monetary items, and
on the translation of monetary items, are included in net income
for the period. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are considered as assets and liabilities
denominated in the functional currency of the foreign entity.
Upon consolidation, the assets and liabilities of subsidiaries with a
functional currency other than the euro are translated into euros
using the exchange rates prevailing at the balance sheet date.
Income and expense items are translated at the average exchange
rates for the respective periods. Investments in joint ventures
and associates with a functional currency other than the euro
are translated into euros using exchange rates prevailing on
the balance sheet date. Exchange rate differences arising during
consolidation and on the translation of investments in joint ventures
and associates are included in equity, in the currency translation
reserve. Intercompany loans to and from foreign entities for which
settlement is neither planned nor likely to occur in the foreseeable
future are considered to increase or decrease the net investment
in that foreign entity; therefore the exchange rate differences
relating to these loans are also included in equity, in the currency
translation reserve.
