77
3 Significant accounting policies continued
Income taxes
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Notes to the consolidated financial statements continued
Investors
Income tax expense represents the sum of current and deferred
tax. Income tax is recognized in the income statement except to the
extent that it relates to items recognized directly in equity. Current
tax expense is based on the best estimate of taxable income for
the year, using tax rates that have been enacted or substantively
enacted at the balance sheet date, and adjustments for current
taxes payable (receivable) for prior years. Deferred tax is the tax
expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities and the corresponding
tax basis used in the computation of taxable income. Deferred tax
assets and liabilities are generally recognized for all temporary
differences, except to the extent that a deferred tax liability arises
from the initial recognition of goodwill. Deferred tax is calculated
at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realized.
Deferred tax assets, including deferred tax assets for tax loss
carryforward positions and tax credit carryforward positions, are
recognized to the extent that it is probable that future taxable
income will be available against which temporary differences,
unused tax losses or unused tax credits can be utilized.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable income will be available to allow
all or part of the assets to be recovered.
Deferred tax assets and liabilities are not discounted. Deferred
income tax assets and liabilities are offset on the balance sheet
when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes
relate to income taxes levied by the same fiscal authority. Current
income tax assets and liabilities are offset on the balance sheet
when there is a legally enforceable right to offset and when the
Company intends either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
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
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.
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 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
and 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.
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 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.
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
Buildings
Building components
Machinery and equipment
Other
indefinite
30 - 40 years
7 - 20 years
5 - 12 years
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.