3 Significant accounting policies continued
Ahold
Annual Report 2011
Groupata glance
Performance
Governance
Notes to the consolidated financial statements continued
Investors
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 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.
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.
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.
New accounting policies not yet effective for 2011
The IASB issued several Standards, or revisions thereto, and
Interpretations in 2011 and 2010 that are not yet effective for
2011 but will become effective in coming years subject to
EU endorsement.
IAS 19, "Employee benefits," was amended in June 2011
The impact on the Company will be as follows: to eliminate the
corridor approach and recognize all actuarial gains and losses
in other comprehensive income as they occur; to immediately
recognize all past service costs; and to replace interest cost and
expected return on plan assets with a net interest amount that is
calculated by applying the discount rate to the net defined benefit
liability (asset). The Company is in the process of evaluating the full
impact of the amendments and intends to adopt them when they
are endorsed by the EU in 2013.
IFRS 9, "Financial instruments," addresses the classification,
measurement, and recognition of financial assets and financial
liabilities. IFRS 9 was issued in parts in November 2009 and
October 2010, respectively. It replaces the parts of IAS 39
that relate to the classification and measurement of financial
instruments. The main change is that, in cases where the fair
value option is taken for financial liabilities, the part of a fair value
change that is due to an entity's own credit risk is recorded in other
comprehensive income rather than in the income statement.
The Company has yet to assess IFRS 9's full impact.
IFRS 10, "Consolidated financial statements," builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements of the parent company.
The standard provides additional guidance to assist in the
determination of control where this is difficult to assess. The
Company does not believe that the adoption of IFRS 10 will have
a significant effect on its future consolidated financial statements.
IFRS 11, "Joint arrangements," replaces IAS 31, "Interests in joint
ventures," and deals with how a joint arrangement in which two or
more parties have joint control over an entity should be classified.
Under IFRS 11joint arrangements are classified as joint
operations or joint ventures, depending on the rights and
obligations of the parties to the arrangements. Joint ventures under
IFRS 11 are required to be accounted for using the equity method
of accounting, whereas jointly controlled entities under IAS 31
can be accounted for using the equity method of accounting or
proportionate accounting. The Company does not believe that
the adoption of IFRS 11 will have a significant effect on its future
consolidated financial statements.
IFRS 12, "Disclosures of interests in other entities," includes the
disclosure requirements for all forms of interests in other entities,
including joint arrangements, associates, special purpose vehicles
and other off balance sheet vehicles. The Company is in the
process of evaluating the full impact of IFRS 12.
IFRS 13, "Fair value measurement," aims to improve consistency
and reduce complexity by providing a precise definition of fair value
and a single source of fair value measurement and disclosure
requirements for use across all IFRSs. The requirements do not
extend the use of fair value accounting but provide guidance
on how it should be applied where its use is already required or
permitted by other standards within the IFRSs. The Company has
yet to assess IFRS 13's full impact.
There are no other IFRSs or IFRIC interpretations that have been
issued but are not yet effective that are expected to have a material
impact on the Company.
