29 Earnings per share (continued)
30 Financial risk management and financial instruments
Ahold Annual Report 2012 121
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Notes to the consolidated
financial statements
The calculation of the basic and diluted income from continuing operations per share attributable to common shareholders is based on the same number of shares as detailed above and
the following earnings data:
million
2012
2011
Income from continuing operations, attributable to common shareholders for the purposes of basic earnings per share
830
1,032
Effect of dilutive potential common shares - reversal of preferred dividends from earnings
25
25
Income from continuing operations, attributable to common shareholders for the purposes of diluted earnings per share
855
1,057
Basic and diluted income per share from discontinued operations attributable to common shareholders amounted to €0.00 and negative €0.01respectively (2011negative €0.01 basic and
negative €0.01 diluted). They are based on the loss from discontinued operations attributable to common shareholders of €3 million (2011loss €15 million) and the denominators detailed
above.
Financial risk management
The Treasury function provides a centralized service to the Company for funding, foreign exchange, interest rate, liquidity and counterparty risk management. Treasury operates in a centralized
function within a framework of policies and procedures that is reviewed regularly. The Treasury function is not operated as a profit center. Treasury's function is to manage the financial risks that
arise in relation to underlying business needs. Ahold's Corporate Executive Board has overall responsibility for the establishment and oversight of the Treasury risk management framework.
Ahold's management reviews material changes to Treasury policies and receives information related to Treasury activities.
In accordance with its Treasury policies, Ahold uses derivative instruments solely for the purpose of hedging exposures. These exposures are mainly connected with the interest rate and currency
risks arising from the Company's operations and its sources of finance. Ahold does not enter into derivative financial instruments for speculative purposes. The transaction of derivative
instruments is restricted to Treasury personnel only and Ahold's Internal Control and Internal Audit departments review the Treasury internal control environment regularly. Relationships with
the credit rating agencies and monitoring of key credit ratios are also managed by the Treasury department.
Ahold's primary market risk exposures relate to foreign currency exchange rates and interest rates. In order to manage the risks arising from these exposures, various financial instruments may
be utilized.
Currency risk
Ahold operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the U.S. dollar. Since Ahold's subsidiaries primarily
purchase and sell in local currencies, the Company's exposure to exchange rate movements in commercial operations is naturally limited. The Company is subject to foreign currency
exchange risks due to exchange rate movements in connection with the translation of its foreign subsidiaries' income, assets and liabilities into euros for inclusion in its consolidated financial
statements. To protect the value of future foreign currency cash flows, including loan and interest payments, lease payments, dividends and firm purchase commitments, and the value of assets
and liabilities denominated in foreign currency, Ahold seeks to mitigate its foreign currency exchange exposure by borrowing in local currency and entering into various financial instruments,
including forward contracts and currency swaps. It is Ahold's policy to cover foreign exchange transaction exposure in relation to existing assets, liabilities and firm purchase commitments.
Translation risk related to Ahold's foreign subsidiaries, joint ventures and associates is not actively hedged, except for cash flows from dividends not denominated in euro that are hedged using
net investment hedges.
Foreign currency sensitivity analysis
Approximately 66% of Ahold's net sales is generated by subsidiaries whose activities are conducted in a currency other than the euro (201165%) - mainly in the U.S. dollar. Assuming the
euro had strengthened (weakened) by 10% against the U.S. dollar in 2012 compared to the actual 2012 rate, with all other variables held constant, the hypothetical result on income before
income taxes would be a decrease (increase) of €42 million (201 1€22 million).
