79
Notes to the
consolidated
financial
statements
1 The Company and its operations
2 Basis of preparation
3 Significant accounting policies
Ahold Annual Report 2012
Ahold at a glance
Our strategy
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
31Financial year 2012 consisted of 52 weeks and ended on December 30, 2012. The
comparative financial year 2011 consisted of 52 weeks and ended on January 1, 2012.
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:
2012
2011
Average exchange rate
0.7782
0.7189
Year-end closing exchange rate
0.7566
0.7724
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)
Income taxes (Notes 3 and 10)
Intangible assets (Note 3)
Leases and sale and leaseback transactions (Note 3)
Impairments (Note 3)
Equity method of accounting for ICA (Note 14)
Company and multi-employer pension obligations (Note 23)
Provisions and contingencies (Notes 24 and 34)
Our performance
Governan
Financials
Investors
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.