94
8 Expenses by nature
-
9 Net financial expenses
Ahold Annual Report 2012
Notes to the consolidated
financial statements
Ahold at a glance
Our strategy
Our performance
Governan
Financials
Investors
The aggregate of cost of sales and operating expenses is specified by nature as follows:
million
2012
2011
Cost of product
23,181
21,285
Employee benefit expenses
4,461
4,001
Other operational expenses
2,538
2,367
Depreciation and amortization
821
772
Write-down of intangible assets under development (Note 13)
92
Rent (income) expense - net
527
486
Impairment losses and reversals - net
55
25
Gains on the sale of assets - net
(21)
(12)
Total expenses
31,654
28,924
million
2012
2011
Interest income
10
20
Interest expense
(236)
(245)
Gains (losses) on foreign exchange (10) (7)
Fair value gains on financial instruments
16
20
Other
(7)
(104)
Other financial expenses
(1)
(91)
Net financial expenses
(227)
(316)
Interest income mainly corresponds to interest earned on cash and cash equivalents and short-term cash deposits.
Interest expense primarily relates to financial liabilities measured at amortized cost (mainly loans, finance lease liabilities, financing obligations and cumulative preferred financing shares) and
interest accretions to provisions. The reduction primarily relates to debt repayments (EUR 407 million notes) done in 2012, see Note 21
The gains (losses) on foreign exchange in both 2012 and 2011 mainly result from the foreign exchange translation of the GBP 500 million notes and from settlement of forward contracts done
in 2012. Foreign exchange results on financial assets and liabilities, including amounts released from the cash flow hedging reserve, are presented as part of net financial expense, within gains
(losses) on foreign exchange. Foreign exchange results arising from the purchase of goods for sale or goods and services consumed in Ahold's operations are included in cost of sales or in the
appropriate element of operating expenses, respectively. In 2012 the Company incurred a net exchange result (including impact of foreign exchange hedging instruments) of €2 million in
operating income (201 1€1 million).
The fair value gains on financial instruments primarily resulted from the derivatives related to the GBP 500 million notes (an interest rate and a cross currency swap), which do not qualify
for hedge accounting treatment, and were mainly caused by the US dollar interest rate and exchange rate movements. For more information on financial instruments, see Note 30.
Other financial expenses in 2011 primarily included a loss of €92 million, as a result of a financial guarantee provision, related to the estimated impact of the legal judgment rendered in
connection with Stop Shop Bradlees' lease litigation with Vornado. For more information, see Note 34.
