borrowing costs are expensed as incurred. Borrowing costs consist of interest and other costs that Delhaize Group incurs in
connection with the borrowing of funds.
Government Grants
Government grants are recognized when there is reasonable assurance that the grant will be received and the Group will comply
with all attached conditions. When a grant relates to an expense item, it is recognized as income over the period necessary to
match the grant on a systematic basis to the costs that it is intended to compensate. When a grant relates to an asset, it is
recognized as deferred income and recognized in the income statement as "Oth er operating income (see Note 27) on a
systematic basis over the expected useful life of the related asset.
I nventories
Inventories are valued at the lower of cost on a weighted average cost basis and net realizable value. Costs of inventory include all
costs incurred to bring each product to its present location and condition. Inventories are regularly reviewed and written down on a
case-by-case basis if the anticipated net realizable value (anticipated selling price in the course of ordinary business less the
estimated costs necessary to make the sale) declines below the carrying amount of the inventories. When the reason for a write
down of the inventories has ceased to exist, the write-down is reversed.
Delhaize Group receives allowances and credits from suppliers primarily for in-store promotions, cooperative advertising, new
product introduction and volume incentives. Th ese "vendor allowances" are included in the cost of inventory and recognized in
the income statement when the product is sold, unless they represent reimbursement of a specific, incremental and identifiable
cost incurred by the Group to sell the vendor's p roduct in which case they are recorded immediately as a reduction of the
corresponding selling, general and administrative expenses. Estimating rebates from suppliers requires in certain cases the use
of assumptions and judgment regarding the achievement of specified purchase or sales level and related inventory turnover.
Cash and Cash Equivalents
Gash and cash equivalents include cash on call with banks and on hand, shortterm deposits and other highly liquid investments
with an original m aturity of three months or less which are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value. Negative cash balances (bank overdrafts) are reclassified on the balance sheet to "Other
current liabilities."
Impairment of Non-Financial Assets
At each reporting date, the Group assesses whether there is an indication that a non-financial asset (hereafter asset may be
impaired. If such indications are identified, the asset's recoverable amount is estimated. Further, goodwill and intangible assets
with indefinite lives or that are not yet available for use are tested annually for impairment, which at Delhaize Group is in the
fourth quarter of the year and whenever there is an indication that goodwill may be impaired.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risk specific to the asset. As independent cash flows are often
not available for individual assets for the purpose of impairment testing, assets need to be grouped together into the s mallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets
or groups of assets ("cash generating unit" or CGU).
In determining fair value less costs to sell for individual assets or CGUs, appropriate valuation models are used, which are
supported by valuation multiples or other available fair value indicators.
Goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to the CGUs that are expected to
benefit from the synergies of the combination and that represents the lowest level within the Group at which the goodwill is
monitored for internal management purposes and that is not larger than an operating segment before aggregation (see Note 6).
An impairment loss of a continuing operation is recognized in the income statement in Oth e r operating expenses (see Note 28)
if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses recognized for CGUs are alloc ate d
first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other
assets in the CGU on a pro rata basis.
If the impairment of assets, other than goodwill, is no longer justified in future periods due to a recovery in fair value or value in
use of the asset, the impairment is reversed. An impairment loss is reversed only to the extent that the asset's carrying amo unt
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized. Goodwill impairment is never reversed.
80 DELHAIZE GROUP FINANCIAL STATEMENTS'12
