H
82
3 Significant accounting policies (continued)
Ahold at a glance
Notes to the consolidated
financial statements
Our strategy
Our performance
Governan
Financials
Investors
Ahold Annual Report 2013
Income taxes
Income tax expense represents the sum of current and deferred tax. Income tax is recognized
in the income statement except to the extent that it relates to items recognized directly in equity
or other comprehensive income. Current tax expense is based on the best estimate of taxable
income for the year, using tax rates that have been enacted or substantively enacted at the
balance sheet date and adjustments for current taxes payable (receivable) for prior years.
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities and the corresponding tax basis used in the
computation of taxable income. Deferred tax assets and liabilities are generally recognized for
all temporary differences. However, deferred tax liabilities are not recognized if they arise from
the initial recognition of goodwill. Deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination
that, at the time of the transaction, affects neither accounting nor taxable profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realized.
Deferred tax assets, including deferred tax assets for tax loss carryforward positions and tax
credit carryforward positions, are recognized to the extent that it is probable that future taxable
income will be available against which temporary differences, unused tax losses or unused tax
credits can be utilized. The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that sufficient taxable income
will be available to allow all or part of the assets to be recovered.
Deferred tax assets and liabilities are not discounted. Deferred income tax assets and liabilities are
offset on the balance sheet when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes relate to income taxes levied by
the same fiscal authority. Current income tax assets and liabilities are offset on the balance sheet
when there is a legally enforceable right to offset and when the Company intends either to settle
on a net basis or to realize the asset and settle the liability simultaneously.
The ultimate tax effects of some transactions can be uncertain for a considerable period of
time, requiring management to estimate the related current and deferred tax positions. The
Company recognizes liabilities for uncertain tax positions when it is more likely than not that
additional taxes will be due. These liabilities are presented as current income taxes payable,
except in jurisdictions where prior tax losses are being carried forward to be used to offset
future taxes that will be due; in these instances the liabilities are presented as a reduction to
deferred tax assets.
Non-current assets held for sale and discontinued operations
Non-current assets and disposal groups are classified as held for sale if their carrying amount
will be recovered through a sale transaction rather than through continuing use. For this to be
the case the asset (or disposal group) must be available for immediate sale in its present
condition and its sale must be highly probable. Non-current assets (or disposal groups)
classified as held for sale are measured at the lower of the asset's carrying amount and the fair
value less costs of disposal. Depreciation or amortization of an asset ceases when it is
classified as held for sale. Equity accounting ceases for an investment in a joint venture or
associate when it is classified as held for sale; instead, dividends received are recognized in the
consolidated income statement.
A discontinued operation is a component of the Company that either has been disposed of or
is classified as held for sale, and represents a separate major line of business or geographical
area of operations or is part of a single coordinated plan to dispose of a separate major line
of business or geographical area of operations. Results from discontinued operations that are
clearly identifiable as part of the component disposed of and that will not be recognized
subsequent to the disposal are presented separately as a single amount in the consolidated
income statement. Results and cash flows from discontinued operations are reclassified for
prior periods and presented in the financial statements so that the results and cash flows from
discontinued operations relate to all operations that have been discontinued as of the balance
sheet date for the latest period presented.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses. Cost includes expenditures that are directly attributable to the acquisition or
construction of an asset and borrowing costs incurred during construction. Where applicable,
estimated asset retirement costs are added to the cost of an asset. Subsequent expenditures
are capitalized only when it is probable that future economic benefits associated with the item
will flow to the Company and the costs can be measured reliably. All other subsequent
expenditures represent repairs and maintenance and are expensed as incurred.
Depreciation is computed using the straight-line method based on the estimated useful lives of
the items of property, plant and equipment, taking into account the estimated residual value.
Where an item of property, plant and equipment comprises major components having
different useful lives, each such part is depreciated separately. The assets' useful lives are
reviewed, and adjusted, if appropriate, at each balance sheet date.
The estimated useful lives of property, plant and equipment are:
Land
indefinite
Buildings
30 - 40 years
Building components
7 - 20 years
Machinery and equipment
5 - 12 years
Other
3 - 10 years
Depreciation of assets subject to finance leases and leasehold improvements is calculated on
a straight-line basis over either the lease term (including renewal periods when renewal is
reasonably assured) or the estimated useful life of the asset, whichever is shorter.
