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3 Significant accounting policies (continued)
Ahold at a glance
Notes to the consolidated
financial statements
Our strategy
Our performance
Governan
Financials
Investors
For the purposes of impairment testing, goodwill is allocated to each of the cash-generating
units (or groups of cash-generating units) that is expected to benefit from the synergies of a
business combination. Goodwill is allocated to a cash-generating unit (or group of cash-
generating units) representing the lowest level within the Company at which the goodwill is
monitored for internal management purposes and is never larger than an operating segment
before aggregation. Cash-generating units to which goodwill has been allocated are tested
for impairment annually, or more frequently when there is an indication that the cash-
generating unit may be impaired. Goodwill on acquisitions of joint ventures and associates
is assessed for impairment as part of the investment whenever there is an indication that the
investment may be impaired. An impairment loss is recognized for the amount by which the
cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of a cash-generating unit's fair value less cost to sell and its value in use.
An impairment loss is allocated first to reduce the carrying amount of the goodwill and then
to the other assets of the cash-generating unit pro-rata on the basis of the carrying amount
of each asset in the cash-generating unit. An impairment loss recognized for goodwill is not
reversed in subsequent periods.
On the partial or complete disposal of an operation, the goodwill attributable to that
operation is included in the determination of the gain or loss on disposal.
Other intangible assets
Separately acquired intangible assets and internally developed software are carried at cost
less accumulated amortization and impairment losses. Intangible assets acquired in a
business combination are recognized at fair value at the date of acquisition (which is
regarded as their cost).
Customer relationships acquired in business acquisitions are stated at fair value determined
using an income approach. Direct costs related to development of software for internal use
are capitalized only if the costs can be measured reliably, technological feasibility has been
established, future economic benefits are probable, and the Company intends to complete
development and to use the software. All other costs, including all overhead, general and
administrative, and training costs, are expensed as incurred. Lease-related intangible assets,
consisting primarily of favorable operating lease contracts acquired in business acquisitions,
are measured at the present value of the amount by which the contract terms are favorable
relative to market prices at the date of acquisition.
Amortization is computed using the straight-line method based on estimated useful lives,
which are as follows:
Customer relationships
7 - 25 years
Software
3 - 10 years
Lease-related intangibles
remaining expected duration of the lease
Brand names
indefinite
Other
5 - indefinite
Ahold Annual Report 2013
Investments in joint arrangements and associates
Investments in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations each investor has rather than the legal
structure of the joint arrangement. Joint operations arise where Ahold has rights to the assets and
obligations relating to the arrangement and therefore accounts for its share of assets, liabilities,
revenue and expenses. Joint ventures arise where Ahold has rights to the net assets of the
arrangement and therefore equity accounts for its interest.
Associates are entities over which Ahold has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Significant
influence is the power to participate in the financial and operating policy decisions of the entity
but is not control or joint control over those policies. Associates are accounted for using the
equity method.
Under the equity method, investments in joint ventures and associates are measured initially at
cost and subsequently adjusted for post-acquisition changes in Ahold's share of the net assets
of the investment (net of any accumulated impairment in the value of individual investments).
Where necessary, adjustments are made to the financial figures of joint ventures and
associates to ensure consistency with the accounting policies of the Company.
Unrealized gains on transactions between Ahold and its joint ventures and associates are
eliminated to the extent of Ahold's stake in these investments. Unrealized losses are also
eliminated unless the transaction provides evidence of an impairment of the assets transferred.
Impairment of non-current assets other than goodwill
Ahold assesses on a quarterly basis whether there is any indication that non-current assets may
be impaired. If indicators of impairment exist, Ahold estimates the recoverable amount of the
asset. If it is not possible to estimate the recoverable amount of an individual asset, Ahold
estimates the recoverable amount of the cash-generating unit to which it belongs. Individual
stores are considered separate cash-generating units for impairment testing purposes.
The recoverable amount is the higher of an asset's fair value less cost to sell and the asset's
value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. An impairment loss is recognized in the
income statement for the amount by which the asset's carrying amount exceeds its recoverable
amount.
The useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.