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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
Ahold Annual Report 2013
Defined benefit costs are split into three categories:
Service cost, past service cost, gains and losses on curtailment and settlements
Net interest expense or income
Remeasurement
The first category is presented as labor costs within operating earnings. Past-service costs are
recognized in the income statement in the period of plan amendment. Results from
curtailments or settlements are recognized immediately. During 2012, the Company changed
its policy for measuring past service years within the Dutch pension fund. The previous policy
was to calculate past service years based on a participant's accrued benefits, but this has been
changed to a methodology that will use the maximum past service years based on a
participant's actual date of hire or accrued benefits.
Net interest is calculated by applying the discount rate to the net defined benefit liability or
asset and is presented within net financial expenses.
Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling (if
applicable) and the return on plan assets (excluding interest) are recognized immediately in the
balance sheet with a charge or credit to other comprehensive income in the period in which it
occurs. Remeasurements recorded in other comprehensive income are not recycled.
Contributions to defined contribution plans are recognized as an expense when employees
have rendered service entitling them to the contributions. Post-employment benefits provided
through industry multi-employer plans, managed by third parties, are generally accounted for
under defined contribution criteria.
For other long-term employee benefits, such as long-service awards, provisions are
recognized on the basis of discount rates and other estimates that are consistent with
the estimates used for the defined benefit obligations. For these all actuarial gains and losses
are recognized in the income statement immediately.
Provisions
Provisions are recognized when (i) the Company has a present (legal or constructive)
obligation as a result of past events, (ii) it is more likely than not that an outflow of resources
will be required to settle the obligation, and (iii) the amount can be reliably estimated. The
amount recognized is the best estimate of the expenditure required to settle the obligation.
Provisions are discounted whenever the effect of the time value of money is significant.
The provision for the Company's self-insurance program is recorded based on claims filed
and an estimate of claims incurred but not yet reported. The provision includes expenses
incurred in the claim settlement process that can be directly associated with specific claims.
Other expenses incurred in the claim settlement process are expensed when incurred. The
Company's estimate of the required liability of such claims is recorded on a discounted basis,
utilizing an actuarial method based upon various assumptions that include, but are not limited
to, historical loss experience, projected loss development factors and actual payroll costs.
Restructuring provisions are recognized when the Company has approved a detailed formal
restructuring plan and the restructuring has either commenced or has been announced to
those affected by it. Onerous contract provisions are measured at the amount by which the
unavoidable costs to fulfill agreements exceeds the expected benefits from such agreements.
Changes in presentation
In 2013, Ahold changed the presentation of its income statement to a framework that
provides a better alignment between expense categories and functions. The change resulted in
certain reclassifications within the 2012 income statement. In the 2012 income statement, this
change decreased cost of sales by €133 million and increased selling expenses and general
and administrative expenses by €87 million and €46 million, respectively. Furthermore, the
comparative 2012 expenses by nature figures have been changed to conform to the current
year presentation (see Note 8).
In 2013, Ahold's investment in ICA met the criteria to be classified as a discontinued
operation and, accordingly, €75 million that was previously reported in 2012 as share of
income from joint ventures has been reclassified to income from discontinued operations.
In 2013, Ahold's investment in Slovakia met the criteria to be classified as a discontinued
operation and, accordingly, a €26 million loss that was previously reported in 2012 within
income before taxes has been reclassified to income from discontinued operations. In the
2012 income statement, this change decreased net sales by €159 million, cost of sales by
€1 19 million, selling expenses by €40 million and general and administrative expenses by
€24 million.
The tables at the end of this note outline the effects on Ahold's comparative 2012 amounts.
New accounting policies effective for 2013
The amendment to IAS 1"Presentation of Financial Statements," as part of the "Annual
Improvements to IFRSs 2009-2011 Cycle," became effective in 2013. These amendments
require Ahold to group the items in other comprehensive income on the basis of whether they
are potentially able to be subsequently reclassified to profit or loss (reclassification
adjustments). The presentation of Ahold's consolidated statement of comprehensive income
has been adjusted to comply with these amendments; however the amendments have no
effect on Ahold's financial position or performance.
IAS 19, "Employee Benefits," (as revised in June 2011) became effective for the Company as
of January 1, 2013. Ahold has applied the revised standard retrospectively and in accordance
with the transitional provisions as set out in IAS 19.173 (as revised). These transitional
provisions do not have an effect on future periods.