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Ahold ata glanceOur strategy Our performance j Governance
Other information Defined benefit obligations
The Group has defined benefit plans in the Netherlands and the U.S., giving rise to defined benefit obligations totalling to EUR 4.4 billion (Note 23). This area was important to our audit
because of the magnitude of the amounts, the judgement and technical expertise required to determine these amounts and the required changes in accounting in 201 3 in view of adopting IAS
19R.
Our procedures included, amongst others, involving our experts to assist us in evaluating the actuarial and demographic assumptions and valuation methodologies used by the Group to
assess Ahold's various pension obligations. We assessed whether the key actuarial assumptions are reasonable and consistently applied, and evaluated the rationale for any changes. We also
compared the membership census data used in the actuarial models to the payroll data of the Group. In addition, we assessed the application of the guidance in IAS1 9R in its pension
calculations and disclosures.
Impairment testing of goodwill
The Group is required to annually test goodwill for impairment. This area was important to our audit because the goodwill impairment test requires significant judgement in determining the
assumptions to be used for the cash flow forecasts. These assumptions include expectations for sales and margin developments, overall market or economic conditions and shopping trends.
Our audit procedures included, amongst others, evaluating the assumptions and methodologies used by the Group. We used a valuation expert to assist us. We focussed our procedures on
the forecasted revenue growth and the WACC's for the cash generating units. Especially for the online business, we challenged assumptions about market growth rates for existing and new
categories and the length of the forecasting period to be used. Furthermore we focused on the adequacy of the disclosures about the assumptions and the outcome of the impairment test in
the financial statements. Management's conclusion on the goodwill impairment tests and related disclosures are included in Note 13.
Impairment testing of store assets
The Group operates retail stores in Europe and the U.S. The associated store assets are important to our audit due to the size of the store asset carrying value (Note 11) as well as the judgment
involved in the assessment of the recoverability of the invested amounts. Such judgement focuses predominantly on future store performance, which is, amongst others, dependent on the
expected store traffic, basket size and the competitive landscape in local markets. Management assesses, on a quarterly basis, whether there are triggering events indicating potential
impairment. In 201 3 management recognized net impairment losses of EUR 69 million.
Our audit procedures included, amongst others, an evaluation of the Group's policies and procedures to identify triggering events for potential impairment of assets related to underperforming
stores. We challenged management's main cash flow assumptions and corroborated them by comparing them to internal forecasts and long term and strategic plans that were approved by
senior management, external data as well as historic trend analyses. We also involved our valuation experts to analyse the applied WACC calculated by the Group.
Estimates in recognition of vendor allowances
The Group receives various types of vendor allowances, as further discussed in Note 3 to the financial statements. These allowances are a significant component of cost of sales. The majority of
the incentives are settled during the financial year, however a substantial amount is collected after year-end. The recognition of receivables requires, to some extent, estimates from
management, for example concerning purchase or sales volumes.
Our audit procedures included, amongst others, an evaluation of the accounting treatment of significant vendor allowance agreements applicable to the financial year and confirmation of the
related positions and terms with the vendors. We also assessed the collectability of vendor allowance receivables, including a review of the collections related to the prior year (December 30,
2012) balance, reconciled estimates to signed agreements and tested management's controls on the vendor allowance process.
Contingent liabilities relating to divestments in prior periods
The Group provided significant lease guarantees and other representations and warranties, mostly in connection with divestments made in previous years. We refer to Note 34 of the financial
statements for further details. We focussed on this area because of the potential significance of these commitments and contingencies. In addition, the assessment as to whether or not a liability
should be recognized and whether amounts can be reliably estimated includes, to a certain extent, judgement from management.
Our procedures included, amongst others, an assessment of the legal advice obtained by the Group as well as periodic meetings with management to discuss developments in legal
proceedings and unasserted claims. We also obtained confirmations from the Group's external legal counsels in order to compare their expert opinions to management's position on
measurement and or disclosures for each of the material contingencies.
Financials
Investors
Ahold Annual Report 2013