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Notes to the consolidated financial statements
3 Significant accounting policies (continued)
Intangible assets
Investments in joint arrangements and associates
Impairment of non-current assets other than goodwill
Ahold at a glance I Business review I Governance I Financials I Investors
buyer. The leaseback of the Ahold store and any gain on the sale of the Ahold store is accounted for under
the sale and leaseback criteria described above.
In some sale and leaseback arrangements, Ahold subleases the property to third parties (including franchisees)
or maintains a form of continuing involvement in the property sold, such as earn-out provisions or obligations
or options to repurchase the property. In such situations, the transaction generally does not qualify for sale and
leaseback accounting, but rather is accounted for as a financing transaction (financing). The carrying amount
of the asset remains on the balance sheet and the sale proceeds are recorded as a financing obligation.
The financing obligation is amortized over the lease term. Once Ahold's continuing involvement ends, the sale
is accounted for under the sale and leaseback criteria described above.
Goodwill and impairment of goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred
over the Company's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities at
the date of acquisition, and is carried at cost less accumulated impairment losses. Goodwill on acquisitions of
joint ventures and associates is included in the carrying amount of the investment.
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 the 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,
Ahold
Annual Report 2014
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
The useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
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.
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.
