Government Grants
Inventories
Cash and Cash Equivalents
Impairment of Non-Financial Assets
Non-derivative Financial Assets
Delhaize Group Annual Report 2014 85
Government grants are recognized when there is reasonable assurance that the grant will be received and the Group will comply
with all attached conditions. When a grant relates to an expense item, it is recognized as income over the period necessary to
match the grant on a systematic basis to the costs that it is intended to compensate. When a grant relates to an asset, it is
recognized as deferred income and recognized in the income statement as "Other operating income" (see Note 27) on a
systematic basis over the expected useful life of the related asset.
Inventories are valued at the lower of cost on a weighted average cost basis and net realizable value. Costs of inventory include
all costs incurred to bring each product to its present location and condition. Inventories are regularly reviewed and written down
on a case-by-case basis if the anticipated net realizable value (anticipated selling price in the course of ordinary business less
the estimated costs necessary to make the sale) declines below the carrying amount of the inventories. When the reason for a
write-down of the inventories has ceased to exist, the write-down is reversed.
Delhaize Group receives allowances and credits from suppliers primarily for in-store promotions, cooperative advertising, new
product introduction and volume incentives. The Group has a strict rebuttable presumptions that all of these "vendor allowances",
as well as other cash discounts, represent a reduction in the cost of inventory and are therefore recognized in the income
statement when the product is sold, unless they represent reimbursement of a specific, incremental and identifiable cost incurred
by the Group to sell the vendor's product. In this case they are recorded immediately as a reduction of the corresponding sel ling,
general and administrative expenses. Estimating rebates from suppliers requires in certain cases the use of assumptions and
judgment regarding the achievement of specified purchase or sales level and related inventory turnover.
Cash and cash equivalents include cash on call with banks and on hand, short-term deposits and other highly liquid investments
with an original maturity of three months or less which are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value. Negative cash balances are reclassified on the balance sheet to "Bank overdrafts".
At each reporting date, the Group assesses whether there is an indication that a non-financial asset (hereafter "asset") may be
impaired. If such indications are identified, the asset's recoverable amount is estimated. Further, goodwill and intangible assets
with indefinite lives or that are not yet available for use are tested annually for impairment, which at Delhaize Group is in the
fourth quarter of the year and whenever there is an indication of impairment.
The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risk specific to the asset. As independent cash flows are
often not available for individual assets for the purpose of impairment testing, assets need to be grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or groups of assets ("cash generating unit" or CGU).
In determining fair value less costs to sell for individual assets or CGUs, appropriate valuation models (see Note 2.1) are used.
Goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to the CGUs that are expected to
benefit from the synergies of the combination and that represent the lowest level within the Group at which the goodwill is
monitored for internal management purposes and that are not larger than an operating segment before aggregation (see Note 6).
An impairment loss of a continuing operation is recognized in the income statement in "Other operating expenses" (see Note 28)
if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses recognized for CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the
other assets in the CGU on a pro rata basis.
If the impairment of assets, other than goodwill, is no longer justified in future periods due to a recovery in fair value or value in
use of the asset, the impairment is reversed. An impairment loss is reversed only to the extent that the asset's carrying amo unt
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized. Goodwill impairment is never reversed.
Delhaize Group classifies its non-derivative financial assets (hereafter "financial assets") within the scope of IAS 39 Financial
Instruments: Recognition and Measurement into the following categories: loans and receivables and available for sale. Delhaize
Group currently holds no financial assets that would be classified as measured at fair value through profit or loss and held-to-
maturity. The Group determines the classification of its financial assets at initial recognition.
These financial assets are initially recorded at fair value plus transaction costs that are directly attributable to the acquisition or
issuance of the financial assets.
Loans and receivables: Financial assets with fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Such financial assets are subsequent to initial recognition carried at amortized cost
using the effective interest rate method. Gains and losses are recognized in the income statement when the loans and
receivables are derecognized or impaired and through the amortization process. The Group's loans and receivables
