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Ahold at a glance
Business review
Governance
Financials
Ahold
Annual Report 2015
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the supervisory board, but they are not
a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.
The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of
the financial statements. Any comments we make on the results of our procedures should be read in this context.
Key audit matter
How our audit addressed the matter
Recognition of vendor allowances
Note 1/
The group receives various types of vendor allowances, as further discussed in Note 3 to the financial statements.
These allowances are a significant component in cost of sales. The vendor allowance receivable at January 3, 2016
amounts to EUR 260 million (Note 1/).
We also considered this to be a key audit matter because the recognition of vendor allowance income and
receivables requires judgement from management, for example concerning the nature and level of fulfilment of the
company's obligations under the vendor agreements, estimates with respect to purchase or sales volumes to support
income recognition.
Our procedures included testing management's controls around the completeness and accuracy of the contractual
agreements recognized in the accounting system, challenging management's assumptions used in determining the
unrealized vendor allowances through discussions with management and performing the following specific
substantive procedures. On a sample basis we agreed the recorded amounts to contractual evidence and confirmed
the related positions and terms with the vendors. In addition, to evaluate the reliability of management's estimates, we
performed a retrospective review of subsequent collections on prior period vendor allowance receivables. We found
no significant differences in prior year estimates. Finally we tested cut-off through assessing the obligation fulfilment of
vendor allowance income recorded during a period shortly before and after year-end.
Impairment store assets
Note 11
The Group operates retail stores in Europe and the United States. 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 identification
of any impairment triggers and subsequent 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 2015 management recognized net impairment
losses of EUR 26 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 by assessing management's
review of the financial performance on a store by store basis. We challenged management's assumptions underlying
the impairment calculation for those stores where a triggering event was identified and corroborated them by
comparing them to internal forecasts and long term and strategic plans that were approved by management as well
as historic trend analyses to determine management's ability to reliably estimate such assumptions. Our valuation
experts assisted us in evaluating the applied discount rate calculated by the Group which we found to be
appropriate.
Employee benefit plan measurement
Note 23
The Group has defined benefit plans in the Netherlands and the United States, giving rise to defined benefit
obligations of EUR 4.1 billion and EUR 1.4 billion, respectively (Note 23).
We considered this to be a key audit matter because of the magnitude of the amounts, management's judgement
applied (for example around salary increases, inflation, discount rates and mortality rates) and technical expertise
required to determine these amounts as discussed in Note 23.
The group also has a significant number of union employees in the United States whose pension benefits are
covered by multi-employer plans (we also refer to the risk factor on pension plan funding on page 61 of the annual
report). In Note 23 management has disclosed a calculation, which is based on different assumptions and leads to
an estimate of the group's possible proportionate share of the total net deficit in these plans.
Our procedures included, amongst others, involving our experts to assist us in evaluating the actuarial and
demographic assumptions and valuation methodologies used by management to assess Ahold's various pension
obligations. We assessed whether the key actuarial assumptions are reasonable and consistently applied. We
tested payroll data, through a combination of controls and test of details, and reconciled the membership census
data used in the actuarial models to the payroll data of the group audited by us.
In addition, we evaluated the potential exposure under the multi-employer plans in the United States as disclosed.
We reconciled the related inputs used by management to determine the potential exposure to supporting
documentation such as the latest available plan information and actuarial calculations.
