Other information
continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
How our audit addressed the matter
Our procedures on the business combination included the following:
On July 23, 2016 the Group completed the merger between
Ahold and Delhaize. As indicated in Note 4 to the financial
statements, the merger is accounted for as a business
combination, which required significant and complex
judgments from management, including but not limited to
the determination of the fair values of assets acquired and
liabilities assumed at the acquisition date (i.e. an allocation
of the purchase price of €10.8 billion as defined by IFRS 3).
The recognition, measurement and disclosure of Ahold’s
merger with Delhaize in the 2016 financial statements was
considered a key audit matter due to its magnitude and
the level of judgment required in choosing appropriate
assumptions, for example in the valuation of brands,
franchisee relationships, store properties, favourable and
unfavourable lease rights and the allocation of goodwill
to new and existing cash generating units. In addition the
related accounting policy alignment and its consistent
application at the Delhaize components, could result in
material measurement period adjustments or inconsistencies,
if not timely identified.
An assessment of the process that management has undertaken to determine
the allocation of the purchase price including but not limited to understanding
the scope of work, assessing the qualifications and competence of the valuation
experts engaged by the Group and evaluating the process and oversight
performed by Group finance on harmonising the accounting policies.
Auditing the fair value measurements prepared by management and their
valuation experts including assessing the key valuation assumptions used (such
as WACC rates, property values and future growth rates). We validated and/
or benchmarked key data inputs used in the valuation model such as churn
assumptions for the valuation of franchise and affiliate intangibles and lease and
property data.
An assessment of the accounting policy alignment including reading the material
accounting policies of Delhaize, evaluating the completeness of management’s
own analysis of the accounting policy differences, planning and directing our
component auditors to perform specific procedures over the policy alignment and
testing the valuation of adjustments recorded where alignment was required.
Planning and directing the audit of the closing balance sheet of Delhaize which
was used as an input in the purchase price allocation.
Understanding and evaluating the design and testing the operating effectiveness
of controls related to key inputs and key outputs of the group’s purchase price
allocation process.
Furthermore, we assessed the adequacy of the related disclosures included in
Note 4 to the financial statements.
The context of our audit is set by the Group’s major activities in 2016. The most significant event of the last twelve months has been the completion
of the Group’s merger with Delhaize. This has therefore become a new key audit matter for our audit in 2016 given the number of significant
management estimates and judgements required to account for the transaction and the broad range of financial statement line items that
are impacted. The remaining key audit matters are consistent with prior year in view of their magnitude and the significant estimates and
assumptions involved.
Key audit matter
Accounting for the Ahold Delhaize merger and alignment
of accounting policies
Note 4
