Notes to the
consolidated
financial statements
continued
2 Basis of preparation continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
The preparation of financial statements requires management to make a number of estimates and assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. All assumptions, expectations and forecasts
used as a basis for certain estimates within these financial statements represent good faith assessments of Ahold Delhaize’s future performance
for which management believes there is a reasonable basis. They involve risks, uncertainties and other factors that could cause the Company’s
actual future results, performance and achievements to differ materially from those forecasted. The estimates, assumptions and judgments that
management considers most critical relate to:
Vendor allowances (Notes 3 and 17)
The Company must estimate the allowances that are earned based on the fulfillment of its related obligations, many of which require
management to estimate the volume of purchases that will be made during a period of time. The Company must also estimate the amount
of related product that has been sold and the amount that remains in ending inventories and allocate the allowance to cost of sales or
inventories accordingly.
Intangible assets (Notes 3,4 and 13)
Intangible assets acquired in a business acquisition are stated at fair value, as determined at the date of the acquisition. To determine the fair
value at the acquisition date, judgments and estimates are required.
Leases and sale and leaseback transactions (Notes 3,22 and 33)
The classification of leases as finance leases or operating leases requires judgments about the fair value of the leased asset, the split of the fair
value between land and buildings, the economic life of the asset, whether or not to include renewal options in the lease term and the appropriate
discount rate to calculate the present value of the minimum lease payments.
Business acquisitions (Note 4)
Determining the fair value of assets and liabilities recognized from a business acquisition involves a number of judgments and estimates.
This includes the use of:
Income taxes (Notes 3,10 and 34)
The ultimate tax effects of transactions may be uncertain for a considerable period of time, requiring management to estimate the related current
and deferred tax positions. The Company recognizes liabilities for uncertain tax positions when it is more likely than not that additional tax will be
due. Judgment is required in determining whether deferred tax assets are realizable and therefore recognized in the balance sheet.
An income approach (for property, plant and equipment, brand names and contractual relationships), which requires the estimation of the
income generating capacity of the relevant assets and the return or yield that a market participant would apply to such assets or an estimate or
forecast of future expected cash flows through either a relief from royalty or multi-period excess earnings approach.
A cost approach (for property, plant and equipment), which requires the calculation of the depreciated replacement cost of the relevant assets.
A market approach (for property plant and equipment, lease related intangibles), which requires the comparison of the subject assets to
transactions involving comparable assets or a comparison of contract and market prices.
Expected sales consideration, less any incremental costs directly attributable to the sale (for acquired assets classified as held for sale).
Market-quoted rates for the listed debt.
Assessments of the expected cash outflow and the probability of such an outflow for contingent liabilities related to legal disputes.
Evaluations of a counterparty’s credit risk and the re-let potential for contingent liabilities related to lease guarantees.
