Notes to the
consolidated
financial statements
continued
3 Significant accounting policies
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Consolidation
The consolidated financial statements incorporate the financial figures of the Company and its subsidiaries. Subsidiaries are entities over which
the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date that control
commences until the date that control ceases. All intra-group transactions, balances, income and expenses are eliminated upon consolidation.
Unrealized losses on intra-group transactions are eliminated, unless the transaction provides evidence of an impairment of the assets transferred.
Segmentation
Ahold Delhaize’s operating segments are its retail operating companies that engage in business activities from which they earn revenues and
incur expenses and whose operating results are regularly reviewed by the Management Board to make decisions about resources to be allocated
to the segments and to assess their performance. In establishing the reportable segments, certain operating segments with similar economic
characteristics have been aggregated. As Ahold Delhaize’s operating segments offer similar products using complementary business models,
and there is no discernible difference in customer bases, the Company’s policy on aggregating its operating segments into reportable segments is
based on geography, functional currency and management oversight.
Non-controlling interests are recorded, as appropriate, on the consolidated balance sheet, in the consolidated income statement, and in
the consolidated statement of comprehensive income for the non-controlling shareholders’ share in the net assets and the income or loss of
subsidiaries. Non-controlling shareholders’ interest in an acquired subsidiary is initially measured at the non-controlling interest’s proportion of the
net fair value of the assets, liabilities and contingent liabilities recognized. Ahold Delhaize does not have subsidiaries with non-controlling interests
that are material to the Group.
Foreign currency translation
The financial statements of subsidiaries, joint ventures and associates are prepared in their functional currencies, which are determined based on
the primary economic environment in which they operate. Transactions in currencies other than the functional currency are recorded at the rates
of exchange prevailing on the transaction dates. At each balance sheet date, monetary items denominated in foreign currencies are translated
into the entity’s functional currency at the then prevailing rates. Exchange differences arising on the settlement and translation of monetary items
are included in net income for the period. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are considered as
assets and liabilities denominated in the functional currency of the foreign entity.
Upon consolidation, the assets and liabilities of subsidiaries with a functional currency other than the euro are translated into euros using the
exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the respective
periods. Exchange rate differences arising during consolidation and on the translation of investments in subsidiaries are included in other
comprehensive income and in equity, in the currency translation reserve. Intercompany loans to and from foreign entities for which settlement
is neither planned nor likely to occur in the foreseeable future are considered to increase or decrease the net investment in that foreign entity;
therefore the exchange rate differences relating to these loans are also included in other comprehensive income and in equity, in the currency
translation reserve.
The segments’ performance is evaluated against several measures, of which operating income is the most important. Intersegment sales are
executed under normal commercial terms and conditions that would also be available to unrelated third parties.
On the disposal of a foreign operation resulting in loss of control, loss of joint control or loss of significant influence, the related cumulative
exchange rate difference that was included in equity is transferred to the consolidated income statement.
