Notes to the
consolidated
financial statements
continued
3 Significant accounting policies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
The useful lives are reviewed at each balance sheet date and adjusted, if appropriate.
Intangible assets
Goodwill and impairment of goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Company’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities at the date of acquisition, and is carried at cost less accumulated
impairment losses. Goodwill on acquisitions of joint ventures and associates is included in the carrying amount of the investment.
For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units (or groups of cash-generating units) that is
expected to benefit from the synergies of a business combination. Goodwill is allocated to a cash-generating unit (or group of cash-generating
units) representing the lowest level within the Company at which the goodwill is monitored for internal management purposes and is never
larger than an operating segment before aggregation. Cash-generating units to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the cash-generating unit may be impaired. Goodwill on acquisitions of joint
ventures and associates is assessed for impairment as part of the investment whenever there is an indication that the investment may be
impaired. An impairment loss is recognized for the amount by which the cash-generating unit’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of a cash-generating unit’s fair value less cost to sell or its value in use. An impairment loss is allocated first to
reduce the carrying amount of the goodwill and then to the other assets of the cash-generating unit pro rata on the basis of the carrying amount
of each asset. An impairment loss recognized for goodwill is not reversed in subsequent periods.
Other intangible assets
Separately acquired intangible assets and internally developed software are carried at cost less accumulated amortization and impairment losses.
Intangible assets acquired in a business combination are recognized at fair value at the date of acquisition (which is regarded as their cost).
Customer, franchise, and affiliate relationships acquired in business acquisitions are stated at fair value determined using an income approach.
Direct costs related to the development of software for internal use are capitalized only if the costs can be measured reliably, technological
feasibility has been established, future economic benefits are probable, and the Company intends to complete development and to use the
software. All other costs, including all overhead, general and administrative, and training costs, are expensed as incurred. Lease-related intangible
assets, consisting primarily of favorable operating lease contracts acquired in business acquisitions, are measured at the present value of the
amount by which the contract terms are favorable relative to market prices at the date of acquisition.
On the partial or complete disposal of an operation, the goodwill attributable to that operation is included in the determination of the gain or loss
on disposal.
Amortization is computed using the straight-line method based on estimated useful lives, which are as follows:
Lease-related intangibles Remaining expected duration of the lease
Software 3-10 years
Customer relationships 7-25 years
Brand names indefinite
Franchise and affiliate relationships 14-40 years
Other 5-indefinite
