Notes to the
consolidated
financial statements
continued
3 Significant accounting policies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Financial instruments
Financial assets and liabilities
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of a financial instrument.
Financial assets are derecognized when the rights to receive cash flows from the financial assets expire, or if the Company transfers the financial
asset to another party and does not retain control or substantially all risks and rewards of the asset. Financial liabilities are derecognized when the
Company’s obligations specified in the contract expire or are discharged or cancelled. Purchases and sales of financial assets in the normal course
of business are accounted for at settlement date (i.e., the date that the asset is delivered to or by the Company).
At initial recognition, management classifies its financial assets as either (i) at fair value through profit or loss, (ii) loans and receivables, (iii) held to
maturity or (iv) available-for-sale, depending on the purpose for which the financial assets were acquired. Financial assets are initially recognized
at fair value. For instruments not classified as at fair value through profit or loss, any directly attributable transaction costs are initially recognized
as part of the asset value. Directly attributable transaction costs related to financial assets at fair value through profit or loss are expensed
when incurred.
Investments at fair value through profit or loss
Investments at fair value through profit or loss are those investments that are either held for trading or designated as such by the Company.
A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the short term. Derivatives are classified as
held for trading unless they are designated as hedges. Financial instruments held for trading are measured at fair value and changes therein are
recognized in the income statement.
The fair value of quoted investments is based on current bid prices. If the market for a financial asset is not active, or if the financial asset
represents an unlisted security, the Company establishes fair value using valuation techniques. These include the use of recent arm’s-length
transactions, reference to other instruments that are substantially the same, and discounted cash flow analysis, making maximum use of market
inputs. Subsequent to initial recognition, financial assets are measured as described below. At each balance sheet date, the Company assesses
whether there is objective evidence that a financial asset or a group of financial assets is impaired.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
carried at amortized cost using the effective interest method, less any impairment losses. They are included in current assets, except for loans and
receivables with maturities greater than 12 months after the balance sheet date.
Held to maturity financial assets
Held to maturity financial assets are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Company
has the positive intention and ability to hold to maturity. They are carried at amortized cost using the effective interest method, less any
impairment losses. They are included in current assets, except for held to maturity financial assets with maturities greater than 12 months after the
balance sheet date.
