Notes to the
consolidated
financial statements
continued
3 Significant accounting policies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
At each balance sheet date, the Company assesses whether there is objective evidence that an investment or a group of investments is impaired.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category of financial assets or not classified
in any of the other categories. They are measured at fair value based on quoted market prices with changes therein recognized directly in equity
until the investment is derecognized or determined to be impaired, at which time the cumulative gain or loss previously recorded in equity is
transferred to the income statement. Investments in equity instruments that do not have a quoted market price and whose fair value cannot be
reliably measured are carried at cost.
Available-for-sale financial assets are included in non-current financial assets unless they are expected to be realized or are intended for sale or
consumption within 12 months after the balance sheet date.
Loans and short-term borrowings
Loans and short-term borrowings are recognized initially at fair value, net of transaction costs incurred. Loans and short-term borrowings are
subsequently stated at amortized cost, unless they are designated as fair value hedges. Any difference between the proceeds and redemption
value is recognized in the income statement over the period of the loans and short-term borrowings using the effective interest method. Loans are
classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the
balance sheet date.
Derivative financial instruments
All derivative financial instruments are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period. Gains and losses resulting from the fair value remeasurement are recognized in
the income statement as fair value gains (losses) on financial instruments, unless the derivative qualifies and is effective as a hedging instrument in
a designated hedging relationship. In order for a derivative financial instrument to qualify as a hedging instrument for accounting purposes, the
Company must document (i) at the inception of the transaction, the relationship between the hedging instrument and the hedged item, as well as
its risk management objectives and strategy for undertaking various hedging transactions and (ii) its assessment, both at hedge inception and on
an ongoing basis, of whether the derivative that is used in the hedging transaction is highly effective in offsetting changes in fair values or cash
flows of hedged items. Derivatives that are designated as hedges are accounted for as either cash flow hedges or fair value hedges.
Cash and cash equivalents
Cash and cash equivalents include all cash on hand balances, checks, debit and credit card receivables, short-term highly liquid cash investments,
and time deposits with original maturities of three months or less. Time deposits and similar instruments with original maturities of more than three
months but less than 12 months are classified as other current financial assets. Bank overdrafts are included in short-term borrowings.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized initially in the
cash flow hedging reserve, a separate component of equity. The gain or loss relating to the ineffective portion is recognized immediately in the
income statement. Amounts accumulated in equity are reclassified into the income statement in the same period in which the related exposure
impacts the income statement. When a cash flow hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in equity at that time remains in equity and is recognized when the forecasted transaction is ultimately recognized in the income statement.
When a forecasted transaction is no longer expected to occur, the cumulative gain or loss existing in equity is immediately recognized in the
income statement.
Fair value changes of derivative instruments that qualify for fair value hedge accounting treatment are recognized in the income statement in the
periods in which they arise, together with any changes in fair value of the hedged asset or liability. If the hedging instrument no longer meets the
criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is amortized in the income statement over the remaining
period to maturity of the hedged item.
