Notes to the
consolidated
financial statements
continued
3 Significant accounting policies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Defined benefit costs are split into three categories:
Service cost, past service cost, gains and losses on curtailment and settlements
Net interest expense or income
Remeasurement
Reinsurance assets and liabilities
Under Ahold Delhaize’s self-insurance program, part of the insurance risk is ceded under a reinsurance treaty, which is a pooling arrangement
between unrelated companies. Reinsurance assets include estimated receivable balances related to reinsurance contracts purchased by the
Company. Reinsurance liabilities represent the expected insurance risks related to reinsurance contracts sold by the Company. Reinsurance assets
and liabilities are measured on a discounted basis using accepted actuarial methods.
Pension and other post-employment benefits
The net assets and net liabilities recognized on the consolidated balance sheet for defined benefit plans represent the actual surplus or deficit
in Ahold Delhaize’s defined benefit plans measured as the present value of the defined benefit obligations less the fair value of plan assets.
Any surplus resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan.
Financial guarantees
Financial guarantees are recognized initially as a liability at fair value. Subsequently, the liability is measured at the higher of the best estimate of
the expenditure required to settle the obligation or the amount initially recognized less cumulative amortization.
Equity
Equity instruments issued by the Company are recorded at the value of proceeds received. Own equity instruments that are bought back (treasury
shares) are deducted from equity. Incremental costs that are directly attributable to issuing or buying back own equity instruments are recognized
directly in equity, net of the related tax. No gain or loss is recognized in the income statement on the purchase, sale, issuance or cancellation of the
Company’s own equity instruments.
Cumulative preferred financing shares
Cumulative preferred financing shares, for which dividend payments are not at the discretion of the Company, are classified as non-current
financial liabilities and are stated at amortized cost. The dividends on these cumulative preferred financing shares are recognized as interest
expense in the income statement, using the effective interest method. From the date when Ahold Delhaize receives irrevocable notification from
a holder of cumulative preferred financing shares to convert these shares into common shares, the cumulative preferred financing shares are
classified as a separate class of equity.
The first category is presented as labor costs within operating earnings. Past-service costs are recognized in the income statement in the period of
plan amendment. Results from curtailments or settlements are recognized immediately.
Defined benefit obligations are actuarially calculated on the balance sheet date using the projected unit credit method. The present value of the
defined benefit obligations is determined by discounting the estimated future cash outflows using market yields on high-quality corporate bonds
(i.e., bonds rated AA or higher), denominated in the currency in which the benefits will be paid, and that have an average duration similar to the
expected duration of the related pension liabilities.
