Notes to the
consolidated
financial statements
continued
3 Significant accounting policies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset and is presented within net financial expenses.
Past service years within the Dutch pension fund are calculated based upon a methodology that uses the maximum past service years based on
accrued benefits or a participant’s actual date of hire.
For other long-term employee benefits, such as long-service awards, provisions are recognized on the basis of estimates that are consistent with
the estimates used for the defined benefit obligations, however discounted using Ahold Delhaize’s cost of debt rate. For these, all actuarial gains
and losses are recognized in the income statement immediately.
Provisions
Provisions are recognized when (i) the Company has a present (legal or constructive) obligation as a result of past events, (ii) it is more likely than
not that an outflow of resources will be required to settle the obligation, and (iii) the amount can be reliably estimated. The amount recognized is
the best estimate of the expenditure required to settle the obligation. Provisions are discounted whenever the effect of the time value of money
is significant.
The provision for the Company’s self-insurance program is recorded based on claims filed and an estimate of claims incurred but not yet reported.
The provision includes expenses incurred in the claim settlement process that can be directly associated with specific claims. Other expenses
incurred in the claim settlement process are expensed when incurred. The Company’s estimate of the required liability of such claims is recorded
on a discounted basis, utilizing an actuarial method based upon various assumptions that include, but are not limited to, historical loss experience,
projected loss development factors and actual payroll costs.
Changes in accounting policy
In 2016, in conjunction with the merger and the alignment of accounting policies, the Company changed its policy of accounting for employee
contributions to its defined benefit plans and they are now reflected as a reduction of service costs in the period in which the related service is
rendered. Previously, employee contributions were attributed to the periods of future service when measuring the defined benefit obligation.
This change is only applicable to the Company’s defined benefit pension plan in the Netherlands, as other defined benefit plans do not receive
employee contributions. The change in policy has been applied prospectively. The effect of this change in policy was to increase the pension
provision balance by €28 million, through other comprehensive income.
Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding
interest) are recognized immediately in the balance sheet with a charge or credit to other comprehensive income in the period in which it occurs.
Remeasurements recorded in other comprehensive income are not recycled to the income statement.
Contributions to defined contribution plans are recognized as an expense when employees have rendered service entitling them to the
contributions. Post-employment benefits provided through industry multi-employer plans, managed by third parties, are generally accounted for
under defined contribution criteria.
Restructuring-related provisions for severance and termination benefits are recognized when the Company has approved a detailed formal
restructuring plan and the restructuring has either commenced or has been announced to those affected by it. Onerous contract provisions are
measured at the amount by which the unavoidable costs to fulfill agreements exceeds the expected benefits from such agreements.
