Notes to the
consolidated
financial statements
continued
4 Acquisitions continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
The valuation techniques used for measuring the fair value of material assets acquired and liabilities assumed were as follows:
If new information is obtained within one year of the date of acquisition about any additional provisions or facts and circumstances that would lead
to adjustments to the above amounts that existed at the date of acquisition, the accounting for the acquisition will be revised.
Property, plant and equipment: The fair value adjustments with respect to property, plant and equipment have been determined primarily through
the combination of an income approach, which requires the estimation of the “income generating” capacity of the relevant assets and the return or
yield that a market participant would apply to such assets; a cost approach, which requires the calculation of the depreciated replacement cost of
the relevant assets; and a market approach, which requires the comparison of the subject assets to transactions involving comparable assets.
Other intangible assets: The fair values of brand names and contractual relationships have been determined primarily through an income
approach, which requires an estimate or forecast of future expected cash flows through either a relief from royalty or multi-period excess
earnings approach.
Other intangible assets - lease-related intangibles: The fair values of lease-related intangibles have been assessed through a market approach,
which requires a comparison of contract and market prices.
Deferred tax assets and liabilities: Deferred income tax assets and liabilities as of the merger date represented the expected future tax
consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. Deferred tax
liabilities have been recognized in full except where the reversal of the temporary differences is within the control of the Company and these
differences are not expected to reverse in the foreseeable future. Deferred tax assets have been recognized based on recoverability of the
temporary differences and considering the tax planning strategies expected to be adopted by the Company.
Inventory: The fair value of inventory is primarily the carrying value at the merger date on the basis that the carrying value of inventory at cost for
a retailer represents the fair value that would be paid by a market participant in the retail sector.
Assets held for sale - remedy stores: In order to get approval from competition authorities in the U.S. and Belgium, the Company has agreed to sell
certain stores as part of the merger (“remedy stores”). The remedy stores have been presented as assets held for sale on the opening balance sheet
and the purchase price allocated to these stores is based on the expected sales consideration, less any incremental costs directly attributable to the
sale in accordance with IFRS 5.
Loans: The fair value of debt was estimated primarily on the basis of “market-quoted rates” for the listed debt.
Provisions - contingent liabilities: The provisions assumed as part of the net assets of the business combination include the fair value of contingent
liabilities related to certain legal disputes as well as lease guarantees provided to lessors on certain stores which have been assigned or sold.
The fair value of the contingent liability associated with the legal disputes is based on an assessment of the expected cash outflow and the
probability of such an outflow. The timing associated with any settlement of these disputes is uncertain and therefore the expected cash outflow
considering its probability has not been discounted.
The fair value of the contingent liability associated with lease guarantees provided on sold or assigned stores is based on an evaluation of the
counterparty’s credit risk (i.e., the risk of the party on behalf of whom the guarantee is provided) and the re-let potential of the property linked to
its location.
Other receivables and liabilities: Other receivables and liabilities such as trade payables and receivables, other current and non-current assets
and liabilities, provisions (other than contingent liabilities) and accruals are valued at the carrying values in Delhaize’s books on the basis that the
carrying value represented the fair value as of the merger date. The carrying value of trade receivables recorded in Delhaize’s books included
a provision relating to uncertain trade receivables where collectibility was not assured and these provisions have been included in the fair value
assessment as of the merger date. No incremental fair value adjustments have been made to the carrying value of trade receivables recorded in
Delhaize’s books.
