Notes to the
consolidated
financial statements
continued
II Property, plant and equipment continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Other movements mainly include transfers between asset classes and transfers to investment property.
In 2016, Ahold Delhaize recognized net impairment losses of €71 million for property, plant and equipment (2015: €26 million). These were mainly
related to Ahold USA (2016: €60 million, 2015: €17 million) and the Netherlands (2016: €6 million, 2015: €9 million) and were recognized for various
operating and closed stores. In 2016, the fair value less cost of disposal was the recoverable amount in the determination of €40 million of the net
impairment losses mainly relating to remedy and other divestment stores (2015: €2 million of the net impairment losses). As part of approval of the
merger between Ahold and Delhaize Group by the U.S. Federal Trade Commission, Ahold USA entered into agreements to sell 15 stores (‘’remedy
stores,” see Note 5). In addition to remedy stores, Ahold USA intends to divest another 10 stores in the Richmond area (‘’other divestment stores’’).
Ahold USA incurred net impairment charges of €17 million in total for the property, plant and equipment of the remedy stores before they were
classified as held for sale and a €3 million impairment for the stores’ associated fixed assets to be abandoned. Impairments for the property, plant
and equipment of the other divestment stores of Ahold USA amounted to €20 million. The impairments related to remedy and other divestment
stores were mainly based on the bid prices received.
The higher of the value in use or fair value less cost of disposal represents an asset’s recoverable amount. The value in use method involves
estimating future cash flows. The present value of estimated future cash flows has been calculated using pre-tax discount rates ranging between
5.8% and 17.3% (2015: 6.3% - 12.7%). Fair value represents the price that would be received to sell an asset in an orderly transaction between market
participants and is generally measured by using an income approach or a market approach. The income approach is generally applied by using
discounted cash flow projections based on the assets’ highest and best use from a market participants’ perspective. The market approach requires
the comparison of the subject assets to transactions involving comparable assets by using inputs such as bid or ask prices or market multiples.
The additions to property, plant and equipment include capitalized borrowing costs of €1 million (2015: €1 million). Generally, the capitalization rate
used to determine the amount of capitalized borrowing costs is a weighted average of the interest rate applicable to the respective operating
companies. This rate ranged between 1.8% and 10.6% (2015: 2.3% - 3.8%).
The carrying amount of land and buildings includes amounts related to assets held under finance leases and financings of €1,323 million and
€210 million, respectively (January 3, 2016: €987 million and €218 million). In addition, the carrying amount of other property, plant and equipment
includes an amount of €37 million (January 3, 2016: €6 million) relating to assets held under finance leases. Ahold Delhaize does not have legal title
to these assets.
Company-owned property, plant and equipment with a carrying amount of €51 million (January 3, 2016: €48 million) has been pledged as security
for liabilities, mainly for loans.
Buildings and land includes stores, distribution centers, warehouses and improvements to these assets. “Other” property, plant and equipment
mainly consists of furnishings, machinery and equipment, trucks, trailers and other vehicles. Assets under construction mainly consists of stores.
