Notes to the
consolidated
financial statements
continued
13 Intangible assets continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
The recoverable amount of each CGU is determined based on value in use calculations. Value in use is determined using discounted cash flow
projections that generally cover a period of three years and are based on the financial plans approved by the Company’s management. Due to
the expected continuation of high growth in the relevant online retail markets, we project cash flow for bol.com and Peapod over 10-year periods
to better reflect the growth expectations in sales, profitability and cash generation after the first three-year projection period. The key assumptions
for the value-in-use calculations relate to discount rate, sales growth and operating margin. The post-tax rates used to discount the projected
cash flows reflect specific risks relating to relevant CGUs and are 6.1% for Ahold USA, 5.1% for The Netherlands, 9.5% for bol.com and 6.4% for the
Czech Republic. The pre-tax discount rates are 10.2% for Ahold USA, 8.7% for Peapod, 6.8% for The Netherlands, 11.5% for bol.com and 7.9% for the
Czech Republic. The value in use for the CGUs would be the same as that which would be derived from discounting pre-tax cash flows at these
pre-tax discount rates. The sales growth rates and operating margins used to estimate future performance are based on past performance and
our experience of growth rates and operating margins achievable in Ahold Delhaize’s main markets. The average annual compound sales growth
rates applied in the projected periods ranged between 14.3% and 14.5% for the CGUs of our online business and between 1.6% and 3.1% for the other
CGUs. The average operating margins applied in the projected periods ranged between 0.2% and 1.8% for the CGUs of our online business and
between 2.6% and 5.2% for the other CGUs. Growth rates used to extrapolate cash flows beyond the explicit forecast period are set such that the
return on invested capital never exceeds the weighted average cost of capital of the CGUs.
Lease-related intangible assets consist primarily of favorable operating lease contracts acquired in business acquisitions. Customer relationships
consist primarily of pharmacy scripts and customer lists recognized through the acquisition of bol.com in 2012. Brand names refer to the banner
names as well as certain private label brands. Ahold Delhaize brands play an important role in the Company’s business strategy. Ahold Delhaize
believes that there is currently no foreseeable limit to the period over which the brands (excluding private label brands) are expected to generate
net cash inflows and therefore they are assessed to have an indefinite useful life. The assets are tested for impairment in accordance with the
policies as stated in Note3. “Other” mainly includes intangible assets related to relationships with franchisees and affiliates recognized in
connection with Ahold Delhaize merger, location development rights, deed restrictions and similar assets. Included in “Other” is an intangible
asset allocated to Stop Shop New England with an indefinite useful life and a carrying value of €33 million (2015: €32 million). The useful life of this
asset is assessed to be indefinite since it relates to the land portion of an owned location. Intangible assets under development relate mainly to
software development.
