Food Lion 2002 Annual Report Download - page 62

60 |Delhaize Group |Annual Report 2002
Foreign Currency Transactions
Under Belgian GAAP, the Group has deferred foreign currency transac-
tion exchange rate losses incurred on debts contracted to finance non-
monetary assets. These losses are recognized based on the principle of
matching expenses to the income to which they relate. Under US GAAP,
the increase or decrease in expected functional currency cash flows is a
foreign currency transaction gain or loss that is included in determining
net income for the period in which the exchange rate changes.
Income Taxes
Under Belgian GAAP, Delhaize Group accounts for deferred income tax
assets and liabilities for its United States subsidiaries under the provisions
of SFAS 109, Accounting for Income Taxes (SFAS 109). For all other
consolidated entities, deferred income tax assets and liabilities are calcu-
lated on certain, but not all, temporary differences arising in the accounts
of these consolidated entities. Deferred income tax assets and liabilities
are not calculated on tax-exempt reserves and tax loss carryforwards.
Under US GAAP, all subsidiaries of Delhaize Group are accounted for
under the provisions of SFAS 109.
Dividends and Directors’ Remuneration
Under Belgian GAAP, the proposed annual dividend on ordinary shares
to be approved by the General Meeting of Shareholders, which is held
subsequent to year-end, is accrued at year-end. Under US GAAP, such
dividends are not considered an obligation until approved. Under Belgian
GAAP, the directors’ remuneration is considered a distribution of profits,
similar to a dividend to shareholders, and is recorded as a charge to
retained earnings. Under US GAAP, such remuneration is considered
compensation expense.
Derivative Instruments
Under US GAAP, Delhaize Group follows the provisions of SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, to account
for derivative instruments such as interest rate swaps or cross currency
swaps. Additionally, under Belgian GAAP, the loss (net of tax) related to
the interest-rate lock agreements that were entered into prior to the bond
issues related to the acquisition of Hannaford, was classified in the bal-
ance sheet caption “Prepayments and accrued income”. Under US GAAP,
this loss was classified in the balance sheet caption “Other comprehensive
income”, which is part of shareholders’ equity.
Stock Based Compensation
Under Belgian GAAP, compensation expense related to stock options is
not recorded. Under US GAAP, Delhaize Group has elected to follow the
accounting provisions of Accounting Principles Board Opinion (APBO)
N° 25, Accounting for Stock Issued to Employees, for grant of shares,
stock options and other equity instruments. This resulted in the recording
of compensation expense relating to Delhaize America’s restricted stock
plans and Delhaize Group’s stock option plans. In addition, expenses
recorded in Belgian GAAP to recognize the difference between the mar-
ket price of a share and its exercise price when stock options are exer-
cised, are reversed for US GAAP. The Delhaize America share exchange
resulted in a new measurement date for the Delhaize America’s stock
option and restricted stock plans. As a result, a one-time, non-cash com-
pensation expense of EUR 13.1 million pre-tax was recorded in 2001
under US GAAP.
Treasury Shares
Under Belgian GAAP, treasury shares are classified in the balance sheet
caption “Short-term investments” and are subject to a valuation
allowance when the share price at the reporting date is lower than the
acquisition price. Under US GAAP, treasury shares are deducted from
shareholders’ equity in the captions “Capital” and “Additional Paid in
Capital” and are maintained at cost.
Other Items
Other items include adjustments to record differences between Belgian
GAAP and US GAAP for interest cost capitalization, software develop-
ment cost capitalization, accounting for security investments and account-
ing for a highly inflationary country (Romania). An adjustment is also
recorded to reflect the difference in the basis for Belgian GAAP and US
GAAP on the gain recorded on the disposition of an investment in 2000.