Food Lion 2003 Annual Report Download - page 60

Delhaize Group - Annual Report 2003
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Foreign Currency Transactions
Under Belgian GAAP, the Group had deferred foreign currency trans-
action exchange rate losses incurred on debts contracted to finance
non-monetary assets. These losses were 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 cur-
rency 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 U.S. 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
calculated 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 dis-
tribution 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 balance sheet caption “Prepayments and
accrued income”. Under US GAAP, this loss was classified in the bal-
ance 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 market price of a share and its exercise
price when stock options are exercised, are reversed for US GAAP.
The Delhaize America share exchange resulted in a new measure-
ment date for the Delhaize America’s stock option and restricted
stock plans. As a result, a one-time, non-cash compensation expense
of EUR 13.1million 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.
Inventories
Under Belgian GAAP, amounts received from suppliers for in-store
promotions and co-operative advertising are recognized when the
activities required by the supplier are completed. Under US GAAP,
Delhaize Group adopted the Emerging Issues Task Force (EITF) Issue
No. 02-16, “Accounting by a Reseller for Cash Consideration
Received” in 2003. EITF issue No. 02-16 directs that cash considera-
tion received from a vendor should be presumed to be a reduction of
inventory, and recognized in cost of sales when the product is sold,
unless it is a reimbursement of specific costs incurred in advertising
the vendor’s products. The resulting before tax adjustment was EUR
15.9million.
Other Items
Other items include adjustments to record differences between
Belgian GAAP and US GAAP for interest cost capitalization, software
development cost capitalization, accounting for security investments
and accounting for a highly inflationary country (Romania).