Food Lion 2009 Annual Report Download - page 104

100 - Delhaize Group - Annual Report 2009
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT
OF CASH FLOWS
NOTES TO THE FINANCIAL
STATEMENTS
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
CONSOLIDATED INCOME
STATEMENT
CONSOLIDATED BALANCE SHEET
6. Goodwill
(in millions of EUR) 2009 2008 2007
Gross carrying amount at January 1 2 677 2 516 2 774
Accumulated impairment at January 1 (70) (70) (77)
Net carrying amount at January 1 2 607 2 446 2 697
Acquisitions through business combinations
and adjustments to initial purchase accounting 41 30 6
Acquisition of non-controlling interests 72 7 -
Currency translation effect (80) 124 (257)
Gross carrying amount at December 31 2 707 2 677 2 516
Accumulated impairment at December 31 (67) (70) (70)
Net carrying amount at December 31 2 640 2 607 2 446
Goodwill is allocated and tested for impairment at the cash generating unit (CGU) level that is expected to benefit from synergies of the combi-
nation the goodwill resulted from, which at Delhaize Group represents an operating entity or country level, being also the lowest level at which
goodwill is monitored for internal management purpose. The Group’s CGUs with significant goodwill allocated to are detailed below:
(in millions of EUR) 2009 2008 2007
Food Lion 1 172 1 213 1 147
Hannaford 1 071 1 103 1 043
United States 2 243 2 316 2 190
Belgium 180 160 160
Greece 201 120 94
Other 16 11 2
Total 2 640 2 607 2 446
In accordance with the accounting policies stated in Note 2.3, Delhaize Group conducts an annual impairment assessment for goodwill and,
in addition, whenever events or circumstances indicate that an impairment may have occurred. The impairment test of goodwill involves com-
paring the recoverable amount of each CGU with its carrying value, including goodwill, and recognition of an impairment loss if the carrying
value exceeds the recoverable amount.
The recoverable amount of each operating entity is determined based on the higher of value in use calculations and the fair value less cost
to sell:
t5IFWBMVFJOVTFi7*6wDBMDVMBUJPOTVTFDBTIGMPXQSPKFDUJPOTCBTFEPOUIFMBUFTUBWBJMBCMFGJOBODJBMQMBOTBQQSPWFECZNBOBHFNFOUDPWFS-
ing a three-year period. Cash flows beyond the three-year period are extrapolated using estimated growth rates, with these growth rates not
exceeding the long-term average growth rate for the supermarket retail business in the particular market in question.
t5IFGBJSWBMVFMFTTDPTUUPTFMMi'7-$54wJTCBTFEPOFBSOJOHTNVMUJQMFTQBJEGPSTJNJMBSDPNQBOJFTJOUIFNBSLFUBOEPSNBSLFUDBQJUBMJ[BUJPO
for publicly traded subsidiaries (i.e. Alfa Beta Vassilopoulos S.A.).
In 2009, 2008 and 2007, goodwill relating to the U.S. entities was tested applying discounted cash flows models to estimate the VIU. Goodwill at
the remaining CGUs with significant goodwill allocation was tested for impairment using a market multiple or market capitalization approach,
where possible, to determine FVLCTS and discounted cash flows models to establish the VIU.
Key assumptions used for VIU calculations for the U.S. entities:
(in millions of EUR) 2009 2008 2007
Growth rate* 2.0% 2.0% 2.0%
Discount rate** 7.6% 7.3% 8.5%
* Weighted average growth rate used to extrapolate cash flows beyond the financial plans period.
** After-tax discount rate applied to corresponding cash flow projections.
Management believes that the assumptions used in the VIU calculations of the goodwill impairment testing represent the best estimates of
future developments and is of the opinion that no reasonable possible change in any of the key assumptions mentioned above would cause
the carrying value of the cash generating units to materially exceed their recoverable amounts. For information purposes only, an increase
of the discount rate applied to the discounted cash flows of e.g., 100 basis points and a simultaneous reduction of total projected future cash
flows by e.g., 10%, would have decreased the total VIU by EUR 3.0 billion in 2009 (EUR 3.1 billion in 2008) and would not have resulted in the
carrying amounts of the significant CGUs exceeding their recoverable amounts.
7. Intangible Assets
Intangible assets consist primarily of trade names, purchased and developed software, favorable lease rights, prescription files and other
licenses.