Food Lion 2011 Annual Report Download - page 80

78 // DELHAIZE GROUP FINANCIAL STATEMENTS ’11
Share Capital and Treasury Shares
• Ordinary shares: Delhaize Group’s ordinary shares are classified as equity. Incremental costs directly attributable to the
issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
• Treasury shares: Shares of the Group purchased by the Group or companies within the Group are included in equity at cost
(including any costs directly attributable to the purchase of the shares) until the shares are cancelled, sold or otherwise
disposed. Where such shares are subsequently reissued, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included in equity attributable to the company’s equity
holders.
Income Taxes
The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement except to the
extent that it relates to items recognized directly in OCI or in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Group’s subsidiaries and associates operate and generate taxable income. Provisions and
receivables are established on the basis of amounts expected to be paid to or recovered from the tax authorities.
Deferred tax liabilities and assets are recognized, using the liability method, on temporary differences arising between the
carrying amount in the consolidated financial statements and the tax basis of assets and liabilities. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates and laws that have been enacted or substantially enacted at the balance sheet date and are expected to apply when
the temporary differences reverse.
Deferred tax liabilities are recognized for temporary differences arising on investments in subsidiaries, associates and interests in
joint ventures, if any, except where the Group is able to control the timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profit will be available against which the
temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are only offset if there is a legally enforceable right to set off current tax liabilities and assets
and the deferred income taxes relate to the same taxable entity and the same taxation authority.
The Group elected to present interest and penalties relating to income taxes in “Income tax expense” in the income statement.
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Provisions are measured at balance sheet date at management’s best estimate of the expenditures expected to be required to
settle the obligation, discounted using a pre-tax discount rate that reflects the current market assessments of the time value of
money and the risk specific on the liability, if material. Where discounting is used, the increase in the provision due to the
passage of time (“unwinding of the discount”) is recognized within “Finance costs” (see Note 29.1).
• Store closing costs: Delhaize Group regularly reviews its stores operating performance and assesses the Group’s plans for
certain store closures. Closing stores results in a number of activities required by IFRS in order to appropriately reflect the
value of assets and liabilities and related store closing costs, such as a review of net realizable value of inventory or review
for impairment of assets or cash generating units (for both activities see accounting policies described above). In addition,
Delhaize Group recognizes “Closed store provisions,” which consist primarily of provisions for onerous contracts and
severance (“termination”) costs (for both see further below). Costs recognized as part of store closings are included in “Other
operating expenses” (see Note 28), except for inventory write-downs, which are classified as “Cost of sales” (see Note 25). If
appropriate (see accounting policy for “Non-Current Assets / Disposal Groups and Discontinued Operations” above), stores
are accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Onerous contracts: IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires the recognition of a provision
for a present obligation arising under an onerous contract, which is defined as a contract in which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits expected to be received under it. Judgment is
required in determining if a present obligation exists, taking into account all available evidence. Once the existence has been
established, at the latest upon actual closing, Delhaize Group recognizes provisions for the present value of the amount by
which the unavoidable costs to fulfill the agreements exceeds the expected benefits from such agreements, which comprises
the estimated non-cancellable lease payments, including contractually required real estate taxes, common area
maintenance and insurance costs, net of anticipated subtenant income. The adequacy of the closed store provision is
dependent upon the economic conditions in which stores are located which will impact the Group’s ability to realize