Safeway 2002 Annual Report Download - page 37

SAFEWAY INC. 2002 ANNUAL REPORT 35
NOTE C: GOODWILL
A summary of changes in Safeway’s goodwill during 2002 and 2001 by reportable operating segment is as follows :
2002 2001
(In millions, except per-share amounts) U.S Canada Total U.S Canada Total
Balance – beginning of year $3,553.9 $62.1(2) $3,616.0 $3,145.4 $68.8(2) $3,214.2
Genuardi’s acquisition 23.4 –(2) 23.4 497.5 –(2) 497.5
Amortization ––
(2) –(98.5) (2.5) (101.0)
Impairment charge (704.2) –(2) (704.2) ––
(2) –
Cumulative effect of accounting change (111.0) –(2) (111.0) ––
(2) –
Adjustments 21.3(1) 0.7(2) 22.0 9.5(1) (4.2)(2) 5.3
$2,783.4 $62.8(2) $2,846.2 $3,553.9 $62.1(2) $3,616.0
(1) Primarily represents reclassifications in connection with the consolidation of certain affiliates due to increases in Safeway’s ownership.
(2) Represents foreign currency translation adjustments.
services and should, therefore, be characterized as a reduc-
tion in cost of sales unless it is a payment for assets or services
delivered to the vendor, in which case the cash consideration
should be characterized as revenue, or it is a reimbursement of
costs incurred to sell the vendor’s products, in which case the
cash consideration should be characterized as a reduction of
that cost. EITF No. 02-16 becomes effective for the Com-
pany in the first quarter of 2003. The Company is current-
ly analyzing the effect that adoption of EITF No. 02-16 will
have on its financial statements.
In November 2002, FASB Interpretation (“FIN”) No. 45,
“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees and
Indebtedness of Others,” was issued. This interpretation
requires the initial measurement and recognition, on a
prospective basis only, to guarantees issued or modified after
December 31, 2002. Additionally, certain disclosure require-
ments are effective for financial statements ending after
December 15, 2002. The Company complies with the dis-
closure provisions of FIN No. 45 and is currently assessing
the impact that adoption of FIN No. 45 will have on the
Company’s financial statements.
In January 2003, FIN No. 46, “Consolidation of Variable
Interest Entities,” was issued. This interpretation requires a
company to consolidate variable interest entities (“VIE”) if
the enterprise is a primary beneficiary (holds a majority of
the variable interest) of the VIE and the VIE posses specific
characteristics. It also requires additional disclosure for
parties involved with VIEs. The provisions of this interpre-
tation are effective in 2003. Adoption of this interpretation
will not have a material effect on the Company’s
financial statements.
NOTE B: ACQUISITION
The following unaudited pro forma combined summary
financial information is based on the historical consolidated
results of operations of Safeway and Genuardi’s as if the
Genuardi’s Acquisition had occurred as of the beginning of
2000. This pro forma financial information is presented for
informational purposes only and may not be indicative of
what the actual consolidated results of operations would
have been if the acquisition had been effective as of the
beginning of 2000. Pro forma adjustments were applied to
the historical financial statements to account for the acquisi-
tion as a purchase. Under purchase accounting, the pur-
chase price is allocated to acquired assets and liabilities
based on their estimated fair values at the date of acquisi-
tion, and any excess is allocated to goodwill.
Pro Forma
(Unaudited)
(in millions, except per-share amounts) 2000
Sales $30,368.7
Net income $ 1,100.9
Diluted earnings per share $ 2.15