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Royal Ahold NV - The US Foodservice Accounting Fraud

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Case Details:


Case Code : FINC044 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Shipping & Handling Charges extra


Accounting and Control

Case Length : 18 Pages
Period : 2000-06
Pub Date : 2007
Teaching Note : Available
Organization : Royal Ahold NV, US Foodservice
Industry : Retailing
Countries : US/Netherlands


The case examines the accounting fraud at US Foodservice (USF); a subsidiary of the Netherlands based retailer - Royal Ahold NV. It discusses in detail the system followed by USF to account for promotional allowances. The case highlights the role of USF's management in the accounting fraud who intentionally booked higher promotional allowances to show higher income in order to get extra bonuses. It also examines the reasons that lead to accounting frauds such as poor financial and accounting controls, weak internal control system of the parent company over its subsidiaries, lack of transparency in accounting procedures and linking of management's compensation with the achievement of revenue targets.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

The case then describes the measures taken by Ahold to regain shareholders' confidence and strengthen its control systems and governance practices.


Understand the accounting of supplier rebates in the food retailing business

Study the reasons for lack of proper rules and standards to account supplier rebates due to which it is susceptible to misappropriation and fraud

Examine and analyze the accounting scandal at USF and the circumstances that led to the continuation of fraudulent accounting practices

Study the reasons for overlooking the observations of financial due diligence team by Ahold during the acquisition of USF

Examine the methods adopted by USF employees to account for promotional allowances and the role played by the suppliers who provided false confirmations

Examine the necessity of centralized control system for companies like Ahold, which have grown over the years through acquisitions

Analyze the corrective measures taken by Ahold to regain shareholders' confidence


  Page No.
Introduction 1
About Ahold 2
Accounting Fraud at US Foodservice 4
Events Leading to the Disclosure 5
The Investigation 7
The Aftermath 9
The Action Taken 10
Exhibits 12


Royal Ahold NV, Accounting Fraud, US Foodservice, Promotional Allowances, Vendor Rebates, Average Percentage Rate, Internal Control System, Financial and Accounting Control, Financial Due Diligence, Acquisition, Balance Sheet Adjustments, Internal Control Weaknesses, Road to Recovery program, Capital Budgeting, Vendor Allowance Programs

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