Notes to the combined and consolidated financial statements - Mondi

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Notes to the combined and consolidated financial statements continued for the year ended 31 December 2009 1 Accounting policies (continued) Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the combined and consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also taken directly to equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Operating leases Rental costs under operating leases are charged to the combined and consolidated income statement in equal annual amounts over the lease term. Finance leases Assets held under finance leases are recognised as assets of the Group on inception of the lease at the lower of fair value or the present value of the minimum lease payments derived by discounting at the interest rate implicit in the lease. The interest element of the rental is charged against profit so as to produce a constant yearly rate of interest on the remaining balance of the liability, unless it is directly attributable to qualifying assets, in which case it is capitalised in accordance with the Group’s general policy on borrowing costs. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Restoration, decommissioning and environmental costs An obligation to incur restoration and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a plant or landfill site. Such costs arising from the installation of plant and other site preparation work, discounted to their present value, are provided for and capitalised at the start of each project, or as soon as the obligation to incur such costs arises. These costs are charged against profit over the life of the operation, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their present values and charged against profits as the obligation arises. Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current year. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the combined and consolidated income statement. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy for impairment testing. Government grants Government grants relating to capital expenditure projects are treated as deferred income and released to the combined and consolidated income statement over the expected useful lives of the assets for which the government grants are provided. 90 Annual report and accounts 2009 Mondi Group
1 Accounting policies (continued) Foreign currency transactions and translation Foreign currency transactions Foreign currency transactions by companies comprising the Group are recorded in their functional currencies at the exchange rates ruling on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Gains and losses arising on retranslation are included in the combined and consolidated income statement for the year and are classified as either operating or financing depending on the nature of the monetary item giving rise to them. Translation of overseas operations The Group’s results are presented in euros (the Group’s presentation currency), the currency in which most of its business is conducted. On consolidation, the assets and liabilities of the Group’s overseas operations are translated into the presentation currency of the Group at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the year where these approximate the rates at the dates of transactions. Exchange differences arising, if any, are recognised directly in equity. Such translation differences are recognised as income or expenses in the period in which overseas operations are disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets of the foreign entity and translated at the closing rate. Share-based payments The Group operates a number of equity-settled, share-based compensation schemes. The fair value of the employee services received in exchange for the grant of share awards is recognised concurrently as an expense and an adjustment to equity. The total amount to be expensed over the vesting period is determined by reference to the fair value of the share awards granted, as adjusted for market performance conditions and non-vesting conditions where applicable. Vesting conditions are included in assumptions about the number of awards that are expected to vest. At each reporting date, the Group revises its estimates of the number of share awards that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the combined and consolidated income statement, with a corresponding adjustment to equity. Financial instruments Financial assets and financial liabilities are recognised in the Group’s combined and consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial asset investments Investments, other than investments in subsidiaries, joint ventures and associates, are either classified as available-for-sale or loans and receivables. Available-for-sale investments are initially recorded at fair value. They are subsequently remeasured at each reporting date to fair value. Any unrealised gains and losses are deferred in equity until an investment is disposed of or impaired, at which time the cumulative gain or loss deferred in equity is included in the combined and consolidated income statement. Loans and receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments of a maturity of three months or less from the date of acquisition that are readily convertible to a known amount of cash and that are subject to an insignificant risk of changes in value. Bank overdrafts are shown within short-term borrowings in current liabilities on the combined and consolidated statement of financial position. Cash and cash equivalents in the combined and consolidated statement of cash flows and in the presentation of net debt are reflected net of overdrafts. Financial statements Annual report and accounts 2009 Mondi Group 91
Page 1 and 2: Notes to the combined and consolida
Page 3 and 4: 1 Accounting policies (continued) W
Page 5: 1 Accounting policies (continued) R
Page 9 and 10: 1 Accounting policies (continued) F
Page 11 and 12: 1 Accounting policies (continued) A
Page 13 and 14: 1 Accounting policies (continued) S
Page 15 and 16: 1 Accounting policies (continued) F
Page 17 and 18: 2 Operating segments (continued) Th
Page 19 and 20: 2 Operating segments (continued) Op
Page 21 and 22: 2 Operating segments (continued) Se
Page 23 and 24: 2 Operating segments (continued) Ca
Page 25 and 26: 4 Employee numbers and costs (conti
Page 27 and 28: 5 Special items 1 (continued) E mil
Page 29 and 30: 6 Net finance costs Net finance cos
Page 31 and 32: 9 Dividends Dividends paid to the e
Page 33 and 34: 11 Intangible assets Licences and o
Page 35 and 36: 11 Intangible assets (continued) Ca
Page 37 and 38: 13 Forestry assets E million 2009 2
Page 39 and 40: 16 Financial asset investments Fina
Page 41 and 42: 18 Trade and other receivables (con
Page 43 and 44: 21 Borrowings (continued) The Group
Page 45 and 46: 22 Derivative financial instruments
Page 47 and 48: 24 Deferred tax Deferred tax assets
Page 49 and 50: 25 Retirement benefits (continued)
Page 55 and 56: 26 Other comprehensive income Recla
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28 Share capital and share premium
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29 Share-based payments (continued)
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29 Share-based payments (continued)
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30 Business combinations (continued
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33 Consolidated cash flow analysis
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33 Consolidated cash flow analysis
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38 Financial risk management (conti
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40 Group companies The principal su
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Notes to the combined and consolidated financial statements - Mondi

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