Financial statements - Mondi

Notes to the combined and
consolidated financial statements
continued
for the year ended 31 December 2010
1 Accounting policies (continued)
The recoverable amount of the asset, or cash-generating unit, is the higher of its fair value less costs to sell and its value-in-use.
In assessing value-in-use, the estimated future cash flows generated by the asset are discounted to their present value using a
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which
estimates of future cash flows have not been adjusted. If the recoverable amount of an asset, or cash-generating unit, is estimated
to be less than its carrying amount, the carrying amount of the asset, or cash-generating unit, is reduced to its recoverable
amount. An impairment is recognised as an expense. Where the underlying circumstances change such that a previously
recognised impairment subsequently reverses, the carrying amount of the asset, or cash-generating unit, is increased to the
revised estimate of its recoverable amount. Such reversal is limited to the carrying amount that would have been determined had
no impairment been recognised for the asset, or cash-generating unit, in prior years. A reversal of an impairment is recognised in
the combined and consolidated income statement.
Agriculture
Owned forestry assets
Owned forestry assets are measured at fair value, calculated by applying the expected selling price, less costs to harvest and
deliver, to the estimated volume of timber on hand at each reporting date. The estimated volume of timber on hand is determined
based on the maturity profile of the area under afforestation, the species, the geographic location and other environmental
considerations and excludes future growth. The product of these is then adjusted to present value by applying a market related pre
tax discount rate.
Changes in fair value are recognised in the combined and consolidated income statement within ‘other net operating expenses’.
At point of felling, the carrying value of forestry assets is transferred to inventory.
Directly attributable costs incurred during the year of biological growth and investments in standing timber are capitalised and
presented within cash flows from investing activities in the combined and consolidated statement of cash flows.
Non-current assets held for sale
Non-current assets, and disposal groups, are classified as held for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. Non-current assets, and disposal groups, classified as held for sale are measured
at the lower of carrying amount and fair value less costs to sell from the date on which these conditions are met.
Any resulting impairment is reported through the combined and consolidated income statement as a special item. On classification
as held for sale, the assets are no longer depreciated or amortised. Comparative amounts are not adjusted.
Discontinued operations are either a separate major line of business or geographical area of operations that have been sold or are
part of a single co-ordinated plan for disposal, or represent a subsidiary acquired exclusively with a view to resale.
Current non-financial assets
Inventory
Inventory and work-in-progress are valued at the lower of cost and net realisable value. Cost is determined on the first-in-first-out
(FIFO) or weighted average cost basis, as appropriate. Cost comprises direct materials and overheads that have been incurred in
bringing the inventories to their present location and condition. Net realisable value is defined as the selling price less any
estimated costs to sell.
Retirement benefits
The Group operates both defined benefit and defined contribution schemes for its employees as well as post-retirement
medical plans.
82 Annual report and accounts 2010