SAPPI LTD (SAP) 6-K

Property, plant and equipment
Items of property, plant and equipment are measured at original cost. Property, plant and equipment is presented in the balance sheet at cost less accumulated
depreciation and impairment losses. For investments in property, plant and equipment requiring a long construction time, the interest cost incurred during
construction is capitalised in the combined balance sheet as part of the asset for the time that is necessary for bringing the asset to working condition for its
intended use.
Items of property, plant and equipment are depreciated on a straight-line basis over the following expected useful lives:
Category
Depreciation period
Buildings
20 to 40 years
Property, plant and equipment 5 to 20 years
Other property, plant and equipment5 to 20 years
Other property, plant and equipment consist of bridges, dams, asphalt work and similar items.
Land is not depreciated. If the significant parts of an item of property, plant and equipment have useful lives of differing length, each part is depreciated
separately.
The estimated useful lives and residual values are reassessed at each reporting date and adjusted if necessary. Expenditures arising from large-sized
modernisation and improvement projects are capitalised in the balance sheet if it is probable that the economic benefit resulting from the projects will exceed
the estimated revenue originally obtainable from the asset item that is to be modernised. Other expenditure related to repairs and maintenance is expensed in
the period in which it is incurred.
Gains and losses on disposal or retirement of tangible fixed assets are determined by comparing the proceeds received with the carrying amounts and are
included in the combined income statements.
Leases
Leases on assets for which the Company assumes substantially all the risks and rewards incident to ownership of the asset are classified as finance lease
agreements. A finance lease agreement is recognised in the balance sheet at an amount equal at the inception of the lease to the fair value of the leased
property or, if lower, at the present value of the minimum lease payments. The corresponding lease payment liability is recorded in interest-bearing liabilities
under other non-current liabilities. An asset obtained on a finance lease is depreciated over the useful life of the asset or, if shorter, the lease term. Lease
payments are split between financial expenses and a reduction in the lease liabilities.
Lease agreements in which the risks and rewards incident to ownership remain with the lessor are treated as other lease agreements (operating leases). Lease
payments under an operating lease are recognised as an expense in the income statement on a straight-line basis over the lease term.
Goodwill
Goodwill represents the excess of the acquisition costs over the fair value of the net assets acquired, at the date of acquisition. Under the exemption provided
by IFRS 1 First-time Adoption of International Financial Reporting Standards, M-real elected not to apply IFRS 3 Business Combinations retrospectively to
business combinations made prior to 1 January 2004, the date M-real transitioned to IFRS. Accordingly, goodwill resulting from business combinations prior
to M-real’s transition to IFRS has been measured in accordance with Generally Accepted Accounting Standards in Finland (“Finnish GAAP”) and has not
been adjusted retroactively.
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