SAPPI LTD (SAP) 6-K

IFRS 8, ‘Operating Segments’, replaces IAS 14. The new standard requires a ‘management approach’, under which segment information is presented on the
same basis as that used for internal reporting purposes. The Company is not a public company and is electing not to present segment disclosures in its
combined financial statements.
IFRS 3 (Revised) – Business Combinations and IAS 27 (Revised) – Consolidated and Separate Financial Statements. The management is currently assessing
the impact of the amendment on the financial statements.
IFRIC 13, ‘Customer Loyalty Programmes’. IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive, the
arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement
using fair values. IFRIC 13 is not relevant to the Company’s operations because none of the Company’s entities operate any loyalty programmes.
IFRIC 15, Agreements for the Construction of Real Estate. The interpretation does not have an effect on the Company’s accounts, because it is not relevant to
the Company’s operations.
IFRIC 16, Hedges of a Net Investment in a Foreign Operation. The interpretation does not have an effect on the Company’s accounts, as the hedging activities
and hedge accounting are centralised to the M-real Group’s internal bank.
Note 3•Management of financial risks
Metsä Group Financial Services Oy (“Metsä Finance”) is specialised in finance and functions as the M-real Group’s internal bank. M-real’s holding in Metsä
Finance is 51 per cent and Metsäliitto Cooperative’s holding is 49 per cent. Financial operations have been centralised to Metsä Finance, which is responsible
for managing the Group companies’ financial positions according to the strategy and financial policy, providing necessary financial services within the
Metsäliitto Group and acting as an advisor in financial matters.
The Company’s financial risks associated with business operations are managed as a part of M-real Group in accordance with the financial policy endorsed by
the M-real’s Board of Directors and the senior management of the Company. The policy defines focal instructions on the management of foreign currency,
interest rate, liquidity and counterparty risks, and for the use of derivative financial instruments. Correspondingly, commodity risks are managed according to
the M-real’s commodity risk policy. The purpose is to protect the M-real Group against major financial and commodity risks, to balance the cash flow and to
allow the business units time to adjust their operations to changing conditions.
The Company’s accounts receivables carry a counterparty risk that the Company may incur losses should the counterparty be unable to meet its commitments.
Credit risk attached to accounts receivables is managed on the basis of the credit risk management policies approved by operative management at the parent
company M-real group level. The Company’s accounts receivable performance is followed monthly as part of M-real Group by M-real’s Corporate Risk
Management Team and Corporate Credit Committee. Credit quality of customers is assessed at regular intervals based on the customers’ financial statements,
payment behaviour, credit agencies and credit ratings agencies. Individual credit limits are reviewed at least annually. From time to time, as deemed necessary
by management, Letters of Credits, bank and parent company guarantees and Credit insurance are used to mitigate credit risk. The Company’s credit limits as
part of M-real Group are approved according to credit risk management policy with approval limits of varying values across the Group. The M-real Group
Corporate Credit Committee reviews sets all major credit limits which are not supported by credit insurance and/ or other security.
The Company as a part of M-real Group adopted a process whereby regular impairment tests for customer accounts receivable are carried out, with material
credit loss impairment booked when a customer enters legal bankruptcy, or becomes past due for more than 6 months (180 days) without a valid payment plan
or other valid reasons. The portion of overdue client receivables of all sales receivables is at the time of financial statements 10.0 % (EUR 19,426), of which
0.3 % (EUR 648) is overdue between 90 - 180 days and 0.4 % (EUR 808) over 180 days. All the accounts receivables due later than 180 days have been
impaired.
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