2007 Annual Report - Sappi

Notes to the group annual financial statements continued
for the year ended September 2007
35. Summary of differences between International Financial Reporting Standards
and United States Generally Accepted Accounting Principles
The group’s accounts are prepared in accordance with International Financial Reporting Standards, which differs in certain
material respects from United States GAAP. These differences relate principally to the following items, and the effects on net
profit and shareholders’ equity are shown in the following tables.
International Financial Reporting
Standards (IFRS)
United States GAAP (US GAAP)
a. Pension programmes and post- At 30 September 2007, Sappi adopted FAS 158, ‘Employer’s Accounting for
retirement medical benefits Defined Benefit Pension and Other Post-Retirement Plans’ as issued by the
Financial Accounting Standards Board (FASB) in September 2006. The standard
requires the net surplus or deficit of plans to be shown in the statement of
financial position. The adoption of FAS 158 aligned the balance sheet
presentation with IFRS. Upon adoption of FAS 158, all existing unrecognised prior
service costs/credits are recognised in the Accumulated Other Comprehensive
Income (AOCI). The prior service costs/credits recognised in the AOCI will
continue to be amortised over the future life expectancy of the employees
involved. The amortised amount will reduce the prior service cost/credit in the
AOCI and will be accounted for in the net periodic benefit cost (NPBC).
1. Transitional rules for On adoption of the revised IFRS Upon the first time adoption of US
initial applications standard, IFRS requires the post- GAAP in 1996, the group had to
employment obligation or asset to be amortise on a straight line basis the
recognised immediately.
original obligation over a number of
years equal to the difference between:
(a) the period from the effective date of
the relevant US accounting standards
to 1996; and (b) 15 years. Subsequent
changes in the obligation or assets
after initial adoption are recognised in
the year in which the change occurs.
In 2002, a pension asset was recognised for the Southern African defined benefit
pension scheme as detailed below for IFRS and United States GAAP.
2. Recognition of pension asset Post-employment benefit assets can No such limitation exists under
only be recognised to the extent that US GAAP.
the asset will lead to a reduction in
future payments or a cash refund.
The reduction in this asset is reflected
in the Statement of Recognised
Income and Expense.
3. Recognition of curtailment In terms of IFRS, the difference The cumulative actuarial gains/losses
gains and losses between the actuarial valuation and as well as prior service costs/credits
the settlement or curtailment amount recognised in the AOCI that are no
is recognised in the income statement. longer expected to be rendered will
reduce the items recognised in the
AOCI and will be accounted for in the
income statement.
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