2007 Annual Report - Sappi

Notes to the group annual financial statements continued
for the year ended September 2007
2. Accounting policies continued
The following methods and rates were used during the year
to depreciate property, plant and equipment to estimated
residual values:
Land
No depreciation
Buildings straight line 40 years
Plant straight line 5 to 20 years
Vehicles straight line 5 to 10 years
Furniture and equipment straight line 3 to 6 years
Assets held under finance leases are depreciated over their
expected useful lives or the term of the relevant lease, where
shorter. The useful lives and residual values of property, plant and
equipment are reviewed on an annual basis – and are revised
when the current estimate is different from the existing estimate.
The gain or loss arising on the disposal or scrapping of property,
plant and equipment is recognised in profit or loss.
2.3.15 Segment reporting
The primary business segments are Sappi Fine Paper and
Sappi Forest Products. On a secondary segment basis, significant
geographic regions have been identified based on the location
of the productive assets, being Southern Africa, Europe and
North America.
Assets, liabilities, revenues or expenses that are not directly
attributable to a particular segment are allocated between
segments where there is a reasonable basis for doing so. The
group accounts for intersegment revenues and transfers as if
the transactions were with third parties at current market prices.
2.3.16 Share-based payments
(i) Equity-settled share-based payment
transactions with employees
The services received in an equity-settled share-based payment
transaction with employees are measured at the fair value of
the equity instruments granted. The fair value of those equity
instruments is measured at grant date.
If the equity instruments granted vest immediately and an
employee is not required to complete a specified period of
service before becoming unconditionally entitled to those
instruments, the services received are recognised in profit or
loss for the period in full on grant date with a corresponding
increase in equity.
Where the equity instruments do not vest until the employee has
completed a specified period of service, it is assumed that the
services rendered by the employee, as consideration for those
equity instruments, will be received in the future during the vesting
period. These services are accounted for in profit or loss as they
are rendered during the vesting period, with a corresponding
increase in equity. Share-based payment expenses are adjusted
for non-market-related performance conditions.
(ii) Measurement of fair value of equity
instruments granted
The equity instruments granted by the group are measured at
fair value at measurement date using modified binomial option
pricing valuation models. The valuation technique is consistent
with generally acceptable valuation methodologies for pricing
financial instruments and incorporates all factors and
assumptions that knowledgeable, willing market participants
would consider in setting the price of the equity instruments.
2.3.17 Shareholders’ equity
(i) Share capital
Share capital issued by the company is recorded as the
proceeds received, net of direct issue costs.
Ordinary and preference share capital is classified as equity, if
the shares are non-redeemable by the shareholder and any
dividends are discretionary.
(ii) Treasury shares
When share capital recognised as equity is repurchased by the
company or other members of the group, the amount of the
consideration paid, including directly attributable costs, is
recognised as a change in equity. Shares repurchased by the
issuing company are cancelled.
Shares repurchased by group companies are classified as
treasury shares and are held at cost. These shares are treated
as a deduction from the issued and weighted average number
of shares and the cost price of the shares is presented as a
deduction from total equity. The par value of the shares is
presented as a deduction from ordinary share capital and the
remainder of the cost is presented as a deduction from ordinary
share premium. Dividends received on treasury shares are
eliminated on consolidation.
(iii) Dividends
Dividends are recognised as distributions within equity in the
period in which they are payable to shareholders. Dividends for
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sappi limited | 07 | annual report