2007 Annual Report - Sappi

the year that are declared after the balance sheet date are
disclosed in the dividends note. Taxation costs incurred on
dividends are recognised in the period in which the dividend
is declared.
2.3.18 Taxation
Taxation on the profit or loss for the year comprises current and
deferred taxation. Taxation is recognised in profit or loss except
to the extent that it relates to items recognised directly to equity,
in which case it is recognised in equity.
(i) Current taxation
Current taxation is the expected taxation payable on the taxable
income, which is based on the results for the period after taking
into account the necessary adjustments, for the year, using
taxation rates enacted or substantively enacted at the balance
sheet date, and any adjustment to taxation payable in respect
of previous years.
Secondary Tax on Companies (STC) is a South African Income
Tax, that arises from the distribution of dividends and is
recognised at the same time as the liability to pay the
related dividend.
(ii) Deferred taxation
Deferred taxation is provided using the balance sheet liability
method, based on temporary differences. Temporary differences
are differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their taxation base.
The amount of deferred taxation provided is based on the
expected manner of realisation or settlement of the carrying
amount of assets and liabilities using taxation rates enacted or
substantively enacted at the balance sheet date. Deferred
taxation is charged to profit or loss for the period, except to the
extent that it relates to a transaction that is recognised directly
in equity, or a business combination that is an acquisition. The
effect on deferred taxation of any changes in taxation rates is
recognised in profit or loss, except to the extent that it relates
to items previously charged or credited directly to equity.
A deferred taxation asset is recognised to the extent that it is
probable that future taxable income will be available against
which the unutilised taxation losses and deductible temporary
differences can be used. The carrying amount of deferred tax
assets is reviewed at each balance sheet date and is reduced
to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
2.3.19 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction and production of qualifying assets are capitalised
as part of the costs of those assets.
Capitalisation of borrowing costs continues up to the date when
the assets are substantially ready for their use or sale.
Details of borrowing costs capitalised are disclosed in the notes
to the accounts by asset category and are calculated at the
group’s average funding cost, except to the extent that funds
are borrowed specifically for the purpose of obtaining a
qualifying asset. Where this occurs, actual borrowing costs
incurred less any investment income on the temporary
investment of those borrowings are capitalised.
2.3.20 Cost of sales
When inventories are sold, the carrying amount is recognised as
part of cost of sales. Any write-down of inventories to net
realisable value and all losses of inventories or reversals of
previous write-downs or losses are recognised in cost of sales
in the period the write-down, loss or reversal occurs.
2.3.21 Revenue
Revenue represents the gross inflow of economic benefits
during the period arising in the course of the ordinary activities
when those inflows result in increases in equity, other than
increases relating to contributions from equity participants.
Revenue from the sale of goods (sales) is recognised when the
significant risks and rewards of ownership have been transferred,
when delivery has been made and title has passed, when the
amount of the revenue and the related costs can be reliably
measured and when it is probable that the debtor will pay for
the goods. For the majority of local and regional sales, transfer
occurs at the point of offloading the shipment into the customer
warehouse, whereas for the majority of export sales transfer
occurs when the goods have been loaded into the relevant
carrier, unless the contract of sales specifies different terms.
Revenue is measured at the fair value of the amount received
or receivable. Trade and settlement discounts, rebates, and
customer returns given are included in sales.
Shipping and handling costs, such as freight to our customers’
destination are included in cost of sales, in the consolidated
income statement. These costs, when included in the sales
price charged for our products are recognised in net sales.
sappi limited | 07 | annual report 85