2007 Annual Report - Sappi

The group is required to record provisions for estimated
environmental liabilities, based on current interpretations of
environmental laws and regulations, when expenditures are
considered probable and can be reasonably estimated. These
estimates reflect management assumptions and judgements
as to the probable nature, magnitude and timing of required
investigations, remediation and monitoring activities, changes
in governmental regulations, insurance recoveries and the
contributions by other potentially responsible parties. These
assumptions and judgements are subject to various uncertainties
which could result in estimated costs that could materially differ
from the actual costs incurred.
The group is required to record provisions for legal contingencies
when the contingency is probable of occurring and the amount
of the loss can be reasonably estimated. Liabilities provided for
legal matters require judgements regarding projected outcomes
and ranges of losses based on historical experience and
recommendations of legal counsel. Litigation is however
unpredictable and actual costs incurred could differ materially
from those estimated at the balance sheet date.
Provisions for dismantling of property, plant and equipment are
only recognised when a legal or constructive obligation arises.
Special items
Special items are not defined by IFRS. Therefore this term is
subject to management judgement and interpretation. Special
items cover those items which management believe are
material by nature or amount to the results and require separate
disclosure in accordance with IAS 1 paragraph 86. Such items
would generally include profit or loss on disposal of property,
investments and businesses, asset impairments, restructuring
charges, natural disasters and non-cash gains or losses on the
price fair value adjustment of plantations.
2.5 Adoption of accounting standards in the
current year
The following accounting standards have been adopted by the
group in the current year:
IAS 23 – Borrowing costs
This standard has been amended to remove the option to
expense borrowing costs incurred on qualifying assets.
The amendment did not have a significant impact on the
group’s results or financial position, as all qualifying borrowing
costs are already capitalised.
IFRIC 4 – Determining whether an Arrangement
contains a Lease
The interpretation states that an arrangement that grants the
right to control the use of an underlying specific asset, is, or
contains a lease, that should be accounted for in accordance
with IAS 17 Leases.
The implementation of this interpretation did not have a material
impact on the group’s reported results or financial position.
IFRIC 8 – Scope of IFRS 2
This interpretation clarifies that IFRS 2 Share-based Payment
applies to arrangements where an entity makes share-based
payments for apparently nil or inadequate consideration.
IFRIC 8 states that, if the identifiable consideration given
appears to be less than the fair value of the equity instruments
granted or liability incurred, this situation typically indicates
that other consideration has been or will be received. IFRS 2
therefore applies.
The implementation of this interpretation did not have a material
impact on the group’s reported results or financial position.
IFRIC 9 – Reassessment of embedded derivatives
The group has performed an exercise that has determined
that there were no embedded derivatives which required
reassessment. The implementation of this interpretation has
therefore had no impact on the group’s results or financial
position.
IFRIC 14 – The limit on a defined benefit asset,
minimum funding requirements and their
interaction
When determining the limit on a defined benefit asset in
accordance with IAS 19 – Employee benefits, under IFRIC 14
entities are required to measure any economic benefits available
to them in the form of refunds or reductions in future contributions
at the maximum amount that is consistent with the terms and
conditions of the plan and any statutory requirements in the
jurisdiction of the plan.
The early adoption of this interpretation did not have any material
impact on the group’s reported results or financial position.
Circular 8/2007 – Headline earnings
This circular provides rules for calculating headline earnings by
accounting standard. In addition this circular requires a detailed
sappi limited | 07 | annual report 91