Our performance in 2009 - Sappi

Notes to the group annual financial statements
for the year ended September 2009
1. Business
Sappi Limited, a corporation organised under the laws of the
Republic of South Africa (the ‘company’ and, together with its
consolidated subsidiaries, ‘Sappi’ or the ‘group’), was formed
in 1936 and is a major, vertically integrated international pulp
and paper producer. Sappi is a leading global producer of coated
fine paper and chemical cellulose. The group has manufacturing
facilities in ten countries, on four continents, and customers in
over 100 countries across the globe.
The group is comprised of its Sappi Fine Paper and Sappi Forest
Products business units. Sappi Fine Paper has manufacturing
and marketing facilities in North America, Europe, Southern
Africa and Asia and produces mainly high quality branded coated
fine paper. It also manufactures uncoated graphic and business
paper, coated and uncoated speciality paper, and casting release
paper used in the manufacture of artificial leather and textured
polyurethane applications. Sappi Forest Products, based in
Southern Africa, produces commodity paper products, pulp,
chemical cellulose and forest and timber products for Southern
Africa and export markets. The group operates a trading network
called Sappi Trading for the international marketing and
distribution of chemical cellulose and market pulp throughout the
world and of the group’s other products in areas outside its core
operating regions of North America, Europe and Southern Africa.
All sales and costs associated with Sappi Trading are allocated to
our reporting segments.
2. Accounting policies
The following principal accounting policies have been consistently
applied in dealing with items that are considered material
in relation to the Sappi Limited group financial statements. The
group has, however, elected to early adopt IAS 1 Presentation of
Financial Statements. This did not have an impact on the group’s
reported results or financial position.
2.1 Basis of preparation
The group’s consolidated financial statements have been
prepared in accordance with:
– International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB);
– Interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB; and
– the requirements of the South African Companies Act of 1973.
The financial statements are presented in United States Dollars
(US$), as it is the major trading currency of the pulp and paper
industry, and are rounded to the nearest million except as
otherwise indicated.
The financial statements are prepared on the historical-cost
basis, except for certain financial assets and liabilities and
plantations that are stated at their fair value.
Non-current assets and disposal groups held for sale are
stated at the lower of carrying amount and fair value less costs
to sell.
(i) Fiscal year
2009 annual report
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The group’s financial year end is on the Sunday closest to the
last day of September.
Accordingly, the last three financial years were as follows:
• 29 September 2008 to 27 September 2009 (52 weeks)
• 01 October 2007 to 28 September 2008 (52 weeks)
• 02 October 2006 to 30 September 2007 (52 weeks)
The group has disclosed two years’ comparative information
for the income statement, statement of comprehensive income
and the cash flow statement to be consistent with its disclosure
in the annual report prepared on Form 20-F.
(ii) Underlying concepts
The financial statements are prepared on the going concern
basis.
Assets and liabilities and income and expenses are not offset
in the income statement or balance sheet unless specifically
permitted by an accounting standard or interpretation.
Changes in accounting estimates are recognised prospectively
in profit or loss, except to the extent that they give rise to changes
in the carrying amount of recognised assets and liabilities where
the change in estimate is recognised immediately.
Prior period errors are retrospectively restated if material.
2.2 Accounting policies
2.2.1 Foreign currencies
(i) Foreign currency transactions
Transactions in foreign currencies are converted into the
functional currency of the group’s individual operations at the
rate of exchange ruling at the date of such transactions.
Monetary and non-monetary assets and liabilities in foreign
currencies are translated into the functional currency of the
entities’ in the group at rates of exchange ruling at the reporting
date.
Exchange gains and losses on the translation and settlement
of foreign currency monetary assets and liabilities during the
period are recognised in the profit or loss in the period in which
they arise.
(ii) Consolidation of foreign operations
The assets and liabilities, including goodwill of entities that have
non-dollar functional currencies are translated at the closing
rate, while the income and expenses are translated using the
average exchange rate. The differences that arise on translation
are reported directly in other comprehensive income. These
translation differences are recycled through profit or loss for the
period on disposal of the foreign operation.
The functional currency of the European business is Euro,
the Southern African business is ZAR and the North American
business is US Dollars. Other minor companies in the group
may have different functional currencies depending on the
business environment in which they operate.
financials