Our performance in 2009 - Sappi

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Notes to the group annual financial statements continued
The group used the following exchange rates for financial
reporting purposes:
Rate at
Sep 09 Sep 08 Sep 07
ZAR to one US$ 7.4112 8.0751 6.8713
GBP to one US$ 0.6268 0.5421 0.4885
EUR to one US$ 0.6809 0.6843 0.7007
Average annual rate
Sep 09 Sep 08 Sep 07
ZAR to one US$ 9.0135 7.4294 7.1741
GBP to one US$ 0.6419 0.5049 0.5072
EUR to one US$ 0.7322 0.6638 0.7499
2.2.2 Group accounting
(i) Subsidiary undertakings and special-purpose entities
The group financial statements include the assets, liabilities and
results of the company and subsidiary undertakings (including
special-purpose entities) controlled by the group. The results of
subsidiary undertakings acquired or disposed of in the year are
included in the consolidated income statement from the date of
acquisition or up to the date of disposal or cessation of control.
Intragroup balances and transactions, and profits and losses
arising from intragroup transactions, are eliminated in the
preparation of the group financial statements. Unrealised losses
are not eliminated to the extent that they provide objective
evidence of impairment.
(ii) Associates and joint ventures
The results and assets and liabilities of associates and joint
ventures are incorporated in the group’s financial statements
using the equity method of accounting. The share of the
associates’ or joint ventures’ retained income, which is the
profit after tax, is determined from their latest financial statements.
The carrying amount of such investments is reduced to recognise
any impairment in the value of individual investments.
Where an entity within the group transacts with an associate
or joint venture of the group, unrealised profits and losses are
eliminated to the extent of the group’s interest in the relevant
associate or joint venture.
(iii) Goodwill
The acquisition of subsidiaries is accounted for using the purchase
method. The cost of the acquisition is measured at the aggregate
of the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the
group in exchange for control of the acquiree, plus any costs
directly attributable to the business combination. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 are recognised at
their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, which are recognised and measured
at fair value less costs to sell.
The excess between the fair value of the purchase consideration
and the group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities acquired is recognised
as goodwill in the balance sheet.
Goodwill is subsequently held at cost less any accumulated
impairment losses. Goodwill is not amortised but is tested
for impairment annually or more frequently where there is an
indication of impairment based on an allocation to one or more
cash-generating units (CGUs) in which the synergies from the
business combinations are expected.
Impairment losses recognised in respect of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated
to a CGU and then to reduce the carrying amount of the other
assets in the CGU on a pro rata basis. Impairment losses relating
to goodwill are not reversed.
Critical areas of judgement and the use of estimates are included
in section 2.3 of the accounting policies.
2.2.3 Environmental expenditures and liabilities
Environmental accruals are recorded based on current interpretation
of environmental laws and regulations. Amounts
accrued do not include third-party recoveries. All available
information is considered, including the results of remedial
investigation/feasibility studies (RI/FS). In evaluating any disposal
site environmental exposure, an assessment is made of the
company’s potential share of the remediation costs by reference
to the known or estimated volume of the company’s waste that
was sent to the site and the range of costs to treat similar waste
at other sites if a RI/FS is not available.
2.2.4 Financial instruments
(i) Initial recognition
Financial instruments are recognised on the balance sheet
when the group becomes a party to the contractual provisions
of a financial instrument. All purchases of financial assets that
require delivery within the timeframe established by regulation
or market convention (‘regular way’ purchases) are recognised
at transaction date.
(ii) Initial measurement
All financial instruments are initially recognised at fair value plus
transaction costs that are incremental to the group and directly
attributable to the acquisition or issue of the financial asset or
financial liability except for those classified as ‘fair value through
profit and loss’.
(iii) Subsequent measurement
Subsequent to initial measurement, financial instruments are
either measured at fair value or amortised cost, depending on
their classification: