Our performance in 2009 - Sappi

2.2.10 Non-current assets held for sale
and discontinued operations
Non-current assets (or disposal groups) are classified as held
for sale when their carrying value will be recovered principally
through sale within 12 months rather than use. Non-current
assets held for sale are measured at the lower of carrying amount
and fair value less cost to sell and are not depreciated.
2.2.11 Provisions
Provisions are recognised when the group has a legal or constructive
obligation arising from past events that will probably
be settled. Where the effect of discounting (time value) is material,
provisions are discounted and the discount rate used is a pretaxation
rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific
to the liability.
The following specific policies are applied:
• A provision for onerous contracts is recognised when the
expected benefits to be derived by the group from a contract
are lower than the unavoidable cost of meeting the obligations
under the contract
• A provision for restructuring is recognised only if the group
has created a detailed formal plan and raised a valid expectation,
among those parties directly affected, that the plan will be
carried out, either by having begun implementation or by
publicly announcing the plan’s main features. Future operating
costs or losses are not provided for.
Critical areas of judgement and the use of estimates involving
provisions are included in section 2.3 of the accounting policies.
2.2.12 Pension plans and other post-retirement benefits
(i) Post-employment benefits – pensions
Defined-benefit and defined-contribution plans have been
established for eligible employees of the group, with the assets
held in separate trustee-administered funds.
The present value of the defined benefit obligation and related
current service cost are calculated annually by independent
actuaries using the projected unit method.
The group’s policy is to recognise actuarial gains and losses,
which can arise from differences between expected and actual
outcomes or changes in actuarial assumptions, in other comprehensive
income. Any increase in the present value of plan liabilities
expected to arise due to current service costs is charged to
operating profit.
Gains or losses on the curtailment or settlement of a defined
benefit plan are recognised in profit or loss when the group is
demonstrably committed to the curtailment or settlement. Past
service costs are recognised immediately to the extent that the
benefits are already vested, and otherwise are amortised on a
straight-line basis over the vesting period of those benefits.
The net liability recognised in the balance sheet represents
the present value of the defined benefit obligation adjusted for
2009 annual report
111
unrecognised past service costs, reduced by the fair value of
the plan assets. Where the calculation results in a benefit to the
group, the recognised asset is limited to the net total of past
service costs and the present value of any future refunds from
the plan or reductions in future contributions to the plan.
Contributions in respect of defined-contribution plans are
recognised as an expense in profit or loss as incurred.
(ii) Post-employment benefits – medical
The projected unit credit method is used in determining the
present value of post employment medical benefits. The estimated
cost of retiree health care and life insurance benefit plans is
accrued during the participants’ actual service periods up to
the dates they become eligible for full benefits. Experience
adjustments and plan amendments in respect of existing
employees are treated in a similar manner as described in the
preceding paragraph, in the statement of comprehensive income.
(iii) Workmen’s compensation insurance
Sappi Fine Paper North America has a combination of selfinsured
and insured workers’ compensation programmes.
The self-insurance claim liability for workers’ compensation is
based on claims reported and actuarial estimates of adverse
developments and claims incurred but not reported.
Critical areas of judgement and the use of estimates involving
pension plans and other post-retirement benefits are included
in section 2.3 of the accounting policies.
2.2.13 Plantations
Plantations are stated at fair value less estimated cost to sell at
the harvesting stage. Fair value is determined using the present
value of expected future cash flows for immature timber and
the standing value method for mature timber. The age threshold
used for quantifying immature timber is dependent on the
rotation period of the specific timber genus which varies between
eight to 18 years. In the Southern African region softwood less
than eight years and hardwood less than five years is classified
as immature timber. All changes in fair value are recognised in the
period in which they arise.
The fair value of immature timber calculation takes into account
unadjusted current market prices, estimated projected growth
over the rotation period for the existing immature timber volumes
in metric ton, cost of delivery and estimated maintenance costs
up to the timber becoming mature. The standing value for
mature timber is based on unadjusted current market prices in
available markets and estimated timber volumes in metric tons
less cost of delivery.
Cost of delivery includes all costs associated with getting the
harvested agricultural produce to the market, being harvesting,
loading, transport and allocated fixed overheads.
Trees are generally felled at the optimum age when ready for
intended use. At the time the tree is felled it is taken out of
plantations and accounted for under inventory and reported as
depletion cost (fellings).
financials