Our performance in 2009 - Sappi

(iii) Dividends
Dividends are recognised as distributions within equity in the period
in which they are payable to shareholders. Dividends for 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.
2.2.18 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
in profit or loss 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. 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.
When dividends received in the current year can be offset
against future dividend payments to reduce the STC liability, a
deferred tax asset is recognised to the extent of the future
reduction in STC.
Critical areas of judgement and the use of estimates involving
taxation are included in section 2.3 of the accounting policies.
2.2.19 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.
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Capitalisation of borrowing costs continues up to the date when
the assets are substantially ready for their use or sale.
Borrowing costs capitalised 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.
2.2.20 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.
2.2.21 Revenue
Revenue 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 sale specifies different terms.
Revenue is measured at the fair value of the amount received
or receivable which is arrived at after deducting trade and
settlement discounts, rebates, and customer returns.
Shipping and handling costs, such as freight to our customers’
destination are included in cost of sales. These costs, when
included in the sales price charged for our products are
recognised in net sales.
2.2.22 Emission trading
The group accounts for grants allocated by governments for
emission rights as an intangible asset with an equal liability at
the time of the grant. The asset and liability are recognised at
a nominal amount when the grants are issued.
The group does not recognise a liability for emissions to the
extent that it has sufficient allowances to satisfy emission
liabilities incurred. Where there is a shortfall of allowances that
the group would have to deliver for emissions, a liability is
recognised at the current market value of the shortfall.
Where the group has allowances that exceed actual emissions
and the excess allowances are sold to parties outside the
group, a gain is recognised in profit or loss for the period.
2.2.23 Black Economic Empowerment (BEE) transaction
The group has entered into a transaction that introduces
empowered black ownership to the group’s land portfolio in
South Africa. This empowerment transaction has resulted in
our empowerment partner obtaining an undivided 25% interest
of this land portfolio via a swap arrangement for the continued
right of use of the land. This transaction was based on the fair
value of the 25% undivided interest in the share of the land.
financials