Our performance in 2009 - Sappi

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Notes to the group annual financial statements continued
30. Financial instruments continued
Fair values
All financial instruments are carried at fair value or amounts that approximate fair value, except the non-current interest-
bearing borrowings at fixed rates of interest. The carrying amounts for cash, cash equivalents, accounts receivable, certain
investments, accounts payable and current portion of interest-bearing borrowings approximate fair value due to the short-
term nature of these instruments. Where these fixed rates of interest have been hedged into variable rates of interest and
fair value hedge accounting has been applied, then the non-current interest-bearing borrowings are carried at fair value
calculated by discounting all future cash flows at market data valid at closing date. The same data is used to value the
related hedging instrument.
No financial assets were carried at an amount in excess of fair value.
Direct and incremental transaction costs are included in the initial fair value of financial assets and financial liabilities, other
than those at fair value through profit or loss. The best evidence of the fair value of a financial asset or financial liability at
initial recognition is the transaction price, unless the fair value of the instrument is evidenced by comparison with other
current observable market transactions. Where market prices or rates are available, such market data is used to determine
the fair value of financial assets and financial liabilities.
If quoted market prices are unavailable, the fair value of financial assets and financial liabilities is calculated using pricing
models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows
are based on management’s best estimates and the discount rate used is a market-related rate at the balance sheet date
for an instrument with similar terms and conditions. Where pricing models are used, market-related inputs are used to
measure fair value at the balance sheet date.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot
be reliably measured, and derivatives that are linked to and have to be settled by delivery of such unquoted equity
instruments, are not measured at fair value but at cost.
Fair values of foreign exchange and interest rate derivatives are calculated by using recognised treasury tools which use
discounted cash flow techniques based on effective market data valid at closing date.
The fair value of loan commitments are based on the commitment fees effectively paid.