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OAO Severstal and subsidiariesOAO Severstal and subsidiariesNotes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)t. Interest expenseInterest expense is recognized in the income statement as it accrues, taking into account the effective yield on theliability.All interest costs incurred in connection with borrowings, which are not directly attributable to the acquisition,construction or production of qualifying assets, are expensed as incurred.u. Net income from securities operationsNet income from securities operations comprises dividend income (except for dividends from equity associates),realized and unrealized gains on financial assets at fair value through profit or loss, realized gains and impairmentlosses on available-for-sale and held-to-maturity investments.v. Earnings per shareEarnings per share is calculated by dividing the net profit by the weighted average number of shares outstandingduring the year, assuming that shares issued in consideration for the companies acquired from the MajorityShareholder were issued from the moment these companies are included in these consolidated financialstatements.w. Discontinued operationsDiscontinued operations are disclosed when a component of the Group either has been disposed of during thereporting period, or is classified as held for sale or other type of disposal at the balance sheet date. This condition isregarded as met only when the disposal is highly probable within one year from the date of classification.The comparative income statement is presented as if the operation had been discontinued from the beginning of thecomparative period.Assets and liabilities of a disposal group are presented in the balance sheet separately from other assets andliabilities. Comparative information related to discontinued operations is not amended in the balance sheet.x. Segment reportingA segment is a distinguishable component of the Group that is engaged either in providing related products orservices (business segment), or in providing products or services within a particular economic environment(geographical segment), which is subject to risks and returns that are different from those of other segments. TheGroup’s primary format for segment reporting is a combination of both business and geographical components,predetermined by the Group’s management and internal reporting structure.Inter-segment pricing is determined on an arm’s length basis.Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment,and intangible assets other than goodwill.Notes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)4. SalesSales by product were as follows:Sales by delivery destination were as follows:5. Staff costsEmployment costs were as follows:Year ended December 31,2008 2007 2006Hot-rolled strip and plate 5,952,558 3,797,586 3,449,291Long products 3,793,931 3,150,114 2,434,993Galvanized and other metallic coated sheet 2,350,259 1,323,406 1,143,198Cold-rolled sheet 2,314,440 1,285,217 1,349,704Semifinished products 1,667,294 1,101,800 939,351Metalware products 1,384,637 1,009,999 845,033Large diameter pipes 819,727 530,726 -Shipping and handling costs billed to customers 808,695 662,447 544,833Others tubes and pipes, formed shapes 485,467 411,690 351,194Pellets and iron ore 453,069 304,825 242,697Color coated sheet 388,160 289,687 144,514Scrap 321,317 290,752 26,513Rails, wheels and axles 279,354 321,751 375,270Coal and coking coal concentrate 257,463 264,753 249,280Gold 190,415 - -Others 925,931 758,634 626,96522,392,717 15,503,388 12,722,836Year ended December 31,2008 2007 2006Russian Federation 8,878,900 6,879,437 5,159,766Europe 6,336,431 5,317,895 4,417,367North America 5,410,115 2,002,852 2,406,186The Middle East 556,413 450,360 215,059China and Central Asia 399,029 353,916 138,016South-East Asia 381,929 291,052 143,553Central & South America 320,489 151,281 156,685Africa 109,411 56,595 86,20422,392,717 15,503,388 12,722,836Year ended December 31,2008 2007 2006Wages and salaries (2,078,521) (1,534,443) (1,279,816)Social security costs (450,812) (418,031) (304,087)Retirement benefit costs (Note 26) (28,647) (7,719) (2,385)(2,557,980) (1,960,193) (1,586,288)Actuarial (losses)/gains recognized (Note 26) (33,141) 37,056 (67,658)Staff costs (2,591,121) (1,923,137) (1,653,946)126127