2006 20-F - Sappi

1. BUSINESS
SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
for the year ended September 2006
Sappi Limited, a corporation organised under the laws of the Republic of South Africa (the
“company” and, together with its consolidated subsidiaries, “Sappi” or the “group”), was formed in 1936
and is a major, vertically integrated international pulp and paper producer. Sappi is a leading global
producer of coated fine paper and chemical cellulose. The group has manufacturing facilities in nine
countries, on four continents, and customers in over 100 countries across the globe.
The group is composed of its Sappi Fine Paper and Sappi Forest Products business units. Sappi Fine
Paper has manufacturing and marketing facilities in North America, Europe, southern Africa and Asia and
produces mainly high quality branded coated fine paper. It also manufactures uncoated graphic and
business paper, coated and uncoated speciality paper, and casting release paper used in the manufacture of
artificial leather and textured polyurethane applications. Sappi Forest Products, based in southern Africa,
produces commodity paper products, pulp, chemical cellulose and forest and timber products for southern
Africa and export markets. The group operates a trading network called Sappi Trading for the
international marketing and distribution of chemical cellulose and market pulp throughout the world and
of the group’s other products in areas outside our core operating regions of North America, Europe and
southern Africa. All sales and costs associated with Sappi Trading are allocated to our two reporting
segments.
2. ACCOUNTING POLICIES
The following principal accounting policies have been consistently applied in dealing with items that
are considered material in relation to the Sappi Limited group financial statements.
2.1 Basis of preparation
The group’s consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB)
and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of
the IASB, and the requirements of the South African Companies Act of 1973. These are the group’s first
consolidated annual financial statements prepared in accordance with IFRS. In prior years the group
prepared its consolidated financial statements in accordance with South African Statements of Generally
Accepted Accounting Practice (SA GAAP). The group has restated its opening balance sheet at October
2004 applying IFRS retrospectively, except with regard to IFRS 1: First-time Adoption of International
Financial Reporting Standards which either permits, prohibits or modifies the retrospective application of
IFRS as set out in note 2.5 of the financial statements.
The financial statements are presented in United States Dollars (US$) and are rounded to the nearest
million dollars. US$ is the presentation currency of the group because the majority of the group’s revenue
is denominated in USD and it is the currency in which the pulp and paper industry is measured.
They are prepared on the historical-cost basis, except for the following assets and liabilities that are
stated at their fair value:
• derivative financial instruments;
• financial assets and financial liabilities classified as held-for-trading;
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