2006 20-F - Sappi

SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)
for the year ended September 2006
2. ACCOUNTING POLICIES (Continued)
(vi) Derecognition
All financial assets and financial liabilities are derecognised when the group commits to selling a
financial asset or redeeming a financial liability.
The group derecognises a financial asset when:
• the contractual rights to the cash flows arising from the financial asset have expired or have been
forfeited by the group; or
• it transfers (or it assumes an obligation to transfer) the financial asset, including substantially all the
risks and rewards of ownership of the asset; or
• it transfers the financial asset, neither retaining nor transferring substantially all the risks and
rewards of ownership of the asset, but no longer retains control of the asset.
A financial liability is derecognised when and only when the liability is extinguished, ie when the
obligation specified in the contract is discharged, cancelled or has expired.
The difference between the carrying amount of a financial asset or financial liability (or part thereof)
that is derecognised and the consideration paid or received, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss for the period.
(vii) Impairment of financial assets
The group assesses at each balance sheet date whether there is objective evidence that a financial
asset or group of financial assets may be impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset (a loss event) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is
impaired includes observable data that come to the attention of the group about the following loss events:
• significant financial difficulty of the issuer or obligor;
• a breach of contract, such as a default or delinquency in interest or principal payments;
• the group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to
the borrower a concession that the group would not otherwise consider;
• it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; or
• observable data indicating that there is a measurable decrease in the estimated future cash flows
from a group of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the group, including:
• adverse changes in the payment status of borrowers in the group; or
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