2006 20-F - Sappi

SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)
2. ACCOUNTING POLICIES (Continued)
for the year ended September 2006
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.
2.2.20 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. Qualifying assets are those that necessarily take a
substantial period of time which is greater than six months to prepare for their intended use or sale.
Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for
their use or sale.
Details of borrowing costs capitalised are disclosed in the notes to the accounts by asset category and
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.
All other borrowing costs are expensed in the period in which they are incurred.
No borrowing costs have been capitalised to qualifying assets in the current period.
2.2.21 Cost of sales
When inventories are sold, the carrying amount is recognized 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 recognized in cost of sales in the period the write down, loss or reversal occurs.
2.2.22 Revenue
Revenue represents the gross inflow of economic benefits during the period arising in the course of
the ordinary activities when those inflows result in increases in equity, other than increases relating to
contributions from equity participants.
Revenue is measured at the fair value of the amount received or receivable. Trade and settlement
discounts, rebates, indirect taxes and customer returns are excluded from revenue.
Revenue from the sale of goods 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 sales specifies different terms.
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