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SAPPI<br />
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)<br />
for the year ended September <strong><strong>20</strong>06</strong><br />
35. SUMMARY OF DIFFERENCES BETWEEN INTERNATIONAL FINANCIAL REPORTING<br />
STANDARDS AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES<br />
(Continued)<br />
3. Provisions raised at<br />
acquisition.<br />
International Financial Reporting Standards (IFRS) United States GAAP (US GAAP)<br />
Prior to the adoption of IFRS, SA GAAP<br />
allowed provisions to be raised for<br />
restructuring, rationalisation and other<br />
incidental costs, if they related to the acquired<br />
company.<br />
4. Treatment of goodwill Goodwill was allocated to the fair values of the<br />
assets acquired. The excess of fair value of net<br />
assets acquired over the cost of the acquired<br />
entity (commonly referred to as negative<br />
goodwill) was recognised directly in reserves.<br />
Positive goodwill was required to be<br />
amortised.<br />
c. Pre-commissioning<br />
expenses capitalised<br />
on capital projects<br />
IAS 16 allows for the capitalisation of a<br />
number of directly attributable costs in<br />
determining the cost of an item of property,<br />
plant and equipment. In the past a number of<br />
costs have been capitalised in terms of this<br />
guidance. While US GAAP guidance is more<br />
prescriptive on which costs cannot be<br />
capitalised, the nature of costs that can be<br />
capitalised is not an established GAAP<br />
difference with IFRS. Management, therefore,<br />
elected to expense all remaining precommissioning<br />
costs for IFRS purposes during<br />
the <strong><strong>20</strong>06</strong> financial year.<br />
F-104<br />
Only recognise the costs of<br />
a plan to (1) exit an activity<br />
of an acquired company,<br />
(2) involuntarily terminate<br />
employees of an acquired<br />
company, or (3) relocate<br />
employees of an acquired<br />
company as liabilities<br />
assumed in a purchase<br />
business combination.<br />
Goodwill is capitalised, but<br />
from 01 October <strong>20</strong>02, is<br />
no longer amortised and is<br />
subject to an impairment<br />
test at least annually.<br />
Negative goodwill was<br />
deducted from the fair<br />
value of the non-current<br />
assets. Goodwill included<br />
under US GAAP amounts<br />
to US$174 million<br />
(Sept <strong>20</strong>05: US$174<br />
million).<br />
Pre-commissioning costs<br />
are generally expensed<br />
under US GAAP.
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