SAPPI LIMITED

The Group’s policy is to recognize actuarial gains and losses, which can arise from differences
between expected and actual outcomes or changes in actuarial assumptions, in other comprehensive
income. Any increase in the present value of plan liabilities expected to arise due to current service costs
is charged to operating profit.
Gains or losses on the curtailment or settlement of a defined benefit plan are recognized in profit or
loss when the Group is demonstrably committed to the curtailment or settlement. Past service costs are
recognized immediately to the extent that the benefits are already vested, and otherwise are amortized
on a straight-line basis over the vesting period of those benefits.
The net liability recognized in the balance sheet represents the present value of the defined benefit
obligation adjusted for unrecognized past service costs, reduced by the fair value of the plan assets.
Where the calculation results in a benefit to the Group, the recognized asset is limited to the net total of
past service costs and the present value of any future refunds from the plan or reductions in future
contributions to the plan.
Refer to note 27 to the Group Annual Financial Statements, included elsewhere in this Annual
Report for the key estimates, assumptions and other information on post employment benefits
applicable as at the end of September 2010.
Provisions. Provisions are recognized when the Group has a legal or constructive obligation
arising from past events that will probably be settled. Where the effect of discounting (time value) is
material, provisions are discounted and the discount rate used is a pre-taxation rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The establishment and review of the provisions requires significant judgment by management as to
whether or not there is a probable obligation and as to whether or not a reliable estimate can be made of
the amount of the obligation.
Environmental accruals are recorded based on current interpretation of environmental laws and
regulations.
Adoption of accounting standards in Fiscal 2010
The following standards, interpretations and significant amendments or revisions to standards have
been adopted by the Group in the current year:
IFRS 8 Operating segments
IFRS 8 requires an entity to report financial and descriptive information about its reportable
segments. Reportable segments are components of an entity for which separate financial information is
available that is evaluated regularly by the chief operating decision maker in deciding how to allocate
resources and assessing performance.
The adoption of IFRS 8 ‘‘Operating Segments’’ did not have an impact on the Group’s reported
results or financial position.
Amendment to IFRS 7 Financial Instruments: disclosures
IFRS 7 was amended to require enhanced disclosures about fair value measurements. In note 29 to
the Group Annual Financial Statements, the Group has, disclosed the level in the fair value hierarchy into
which the fair value measurements are categorized for financial instruments that are measured at fair
value in the statement of financial position.
The adoption of this amendment did not have an impact on the Group’s reported results or financial
position.
107