UPM Annual Report 2018

UPM AT A GLANCE

STRATEGY

BUSINESSES

SOCIETY AND ENVIRONMENT

GOVERNANCE AND COMPLIANCE

REPORT OF THE BOARD OF DIRECTORS

FINANCIAL STATEMENTS

AUDITOR’S REPORT

OTHER FINANCIAL INFORMATION

Auditor’s report (Translation from the Finnish Original)

18. Current liabilities

PAYABLES TO PARTICIPATING INTEREST COMPANIES

PAYABLES TO GROUP COMPANIES

To the Annual General Meeting of UPM-Kymmene Corporation

EURm

TOTAL

2018 Trade payables

Report on the Audit of the Financial Statements

324

56

1

Accrued expenses and deferred income Other current liabilities

137

18

– –

Opinion

1,984

1,844

Basis for opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the » Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in » Note 2.3 Operating expenses and other operating income to the Financial Statements.

Carrying value, at 31 December

2,444

1,919

1

In our opinion, • the consolidated financial statements give a true and fair view of the group’s financial performance and financial position in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU • the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements. What we have audited We have audited the financial statements of UPM-Kymmene Corporation (business identity code: 1041090-0) for the year ended 31 December, 2018. The financial statements comprise: • the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies • the parent company’s balance sheet, income statement, statement of cash flows and notes. Our opinion is consistent with the additional report to the Audit Committee.

2017 Bonds

208

– – –

– – – –

EURm

2018

2017

Pension loans

68

Accrued expenses and deferred income Personnel expenses

Advances received

1

77

81 10 42

Trade payables

270

45

Interest expenses

7

Accrued expenses and deferred income Other current liabilities

Exchange gains and losses

51

140

24

– –

Income taxes Other items

– 1

5 2

1,839

1,763

Carrying value, at 31 December

Carrying value, at 31 December

137

140

2,527

1,832

–

19.

Commitments

Pension commitments of the President and CEO and the members of the Group Executive Team » Refer Note 3.2 Key management personnel.

EURm

2018

2017

Mortgages As security against own debt

1 –

69

As security against group companies’ debt Guarantees Guarantees for loans on behalf of Group companies Other guarantees on behalf of Group companies Other commitments Leasing commitments, due within 12 months Leasing commitments, due after 12 months

7

Related party transactions » Refer Note 8.3 Related party transactions.

Our audit approach

1

46

Derivatives All financial derivative contracts of the group were made by the parent company. All contracts were made with external counterparties except for one cross currency swap used in managing foreign currency risk of the group internal assets. Hedge accounting was not applied. Derivatives were initially recognised at cost in the balance sheet. The fair value losses of financial derivatives were recognised through the income statement and presented as a provision in the balance sheet. Financial risks, fair values and maturities of the group external derivatives are disclosed in » Note 6.1 Financial risk management and » Note 6.2 Derivatives and hedge accounting and the group internal financial derivative in » Note 16. Provisions of the parent company.

37

36

OVERVIEW Materiality

• Overall group materiality: EUR 60 million, which represents 5% of profit before tax.

33 81 77

25 67 89

Group scoping

• The group audit scope encompassed all significant group companies, as well as a number of smaller group companies in Europe, Asia, North America and South America covering the vast majority of revenue, assets and liabilities.

Other commitments

Total

229

339

Key audit matters

• Valuation of forest assets • Valuation of energy shareholdings • Recoverability of deferred tax assets

Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

182

183

CONTENTS

ACCOUNTS

UPM ANNUAL REPORT 2018

UPM ANNUAL REPORT 2018