UPM Annual Report 2020
Changes in leased assets
The group as a lessor At inception of a lease contract, the group makes an assessment whether the lease is a finance lease or an operating lease. If the lease transfers substantially all of the risks and rewards incidental to
ownership of the asset, it is considered to be a finance lease; if not, the lease is considered to be an operating lease. The group has only a minor amount of operating lease contracts, whereby the lease payments are recognised on a straight-line basis over the term of the lease.
MACHINERY AND EQUIPMENT
OTHER LEASED ASSETS
ADVANCE PAYMENTS 1)
LAND AREAS BUILDINGS
TOTAL
2020 Carrying value, at 1 January
5.3 Financial assets and liabilities by category Financial assets and liabilities recognised in the balance sheet include cash and cash equivalents, loans and other financial receivables, investments in securities, trade receivables, trade payables, loans, bank overdrafts and derivatives. Classification of financial assets into different measurement categories depends on the contractual cash flow characteristics and the business model for managing the financial asset. The measurement
212
262
104
12
—
590
New contracts and subsequent additions
28
16
10
7
4
65
Reassessments and disposals
3
2
-1
—
— — — —
3
category of each financial asset is determined at inception. Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right in all circumstances to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Depreciations Reclassifications
-12
-32
-22
-7
-73
—
—
-2 -3
— —
-2
Translation differences
-16
-3
-23
Carrying value, at 31 December
214
245
86
12
4
561
2019 Carrying value, at 1 January
174
283
108
16
— — — — — —
581
Financial assets and liabilities by category at the end of 2020
New contracts and subsequent additions
44
11
17
3
75
Reassessments and disposals
1
—
—
—
1
Depreciations
-10
-32
-22
-7
-72
EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OCI
FINANCIAL ASSETS AND LIABILITIES AT AMORTISED COST
FAIR VALUE THROUGH PROFIT AND LOSS
DERIVATIVES UNDER HEDGE ACCOUNTING
Translation differences
3
1
1
—
5
Carrying value, at 31 December
212
262
104
12
590
EURm
TOTAL 1,936
1) Advance payments for leases not commenced at the year end reporting 31.12.2020
Energy shareholdings
—
1,936
—
—
Other non-current financial assets Loans and receivables
— — — —
— — — — — — — —
—
8
8
Accounting policies
Derivatives
157 157
—
157 166
8
Leases The group as a lessee
measured at amortised cost using the effective interest rate method and remeasured (with corresponding adjustment to the related leased asset) when there is a change in future lease payments due to renegotiation, changes of an index or rate or reassessment of options. Leased asset comprises the initial lease liability, initial direct costs and the obligations to refurbish the asset, less any incentives granted by the lessors. The leased asset is subsequently valued at cost less accumulated depreciation and impairment losses. Remeasurement takes place in case lease liability is remeasured and change in cash flows is based on contract terms that have been included in the original contract. The leased asset is depreciated over the shorter of the asset’s useful life and the lease term. The leased asset is subject to testing for impairment if there is an indicator for impairment, as for own assets. The group has elected to separate non-lease components such as service components and other variable components and account them for as expenses, if they can be separated from the leased asset. However, the group does not separate non-lease components from the lease contracts of company cars. The group does not apply portfolio approach of leases with similar characteristics. Leased assets are presented in the balance sheet as a separate financial statement line item. Lease liabilities are presented as part of non-current debt and current debt line items in the balance sheet. Lease liabilities are part of net debt calculation of the group. Short-term lease payments are reported as rents and lease expenses. Variable lease payments are recognised within the operating costs and expenses based on the nature of the payment. The interest expense on the lease liability is recognised as a component of finance costs in income statement. In cash flow statement, payments for the principal portion of the lease liability are recognised as financing cash flow while payments for interest portion of lease liability, short-term leases, and variable amounts not included in the measurement of the lease liability, are classified within operating cash flow.
Trade and other receivables Other current financial assets Loans and receivables
—
1,534
1,534
UPM assesses whether a contract is or contains a lease at inception of the contract. This assessment involves the exercise of judgment about whether it depends on a specified asset, whether UPM obtains substantially all the economic benefits from the use of that asset, and whether UPM has the right to direct the use of the asset. The group recognises a leased asset and a lease liability at the lease commencement date, except for short-term leases. UPM applies this to all asset classes. Short-term leases are leases that, at the commencement date, have a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease. UPM recognises lease payments of short-term leases as an expense on a straight-line basis over the lease term. The lease term is determined as the non- cancellable period of the lease taking into consideration the options to extend and terminate if it is reasonably certain that the group will exercise the extension option or will not exercise the termination option. If the contract is for an indefinite period of time and the group and the lessor both have a right to terminate the contract within a short notice period (12 months or less) without a significant economic penalties and termination cash payments, the contract is considered to be a short-term. The lease liability is recognised at the commencement date and measured at the present value of the lease payments to be paid during the lease term. The group uses, as a basis, discount rate implicit in the lease and if that rate cannot be readily determined, UPM uses incremental borrowing rate which comprises of currency and lease term based reference rate and specific credit spread as well as other specific terms and conditions of a lease. Lease payments can include fixed payments, variable payments that depend on an index or rate and extension option payments or purchase options if it is reasonably certain that the group will exercise them. The lease liability is subsequently
—
—
8
8
Derivatives
32 32
96 96
—
129 136
8
Cash and cash equivalents Total financial assets Non-current debt Interest-bearing liabilities
—
—
1,720 3,270
1,720 5,492
32
1,936
254
— —
— —
— —
1,952 1,952
1,952 1,952
Other non-current financial liabilities Other liabilities 1)
— — —
— — — — — — — — — —
— — — — — — —
97
97
Derivatives
—
—
97
97
Current debt Interest-bearing liabilities
—
82
82
Derivatives
8 8
—
8
82
90
Trade and other payables
—
1,571
1,571
Other current financial liabilities Derivatives
19 19 27
29 29 29
— —
48 48
Total financial liabilities
3,703
3,759
1) Consists mainly of non-current advances received and a put liability that is not estimated to mature within 12 months.
184
UPM ANNUAL REPORT 2020 UPM FINANCIAL REPORT 2020 69 185
UPM ANNUAL REPORT 2020
UPM FINANCIAL REPORT 2020 68
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