UPM Annual Report 2021

ACCOUNTS FOR 2021

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Notes to the consolidated financial statements The notes to the consolidated financial statements are grouped into sections based on their nature. The notes contain the relevant financial information as well as a description of accounting policy and key estimates and judgements applied for the topics of the individual notes. All amounts are shown in millions of euros unless otherwise stated.

1) Adjustments

EURm

2021

2020

Change in fair value of forest assets and wood harvested Share of results of associated companies and joint ventures Depreciation, amortisation and impairment charges Capital gains and losses on sale of non-current assets

-111

25

-2

-3

515 -146

541

-25 24

Financial income and expenses

15

Items marked with this symbol describe the accounting principle applied by UPM to the specific financial statement area.

Items marked with this symbol indicate that the accounting area involves estimates and judgement which are described separately.

Risks related disclosures, whether they are financial, actuarial, credit or counterparty in nature, can be found in sections marked with this symbol.

Income taxes

240

169

Utilised provisions

-85

-55

Non-cash changes in provisions

1

130

Other adjustments

-70

-86

1. Basis for reporting 1.1 Corporate information

Total

356

721

2) Change in working capital

Accounting policies The accounting policies applied to the consolidated financial statements as a whole are described in this section, while the remaining accounting policies are described in the notes to which they relate as UPM aims to provide enhanced understanding of each financial statement area. Further, to provide a better understanding, the accounting choices made within the framework of the prevailing IFRS are described together with the policy. Key estimates and judgements In the process of applying the group’s accounting policies, management has made a number of judgements and applied estimates of future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on management’s best knowledge, actual results and timing may ultimately differ from previously made estimates. Key estimates and judgement which are material to the reported results and financial position are presented in the following notes.

UPM-Kymmene Corporation (“the parent company” or “the company”) together with its consolidated subsidiaries (“UPM” or “the group”) is a global forest-based bioindustry group. UPM´s large product range covers pulp, graphic and specialty papers, selfadhesive labels, wood based renewable diesel, electricity as well as plywood and timber products. UPM-Kymmene Corporation is a Finnish limited liability company, domiciled in Helsinki in the Republic of Finland. The address of the company’s registered office is Alvar Aallon katu 1, 00100 Helsinki, where a copy of the consolidated financial statements can be obtained. The parent company’s shares are publicly traded on the Nasdaq Helsinki Main Market. These group consolidated financial statements were authorised for issue by the Board of Directors on 27 January 2022. According to the Finnish Companies Act, the General Meeting of Shareholders is entitled to decide on the adoption of the company’s financial statements. 1.2 Basis of preparation UPM’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and IFRIC Interpretations. The consolidated financial statements have been prepared under the historical cost convention, except for forest assets, energy shareholdings and certain other financial assets and financial liabilities, defined benefit plan assets and obligations and share-based payment arrangements which are measured at fair value. The consolidated financial statements are presented in millions of euros, which is the functional and presentation currency of the parent company. Items included in the financial statements of each group subsidiary are measured using the currency of the primary economic environment in which the subsidiary operates (“the functional currency”). The amounts within parentheses refer to the preceding year, 2020. Figures presented in these financial statements are rounded and therefore the sum of individual figures might deviate from the presented total figure. In accordance with the European Single Electronic Format (ESEF) reporting requirements, UPM has published the Board of Directors' report and the financial statements as an XHTML file. In line with the ESEF requirements, the primary statements of the consolidated financial statements have been labelled with XBRL tags. XBRL tags are not audited.

EURm

2021

2020

Inventories

-271 -445 601 -115

45

Receivables included in working capital Liabilities included in working capital

-6

-133

Total

-93

3) Total income taxes paid in 2021 amounted to EUR 276 million (146 million). Income taxes paid related to investing activities are presented in investing cash flow.

KEY ESTIMATES AND JUDGEMENTS NOTE Valuation of forest assets

4.2 Forest assets

Fair value determination of energy shareholdings Impairment of property, plant and equipment Impairment of goodwill and other intangible assets Pension and other post-employment benefits

4.3 Energy shareholdings

4.1 Property, plant and equipment

4.4 Goodwill and other intangible assets

3.4 Retirement benefit obligations

Income taxes

7. Income tax 4.5 Provisions 9.2 Litigation

Environmental provisions

Legal contingencies

156

UPM FINANCIAL REPORT 2021 157 UPM ANNUAL REPORT 2021 157

UPM ANNUAL REPORT 2021

UPM FINANCIAL REPORT 2021 156