UPM Annual Report 2021

ACCOUNTS FOR 2021

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

RESPONSIBILITY

GOVERNANCE

5.4 Financial income and expenses

Treasury shares At 31 December 2021, the company held 411,653 (411,653) of its own shares, 0.08% (0.08%) of the total number of shares. Reserves EURm 2021 2020 Fair value reserve 2,012 1,380 Hedging reserve -96 28 Share-based payments reserve 21 22 Total other reserves 1,938 1,430 Reserve for invested non-restricted equity 1,273 1,273 Translation reserve 329 25 Total reserves 3,539 2,728 Fair value reserve This reserve represents the cumulative net change in the fair value of investments in equity securities comprising mainly of the fair value change of the energy shareholdings. Amounts are recycled only within equity upon the disposal of the asset. Hedging reserve This reserve comprises the cumulative net change in the fair value of the effective portion of cash flow hedging instruments related to hedged transactions that have not yet occurred and the cost of hedging when recognised in OCI. Amounts are recognised in profit or loss when the associated hedged transactions affect profit or loss or as part of the acquisition cost of property, plant and equipment. In 2021, a gain of EUR 9 million was reclassified from the hedging reserve to other financial income as a result of inefficiency. In 2020, there were no reclassifications from the cash flow hedge reserve to profit or loss during the period resulting from inefficiency.

Share-based payments reserve The share-based payments reserve is used to recognise the fair value at the grant date of the share incentive plans, Performance Share Plan and

EURm

2021

2020

Deferred Bonus Plan, over their vesting period. Reserve for invested non-restricted equity

Exchange rate gains and losses Derivatives

26 -21

-18 34 -16

Reserve for invested non-restricted equity includes, under the Companies’ Act, the exercise value of shareholders’ investments in the company unless otherwise decided by the company. Translation reserve This reserve includes the foreign currency differences arising from the translation of foreign operations, and the effective result of transactions that hedge the group’s net investments in foreign operations. There were no reclassifications from the translation reserve to profit or loss during the period resulting from inefficiency of net investment hedges. Accounting policies Transaction costs directly relating to the issue of new shares or share options are recognised, net of tax, in equity as a reduction in the proceeds. Where any group company purchases the parent company’s shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax), is deducted from equity attributable to the owners of the parent company until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of the parent company.

Exchange gains and losses on financial liabilities measured at amortised costs Exchange gains and losses on financial assets measured at amortised costs

-7

Other exchange rate gains and losses

—

4 3

-1

Fair value changes Fair value gains and losses on derivatives designated as fair value hedges

-55 53

3

Fair value adjustment of debt attributable to interest rate risk

-4 -2

-1 -3

Total

2

Interest and other finance income and costs, net Interest expense on lease liabilities

-12 -35 31

-12 -35 23

Interest expense on other financial liabilities measured at amortised cost

Interest income on derivatives

Interest income on loans and receivables Other financial income and expenses, net

1 2

3

-5

-12 -15

-26 -24

Total

Net gains and losses on derivatives included in the operating profit

EURm

2021

2020

Cash flow hedges reclassified from hedging reserve

-79 -22

42 24 66

Non-qualifying hedges

Total

-102

Hedging reserve

Foreign exchange gains and losses in the operating profit excluding non-qualifying hedges

ELECTRICITY PURCHASE AND SALES HEDGES

CURRENCY CASH FLOW HEDGES

EURm

2021 2020

COST OF HEDGING

Sales

6

-19 -30 -48

EURm

TAX

TOTAL

Other operating income

-5

2021 Hedging reserve, at 1 January Amounts reclassified to profit and loss

Total

1

57

-26 85

-2 -1

-1

28 63 -14

-5

-16

Amounts reclassified to acquisition cost of a fixed assets Change in fair value of hedging instruments recognised in OCI

-14 -70 -32

—

—

—

-143

2

38 22

-172

5.5 Share capital and reserves The company has one series of shares and each share carries one vote. There are no specific terms related to the shares. At 31 December 2021, the number of the company’s shares was 533,735,699. The shares do not have any nominal counter value. The shares are included within the book entry system for securities.

Hedging reserve, at 31 December

-84

-1

-96

Share capital

ELECTRICITY PURCHASE AND SALES HEDGES

2021 2020

CURRENCY CASH FLOW HEDGES

COST OF HEDGING

Number of shares (1,000)

533,736 533,736

EURm

TAX

TOTAL

Share capital, EURm

890

890

2020 Hedging reserve, at 1 January Amounts reclassified to profit and loss

-4

78 -61

-6

-14

55 -34

10

9

8

Amounts reclassified to acquisition cost of a fixed assets Change in fair value of hedging instruments recognised in OCI

-4

—

—

—

-5

55 57

-43 -26

-5 -2

5

11 28

Hedging reserve, at 31 December

-1

194

UPM FINANCIAL REPORT 2021 195 UPM ANNUAL REPORT 2021 195

UPM ANNUAL REPORT 2021

UPM FINANCIAL REPORT 2021 194