UPM Annual Report 2021

ACCOUNTS FOR 2021

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Notes to the parent company financial statements

Cash flow statement

EURm

2021

2020

Cash flows from operating activities Profit before closing entries and tax Financial income and expenses Adjustments to operating profit 1) Change in working capital 2)

Accounting policies

Leases Lease payments of lease contracts are recognised in other operating expenses over the lease term. Lease payments due in future years under lease contracts are presented as off-balance sheet items. Provisions Provisions include foreseeable future expenses and losses to which the company is committed, the realization of which is probable and the amount can be reliably estimated, e.g. pension and environmental liabilities and termination and restructuring costs. Changes in provisions are recognised in income statement within particular cost items. Sales Sales include sales revenue from actual operations less indirect taxes, discounts, claims and exchange rate differences on net cash flow hedges and trade receivables. Research and development costs Research and development costs are expensed in the year in which they are incurred. Pensions In Finland employers are obliged to insure their employees for statutory benefits, as determined in Employee’s Pension Act (TyEL). The mandatory pensions are arranged mainly through pension insurance companies. Contributions to pension insurance companies are charged to the income statement in the period to which the contributions relate. Pension obligations of own pension funds are fully funded. Share-based payments Share based compensation is recognized as an expense in the income statement over the earnings period and the related liability is booked to the balance sheet. Closing entries Parent company closing entries consists of the change in the depreciation difference and group contributions granted to group companies. The accumulated depreciation difference in the parent company has not been divided into equity and deferred tax liability. Income taxes Income taxes presented in the income statement consist of accrued taxes for the financial year and tax adjustments for prior years. The parent company has not recognised deferred tax assets and liabilities in the balance sheet, but presents the information in the notes. Derivatives Income and expenses of derivative contracts relating to net cash flow hedges are recognised in sales. Income and expenses related to commodity derivatives are recognised in purchases. Income and expenses of fair value hedges are recognised in financial items. Net cash flow hedging derivatives and commodity derivatives are recognised in the income statement when the cash flow occurs. Hedge accounting is not applied. The fair value losses of financial derivatives are recognised through the income statement and presented as a provision in the balance sheet.

581 -281

275 -302 175 -131

The financial statements of the parent company are prepared in accordance with Finnish Accounting Standards, FAS. The main differences in accounting policies of the group and the parent company relate to the measurement of financial derivatives and forest assets and recognition of defined benefit obligations, share-based payments, lease agreements and deferred income taxes. The financial statements are presented in millions of euros and rounded and therefore the sum of individual figures might deviate from the presented total figure. Foreign currency translation Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date and other commitments are translated into euro currency using the balance sheet date exchange rate. Exchange rate differences arising from the valuation of trade receivables are recognised in sales and exchange rate differences on trade payables in purchases. Exchange differences arising from the measurement of other receivables and liabilities are recognised in financial items. Tangible and intangible assets Tangible and intangible assets are stated at cost less accumulated depreciation and amortisation according to plan and impairments. Emission rights are recognised using net approach. Depreciation and amortization according to plan is recorded on a straight-line basis over the expected useful lives of the assets as follows:

64

-639

Interest received

31 -22

49 -29

Interest paid

Dividends received Other financial items Income taxes paid 3) Operating cash flow

288

348

18

-22 -11

-109

-68

352

Cash flows from investing activities Investments in tangible and intangible assets

-46

-84

-829

-719

Investments in shares and holdings

11

15

Proceeds from sale of intangible and tangible assets Proceeds from disposal of shares and holdings

4

6

Change in other non-current receivables

-72

150 -632

Investing cash flow

-932

Cash flows from financing activities Proceeds from non-current liabilities Payments of non-current liabilities

620

904

-35

0

Change in current liabilities

943 -693

269 -693

Dividends paid

Group contributions, net

-19

0 0

Land and water areas, no depreciation Intangible assets

Other items

-101 715

5 – 10 years 20 – 50 years 5 – 10 years 15 – 20 years 20 – 30 years 5 – 20 years

Financing cash flow

480

Buildings

Light machinery and equipment

Cash and cash equivalents at beginning of period

1,582

1,382

Heavy machinery

Change in cash and cash equivalents

-286

200

Power plants

Cash and cash equivalents at end of period

1,296

1,582

Other tangible assets

Notes to cash flow statement 1) Adjustments to operating profit EURm

Forest assets are recognised as tangible assets within land and water areas at historical cost and revaluation. No systematic depreciation or changes in value due to felling is recognised. Investments Investments are stated at cost less impairments. Inventories Inventories are stated at cost or the lower of replacement cost and probable selling price. Costs are measured using FIFO-method. In addition to variable costs, the cost of inventories includes a portion of the fixed costs of acquisition and manufacturing. Revaluations The balance sheet value of land includes revaluations. No new revaluations are made and the balance sheet value of land is considered to be below their fair value.

2021

2020

Depreciation, amortisation and impairment charges Capital gains and losses on sale of non-current assets

124

116

-4

-12 71

Change in provisions

-56 64

Total

175

2) Change in working capital

EURm

2021

2020

Inventories

-23

13

Current receivables

-857 241 -639

-121

Current non-interest-bearing liabilities

-23

Total

-131

3) Income taxes related to sale of assets are presented in investing cash flow.

212

UPM FINANCIAL REPORT 2021 213 UPM ANNUAL REPORT 2021 213

UPM ANNUAL REPORT 2021

UPM FINANCIAL REPORT 2021 212