UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

Non-controlling interests The profit or loss attributable to owners of the parent company and non controlling interests is presented on the face of the income statement. Non-controlling interests are presented in the consolidated balance sheet within equity, separately from equity attributable to owners of the parent company. Transactions with non-controlling interests are treated as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between consideration paid and the acquired share of the carrying value of the subsidiary’s net assets is recorded in equity. Gains or losses of disposals to non-controlling interests are also recorded in equity, net of transaction costs. 1.4 Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of transaction. Receivables and liabilities denominated in foreign currencies outstanding on the balance sheet date are translated into the functional currency using the balance sheet date exchange rate. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when recognised in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. UPM records foreign exchange differences relating to ordinary business operations within the appropriate line items above operating profit and those relating to financial items are presented separately as a net amount in finance costs. Income and expenses of subsidiaries that have a functional currency different from euro are translated into euros at quarterly average exchange rates. Assets and liabilities of subsidiaries are translated at the closing rate at the balance sheet date. All resulting translation differences are recognised as a separate component in other comprehensive income. On consolidation, exchange differences arising from the translation of net investment in foreign operations and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign entity is partially disposed of, sold or liquidated, translation differences accrued in equity are recognised in the income statement as part of the gain or loss on sale/liquidation. 1.5 Changes in accounting policies The group has reviewed IFRS Accounting Standard amendments effective on periods starting 1 January 2023. The amendments effective as of 1 January 2023 did not have any impact on the group's financial statements. IFRS 17 Insurance contracts On 1 January 2023 the group implemented IFRS 17 Insurance contracts. The group has assessed the impact of the implementation of IFRS 17 and concluded that it has no effect on the group financial statements as of 1 January 2023. Narrow-scope amendments to IAS 1 On 1 January 2023 the group has implemented the narrow-scope amendments to IAS 1, which require entities to disclose their material accounting policy information, instead of significant accounting policies. The group has reviewed its accounting policies and made minor amendments to the disclosures.

Reclassification of provisions in the balance sheet Effective from the current reporting period, the group has reclassified current provisions to the current liabilities section. Previously both current and non-current provisions were presented within the non-current liabilities section of the balance sheet. This adjustment ensures better alignment with IFRS Accounting Standards accounting and facilitates a clearer understanding of short-term obligations. The comparative periods have been restated according to the new reporting principles. The reporting change has no impact on group financial result. Liabilities in the balance sheet

Financial risks UPM is exposed to a variety of financial risks as a result of its business activities including currency risk, interest rate risk, commodity price risk, credit risk, capital risk and liquidity risk. Risk management related to financial activities is carried out by UPM’s central treasury department, Treasury and Risk Management, under policies approved by the Board of Directors. Financial risks are described in the relevant notes as described below

FINANCIAL RISK

NOTE

As published Restated

Credit risk

4.6 Working capital

2022

Liquidity and refinancing risk

5.1 Capital management

Deferred tax liabilities

636 527 134

636 527

Interest rate risk

6.1 Financial risk management 6.1 Financial risk management 6.1 Financial risk management

Net retirement benefit liabilities

Foreign exchange risk Electricity price risk Financial counterparty risk

Provisions

64

Non-current debt

4,476

4,476

6.2 Derivatives and hedge accounting

Other non-current financial liabilities

103

103

Non-current liabilities

5,876

5,807

Current debt

558

558

1.3 Consolidation principles Subsidiaries

Trade and other liabilities

2,720

2,720

Provisions

—

70

Other current financial liabilities

102

102

UPM’s consolidated financial statements include the financial statements of the parent company, UPM-Kymmene Corporation, and subsidiaries controlled by UPM. All group entities apply consistently UPM’s accounting policies. All intercompany transactions, receivables, liabilities and unrealised profits, as well as intragroup profit distributions, are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Joint operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is a contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. UPM’s share in joint operations is recognised in the consolidated balance sheet through recognition of the group’s own assets and liabilities and revenues and expenses in the arrangement together with UPM’s proportionate share in the joint assets, liabilities and joint income and expenses. The proportionate share of realised and unrealised gains and losses arising from intragroup transactions between UPM and its joint operations is eliminated. Associates and joint ventures Associates are entities over which the group has significant influence but no control. Significant influence is the power to participate in the financial and operating policy decisions without the power to control or jointly control those policies. Joint ventures are joint arrangements where the group has joint control with other parties and the parties have rights to the arrangement’s net assets. Interests in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. Associates and joint ventures follow the group accounting policies for consolidation purpose.

Income tax payables Current liabilities

73

73

3,452 9,329

3,522 9,329

Liabilities

170

171

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

170

UPM FINANCIAL REPORT 2023

171