UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

7.2 Deferred tax

Movements in deferred tax assets and liabilities

Accounting policies

EURm

2024 2023

EURm

2024 2023 2022

Carrying value, at 1 January Charged to income statement

Deferred tax assets Intangible assets and property, plant and equipment

-185

-151

Deferred tax is calculated based on temporary differences between the carrying amounts and the taxable values of assets and liabilities and for tax loss carry-forwards to the extent that it is probable that these can be utilised against future taxable profits. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised net where there is a legal right to set-off and an intention to settle on a net basis.

85 -35

90

134

66 77 94

86 86 88

Charged to other comprehensive income

-113

Inventories

72 95

Companies acquired

-4

-5

Retirement benefit liabilities and provisions

Classified as held for sale Exchange rate adjustments

—

-13

Other temporary differences

192 276 -243 526

175 242 -224 431

475 167 -417 485

-8

7

Tax losses and tax credits carried forward

Net deferred tax assets (liabilities)

-146

-185

Offset against liabilities

Total

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.

Deferred tax liabilities Intangible assets and property, plant and equipment

-330 -440

-265 -412

-335 -423

Forest assets

Retirement benefit assets Other temporary differences

—

—

-2

-145 243 -673 -146

-163 224 -616 -185

-294 417 -636 -151

Offset against assets

Total

Net deferred tax assets (liabilities)

Tax charge to other comprehensive income

Before tax

Tax

After tax

Before tax

Tax

After tax

EURm

2024

2023

Actuarial gains and losses on defined benefit plans

7

-2

4

-14

4

-10

Energy shareholdings Translation differences

-31

-16

-47

-1,370

19

-1,351

346

—

346

-120 673

—

-120 539

Cash flow hedges

98 -16

-20

78 -13

-134

Net investment hedges

3

8

-2

6

Total

403

-35

368

-823

-113

-936

Key estimates and judgements

Recognised deferred tax assets The recognition of deferred tax assets requires management judgement as to whether it is probable that such balances will be utilised and/or reversed in the foreseeable future. At 31 December 2024, net operating loss carry-forwards for which the group has recognised a deferred tax asset amounted to EUR 904 million (841 million in 2023 and EUR 584 in 2022), of which EUR 865 million (772 million in 2023 and EUR 514 in 2022) was attributable to German subsidiaries. These losses primarily relate to restructuring activities and mill closures, as well as profit improvement programs implemented in recent years. In Germany net operating loss carry-forwards do not expire. The group expects sufficient future taxable income to be available for the utilisation of deferred tax assets. In other countries net operating loss carry-forwards expire at various dates and in varying amounts. Based on profit forecasts, it is probable that there will be sufficient future taxable profits available against which the tax losses and tax credits can be utilised. The assumptions regarding future realisation of tax benefits, and therefore the recognition of deferred tax assets, may change due to future operating performance of the group, as well as other factors, some of which are outside of the control of the group.

Unrecognised deferred tax assets and liabilities The net operating loss carry-forwards for which no deferred tax is recognised due to uncertainty of their utilisation amounted to EUR 844 million (902 million) in 2024. These net operating loss carry-forwards are mainly attributable to certain German and French subsidiaries and do not expire, as well as to certain Uruguayan subsidiaries which expire at different times by the end of 2029. In addition, the group has not recognised deferred tax assets on loss carry-forwards relating to closed Miramichi paper mill in Canada. These loss carry-forwards expire at different times and the majority of the loss carry-forwards expire by the end of 2028. In Uruguay, tax credits amounting to EUR 151 million (155 million) have not been recognised due to uncertainty of their utilisation. The group has not recognised deferred tax liability in respect of undistributed earnings of non-Finnish subsidiaries to the extent that it is probable that the temporary differences will not reverse in the foreseeable future. In addition, the group has not recognised deferred tax liability for the undistributed earnings of Finnish subsidiaries and associates as such earnings can be distributed without any tax consequences.

UPM FINANCIAL REPORT 2024

312

UPM FINANCIAL REPORT 2024

313

312

313

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024