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

Notes to the parent company financial statements

4. Depreciation, amortisation and impairment charges

counterparties except internal derivatives which are used to manage foreign currency and interest rate exposure.

Financial risks, fair values and maturities of the group external derivatives are disclosed in » Note 6.1 Financial risk management and in » Note 6.2 Derivatives and hedge accounting.

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 realisation 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 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 through pension insurance companies. Contributions to pension insurance companies are charged to the income statement in the period to which the contributions relate. Share-based payments Share based compensation is recognised as an expense in the income statement over the earnings period or in the year of award 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 Realised results of derivative contracts and negative fair value of open derivative contracts are recognised in the income statement. Negative fair value of open derivative contracts that are not settled in cash is recognised as a provision in the balance sheet. Hedge accounting is not applied. Income and expenses of balance sheet hedging and forward foreign exchange contracts hedging commercial foreign currency flow of all group companies are recognised in financial items . Income and expenses of commodity derivatives are recognised in operating profit. Income and expenses of commodity derivative contracts of group companies are recognised in financial items. The majority of financial derivative contracts of the group are made by the parent company. All contracts are made with external

Accounting policies

EURm

2024 2023

Intangible rights

2

2

Other intangible assets

15 14 70

13 16 79

1. Sales Sales by business area

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 amortisation according to plan is recorded on a straight-line basis over the expected useful lives of the assets as follows:

Buildings

Machinery and equipment

Other tangible assets

2

3

Total

103

112

EURm

2024 2023

UPM Fibres

2,043

2,075

5. Other operating expenses

Other operations

556

509

Total

2,599

2,585

EURm

2024 2023

Rents and lease expenses Maintenance expenses Other operating expenses 1)

14 91

15

Sales by destination

146 188 349

181 287

EURm Finland

2024 2023

Total

2,545

2,515

Other EU countries

34 20

45 24

1) The research and development costs in operating expenses were EUR 28 million (32 million) and auditor’s fee EUR 2.6 million (3.2 million). In personnel expenses the research and development costs were EUR 20 million (16 million). 6. Income taxes

Other countries

Total

2,599

2,585

2. Other operating income

EURm

2024 2023

EURm

2024 2023

Tax expense for the period

9 3

9

Gains on sale of non-current assets

10

5 6

Tax expense for the previous periods

-10

Rental income

7

Total

12

-1

Other Total

62 79

92

Land and water areas, no depreciation Intangible assets

103

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

Deferred tax assets and liabilities 1)

Buildings

Light machinery and equipment

3. Personnel expenses

EURm

2024 2023

Heavy machinery

Deferred tax assets Provisions Share-based payments

Power plants

40

33

EURm

2024 2023

Other tangible assets

1 2

2

Salaries and fees of the President and CEO, and members of the Board of Directors 1)

Other temporary differences

24 60

3

7

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.

Total

43

Other salaries and fees

203

191

Pension costs

35

36

Deferred tax liabilities Accumulated depreciation difference

Other indirect employee costs

5

7

69 60

73 60

Total

247

241

Revaluations of land areas

1) » Refer Note 3.2 Key management personnel

Total

129

133

1) The parent company has not recognised deferred tax assets and liabilities in the balance sheet. Deferred tax assets and liabilities are calculated based on temporary differences between the carrying and taxable values of assets and liabilities.

Personnel

2024 2023

Total average

2,933

2,932

UPM FINANCIAL REPORT 2024 324

324

UPM FINANCIAL REPORT 2024

325

325

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024