UPM annual report 2014

Non-controlling interests On 11 December 2014, the Group acquired the remaining 10% of the issued shares of Wisapower Oy for a purchase consideration of EUR 4 million. The Group now holds 100% of the equity share capital of Wisapower Oy. The carrying amount of the non-controlling interests in Wisapower Oy on the date of acquisition was EUR 3 million. The Group derecognised non-controlling interests of EUR 3 million and recorded a decrease in equity attributable to owners of the parent of EUR 1 million. The effect of changes in the ownership interest of Wisapower Oy on the equity attributable to owners of the parent com- pany during the year is summarised as follows:

Reconciliation of the movements of deferred tax asset and liability balances during the year 2013

Year ended 31 December

2014

2013

EURm

As at 1 Jan. 2013

Charged to the income statement

As at 31 Dec. 2013

Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Excess of consideration paid recognised in equity attributable to owners of the parent company

Charged to OCI

Translation differences

3

– –

EURm

–4

Deferred tax assets Intangible assets and property, plant and equipment

221

–8

– –

– – 1 1

213

Inventories

40

–13 –12 –39

27

–1

–

Retirement benefit obligations and provisions

164

–18

135

Other temporary differences

68

– –

30

Tax losses and tax credits carried forward

368 861

–103 –175

–13 –11

252 657

Deferred tax assets, total

–18

Deferred tax liabilities Intangible assets and property, plant and equipment

366 224

–127

– –

– – – – –

239 198

Biological assets

–26

Retirement benefit obligations and provisions

5

–3 –2

16

18

Other temporary differences Deferred tax liabilities, total

139 734

2

139 594

–158

18

The amounts recognised in the balance sheet Deferred tax assets

739 612

–146 –129

–18

–11

564 501 –63

Deferred tax liabilities

18 36

–

28 Deferred income taxes Reconciliation of the movements of deferred tax asset and liability balances during the year 2014

Deferred tax liabilities, less deferred tax assets

–127

17

11

As at 1 Jan. 2014

Charged to the income statement

As at 31 Dec. 2014

Charged to OCI

Translation differences

EURm

29 Retirement benefit obligations The Group operates a number of defined benefit and contribution plans in accordance with local conditions and practices in the countries in which it operates. About 90% of the Group's defined benefit arrange- ments exist in Finland, in the UK and in Germany. The Group has defined benefit obligations also in Austria, Holland, France, Canada and in US. Globally about one quarter of employees belong to defined bene- fit arrangements. In Finland employers have to insure their employees for statutory benefits, as determined in Employee’s Pension Act (TyEL). Under TyEL, the benefits that are funded during employment are old age benefit and disability benefit. The benefits can be insured with an insurance company or the employer can establish a fund or a foundation to manage the statutory benefits. Approximately 92% of UPM’s Finnish employees are insured with an insurance company and these arrangements are regarded as defined contribution plans. In addition, the Group operates a TyEL foundation to fulfil the requirement for approximately 8% of employees. The TyEL foundation, Kymin Eläkesäätiö, is regarded as a defined benefit plan for the benefits that are based on employee's average salary. The TyEL Foundation is administered by the representatives of both the employer and the employees. The foundation has named an authorised representative to take care of its regular operations. The Plan is supervised by Financial Supervisory Authority. In the UK, the Group operates a legacy defined benefit scheme, which is closed both to new members and future accrual. A defined con- tribution section also exists and is open to all current employees. The UK Pension Scheme operates under a single Trust which is independent from the Group. In Germany employees within defined benefit arrangements are entitled to annual pensions on retirement based on their service and final salary. The members also receive benefits on disability and on death.

At 31 December 2014, net operating loss carry-forwards for which the Group has recognised a deferred tax asset amounted to EUR 782 million (831 million), of which EUR 630 million (678 million) was attributable to German subsidiaries and EUR 39 million (74 million) to a Canadian subsidiary. In Germany the net operating loss carry-forwards do not expire. In other countries net operating loss carry-forwards expire at various dates and in varying amounts. The net operating loss carry-for- wards for which no deferred tax is recognised due to uncertainty of their utilisation amounted to EUR 1,088 million (903 million) in 2014. These net operating loss carry-forwards are mainly attributable to a Canadian subsidiary and certain German and French subsidiaries. No deferred tax liability has been recognised for the undistributed profits of Finnish subsidiaries and associated companies as such earn- ings can be distributed without any tax consequences. In addition the Group does not recognise a deferred tax liability in respect of undistributed earnings of non-Finnish subsidiaries to the extent that such earnings are intended to be permanently reinvested in those operations or such earnings can be distributed without any tax consequences.

Deferred tax assets Intangible assets and property, plant and equipment

213

–53

– –

– – – – 1 1 – 4 – – 4

160

Inventories

27

8

35

Retirement benefit obligations and provisions

135

–23

46

158

Other temporary differences

30

7

– –

37

Tax losses and tax credits carried forward

252 657

–12 –73

241 631

Deferred tax assets, total

46

Deferred tax liabilities Intangible assets and property, plant and equipment

239 198

–28

– –

211 205

Biological assets

3

Retirement benefit obligations and provisions

18

–1

–8

9

Other temporary differences Deferred tax liabilities, total

139 594

8

–45 –53

102 527

–18

The amounts recognised in the balance sheet Deferred tax assets

564 501 –63

–79 –24

46

1 4 3

532 428

Deferred tax liabilities

–53 –99

Deferred tax liabilities, less deferred tax assets

55

–104

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.

CONTENTS

ACCOUNTS

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UPM Annual Report 2014

UPM Annual Report 2014