UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

18 Property, plant and equipment

Goodwill by reporting segment

As at 31 December

As at 31 December

2015 –783

2014 –752

EURm

As at 31 December

2015

2014

EURm

As at 31 December

Accumulated depreciation and impairment at 1 Jan.

2015

2014

EURm

2015

2014

EURm

Other intangible assets 1) Acquisition cost at 1 Jan.

Depreciation

–17

–17

UPM Biorefining UPM Raflatac UPM Plywood Other operations

220

209

685

673

Land and water areas Acquisition cost at 1 Jan.

Impairment charges

–

–2

7

7

Additions Disposals

4

6

708

670

Disposals

42 –2 –8

2

13

13

–32

–10

Additions Disposals

9

2

Reclassifications

–6 –8

1

1

Reclassifications

1 7

11

–12

–15

Translation differences

Total

241

230

Translation differences Acquisition cost at 31 Dec.

5

Reclassifications

7

3

Accumulated depreciation and impairment at 31 Dec.

–768

–783

665

685

Translation differences Acquisition cost at 31 Dec.

46

48

758

708

Carrying value at 1 Jan. Carrying value at 31 Dec.

114 134

121 114

Impairment tests The Group prepares impairment test calculations at operating segment or at lower business unit level annually. The key assumptions for calcu- lations are those regarding business growth outlook, product prices, cost development, and discount rate. The business growth outlook is based on general forecasts for the business in question. Ten-year forecasts are used in these calculations as the nature of the Group’s business is long-term, due to its capital intensity, and is exposed to cyclical changes. In estimates of product prices and cost development, forecasts prepared by management for the next three years and estimates made for the following seven years are taken into consideration. The Group’s recent profitability trend is taken into account in the forecasts. In addition, when preparing esti- mates, consideration is given to the investment decisions made by the Group as well as the profitability programmes that the Group has implemented and the views of knowledgeable industry experts on the long-term development of demand and prices. In annual impairment tests, the recoverable amount of groups of cash generating units is determined based on value in use calculations. The discount rate is estimated using the weighted average cost of capital on the calculation date adjusted for risks specific to the busi- ness in question. The pre-tax discount rate used in 2015 for pulp oper- ations Finland was 11.02% (9.86%), and for pulp operations Uruguay 10.38% (9.62%). The recoverable amount is most sensitive to pulp sales prices and the cost of wood raw material. As at 31 December 2015, for pulp operations Finland, a decrease of more than 19.4% in pulp prices would result in recognition of impairment loss against goodwill. The Group believes that no reasonable change in wood cost would cause the aggregate carrying amount to exceed the recoverable amount. For pulp operations Uruguay, a decrease of more than 4.5% in pulp prices or an increase of more than 13% in wood cost would result in recognition of impairment loss against goodwill. A decrease of more than 6.3% in pulp prices or an increase of more than 18% in wood cost would result in a write-down of the entire goodwill.

Accumulated amortisation and impairment at 1 Jan.

–616

–591

Amortisation

–25

–30

Accumulated depreciation and impairment at 1 Jan.

–34

–34

Disposals

32 –7

10 –5

Impairment charges Translation differences

– –

–1

Advance payments and construction in progress Acquisition cost at 1 Jan.

Translation differences

1

366 269

240 225

Accumulated amortisation and impairment at 31 Dec.

–616

–616

Accumulated depreciation and impairment at 31 Dec.

–34

–34

Additions

Reclassifications

–563

–103

Carrying value at 1 Jan. Carrying value at 31 Dec.

69 49

82 69

Carrying value at 1 Jan. Carrying value at 31 Dec.

674 724

636 674

Translation differences Acquisition cost at 31 Dec.

8

4

80

366

Advance payments and construction in progress Acquisition cost at 1 Jan.

Buildings Acquisition cost at 1 Jan.

Carrying value at 1 Jan. Carrying value at 31 Dec.

366

240 366

2 3

13

3,611

3,489

80

Additions

2

Additions Disposals

36

22

Reclassifications

–1

–13

–96 113

–17

Property, plant and equipment, total

4,895

4,707

Acquisition cost at 31 Dec.

4

2

Reclassifications

43 74

Translation differences Acquisition cost at 31 Dec.

73

Carrying value at 1 Jan. Carrying value at 31 Dec.

2 4

13

Finance lease arrangements Property, plant and equipment includes property that is acquired under finance lease contracts. As at 31 December EURm 2015 2014 Buildings Acquisition cost 2 2 Accumulated depreciation –1 –1 Carrying value at 31 Dec. 1 1

3,737

3,611

2

Accumulated depreciation and impairment at 1 Jan.

–2,478 –2,333

Emission rights Acquisition cost 1 Jan.

Depreciation

–82

–81 –42

47 24

18 42

Impairment charges

–

Additions 2)

Disposals

95

17 –8

Disposals and settlements Acquisition cost 31 Dec.

–17

–13

Reclassifications

–26 –33

54

47

Translation differences –31 Accumulated depreciation and impairment at 31 Dec. –2,524 –2,478

Accumulated amortisation and impairment at 1 Jan.

–4

–7

Impairment reversal

– 2

1 2

Carrying value at 1 Jan. Carrying value at 31 Dec.

1,133 1,213

1,156 1,133

Disposals

Machinery and equipment Acquisition cost Accumulated depreciation Carrying value at 31 Dec.

Accumulated amortisation and impairment at 31 Dec.

–2

–4

151 –45 106

265 –95 170

Machinery and equipment Acquisition cost at 1 Jan.

Carrying value at 1 Jan. Carrying value at 31 Dec.

43 52

11 43

14,598 14,504

Additions Disposals

150

115

Leased assets, total

107

171

–760

–374

Other intangible assets, total

329

340

Companies sold Reclassifications

–2

–

472 282

50

1) Other intangible assets consist primarily of capitalised software assets.

Capitalised borrowing costs In 2015, the borrowing costs capitalised as part of non-current assets amounted to EUR 8 million (5 million). In 2015, amortisation of capi- talised borrowing was EUR 4 million (3 million). The average interest rate used was 4.99% (2.34%), which repre- sents the costs of the loan used to finance the projects.

Translation differences Acquisition cost at 31 Dec.

303

2) Additions include emission rights received free of charge.

14,740 14,598

17 Other intangible assets

Accumulated depreciation and impairment at 1 Jan. –12,178 –11,900 Depreciation –388 –373 Impairment charges – –93 Disposals 759 369 Companies sold 2 – Reclassifications –1 19 Translation differences –190 –200 Accumulated depreciation and impairment at 31 Dec. –11,996 –12,178

Water rights Intangible rights include EUR 189 million (189 million) in respect of the water rights of hydropower plants belonging to the UPM Energy that are deemed to have an indefinite useful life as the company has a contractual right to exploit water resources in the energy production of these power plants. The values of these water rights are tested annually for impairment based on expected future cash flows of each separate hydropower plant.

As at 31 December

2015

2014

EURm

Intangible rights Acquisition cost at 1 Jan.

549

536

Additions Disposals

4

3

–28

–2 12

Translation differences Acquisition cost at 31 Dec.

11

536

549

Carrying value at 1 Jan. Carrying value at 31 Dec.

2,420 2,744

2,604 2,420

Accumulated amortisation and impairment at 1 Jan.

–323

–300

Amortisation

–8 28 –9

–16

Disposals

2

Other tangible assets Acquisition cost at 1 Jan.

Translation differences

–9

897

873

Accumulated amortisation and impairment at 31 Dec.

–312

–323

Additions Disposals

7

5

–42

–3 10 12

Carrying value at 1 Jan. Carrying value at 31 Dec.

226 224

236 226

Reclassifications

28 12

Translation differences Acquisition cost at 31 Dec.

902

897

contents

accounts

111

112

UPM Annual Report 2015

UPM Annual Report 2015