UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Reconciliation of the movements of deferred tax asset and liability balances during the year 2014

Post-employment and other long-term benefits as at 31 December 2015

Other post- employment benefits

Other long-term employee benefits

As at 1 Jan. 2014

Charged to the income statement

As at 31 Dec. 2014

Charged to OCI

Translation differences

Pension benefits

Total 888 582 –851

EURm

EURm

Present value of funded obligations Present value of unfunded obligations

888 551

–

– – – –

Deferred tax assets Intangible assets and property, plant and equipment

31

213

–53

– –

– – – – 1 1 – 4 – – 4

160

Fair value of plan assets Net defined benefit liability

–851

–

Inventories

27

8

35

588

31

619

Retirement benefit obligations and provisions

135

–23

46

158

Other temporary differences

30

7

– –

37

Other long-term employee benefits

–

– –

35

35 93

Tax losses and tax credits carried forward

252 657

–12 –73

241 631

Defined benefit asset reported in the assets (Note 24)

93

–

Deferred tax assets, total

46

Total liability in the balance sheet

681

31

35

747

Deferred tax liabilities Intangible assets and property, plant and equipment

239 198

–28

– –

211 205

Post-employment and other long-term benefits as at 31 December 2014

Biological assets

3

Retirement benefit obligations and provisions

18

–1

–8

9

Other post- employment benefits

Other long-term employee benefits

Other temporary differences Deferred tax liabilities, total

139 594

8

–45 –53

102 527

Pension benefits

Total 923 658 –794

EURm

–18

Present value of funded obligations Present value of unfunded obligations

923 625

–

– – – –

The amounts recognised in the balance sheet Deferred tax assets

33

564 501 –63

–79 –24

46

1 4 3

532 428

Fair value of plan assets Net defined benefit liability

–794

–

Deferred tax liabilities

–53 –99

754

33

787

Deferred tax liabilities, less deferred tax assets

55

–104

Other long-term employee benefits

–

– –

40

40 40

Defined benefit asset reported in the assets (Note 24)

40

–

Total liability in the balance sheet

794

33

40

867

29 Retirement benefit obligations The Group operates a number of defined benefit and contribution plans in accordance with local conditions and practices in the coun- tries of those respective plans. About 90% of the Group's defined benefit arrangements exist in Finland, in the UK and in Germany. The Group has defined benefit obligations also in Austria, Holland, France, Canada and in US. One quarter of Group´s employees are active members of defined benefit arrangement plans. In Finland employers have to insure their employees for statutory benefits, as determined in Employee’s Pension Act (TyEL). TyEL provides the employee with insurance protection for old age, disability and death. 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 90% of Group´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 10% 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 Finland there will be reform to the Employee´s Pension Act (TyEL) that will come into effect as of beginning of 2017. The effect of the reform to Group´s defined benefit obligation in TyEL Foundation, Kymin eläkesäätiö, in 2015 is EUR 4 million, which is recognised as past service cost. In the UK, the Group operates a legacy defined benefit scheme, which is closed both to new members and future accrual. A defined contribution section also exists and is open to all current employees. The UK Pension Scheme operates under a single Trust which is inde- pendent 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 2015, net operating loss carry-forwards for which the Group has recognised a deferred tax asset amounted to EUR 797 million (782 million), of which EUR 665 million (630 million) was attributable to German subsidiaries and EUR 0 million (39 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-forwards for which no deferred tax is recognised due to uncertainty of their utilisation amounted to EUR 1,071 million (1,088 million) in 2015. 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 undistrib- uted profits of Finnish subsidiaries and associated companies as such earnings 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 it is probable that the temporary difference will not reverse in the foreseeable future.

The net liability of pension and other post-employment benefits by country as at 31 December 2015

Other countries

Finland Germany

UK

Total 888 582 –851

EURm

Present value of funded obligations Present value of unfunded obligations

314

29

504

41 92

–

490

–

Fair value of plan assets

–406

–2

–409

–34

Net liability

–92

517

95

99

619

The net liability of pension and other post-employment benefits by country as at 31 December 2014

Other countries

Finland Germany

UK

Total 923 658 –794

EURm

Present value of funded obligations Present value of unfunded obligations

355

33

494

41 99

–

559

–

Fair value of plan assets

–394

–2

–363

–35 105

Net liability

–39

590

131

787

contents

accounts

117

118

UPM Annual Report 2015

UPM Annual Report 2015