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UPM Annual Report 2015
UPM Annual Report 2015
111
112
contents
accounts
IN BRIEF
STRATEGY
BUSINESSES
STAKEHOLDERS
GOVERNANCE
ACCOUNTS
Goodwill by reporting segment
As at 31 December
EURm
2015
2014
UPM Biorefining
220
209
UPM Raflatac
7
7
UPM Plywood
13
13
Other operations
1
1
Total
241
230
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.
17 Other intangible assets
As at 31 December
EURm
2015
2014
Intangible rights
Acquisition cost at 1 Jan.
549
536
Additions
4
3
Disposals
–28
–2
Translation differences
11
12
Acquisition cost at 31 Dec.
536
549
Accumulated amortisation and impairment at 1 Jan.
–323
–300
Amortisation
–8
–16
Disposals
28
2
Translation differences
–9
–9
Accumulated amortisation and impairment at 31 Dec.
–312
–323
Carrying value at 1 Jan.
226
236
Carrying value at 31 Dec.
224
226
As at 31 December
EURm
2015
2014
Other intangible assets
1)
Acquisition cost at 1 Jan.
685
673
Additions
4
6
Disposals
–32
–10
Reclassifications
1
11
Translation differences
7
5
Acquisition cost at 31 Dec.
665
685
Accumulated amortisation and impairment at 1 Jan.
–616
–591
Amortisation
–25
–30
Disposals
32
10
Translation differences
–7
–5
Accumulated amortisation and impairment at 31 Dec.
–616
–616
Carrying value at 1 Jan.
69
82
Carrying value at 31 Dec.
49
69
Advance payments and construction in progress
Acquisition cost at 1 Jan.
2
13
Additions
3
2
Reclassifications
–1
–13
Acquisition cost at 31 Dec.
4
2
Carrying value at 1 Jan.
2
13
Carrying value at 31 Dec.
4
2
Emission rights
Acquisition cost 1 Jan.
47
18
Additions
2)
24
42
Disposals and settlements
–17
–13
Acquisition cost 31 Dec.
54
47
Accumulated amortisation and impairment at 1 Jan.
–4
–7
Impairment reversal
–
1
Disposals
2
2
Accumulated amortisation and impairment at 31 Dec.
–2
–4
Carrying value at 1 Jan.
43
11
Carrying value at 31 Dec.
52
43
Other intangible assets, total
329
340
1)
Other intangible assets consist primarily of capitalised software assets.
2)
Additions include emission rights received free of charge.
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.
18 Property, plant and equipment
As at 31 December
EURm
2015
2014
Land and water areas
Acquisition cost at 1 Jan.
708
670
Additions
9
2
Disposals
–12
–15
Reclassifications
7
3
Translation differences
46
48
Acquisition cost at 31 Dec.
758
708
Accumulated depreciation and impairment at 1 Jan.
–34
–34
Impairment charges
–
–1
Translation differences
–
1
Accumulated depreciation and impairment at 31 Dec.
–34
–34
Carrying value at 1 Jan.
674
636
Carrying value at 31 Dec.
724
674
Buildings
Acquisition cost at 1 Jan.
3,611
3,489
Additions
36
22
Disposals
–96
–17
Reclassifications
113
43
Translation differences
73
74
Acquisition cost at 31 Dec.
3,737
3,611
Accumulated depreciation and impairment at 1 Jan.
–2,478 –2,333
Depreciation
–82
–81
Impairment charges
–
–42
Disposals
95
17
Reclassifications
–26
–8
Translation differences
–33
–31
Accumulated depreciation and impairment at 31 Dec. –2,524 –2,478
Carrying value at 1 Jan.
1,133
1,156
Carrying value at 31 Dec.
1,213
1,133
Machinery and equipment
Acquisition cost at 1 Jan.
14,598 14,504
Additions
150
115
Disposals
–760
–374
Companies sold
–2
–
Reclassifications
472
50
Translation differences
282
303
Acquisition cost at 31 Dec.
14,740 14,598
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
Carrying value at 1 Jan.
2,420
2,604
Carrying value at 31 Dec.
2,744
2,420
Other tangible assets
Acquisition cost at 1 Jan.
897
873
Additions
7
5
Disposals
–42
–3
Reclassifications
28
10
Translation differences
12
12
Acquisition cost at 31 Dec.
902
897
As at 31 December
EURm
2015
2014
Accumulated depreciation and impairment at 1 Jan.
–783
–752
Depreciation
–17
–17
Impairment charges
–
–2
Disposals
42
2
Reclassifications
–2
–6
Translation differences
–8
–8
Accumulated depreciation and impairment at 31 Dec.
–768
–783
Carrying value at 1 Jan.
114
121
Carrying value at 31 Dec.
134
114
Advance payments and construction in progress
Acquisition cost at 1 Jan.
366
240
Additions
269
225
Reclassifications
–563
–103
Translation differences
8
4
Acquisition cost at 31 Dec.
80
366
Carrying value at 1 Jan.
366
240
Carrying value at 31 Dec.
80
366
Property, plant and equipment, total
4,895
4,707
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
Machinery and equipment
Acquisition cost
151
265
Accumulated depreciation
–45
–95
Carrying value at 31 Dec.
106
170
Leased assets, total
107
171
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.