BUSINESS OPERATIONS AND VALUE CREATION
Sensitivity of benefit obligation to changes in essential weighted assumptions 2022 Impact on benefit obligation Change of assumption Increase Decrease Discount rate 0.5%-points 4.5% decrease 4.9% increase Salary growth rate 0.5%-points 0.5% increase 0.4% decrease Pension growth rate 0.5%-points 4.2% increase 3.9% decrease
4. Capital employed ■ 4.1 Intangible assets
Accounting principles Goodwill
One year increase in assumption
One year decrease in assumption
Goodwill arising from the merging of business operations is recognised as the amount by which the sum of the consideration paid, the non-controlling interests’ share in the object of the acquisition and the previous holding exceed the fair value of the acquired net assets. Goodwill is not amortised. Instead, it is tested for impairment annually and always when there is an indication of a decrease in value. Goodwill is therefore allocated to cash-generating units for impairment testing. Goodwill is recognised at original acquisition cost less accumulated impairment losses. Other intangible assets Intangible assets are initially recognised at their original acqui- sition cost on the balance sheet if the acquisition cost can be determined reliably and it is probable that the expected financial benefit from the asset will be to the benefit of the Group. Intangible assets with limited useful lives are recognised as expenses over their known or estimated useful lives, using the straight-line depreciation method. The residual value of an asset, the useful life and depreciation method are reviewed at least annually, at the end of each financial period, and adjustments are made when necessary to reflect changes in the expected financial benefit of the asset. Research and development costs Research costs are recognised as expenses at the time they are incurred. Development costs are capitalised and amortised over their useful lives if the research project is likely to generate financial benefits and the costs can be measured reliably. Metsä Board has not capitalised development costs. Computer software Costs arising from developing and building of significant new computer software are recognised as intangible assets on the balance sheet and depreciated on a straight-line basis over its estimated useful life, which is not to exceed seven years. Maintenance and operating costs related to computer software are recorded as expenses in the reporting period during which they have been incurred. Configuration and customisation costs in the deployment of cloud services are recognised as expenses if they do not result in intangible assets. If the services received by the group are sep- arable, the costs are recognised as expenses when the supplier modifies the application. If the services received by the group are not separable, the costs are recognised as expenses when the supplier provides access to the application during the term of the agreement. Patents, licences and trademarks The cost of patents, licences and trademarks with finite useful lives are capitalised on the balance sheet under intangible assets and depreciated on a straight-line basis over their useful lives of 5–10 years.
2.9% increase 2.9% decrease
The aforementioned sensitivity analyses are based on a situation where all other assumptions remain unchanged when one assumption changes. The sensitivity of a defined benefit obligation to changes in significant actuarial assumptions has been calculated using the same method as is used in calculating the pension obligation recognised in the balance sheet.
Plan assets are comprised as follows:
2022 EUR million
2021 EUR million
Qualifying insurance policies Cash and cash equivalents
2.2 0.4 2.1
Funds held by Insurance company
37.3 100% 62.8 100%
The most considerable risks related to Defined benefit plans are as follows:
Changes in the return on bonds Liabilities arising from the arrangements have been calculated using a dis- count rate based on the return on high-quality corporate bonds. A decline in the discount rate increases the arrangements’ liabilities. Inflation risk The plan’s benefit obligations are linked to inflation and a higher inflation will lead to increased obligation. Life expectancy The majority of the arrangement obligations arises from generating lifetime benefits for members, so the expected increase in life expectancy will increase the arrangement obligations. The contribution made to post-employment defined benefit plans is expected to be EUR 1.4 million in 2023. The weighted average duration of the defined benefit obligation is 11.5 years (14.4).
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