■ Translations in foreign currency The items included in the financial statements of Group companies are presented in the currency that is used in each company’s primary operat- ing environment. The consolidated financial statements are presented in euros, which is the parent company’s functional and presentation currency. Business transactions denominated in foreign currencies are recognised in the operating currency using the exchange rate on the transaction date. At the end of the financial period, open receivables and liabilities denom- inated in foreign currencies are translated into the functional currency using the exchange rate on the balance sheet date. Since March 2022, the rate used for the Russian ruble is the closing rate for EUR/RUB published by Refinitiv, which management considers to best represent the market rate for the time. Any gains or losses resulting from transactions in foreign currencies and from the translation of monetary items are recognised in financial income and expenses. Information about currency hedging is provided in Note 5.6 Management of financial risks. The income statements of Group companies whose functional currency is not the euro are translated into euros using the average exchange rates of the financial period, and their balance sheets are translated using the exchange rates on the balance sheet date. Changes in translation differences arising from the translation of Group companies’ income state- ments and balance sheets and from the translation of net investments in foreign entities are recognised in the consolidated comprehensive income statement. In conjunction with divestments of Group companies, either by selling or by dissolving , translation differences accumulated by the time of the divestment are recognised in the income statement as part of the gain or loss from the divestment. ■ Earnings per share Undiluted earnings per share are calculated using the weighted average number of shares during the reporting period, where the own shares held by the group have been deducted. In calculating earnings per share adjusted for the effect of dilution, the average number of shares is adjusted for the dilution effect of any equity instruments that have been issued. In calculating earnings per share, earnings are taken to be the reported earnings attributable to the parent company’s shareholders.
■ Other accounting principles Other accounting principles are presented as part of the relevant Notes.
■ Key estimates and judgements The preparation of financial statements requires the use of the manage- ment’s estimates, assumptions and judgement-based decisions that affect the amount of assets and liabilities, the presentation of contingent assets and liabilities in the financial statements, and the amount of income and expenses. Even though such estimates and assumptions are based on the management’s best knowledge at the time they were made, it is possible that the actual values differ from those used in the financial statements. In terms of the financial statements, the key areas that involve the management’s estimates and judgement-based decisions are presented in the following notes:
Key estimates and judgements
Retirement benefit obligations
3.4 Retirement benefit obligations
Intangible assets and impairment testing 4.1 Intangible assets
Property, plant and equipment and leases 4.2 Tangible assets Financial instruments measured at fair value 4.3 Other investments Valuation of inventories 4.4 Inventories
4.5 Accounts receivable and other receivables
Valuation of accounts receivable
6. Income taxes
Contingent liabilities from legal disputes and claims
8.1 Contingent liabilities, assets and commitments
Consolidated financial statements | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022
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