METSÄ BOARD Annual review 2023
Notes to the consolidated financial statements 1. Accounting principles ■ Metsä Board Group
■ 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 2023, 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.
Business operations and value creation 2 This is Metsä Board 4 CEO’s review 6
Strategy and financial targets
8
Value creation
■ Mitigating climate change and reducing emissions Transitioning to fully fossil free energy in production, abandoning fossil-based raw materials, using energy and water more efficiently, and safeguarding strong forest growth and carbon storage are at the core of Metsä Boards’s sustainability targets. The Group aims for fully fossil free mills and raw materials by the end of 2030. The achievement of ambitious targets requires investment, operational development and the use of the best available technology. Climate-related targets have an impact on the useful lives of property, plant and equipment (Note 4.2) and the prepara- tion of future cash flow estimates in connection with goodwill impairment testing (Note 4.1).
■ Other accounting principles Other accounting principles are presented as part of the relevant Notes.
Metsä Board Corporation and its subsidiaries comprise a forest industry group (”Metsä Board” or ”the Group”). Metsä Board’s business operations consist solely of folding boxboard, fresh fibre linerboard and market pulp businesses. Metsä Board reports on its financial performance in one reporting segment. Metsä Board Corporation is Group’s parent company, which is domiciled in Helsinki. The registered address of the company is Revontulenpuisto 2, 02100 Espoo Finland. The parent company is listed on Nasdaq Helsinki Ltd. At the end of 2023 Metsäliitto Cooperative owned 52.0 per cent of the shares, and the voting rights conferred by these shares were 68.9 per cent. A copy of the annual report can be obtained from Metsä Board’s website www.metsaboard.com or parent company’s head office at Revontulen puisto 2, 02100 Espoo Finland. The Group consolidated financial statements were authorised for issue by the Board of Directors on 7 February 2023. According to Finnish Companies Act shareholders can accept or reject the financial statements in General Meeting of shareholders after date of publication. General Meeting of shareholders also have possibility to decide to change financial statements. ■ Accounting principles Metsä Board Corporation’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Stand- ards (IFRS) effective and approved by the EU at the date of the financial statements 31 December 2023. The notes to the consolidated financial statements also comply with the requirements of Finnish accounting and company legislation supplementing the IFRS regulations. The consolidated financial statements are presented in millions of euros, unless otherwise noted. The consolidated financial statements have been prepared based on original acquisition costs, excluding financial assets recognised at fair value, hedged items in fair value hedging, assets and obligations related to defined benefit plans and share-based payments measured at fair value. ■ The impact of Russia’s military aggression Due to the discontinuation of Russian business operations, the Group rec- ognised an impairment of EUR 0.3 million for owned and leased property. The Group also recognised a loss of EUR 0.7 million in other operating expenses mostly related to accumulated Russian ruble-denominated translation differences. Further information can be found in the notes: 2.4. Operating expenses, 4.2. Property, plant and equipment, 5.1. Equity, translation differences, and 5.2. Financial income and expenses.
Financial development 10 Key figures 12
■ 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 man- agement’s estimates and judgement-based decisions are presented in the following notes:
Report of the Board of Directors
20 72
• Sustainability statement • Sustainability statement assurance report
74
Consolidated financial statements
78 Notes to the consolidated financial statements 126 Parent company financial statements 129 Notes to the parent company financial statements 142 The Board’s proposal to the Annual General Meeting for the distribution of funds 143 Auditor’s Report 147 Shares and shareholders 151 Ten years in figures 152 Taxes 153 Production capacities 155 Calculation of key ratios and comparable performance measures Corporate governance 157 Corporate governance statement 165 • Board of Directors of Metsä Board 168 • Corporate Management Team of Metsä Board
■ Amendments to standards applied during the 2023 financial period
Amendments to IAS 12 Income taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction. The amendments narrow the initial recognition exemption (IRE) and clarify that the exemption does not apply to transactions such as leases and decommissioning obligations which give rise to equal and offsetting temporary differences. The amend- ments will impact the notes to be presented. Further information can be found in the note: 6 Income taxes. Amendments to IAS 12 Income taxes - International Tax Reform — Pillar Two Model Rules. The amendments give relief from accounting for deferred taxes arising from the OECD’s (Organisation for Economic Co-operation and Development) international tax reform and require new disclosures to compensate for the potential loss of information resulting from the relief. Further information can be found in the note: 6 Income taxes. Other standard changes do not have a significant impact on the group’s financial statements. ■ New and amended standards to be applied during future financial periods Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures * (effective for financial years beginning on or after 1 January 2024, early application is permitted). The amendments enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities, cash flows and exposure to liquidity risk. Amendments require to disclose quantitative and qualitative information about supplier finance programs. * = Amendment has not been approved to be applied by the EU by 31.12.2023. Other standard changes do not have a significant impact on the group’s financial statements.
Management’s judgement-based decisions Management’s judgement-based decisions that were made when applying the accounting principles and that have the greatest impact on the figures of the consolidated financial statements concern the following areas:
Item
Note
Nature of management’s judgement-based decisions
Financial instruments measured at fair value
4.4 Other investments
Accounting principle and valuation model applied to the shares of Pohjolan Voima Oyj
Estimates and assumptions The Group’s key uncertainties related to assumptions and estimates that carry a significant risk of the book values of assets and liabilities changing during the following financial period include the following:
Item
Note
Nature of estimates and assumptions
170 Remuneration report 174 Investor relations and investor information
Pension obligations
3.4 Pension obligations
Actuarial assumptions used as the basis for determining the current value of pension obli- gations arising from defined benefit plans and the obligation items recognised as expenses during the financial period
Property, plant and equipment and leases 4.2 Property, plant and equipment
Estimates of the useful lives of property, plant and equipment, and of lease extension options
Fair value measurement
4.3 Other investments
Estimates of key factors affecting cash flows in the valuation of Pohjolan Voima Oyj
Inventories
4.4 Inventories
Estimates of the sales prices of products measured at net realisable value, the costs of comple- tion and the costs necessary for making the sale
Provisions
4.9 Provisions
Estimates of the date and amount of costs from the obligation
Income taxes
6. Income taxes
Estimates of the date and amount of tax liabilities arising in tax audits and deferred tax assets recognised for losses Estimates of the date and amount of costs from obligations related to disputes and legal proceedings
Legal obligations
8.1 Commitments and contingencies
78
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Consolidated financial statements | METSÄ BOARD ANNUAL REVIEW 2023
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