D6. Other provisions

AP ACCOUNTING PRINCIPLES

Provisions are recognized in the consolidated balance sheet when there is a legal or informal obligation arising from events that have occurred and it is probable that payments will be required to settle the obligation. It must also be possible to reliably estimate the amount to be paid. The provision is valued at the present value of the anticipated future expenditure to settle the obligation.

A provision for restructuring measures is recognized when the Group has established a detailed plan and either implementation has begun or the main features of the measures have been communicated to the parties involved. Restructuring costs include, for example, costs for plant closures, impairment of production machinery and costs for personnel reductions.

KAA Key assessments and assumptions

The amount of the provisions made relating to national competition investigations is based on the company’s best assessment, which was determined in consultation with local expertise in the field.

In respect of tax risks, these are also based on Essity’s best assessment, which in most cases is determined in consultation with local tax experts.

Distribution of other provisions by maturity¹⁾

¹⁾ The timing of provisions totaling SEK 221m cannot be assessed.

²⁾ At the end of January 2019, the Supreme Court in Spain dismissed Essity’s appeal regarding breaches of competition law, meaning that Essity must pay fines of EUR 35m, corresponding to SEK 360m, in 2019. The amount has been recognized as a non-current provision in the 2018 year-end accounts but will be reclassified to current liabilities in the first quarter of 2019.

Provisions for the period for Efficiency programs are mainly attributable to restructuring measures at the production facilities of Professional Hygiene and Consumer Tissue. Provisions for the period for Tax risks relate mainly to uncertainty concerning the outcome of ongoing tax audits. Of the provisions for the period for Environment, SEK 89m pertains to a liability for carbon dioxide emissions, which will be paid out in 2019. Provisions for the period for Legal disputes relate mainly to an increased provision in a case for which a provision has already been made.

Dissolutions for the period for Efficiency programs are related to a dozen different restructuring programs from previous years. Dissolution for the period for Tax risks is primarily attributable to a tax dispute in Denmark. Dissolutions for the period for Legal disputes relate to a case in Hungary. Other dissolutions are attributable to a new assessment of risk relating to foreign tax of a non-recurring nature on non-current assets outside Sweden arising from the split of SCA into two listed companies.

The provisions recognized at the end of the period attributable to Efficiency programs relate mainly to restructuring measures at production facilities of Professional Hygiene and Consumer Tissue. Provisions for Tax risks relate mainly to uncertainty concerning the restructuring programs implemented and the outcome of ongoing tax audits. Provisions for Environment pertain mainly to a liability for carbon dioxide emissions. Provisions for legal disputes mainly consist of reserves for cases relating to Spain, Chile, the Andean Community (CAN) and France. Other provisions mainly comprise reserves in connection with foreign tax of a non-recurring nature on non-current assets outside Sweden and grants received for future investment commitments in Italy.