F3. Joint ventures and associates

AP Accounting principles

Joint arrangements

Essity classifies its joint arrangements as joint ventures or joint operations, which are presented in Note F4 Joint operations.

Joint ventures

Joint ventures are defined as companies in which Essity together with other parties has shared control over operations. A joint venture entitles the joint owners to the net assets of the investment. Joint ventures are recognized in accordance with the equity method, meaning that a net item including the goodwill will be recognized for each joint venture in the balance sheet. A share in profits is recognized in the income statement as a component of “Share of profits of associates and joint ventures.” Share of profits is calculated based on Essity’s share of equity in the respective joint venture. Joint arrangements recognized in accordance with the equity method are initially measured at cost. Measurement of acquired assets and liabilities is carried out in the same way as for subsidiaries. Essity’s single largest joint venture is Bunzl & Biach G.m.b.H., Vienna, which supplies the business with raw materials.

Associates

Associates are companies in which the Group exercises a significant influence without the partly owned company being a subsidiary or a joint arrangement. Normally, this means that the Group owns between 20% and 50% of the votes. Accounting for associates is carried out according to the equity method and they are initially measured at cost. Valuation of acquired assets and liabilities is performed in the same manner as for subsidiaries and the carrying amount for associates includes any goodwill and other Group adjustments.

The Group’s share of profit after tax arising in the associate after the acquisition is recognized in the consolidated income statement in the line “Share of profits of associates and joint ventures.” Share of profits is calculated on the basis of Essity’s share of equity in the respective associate.

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Carrying amounts of joint ventures and associates

SEKm

2017

2016

2015

Net increase for the period includes the Group’s share of the profit after tax of joint ventures and associates, as well as items recognized directly in equity (both after deductions for any non-controlling interests), in addition to an adjustment for dividends received during the period, which amounted to SEK 5m (2; 11) for joint ventures and SEK 171m (147; 125) for associates.

Joint ventures

Value, January 1

130

114

122

Net increase in joint ventures¹⁾

Reclassification between joint ventures and associates

–

–8

Translation differences

–4

Value, December 31

144

130

114

Associates

Value, January 1

966

927

925

Investments

–

Company acquisitions

–

Company divestments

–

–40

–

Net increase in associates¹⁾

–28

Impairment of associates

–

–62

Reclassification between associates and subsidiaries

–8

–

Reclassification between joint ventures and associates

–

Translation differences

–15

–50

Value, December 31

918

966

927

BS TF3:1 Value, December 31, joint ventures and associates

1,062

1,096

1,041

Joint ventures and associates

Asaleo Care Ltd

As of 2014, Asaleo Care Ltd in Australia is recognized as an associate in accordance with the equity method, following the flotation of the company on the Australian Securities Exchange (ASX). In connection with the flotation, Essity’s participation decreased to 32.5% from the previous figure of 50%. In 2015, the company implemented a program to repurchase shares from the market, in which Essity did not participate. This caused Essity’s participation in Asaleo Care to increase to 34.7% during the fourth quarter of 2015. This program continued in 2016, resulting in Essity’s share in the company increasing to 35.9%. Asaleo Care manufactures and markets Consumer Tissue, Professional Hygiene and Personal Care products. Essity has licensed its Tork and TENA brands to Asaleo Care for sale in Australia, New Zealand and Fiji.

Bunzl & Biach

Bunzl & Biach is a joint venture that operates in the recovered paper market and supplies raw materials to Essity’s business.

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TF3:1 Material joint ventures and associates, 100% of operations
	Joint ventures			Associates
	Bunzl & Biach			Asaleo Care Ltd			Total
SEKm	2017	2016	2015	2017	2016	2015	2017	2016	2015
Condensed income statement
Net sales	1,123	955	852	3,829	3,851	3,946	4,952	4,806	4,798
Depreciation/amortization	–11	–11	–11	–188	–185	–169	–199	–196	–180
Operating profit	28	22	31	604	597	736	632	619	767
Interest income	–	–	–	–	2	3	–	2	3
Interest expenses	–	–	–	–76	–67	–64	–76	–67	–64
Other financial items	1	1	3	–	–2	–3	1	–1	–
Tax expense	–7	–	–8	–154	–155	–193	–161	–155	–201
Profit for the period	22	23	26	374	375	479	396	398	505
Other comprehensive income/loss for the period	–	–	–1	–61	31	–49	–61	31	–50
Comprehensive income for the period	22	23	25	313	406	430	335	429	455

Condensed balance sheet
Non-current assets	120	118	106	3,402	3,600	3,343	3,522	3,718	3,449
Cash and cash equivalents	19	15	10	194	199	214	213	214	224
Other current assets	174	120	93	1,250	1,269	1,159	1,424	1,389	1,252
Total assets	313	253	209	4,846	5,068	4,716	5,159	5,321	4,925

Non-current financial liabilities	92	60	50	1,975	2,121	1,792	2,067	2,181	1,842
Other non-current liabilities	47	46	47	257	252	181	304	298	228
Current financial liabilities	–	–	–	8	28	24	8	28	24
Other current liabilities	30	25	16	703	652	668	733	677	684
Total liabilities	169	131	113	2,943	3,053	2,665	3,112	3,184	2,778
Net assets	144	122	96	1,903	2,015	2,051	2,047	2,137	2,147
Group share of net assets	71	60	47	688	725	711	759	785	758
Fair value adjustment	62	58	56	182	178	119	244	236	175
Carrying amount of the companies	133	118	103	870	903	830	1,003	1,021	933
Carrying amount of other joint ventures	11	12	11	–	–	–	11	12	11
Carrying amount of other associates	–	–	–	48	63	97	48	63	97
BS TF3:2 Carrying amount of joint ventures and associates	144	130	114	918	966	927	1,062	1,096	1,041
Market value, December 31				5,232	5,296	5,495

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TF3:2 Carrying amounts of joint ventures and associates
Company name	Corp. Reg. No.	Domicile	Share of equity at December 31, 2017 %	Share of equity at December 31, 2016 %	Share of equity at December 31, 2015 %	Carrying amount December 31, 2017 SEKm	Carrying amount December 31, 2016 SEKm	Carrying amount December 31, 2015 SEKm
Joint ventures
Bunzl & Biach GmbH	FN79555v	Vienna, Austria	49	49	49	133	118	103
Other						11	12	11

Associates
Asaleo Care Ltd	61.154.461.300	Melbourne, Australia	36	36	35	870	903	830
Other						48	63	97
BS TF3:1 Carrying amount, December 31						1,062	1,096	1,041