D6. Other provisions

AP Accounting principles

Provisions are recognized in the consolidated balance sheet when there is a legal or informal obligation arising from past events 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.

From January 1, 2019, tax risks are recognized as tax liabilities in line with the interpretation of IFRIC 23 Uncertainty over Income Tax Treatments which has taken effect. Essity has chosen the permitted modified retrospective approach, meaning that comparative years are not restated.

KAA Key assessments and assumptions

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

Distribution of other provisions by maturity¹⁾

¹⁾ The timing of provisions totaling SEK 224m cannot be assessed.

Provisions for the period for Efficiency programs are mainly attributable to the Group-wide cost-savings program and to restructuring measures at the production facilities of Professional Hygiene and Consumer Tissue. Of the Provisions for the period for Environment, SEK 210m pertains to a liability for carbon dioxide emissions, which will be paid in 2020.

Utilizations for the period for Efficiency programs are attributable to restructuring measures at the production facilities of Professional Hygiene and Consumer Tissue and the Group-wide cost-savings program. Utilizations for the period for Legal disputes relate mainly to the payment of fines in Spain and the settlement of a legal dispute in France.

During the period, Tax risks were reclassified as tax liabilities in line with the interpretation of IFRIC 23 Uncertainty over Income Tax Treatments, which has taken effect. More information is available in the accounting principles section. Reclassifications for the period of Legal disputes relate mainly to the reclassification of provisions for the dispute in Chile to current liability as the Supreme Court rejected Essity’s appeal.

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 Environment pertain mainly to a liability for carbon dioxide emissions. Provisions for Legal disputes mainly consist of reserves for cases relating to the Andean Community (CAN). 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 investment commitments in Italy.