E8. Equity

AP Accounting principles

Transaction costs directly relating to the issue of new shares or options are recognized, net after tax, in equity as a reduction in the issue proceeds. Expenditure for the purchase of own shares reduces retained earnings in equity in the Parent company and the portion of consolidated equity that pertains to owners of the Parent company. When these shares are sold, the sales proceeds are included in retained earnings in the equity pertaining to owners of the Parent company.

Equity totaled SEK 63,342m (62,801; 54,899) at December 31, 2020. Page Statement of change in equity shows the Consolidated statement of change in equity.

The tables below show specifications of reserves and income tax attributable to components in other comprehensive income.

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TE8:1 Equity, specification of reserves

 

Revaluation reserve1)

 

Hedge reserve2)

 

Available-for-sale assets

 

Fair value through other comprehensive income

 

Translation reserve

SEKm

2020

2019

2018

 

2020

2019

2018

 

2020

2019

2018

 

2020

2019

2018

 

2020

2019

2018

Value, January 1

107

107

107

 

–206

245

166

 

–

–

6

 

8

4

–

 

6,375

4,647

2,875

Reclassification

 

 

 

 

 

 

 

 

 

 

–6

 

 

 

6

 

 

 

 

Fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

3

6

–5

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Result from remeasurement of derivatives recognized in equity

 

 

 

 

–9

–725

471

 

 

 

 

 

 

 

 

 

 

 

 

Transferred to profit or loss for the period

 

 

 

 

473

112

–378

 

 

 

 

 

 

 

 

 

 

 

 

Translation differences in foreign operations3)

 

 

 

 

–6

10

6

 

 

 

 

 

–

–

2

 

–7,246

1,859

1,868

Gains/losses from hedges of net investments in foreign operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,504

–168

–122

Tax on items recognized directly in/transferred from equity

 

 

 

 

–109

138

–21

 

 

 

 

 

–1

–2

1

 

–310

37

26

Other comprehensive income for the period, net of tax

–

–

–

 

349

–465

78

 

–

–

–6

 

2

4

4

 

–6,052

1,728

1,772

Transfer to cost of fixed assets concerning hedged investments, net of tax

 

 

 

 

–2

14

1

 

 

 

 

 

 

 

 

 

 

 

 

Value, December 31

107

107

107

 

141

–206

245

 

–

–

–

 

10

8

4

 

323

6,375

4,647

1)

Revaluation reserve includes effect on equity of step acquisitions.

2)

See also Note E6 Derivatives and hedge accounting for details of when gains or losses are expected to be recognized.

3)

Transfer to profit or loss of realized translation difference relating to divested and liquidated companies is included in the amount of SEK 4m (–178; 0).

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Total reserves in equity

SEKm

2020

2019

2018

Value, January 1

6,284

5,003

3,154

Reclassification

0

0

0

Fair value through other comprehensive income

3

6

–5

Cash flow hedges:

 

 

 

Result from remeasurement of derivatives recognized in equity

–9

–725

471

Transferred to profit or loss for the period

473

112

–378

Translation differences in foreign operations1)

–7,252

1,869

1,876

Gains/losses from hedges of net investments in foreign operations

1,504

–168

–122

Tax on items recognized directly in/transferred from equity

–420

173

6

Other comprehensive income for the period, net of tax

–5,701

1,267

1,848

Transfer to cost of fixed assets concerning hedged investments, net of tax

–2

14

1

Value, December 31

581

6,284

5,003

1)

Transfer to profit or loss of realized translation difference relating to divested and liquidated companies is included in the amount of SEK 4m (–178; 0).

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TE8:2 Specification of income tax attributable to components in other comprehensive income

 

2020

 

2019

 

2018

SEKm

Before tax

Tax effect

After tax

 

Before tax

Tax effect

After tax

 

Before tax

Tax effect

After tax

Actuarial gains/losses on defined benefit pension plans

–202

280

78

 

482

54

536

 

–1,036

175

–861

Fair value through other comprehensive income

3

–1

2

 

6

–2

4

 

–5

1

–4

Cash flow hedges

464

–109

355

 

–613

138

–475

 

93

–21

72

Translation differences in foreign operations

–8,092

–

–8,092

 

2,095

–

2,095

 

2,080

–

2,080

Other comprehensive income from associated companies

–20

4

–16

 

–14

4

–10

 

23

–1

22

Gains/losses from hedges of net investments in foreign operations

1,504

–310

1,194

 

–168

37

–131

 

–122

26

–96

Other comprehensive income for the period

–6,343

–136

–6,479

 

1,788

231

2,019

 

1,033

180

1,213

At December 31, 2020, the debt/equity ratio amounted to 0.67 (0.81; 0.99). Changes in liabilities and equity are described in the Financial position section. Essity’s target for capital structure is to establish an effective capital structure, while at the same time ensuring long-term access to loan financing. Cash flow in relation to net debt is to be taken into consideration with the aim of maintaining a solid investment grade rating.

Essity has a credit rating for long-term debt of Baa1 from Moody’s and BBB+ from Standard & Poor’s. Essity’s financial risk management is described in the Risk and risk management section. The Essity share section on outlines Essity’s dividend policy, while its capital structure is described in the Objectives, targets and outcomes section.