F3. Investments in associates and joint ventures

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 on the basis of 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 Group companies.

Associates

Associated companies are companies in which the Group exercises a significant influence without the partly owned company being a Group company or a joint arrangement. Normally, this means that the Group owns between 20% and 50% of the votes. Accounting for associated companies 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 Group companies and the carrying amount for associated companies 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.

Associates and joint ventures

Asaleo Care

Asaleo Care Ltd (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.

On July 1, 2021, Essity increased its ownership stake in Asaleo Care from 36% to 100%. On account of this, the financial information concerning Asaleo Care below only includes the January to June 2021 period. For further information about the acquisition of the additional shares, refer to Note F6 Acquisitions and divestments of Group companies and other operations.

In 2020, the company discontinued the Baby Care operations in New Zealand. Essity recognized the effects of these transactions as items affecting comparability. During 2019, the company divested the Consumer Tissue operations in Australia.

Bunzl & Biach

Bunzl & Biach GmbH (Bunzl & Biach), Vienna, is Essity’s single largest joint venture that operates in the recovered paper market and supplies raw materials to Essity’s business.