IAS 41 disclosures, forestry, discounted cash flow valuation, IFRS 13 level 3 hierarchy

Svenska Cellulosa Aktiebolaget SCA (publ)  – Annual report – 31 December 2021

Industry: agriculture



Forest assets are divided into standing timber and land assets. Standing timber is recognized as a biological asset in accordance with IAS 41 Agriculture. Land assets are recognized as property, plant and equipment in accordance with IAS 16 Property, plant and equipment.

The total value of the forest assets is based on transactions in the areas where SCA owns forest assets. To support this valuation, SCA retrieves statistics of transactions, which are available from several market sources. In the case of SCA, inputs to the valuation of forest assets that are used in accordance with IFRS 13 are recognized at various levels in the valuation hierarchy (a description of the different measurement levels can be found in Note E1). The statistics can be viewed as market-corroborated inputs in accordance with measurement level 2, but the valuation is recognized in its entirety as level 3.

This is as the estimated forest volume contains assessments and suppliers make certain adjustments in the transaction data using unobservable inputs (see KAA ). In addition to this, an assessment is carried out of the transaction periods to be included in the calculation of an average price. No transfers have taken place between the measurement levels during the year. If a transfer had taken place between the measurement levels, this would be undertaken at year-end.

In combination with the valuation of total forest assets, and to determine the fair value of the Group’s biological assets, expected future cash flows from the assets were also discounted. The calculation to establish the value of biological assets is based on existing, sustainable harvesting plans and assessments regarding growth, timber prices, harvesting and silviculture costs and selling expenses.

Environmental restrictions and other limitations are taken into account which mean that the assets cannot be fully utilized. The calculation is performed for a production cycle for biological assets that SCA estimated to average 100 years. The change in value is recognized in the income statement on the line item for change in value in biological assets.

The value of land assets constitutes the residual amount between the total value of forest assets calculated based on market data and the value of the biological assets based on discounted cash flows.

To confirm the land value, SCA has discounted cash flows linked to land assets. Land assets relating to forest assets are recognized at fair value in accordance with IAS 16.31, and are recognized on a separate line in the balance sheet under forest assets. The change in value pertaining to land is recognized as other comprehensive income and does not impact profit for the year.


SCA has based its valuation of forest assets in Sweden on forest transactions in the areas where SCA owns forest assets. Market statistics are obtained from the providers Ludvig & Co and Svefa, which are two independent parties in relation to SCA. The providers process the data by adjusting market transactions that include other significant components in addition to forest land. SCA never adjusts the data. The regions where SCA owns forest are allocated in the data based on four different areas and the prices in these areas are used as a basis for the volume weighted price.

The calculated market price is based on forest transactions over the last three years, which is used so individual transactions will not have a major impact on the outcome. Since transactions often take longer than seven months there is no isolated market value given at December 31. To ensure that the volume of transactions offer an accurate picture of market development, given the aforementioned factors, SCA has chosen to use a three-year average.

The three-year average price in 2021 was SEK 324/m³fo (291) and is used to determine the total average value per m³fo of SCA’s forest assets in Sweden. The market in the Baltic states is considered comparable with SCA’s holdings in Sweden in terms of price, and is therefore measured at the same value per m³fo. The distribution of value between biological assets and land in the Baltic states takes place using SCA’s own discounted cash flow model since the production cycles differ. As of December 31, 2021, timber volume is estimated to amount to approximately 256 million m³fo in Sweden. Added to this is approximately 5 million m³fo of timber volume in the Baltic states.

TD3:1 describes the sensitivity of the carrying amount with respect to key assumptions.

1) Following the acquisition of forest assets in Sweden, the fair value has been distributed such that 33% (31) of the value has been allocated to land assets and 67% (69) to biological assets. For the acquisitions made in Estonia and Latvia, 25% (25) of the acquisition price has been allocated to land assets and 75% (75) to biological assets.

2) Other changes are primarily recognized as the increase in value due to market prices and growth of the forest.

The change in the fair value of biological assets and change due to felling are recognized as a net value in the income statement on the line change in value in biological assets. The change amounts to IS SEK 1,753m (1,262). SCA also capitalizes replanting costs. Total change in value of biological assets amounts to SEK 2,033m (1,764).

The current year’s valuation of biological assets and land assets was based on market statistics and discounted cash flows. For the current year’s valuation of biological assets, the same valuation model was used as in the previous year using a yield requirement of 3.5% (3.6) after tax.

When cash flow was discounted, estimated income and expenses were adjusted by an annual inflation rate of 2%. Assumptions regarding future price and cost levels are based on the outcome for prior years adjusted for inflation. The valuation assumes an average wood price of SEK 457 (450) per solid cubic meter under bark (m3sub). Annual harvesting in 2021 was 4.8 million m³sub and is expected to rise over the future production cycle.

On average, 85% of harvesting is final harvesting and 15% thinning. Of this, 56% is expected on average over the years to comprise sawlogs and 44% pulpwood.

SCA’s forest holdings are made up of approximately 2.6 million hectares of forest assets primarily in Northern Sweden, of which approximately 2.0 million is productive forest land. SCA also owns just over 45,000 hectares of forest assets in Estonia and Latvia. Growth amounts to approximately 10.5 million m³fo per year, gross, on productive forest area. Net growth, meaning growth after harvesting and natural losses, is estimated at 3.9 million m³fo per year in Sweden. Harvesting in 2021 amounted to approximately 4.3 million m³sub (4.8).

The following charts and tables illustrate some of the components used to determine the Group’s fair value for biological assets.

Market statistics of forest land prices are obtained from two parties that are independent in relation to SCA: Ludvig & Co and Svefa. The chart below shows forest land prices in Sweden, nominal value 2011–2021.

SCA bases its valuation of forest assets in Sweden on forest transactions in the areas where SCA owns forest assets, over the last three years. Data volume is then weighted based on SCA’s forest holding before application to the total forest valuation. The three-year average price in 2021 was SEK 324/m³fo (291) and is used to determine the total average value per m³fo of SCA’s forest assets in Sweden. The chart below shows historical market price (based on three-year average 2017–2021).

The chart below illustrates SCA’s purchases and divestments of forest land in Sweden over the past five years.