IFRS 12 para 7(c), significant judgements, joint arrangement as joint operation

Stora Enso Oyj – Annual report – 31 December 2017

Industry: forestry, manufacturing

Note 1 Accounting principles (extract)

Consolidation principles (extract)

A joint venture is a joint arrangement whereby the partners who have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of the joint arrangement, which exists only when decisions on relevant activities require the unanimous consent of the parties sharing control.

Joint operations are joint arrangements whereby the partners who have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

Joint control is the contractually agreed sharing of the control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the partners sharing control.

The Group has two joint operations: Veracel and Montes del Plata. In relation to its interest in joint operations, as a joint operator, the Group recognises assets, liabilities, revenues and expenses using the line-by-line method.

  • Veracel is a jointly (50%/50%) owned company of Stora Enso and Fibria located in Brazil. The pulp mill produces 1.2 million tonnes of bleached Eucalyptus hard wood pulp per year and both owners are entitled to half of the mill’s output. The eucalyptus is sourced mostly from the company’s own forestry plantations. The mill commenced production in May 2005 and the group’s share of the pulp shipments are sent primarily to Stora Enso mills in Europe and China.
  • Montes del Plata is a jointly (50%/50%) owned company of Stora Enso and Arauco located in Uruguay. The Montes del Plata Pulp Mill’s annual capacity is 1.4 million tonnes of bleached Eucalyptus hard wood pulp and Stora Enso’s part, 650 000 tonnes, is sold entirely as market pulp. The eucalyptus is sourced mostly from the company’s own forestry plantations. The mill started in June 2014.

Note 2 Critical accounting estimates and judgements (extract)

Control assessment of joint operations and associates

Note 1 Accounting principles describes Veracel and Montes del Plata as joint operations. In both companies Stora Enso’s ownership is 50%. The interpretations as joint operations are based on shareholders’ agreements which give Stora Enso rights to a share of the returns and make the Group liable indirectly for the liabilities, as our ability to pay for the pulp is used to finance the debts. Joint operations are consolidated with the proportionate line-by-line method.

The forest holding companies Bergvik Skog Ab and Tornator Oyj are equity accounted investments. Stora Enso does not control the companies alone or jointly with other parties and thus retains its significant minority interest as equity accounted investments. Equity accounted investments are accounted for using the equity method. These companies are presented in Note 13 Equity accounted investments.

 

 

 

 

 

 

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