Annual Report (ESEF) • Mar 14, 2023
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Download Source File743700TU2S3DXWGU7H322022-01-012022-12-31743700TU2S3DXWGU7H322021-01-012021-12-31743700TU2S3DXWGU7H322022-12-31743700TU2S3DXWGU7H322021-12-31743700TU2S3DXWGU7H322020-12-31743700TU2S3DXWGU7H322020-12-31ifrs-full:IssuedCapitalMember743700TU2S3DXWGU7H322020-12-31ifrs-full:TreasurySharesMember743700TU2S3DXWGU7H322020-12-31eli:ReserveOfInvestedUnrestrictedEquityMember743700TU2S3DXWGU7H322020-12-31ifrs-full:OtherReservesMemberiso4217:EURiso4217:EURxbrli:sharesxbrli:shares743700TU2S3DXWGU7H322020-12-31ifrs-full:RetainedEarningsMember743700TU2S3DXWGU7H322020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700TU2S3DXWGU7H322020-12-31ifrs-full:NoncontrollingInterestsMember743700TU2S3DXWGU7H322021-01-012021-12-31ifrs-full:RetainedEarningsMember743700TU2S3DXWGU7H322021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700TU2S3DXWGU7H322021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember743700TU2S3DXWGU7H322021-01-012021-12-31ifrs-full:OtherReservesMember743700TU2S3DXWGU7H322021-01-012021-12-31ifrs-full:TreasurySharesMember743700TU2S3DXWGU7H322021-12-31ifrs-full:IssuedCapitalMember743700TU2S3DXWGU7H322021-12-31ifrs-full:TreasurySharesMember743700TU2S3DXWGU7H322021-12-31eli:ReserveOfInvestedUnrestrictedEquityMember743700TU2S3DXWGU7H322021-12-31ifrs-full:OtherReservesMember743700TU2S3DXWGU7H322021-12-31ifrs-full:RetainedEarningsMember743700TU2S3DXWGU7H322021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700TU2S3DXWGU7H322021-12-31ifrs-full:NoncontrollingInterestsMember743700TU2S3DXWGU7H322022-01-012022-12-31ifrs-full:RetainedEarningsMember743700TU2S3DXWGU7H322022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700TU2S3DXWGU7H322022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember743700TU2S3DXWGU7H322022-01-012022-12-31ifrs-full:OtherReservesMember743700TU2S3DXWGU7H322022-01-012022-12-31ifrs-full:TreasurySharesMember743700TU2S3DXWGU7H322022-12-31ifrs-full:IssuedCapitalMember743700TU2S3DXWGU7H322022-12-31ifrs-full:TreasurySharesMember743700TU2S3DXWGU7H322022-12-31eli:ReserveOfInvestedUnrestrictedEquityMember743700TU2S3DXWGU7H322022-12-31ifrs-full:OtherReservesMember743700TU2S3DXWGU7H322022-12-31ifrs-full:RetainedEarningsMember743700TU2S3DXWGU7H322022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember743700TU2S3DXWGU7H322022-12-31ifrs-full:NoncontrollingInterestsMember FINANCIAL STATEMENTS annual reviewsustainabilitygovernanceremuneration FINANCIAL STATEMENTS 2022 II Contents THE REPORT OF THE BOARD OF DIRECTORS 1 FINANCIAL STATEMENTS 9 Notes 16 1. General accounting principles 16 2. Operational result 19 3. Business acquisitions and disposals 28 4. Personnel 35 5. Tangible and Intangible assets 45 6. Inventories, trade and other receivables, trade and other liabilities 57 7. Capital structure 62 8. Other notes 79 9. Key indicators 90 PARENT COMPANY FINANCIAL STATEMENTS 96 Parent company Financial Statements 96 company 100 Notes to the income statement 101 Notes to the balance sheet 104 SHARES AND SHAREHOLDERS 115 BOARD’S PROPOSAL FOR THE PROFITS DISTRIBUTION 119 SIGNATURES 119 AUDITOR’S REPORT 120 AUDITOR’S REASONABLE ASSURANCE REPORT ON ESEF FINANCIAL STATEMENTS 125 Contents FINANCIAL STATEMENTS 2022 1 Report of the board of directors 2022 THE REPORT OF THE BOARD OF DIRECTORS Market situation EUR million 2022 2021 2020 2,130 733 34.4% 735 34.5% 470 22.1% 472 22.2% 30.4% FINANCIAL STATEMENTS 2022 2 EUR million 2022 2021 2020 1,276 1.7 101.9% 40.6% 300 321 Changes in corporate structure FINANCIAL STATEMENTS 2022 3 Consumer Customers business EUR million 2022 2021 (1 2020 1,301 496 38.1% 497 38.2% 322 24.7% 323 24.9% 191 Corporate Customers business EUR million 2022 2021 (1 2020 829 238 28.7% 238 28.7% 148 17.9% 148 17.9% 99 FINANCIAL STATEMENTS 2022 4 Investments EUR million 2022 2021 2020 290 191 99 25 314 9 26 255 12 2022 2021 2020 2,939 2,684 Total 5,623 Key ESG indicators 4Q22 4Q21 –5.7% 86.2% 29.6% 337 12 Financing arrangements and ratings EUR million Maximum amount In use on 31 Dec 2022 Long term credit ratings Rating Outlook Stable Stable FINANCIAL STATEMENTS 2022 5 Share 2022 2021 2020 71.2 208.4 279.6 14,575.8 167.1,% Shares and market values 2022 2021 2020 167,335,073 Treasury shares 7,075,378 160,259,695 49.46 8,276 4.23,% Total Treasury Outstanding FINANCIAL STATEMENTS 2022 6 Authorisations of the Board of Directors • • • • • FINANCIAL STATEMENTS 2022 7 FINANCIAL STATEMENTS 2022 8 Corporate Governance Statement and Remuneration Report Events after the reporting period FINANCIAL STATEMENTS 2022 9 Consolidated income statement EUR million Note 2022 2021 Revenue 2.1, 2.3 2,129.5 1,997.9 Other operating income 2.4 6.9 9.0 Materials and services 2.5 –820.8 –763.6 Employee expenses 4.1 –394.8 –373.8 Other operating expenses 2.5 –187.5 –172.2 EBITDA 2.1 733.3 697.4 Depreciation, amortisation and impairment 2.1, 5.1 –263.4 –266.6 EBIT 2.1 469.8 430.8 Financial income 7.4.1 5.6 4.6 Financial expenses 7.4.1 –18.7 –16.5 Share of associated companies’ profit –0.7 –0.5 Profit before tax 456.0 418.4 Income taxes 8.1.1 –83.2 –74.9 Profit for the period 372.8 343.5 Attributable to Equity holders of the parent 374.1 343.6 Non-controlling interests –1.3 –0.2 372.8 343.5 Earnings per share (EUR) Basic 2.6 2.33 2.15 Diluted 2.6 2.33 2.15 Average number of outstanding shares (1,000 shares) Basic 2.6 160,253 160,174 Diluted 2.6 160,410 160,174 Contents THE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2022 10 Consolidated statement of comprehensive income EUR million Note 2022 2021 Profit for the period 372.8 343.5 Other comprehensive income, net of tax Items which may be reclassified subsequently to profit or loss Cash flow hedge –0.3 0.9 Translation differences –4.7 –1.2 Items which are not reclassified subsequently to profit or loss Remeasurements of the net defined benefit liability 4.3 0.4 –2.8 Other comprehensive income –4.7 –3.0 Total comprehensive income 368.0 340.4 Total comprehensive income attributable to Equity holders of the parent 369.3 340.5 Non-controlling interests –1.3 –0.1 FINANCIAL STATEMENTS 2022 11 Consolidated statement of financial position EUR million Note 31 Dec. 2022 31 Dec. 2021 ASSETS Non-current assets Property, plant and equipment 5.2 766.7 752.7 Right-of-use assets 5.3 90.4 91.0 Goodwill 5.4.1 1,157.3 1,139.4 Intangible assets 5.4 210.5 198.1 Investments in associated companies 8.3.2 9.9 10.6 Other financial assets 7.4.3 16.2 16.4 Trade and other receivables 6.2.2, 7.4.4 116.8 103.2 Deferred tax assets 8.1.2 13.1 13.1 2,380.9 2,324.5 Current assets Inventories 6.1 95.5 82.8 Trade and other receivables 6.2.1 537.1 506.3 Tax receivables 1.8 0.7 Cash and cash equivalents 85.4 114.1 719.9 703.9 TOTAL ASSETS 2.1 3,100.8 3,028.4 Consolidated Financial Statements FINANCIAL STATEMENTS 2022 12 Consolidated statement of financial position EUR million Note 31 Dec. 2022 31 Dec. 2021 EQUITY AND LIABILITIES EQUITY Share capital 83.0 83.0 Treasury shares –124.5 –126.1 Reserve for invested non-restricted equity 90.9 90.9 Other reserves 373.9 373.9 Retained earnings 823.2 776.1 Equity attributable to equity holders of the parent 4.2, 7.3 1,246.5 1,197.8 Non-controlling interests 5.4 6.3 TOTAL EQUITY 1,251.9 1,204.1 LIABILITIES Non-current liabilities Deferred tax liabilities 8.1.2 25.7 25.3 Interest-bearing financial liabilities 7.4.2, 7.4.3 995.0 1,141.4 Lease liabilities, interest-bearing 7.4.2, 7.4.3 70.8 73.4 Trade payables and other liabilities 6.3, 7.4.3, 7.4.4 30.3 41.0 Pension obligations 4.3 12.9 14.4 Provisions 8.2 2.9 2.8 1,137.7 1,298.3 Current liabilities Interest-bearing financial liabilities 7.4.2, 7.4.3 275.0 100.2 Lease liabilities, interest-bearing 7.4.2, 7.4.3 20.4 18.1 Trade and other payables 6.3, 7.4.3 412.9 401.6 Tax liabilities 2.1 2.9 Provisions 8.2 0.8 3.1 711.2 526.0 TOTAL LIABILITIES 1,848.9 1,824.3 TOTAL EQUITY AND LIABILITIES 3,100.8 3,028.4 FINANCIAL STATEMENTS 2022 13 Consolidated cash flow statement EUR million Liite 2022 202 Cash flow from operating activities Profit before tax 456.0 418.4 Adjustments Depreciation, amortisation and impairment 5.1 263.4 266.6 Financial income (-) and expenses (+) 7.4.1 13.1 11.9 Gains (-) and losses (+) on the disposal of fixed assets –0.1 –1.8 Increase (+) / decrease (-) in provisions on the income statement –2.2 2.6 Other adjustments –16.0 –15.6 258.2 263.7 Change in working capital Increase (-) / decrease (+) in trade and other receivables –16.2 –31.7 Increase (-) / decrease (+) in inventories –13.3 –17.6 Increase (+) / decrease (-) in trade and other payables 2.0 52.6 –27.5 3.3 Dividends received 0.4 0.6 Interest received 2.3 2.8 Interest paid –12.6 –17.4 Taxes paid –85.0 –75.7 Net cash flow from operating activities 591.8 595.7 Consolidated income statement and statement of comprehensive income FINANCIAL STATEMENTS 2022 14 Consolidated cash flow statement EUR million Liite 2022 2021 Cash flow from investing activities Equity investments and business acquisitions 3 –20.5 –4.5 Contingent consideration of subsidiaries –0.1 –1.1 Investments in associates 0.0 –9.7 Other investments –0.3 –0.4 Capital expenditure –270.9 –258.8 Loans granted 3 –0.5 Repayment of loan receivables 0.1 Proceeds from disposal of subsidiaries and businesses –0.2 Proceeds from disposal of other investments 0.0 0.1 Proceeds from disposal of tangible and intangible assets 0.1 0.8 Net cash flow used in investing activities –291.9 –274.1 Cash flow before financing activities 299.9 321.6 Cash flow from financing activities Proceeds from long-term borrowings 100.4 Repayment of long-term borrowings –100.3 –174.1 Increase (+) / decrease (-) in short-term borrowings 124.8 –19.6 Repayment of lease liabilities –24.9 –23.1 Dividends paid –328.1 –310.9 Net cash used in financing activities –328.5 –427.4 Change in cash and cash equivalents –28.6 –105.8 Translation differences –0.1 –0.2 Cash and cash equivalents at the beginning of the period 114.1 220.1 Cash and cash equivalents at the end of the period 85.4 114.1 FINANCIAL STATEMENTS 2022 15 Consolidated statement of changes in equity Equity attributable to equity holders of the parent Reserve for invested Non- Share Treasury non-restricted Other Retained controlling Total EUR million capital shares equity reserves earnings Total interests equity Balance at 1 January 2021 83.0 –128.4 90.9 375.7 761.5 1,182.7 1.5 1,184.2 Profit for the period 343.6 343.6 –0.2 343.5 Other comprehensive income Translation differences –1.2 –1.2 0.1 –1.2 Cash flow hedge 0.9 0.9 0.9 Remeasurements of the net defined benefit liability –2.8 –2.8 –2.8 Total other comprehensive income –1.9 –1.2 –3.1 0.1 –3.0 Total comprehensive income –1.9 342.4 340.6 –0.1 340.4 Dividend distribution –312.4 –312.4 –0.1 –312.5 Share-based compensation 2.3 2.3 2.3 Acquisition of subsidiary with non-controlling interests 5.1 5.1 Other changes –15.5 –15.5 –15.5 Balance at 31 December 2021 83.0 –126.1 90.9 373.9 776.1 1,197.8 6.3 1,204.1 Profit for the period 374.1 374.1 –1.3 372.8 Other comprehensive income Translation differences –4.8 –4.8 0.0 –4.7 Cash flow hedge –0.3 –0.3 –0.3 Remeasurements of the net defined benefit liability 0.4 0.4 0.4 Total other comprehensive income 0.0 –4.8 –4.7 0.0 –4.7 Total comprehensive income 0.0 369.3 369.3 –1.3 368.0 Dividend distribution –328.5 –328.5 –0.1 –328.7 Share-based compensation 1.6 1.6 1.6 Acquisition of subsidiary with non-controlling interests 0.5 0.5 Other changes 6.4 6.4 6.4 Balance at 31 December 2022 83.0 –124.5 90.9 373.9 823.2 1,246.5 5.4 1,251.9 FINANCIAL STATEMENTS 2022 16 Notes to the consolidated financial statements Contents THE REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATE- MENTS Consolidated Financial Statements 1 GENERAL ACCOUNTING PRINCIPLES 1.1 Basic information about the Group Information about the parent company: Elisa Corporation Domicile: Helsinki, Finland Registered address: Ratavartijankatu 5, 00520 Helsinki Business ID: 0116510–6 Elisa Corporation (“Elisa” or “the Group”) engages in telecommunications activities and provides ICT and online services in Finland and in selected international market areas. The shares of the parent company, Elisa Corporation, have been listed on the Nasdaq Helsinki since 1997. On 26 January 2023, Elisa Corporation’s Board of Directors accepted this financial statement for publication. A copy of financial statement is available from Elisa’s head office at Ratavartijankatu 5, Helsinki, or on the company’s website at www.elisa.com. 1.2 Basis of preparation of financial statements Elisa’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), including adherence to IAS and IFRS standards and SIC and IFRIC interpretations valid as at 31 December 2022. In the Finnish Accounting Act and the provisions issued pursuant to it, the Inter-national Financial Reporting Standards refer to standards and interpretations that have been approved for application in the EU according to the procedures provided for in EU regulation (EC) No. 1606/2002 (“IFRS”). The notes to the consolidated financial statements are also compliant with Finnish accounting and corporate legislation. The consolidated financial statements have been prepared under the historical cost convention with the exception of financial assets and liabilities, share-based payments, pension liabilities and derivatives recognised at fair value through profit or loss or statement of comprehensive income. The financial statements are presented in EUR million and the figures are rounded to one decimal place. 1.2.1 Accounting principles, structure and presentation of the consolidated financial statements The accounting policies and descriptions of management’s judgment-based conclusions are mainly found in the notes to the financial statements, which are listed in the table below. Only some general accounting policies are described in this section. Summary of notes, related to accounting principles for the consolidated financial statements of Elisa Group Accounting principle Note Operating segments 2.1 Revenue from contracts with customers 2.3 Other operating income 2.4 Research and development costs 2.5 Earnings per share 2.6 Business acquisitions and disposals 3 Share-based incentives 4.2 Pension obligations 4.3 Property, plant and equipment 5.2 Right-of-use assets 5.3 Intangible assets 5.4 Goodwill 5.4.1 Inventories, trade and other receivables, trade and other liabilities 6 Financial assets and liabilities 7.4 Derivative instruments 7.4.4 Income taxes 8.1.1 Deferred tax assets and liabilities 8.1.2 Provisions 8.2 Consolidation principles, subsidiaries 8.3.1 Consolidation principles, joint arrangements 8.3.2 Off-balance sheet leases 8.4 The symbols below indicate the figures mentioned in the notes that match the balances in the income statement, statement of financial position and the cash flow statement. I/S = Income Statement B/S = Balance Sheet C/F = Cash Flow Statement FINANCIAL STATEMENTS 2022 17 Consolidated income statement and statement of com- prehensive income Consolidation principles The consolidated financial statements include the parent company, Elisa Corporation, subsidiaries, associates and joint arrangements as described in detail in Notes 8.3.1 and 8.3.2. Foreign currency items Functional currency The consolidated financial statements are presented in euros, which is the functional and presentation currency of the parent company. Transactions in foreign currencies Foreign currencies transactions are translated into functional currency using the exchange rates prevailing on the dates of the transactions. Monetary items have been translated into the functional currency at the exchange rates prevailing at the end of the reporting period. Non-monetary items denominated in foreign currencies are translated at the exchange rate at the date of the transaction, excluding items measured at fair value that are translated at the exchange rates prevailing on the valuation date. Gain and losses arising from the currency translations are recognised through profit or loss. Foreign exchange gain and losses resulting from operating activities are included in the respective items above operating profit. Foreign exchange gain and losses from the liabilities denominated in a foreign currency are included in financial income and expenses, with the exception for exchange rate differences on foreign currency items that constitute a part of the net investment made in a foreign unit. These exchange rate differences are recognised in other comprehensive income and accumulated exchange rate differences are included in the translation difference presented in shareholders’ equity. Translation of foreign Group companies’ financial statements The income statements of foreign subsidiaries that use a functional currency other than the Group’s presentation currency have been converted into euro at the average exchange rate prevailing during the year, and statements of financial position at the exchange rate prevailing at the end of the reporting period. The different exchange rates applicable to the conversion of profit or loss on the income statement and balance sheet result in a translation difference recognised in shareholders’ equity on the balance sheet, and any change in this difference is recognised in other comprehensive income. Translation differences arising from the elimination of the acquisition cost of foreign subsidiaries, as well as translation differences arising from equity items accumulated after the acquisition, are recognised in other comprehensive income. When a subsidiary is divested in full or in part, accumulated translation differences are recognised in the income statement as part of the sales gain or loss. Goodwill arising from the acquisition of foreign entities and the fair value adjustments made to the book values of the assets and liabilities of such foreign entities upon acquisition is treated as assets and liabilities belonging to the foreign entities. These are converted into euro at the exchange rate prevailing at the end of the reporting period. 1.2.2 Accounting principles that require management’s judgement and key sources of estimation uncertainty Preparation of the financial statements requires the Group’s management to make certain estimates and consideration. In addition, judgement in applying the accounting policies is required. This applies particularly to cases in which valid IFRS standards provide for alternative methods of recognition, measurement or presentation. The estimates made in connection with the preparation of financial statements are based on the management’s best view at the end of the financial period, and the outcome may differ from the estimates and assumptions. Estimates are based on historical experience and assumptions concerning the future that are believed to be reasonable at the end of the financial period. The Group regularly assesses the realisation of estimates and assumptions, as well as changes in the underlying factors. Any changes in estimates and assumptions are recorded for the financial year during which the estimate or assumption was adjusted, and for all subsequent periods. Significant areas of estimation and uncertainty in applying accounting policies that have the most significant impact on amounts recognised in the financial statements are related to business combinations (3), impairment of intangible assets (5.4.1), share-based payments (4.2), recognition of net defined pension liability (4.3) and recognition of deferred tax assets (8.1.2). The potential climate change-related risks and opportunities to which the Group is exposed are disclosed in the Group’s Sustainability 2022 report on pages 35 and 75. Management has exercised judgement in concluding that there is no other material financial impact from climate-related risks and opportunities that needs to be recognised in the consolidated financial statements. As the future impact of climate change will depend on environmental, regulatory and other factors outside of the Group’s control that are not currently known, management will continue to monitor these estimates. 1.3 Applied new and revised standards The consolidated financial statements have been prepared in accordance with the same accounting policies used in 2021, with the exception for the following new standards, interpretations and revisions to existing standards that the Group has applied since 1 January 2022. Revisions did not have a material impact on the consolidated financial statements. FINANCIAL STATEMENTS 2022 18 • Amendments to IAS 16 Property, Plant and Equipment. Under the amendments, proceeds from selling items before the related item of PPE is available for use should be recognized in profit or loss, together with the costs of producing those items. • Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets. When an onerous contract is accounted for basing on the costs of fulfilling the contract, the amendments clarify that these costs comprise both the incremental costs and an allocation of other direct costs. • Annual Improvements to IFRS Standards 2018–2020 On 1 January 2023, the Group will adopt the following new standard, providing this is approved by the EU by the planned date of adoption. Revisions are not expected to have a material impact on the consolidated financial statements. • IFRS 17 Insurance Contracts. The new standard for insurance contracts will help investors and other parties understand better insurers’ risk exposure, profitability and financial position. This standard replaces IFRS 4 standard. • Amendments to IAS 1 Presentation of Financial Statements. The amendments are to promote consistency in application and clarify the requirements on determining if a liability is current or non-current. The amendments clarify the application of materiality to disclosure of accounting policies to help companies provide useful accounting policy disclosures. • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors. The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and clarifications on accounting estimates. • Amendments to IAS 12 Income Taxes. The amendments narrow the initial recognition exemption (IRE) and clarify that the exemption does not apply to transactions such as leases and decommissioning obligations which give rise to equal and offsetting temporary differences. On 1 January 2024, the Group will adopt the following new standard, providing this is approved by the EU by the planned date of adoption. Revisions are not expected to have a material impact on the consolidated financial statements. • Amendments to IFRS 16 Leases. The amendments introduce a new accounting model for variable payments and will require seller-lessees to reassess and potentially restate sale-and-leaseback transactions entered into since 2019. • Amendments to IAS 1 Presentation of Financial Statements. The amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. The amendments require to disclose information about these covenants in the notes to the financial statements. FINANCIAL STATEMENTS 2022 19 2.1 Operating segments and geographical areas The Group has two reporting segments: Consumer Customers and Corporate Customers. The organisational and management structure of Elisa Group is based on a customer-oriented operating model. The reportable segments are based on the internal reporting provided to management. The Consumer Customers segment provides consumers with telecommunications and communications services, such as fixed and mobile subscriptions with supplementary digital services, cable- tv subscriptions, Elisa Viihde entertainment service and Elisa Kirja e-reading service. The Corporate Customers segment provides corporate and public administration organisations with services such as IT and communication solutions for the digital environment as well as fixed and mobile subscriptions. The Corporate Customers segment provides worlwide services such as video conferencing services, solutions for automation of network management and operation for mobile operators, and IoT solutions for industry. Operating segments: 2022 EUR million Consumer Customers Corporate Customers Unallocated Group Total Revenue 1,300.9 828.6 2,129.5 EBITDA 495.7 237.6 733.3 Depreciation, amortisation and impairment –174.0 –89.5 –263.4 EBIT 321.7 148.1 469.8 Financial income 5.6 5.6 Financial expenses –18.7 –18.7 Share of associated companies' profit –0.7 –0.7 Profit before tax 456.0 Investments 190.6 99.1 289.7 Assets 1,891.9 1,082.4 126.5 3,100.8 2021 EUR million Consumer Customers Corporate Customers Unallocated Group Total Revenue (1 1,242.5 755.4 1,997.9 EBITDA (1 476.0 221.4 697.4 Depreciation, amortisation and impairment (1 –174.0 –92.5 –266.6 EBIT (1 302.0 128.8 430.8 Financial income 4.6 4.6 Financial expenses –16.5 –16.5 Share of associated companies' profit –0.5 –0.5 Profit before tax 418.4 Investments 168.7 96.3 265.1 Assets 1,822.3 1,051.2 154.9 3,028.4 1) Allocation rules of the revenue and expenses allocated to the segments have been specified in 2022 and the comparable figures have been updated to reflect the advanced allocations. In the comparison period 1–12/2021, Consumer Customers revenue was EUR 1,241.3 million; EBITDA was EUR 475.1 million; depreciation, amortisation and impairment totalled EUR –160.7 million; and EBIT was EUR 314.4 million. In the comparison period 1–12/2021, Corporate Customers revenue was EUR 756.6 million; EBITDA was EUR 222.3 million; depreciation, amortisation and impairment totalled EUR –105.8 million; and EBIT was EUR 116.5 million. Consolidated statement of financial position Consolidated cash flow statement Revenue 2022 Consumer Customers 1,300.9 Corporate Customers 828.6 EBITDA 2022 Consumer Customers 495.7 Corporate Customers 237.6 2 Operational result FINANCIAL STATEMENTS 2022 20 Geographical areas 2022 EUR million Finland Rest of Europe Other countries Group total Revenue 1,782.2 295.7 51.7 2,129.5 Assets 2,578.7 489.3 32.8 3,100.8 2021 EUR million Finland Rest of Europe Other countries Group total Revenue 1,702.5 251.2 44.2 1,997.9 Assets 2,551.3 446.5 30.6 3,028.4 Accounting Principles – Operating Segments: The segments are controlled by segment-specific performance reporting that includes external revenue, EBITDA, EBIT and capital investments. Financial items, share of associated companies’ profit and income taxes are not allocated to operating segments. The costs of production and support functions are allocated to operating segments on the matching principle. Operations in Estonia are divided into the Consumer Customers and Corporate Customers operating segments on the basis of customer accounts. Segment assets consist of intangible and tangible assets, right-of-use assets, inventories, trade and other non-interest bearing receivables. Deferred tax assets, investments in associated companies, other investments, interest-bearing receivables, financial items and income tax receivables are not included in segment assets. Liabilities are not allocated to operating segments. The accounting principles of the segments are the same as those used in the preparation of the financial statements. The reported geographical areas are Finland, Rest of Europe and Other Countries. Revenues are presented on the basis of customer location. The assets are presented on the basis of their location. FINANCIAL STATEMENTS 2022 21 2.2 Items affecting comparability Elisa uses comparable key figures in its financial reporting to describe the financial development of its business and increase comparability between different periods. Exceptional transactions outside the ordinary course of business are treated as items affecting comparability. Such items, as identified by the Group, are for example capital gains and losses from divestments of the assets and businesses, acquisition costs of assets and businesses, impairments, restructuring expenses and costs of legislative changes, damages or litigations. Income statement EUR million 2022 2021 Restructuring costs –2.0 –8.4 Items affecting comparability in EBITDA, EBIT and profit before tax –2.0 –8.4 Income taxes on items affecting comparability 0.4 1.6 Items affecting comparability in profit for the period –1.6 –6.7 Consolidated statement of changes in equity FINANCIAL STATEMENTS 2022 22 EUR million 2022 2021 Comparable EBITDA I/S EBITDA 733.3 697.4 Items affecting comparability in EBITDA 2.0 8.4 735.3 705.7 Comparable EBIT I/S EBIT 469.8 430.8 Items affecting comparability in EBIT 2.0 8.4 471.8 439.2 Comparable profit before tax I/S Profit before tax 456.0 418.4 Items affecting comparability in profit before tax 2.0 8.4 458.0 426.8 Comparable profit for the period I/S Profit for the period 372.8 343.5 Items affecting comparability in profit for the period 1.6 6.7 374.4 350.2 Comparable profit for the period attributable to equity holders of the parent Comparable profit for the period 374.4 350.2 Non-controlling interests –1.3 –0.2 375.7 350.4 Comparable earnings per share, EUR Comparable profit for the period attributable to equity holders of the parent 375.7 350.4 Average number of outstanding shares, diluted (1,000 shares) 160,253 160,174 2.34 2.19 FINANCIAL STATEMENTS 2022 23 Cash flow EUR million 2022 2021 Investment in shares and business combinations 20.9 16.2 Items affecting comparability in cash flow before financing 20.9 16.2 The main item affecting comparability in 2022 was the acquisition of Frinx for EUR 12.5 million and Cardinality for EUR 8.2 million. The main item affecting comparability in 2021 was the acquisition of sedApta for EUR 9.7 million and TenForce NV for EUR 3.4 million. Comparable cash flow after investments C/F Cash flow before financing 299.9 321.6 Items affecting comparability in cash flow before financing 20.9 16.2 320.9 337.8 FINANCIAL STATEMENTS 2022 24 20222021202020192018 Development of revenue, EUR million 1,832 1,844 1,895 1,998 2,130 0 500 1,000 1,500 2,000 2,500 2.3 Revenue from contracts with customers Division of Group’s revenue EUR million 2022 2021 Rendering of services 1,726.8 1,642.0 Sale of equipment 402.7 356.0 I/S 2,129.5 1,997.9 EUR million 2022 2021 Mobile telecommunications 1,252.5 1,179.7 Fixed-network broadband and others 877.0 818.3 I/S 2,129.5 1,997.9 Notes FINANCIAL STATEMENTS 2022 25 Accounting Principles – Revenue from contracts with customers: The revenue of consumer customers mainly consists of fixed and mobile subscriptions with supplementary digital services, cable-tv subscriptions, Elisa Viihde entertainment service and Elisa Kirja e-reading service. Consumer customer contracts are typically standard contracts that are treated as separate performance obligations. Customer contract may include several performance obligations, and Elisa may agree on the delivery or rendering of several products, services or access rights (service bundle). In that case, prices specified in the contract are used as transaction price, which is allocated to performance obligations on a relative stand-alone selling price basis. The revenue of corporate customers mainly consists of fixed and mobile subscriptions with supplementary digital services, IT and communication solutions for the digital environment, video conferencing services, solutions for automation of network management and operation for mobile operators and IoT solutions for industry. Contracts with corporate customers typically meet the criteria laid down for a contract negotiated as a single package, in which case the revenue will be allocated to the goods and services based on the prices agreed with each customer. A performance obligation may be fulfilled and revenue recognised over time or at certain points of time. The key criterion for the revenue recognition is the transfer of control. For performance obligations that are satisfied at a certain point of time, such as equipment, the customer is deemed to gain control at the entry to contract and revenue is recognised when the equipment is transferred to the customer. Service contracts mainly comprise performance obligations that are satisfied over time. The performance is carried out, and revenue is recognised over time as the services are provided. Fixed-term service contracts are recognised over the contract period and the opening fees and related expenses, as well as discounts granted, are allocated to the entire contract period. Incremental costs of obtaining a fixed-term contract such as sales and represent commissions are capitalised and accrued as an expense during the contract period when these commissions relate directly to a contract that can be specifically identified. Service contracts valid until further notice are recognised over time. The opening fees and related expenses are recognised at the time when the service is connected. The Group provides consumer customers with the various payment methods granting possibility to purchase equipment on 12–36 months credits. Revenue for equipment is recognised at the time of the sale regardless of whether the customer pays for the device fully at the time of sale or by monthly payments. Based on management’s judgement, the contracts do not include a significant financing component. Revenue from prepaid mobile phone cards is recognised over the period of realised use of the cards. Service fees invoiced from a customer on behalf of a third-party content service provider are not recognised as revenue. As a rule, the customer has 4 weeks to cancel the service contract made at a distance sale and return the purchased equipment. In principle, there is no right of cancellation for equipment bought from an Elisa shop. Based on historical experience the number of refunds is expected to be low due to which the Group has not recognised a refund liability for the amounts expected to be refunded and revenue has not been adjusted by the estimated number of refunds. Customers participating in loyalty programmes are entitled to certain discounts on services and products provided by the Group. Discounts earned by the customers are recognised as reduction of revenue. The Group does not currently have any valid loyalty programmes. FINANCIAL STATEMENTS 2022 26 1. General accounting principles 2.4 Other operating income EUR million 2022 2021 Gain on disposals of property, plant and equipment 0.2 1.9 Government grants 0.4 0.3 Other items (1 6.3 6.9 I/S 6.9 9.0 1) Other items include rental income from the real estate and other income not associated with ordinary operating activities. Accounting Principles – Other operating income: Other operating income includes non-operating income, such as capital gain on the disposal of tangible and intangible assets, subsidiaries and businesses, and rental income from real estate. Government grants associated with development projects are recognised as other operating income when the related costs are recognised as expenses. Government grants associated with capitalised development costs are recorded as a reduction of capital expenditure. FINANCIAL STATEMENTS 2022 27 2.5 Operating expenses Materials and services EUR million 2022 2021 Purchases of materials, supplies and goods 556.4 522.3 Change in inventories –8.8 –10.6 External services 272.9 251.2 Foreign exchange gains and losses 0.2 0.6 I/S 820.8 763.6 Gains and losses arising from foreign currency translations are recognised in accordance with their nature either in materials and services or financial income and expenses. Employee expenses More detailed analysis of employee expenses is included in Note 4. Auditor fees EUR million 2022 2021 Auditing 0.4 0.4 Tax advisory services 0.0 0.0 Other services 0.0 0.1 0.4 0.4 In 2022, non-audit fees charged by KPMG Oy Ab were EUR 0.0 (0.1) million. Research and development costs EUR million 2022 2021 Research and development costs recognised as expenses 13.4 9.5 Capitalised development costs 8.0 6.6 21.4 16.1 The focus areas for the research and development activities in 2022 were of the development of a customer relationship management system, production and quality management software for the manufacturing industry, as well as the development of network software solutions for telecom operators. Accounting Principles – Research and development: Research costs are recorded as expenses in the income statement. Development costs are capitalised from the date the product is technically feasible, it can be utilised commercially and the asset is expected to generate future economic benefit and the Group has both intention and the resources to complete the development and use or sell the asset. Capitalised development costs include those material, labour and testing costs and any capitalised borrowing costs that are directly attributable to bringing the asset to its working condition for its intended use. Otherwise, development costs are recorded as an expense. Development costs initially recognised as expenses cannot be capitalised subsequently. 1.1 Basic information about the Group FINANCIAL STATEMENTS 2022 28 2.6 Earnings per share Earnings per share, basic 2022 2021 I/S Net profit for the period attributable to equity holders of the parent (EUR million) 374.1 343.6 Weighted average number of shares outstanding (1,000 shares) 160,253 160,174 Earnings/share, basic (EUR/share) 2.33 2.15 Diluted earnings per share 2022 2021 I/S Net profit for the period attributable to equity holders of the parent (EUR million) 374.1 343.6 Weighted average number of shares outstanding (1,000 shares) 160,253 160,174 Impact of share-based incentive plans 157 Weighted average number of shares outstanding adjusted by dilutive effect (1,000 shares) 160,410 160,174 Diluted earnings per share (EUR/share) 2.33 2.15 Accounting principles – Earnings per share: Basic earnings per share are calculated by dividing the net profit for the period attributable to the parent company’s equity holders by the weighted average number of shares outstanding during the period. Diluted earnings per share are calculated on the same basis as earnings per basic share, except for the dilutive effect of converting all dilutive potential shares into basic shares. 1.2 Basis of presentation of financial statements FINANCIAL STATEMENTS 2022 29 3. Business acquisitions and disposals Acquired businesses in 2022 Acquisition of Frinx s.r.o. On 31 March 2022, Elisa Polystar acquired Frinx s.r.o., a telecom network automation software supplier based in Slovakia. Frinx’s products and software complement Elisa Polystar’s zero touch automation and analytics offering that helps communication service providers automate the management process of telecom networks in a multi-vendor environment. The acquisition price was EUR 14.4 million including the contingent consideration of EUR 1.1 million. EUR 0.5 million of the total acquisition price was allocated to software, which will be amortised over four years.The acquisition resulted in EUR 12.9 million of goodwill relating to Group’s growth in digital services internationally and strengthening Elisa IndustIQ business. The calculation of the purchase price allocation is preliminary, as the valuation of the acquired net assets has not been fully completed. The acquired company has been consolidated from 1 April 2022 onwards. External revenue after the acquisition was EUR 2.3 million, and the impact on Group’s profit for the period was EUR 0.5 million. Had the acquisition been made as of the beginning of the year 2022, the impact on Group revenue would have been EUR 2.7 million and the effect on profit for the period EUR 0.3 million. Consideration transferred EUR million Preliminary Cash paid 13.4 Contingent consideration 1.1 Total acquisition price 14.4 Analysis of net assets acquired EUR million Tangible assets 0.0 Intangible assets 0.5 Trade and other receivables 0.8 Cash and cash equivalents 1.0 Deferred tax liabilities –0.1 Trade payables and other liabilities –0.4 Tax liabilities –0.3 1.5 Effects of acquisition on cash flow EUR million Acquisition price paid in cash –13.4 Cash and cash equivalents of the acquired entity 1.0 –12.3 Goodwill arising from business combination EUR million Consideration transferred 14.4 Identifiable net assets of the acquired entity 1.5 Goodwill 12.9 EUR 0.2 million of acquisition-related costs, such as professional fees, is recorded in other operating expenses. 1.3 Applied new and revised standards FINANCIAL STATEMENTS 2022 30 Acquisition of Cardinality group On 4 August 2022, Elisa acquired a UK-based Cardinality Ltd. Cardinality is a supplier of cloud-native data management (DataOps), service assurance and customer experience analytics for communications service providers (CSPs) globally. The acquisition price was EUR 10.0 million including the contingent consideration of EUR 0.4 million. EUR 1.5 million of the total acquisition price was allocated to software, which will be amortised over four years. The acquisition resulted in EUR 8.7 million of goodwill relating to the Group’s growth in digital services internationally and acceleration of its telecom software business development under Elisa Polystar. The calculation of the purchase price allocation is preliminary, as the valuation of the acquired net assets has not been fully completed. The acquired companies have been consolidated from 1 August 2022 onwards. External revenue after the acquisition was EUR 1.5 million, and the impact on Group’s profit for the period was EUR –0.7 million. Had the acquisition been made as of the beginning of the year 2022, the impact on Group revenue would have been EUR 3.4 million and the effect on profit for the period EUR –2.1 million. Consideration transferred EUR million Preliminary Cash paid 9.6 Contingent consideration 0.4 Total acquisition price 10.0 Analysis of net assets acquired EUR million Tangible assets 0.0 Intangible assets 1.5 Trade and other receivables 0.5 Tax receivables 0.5 Cash and cash equivalents 1.4 Deferred tax liabilities –0.3 Interest-bearing liabilities –0.3 Trade payables and other liabilities –2.1 1.2 Effects of acquisition on cash flow EUR million Acquisition price paid in cash –9.6 Cash and cash equivalents of the acquired entities 1.4 –8.2 Goodwill arising from business combination EUR million Consideration transferred 10.0 Identifiable net assets of the acquired entities 1.2 Goodwill 8.7 EUR 0.4 million of acquisition-related costs, such as professional fees, is recorded in other operating expenses. FINANCIAL STATEMENTS 2022 31 Acquired businesses in 2021 Acquisition of TenForce NV On 31 August 2021, Elisa acquired a majority stake of 50.1 per cent in Belgian TenForce NV. TenForce is a provider of environmental, health, safety and quality performance (EHSQ) and operational risk management software. TenForce primarily serves large global industrial customers with a SaaS model. The acquisition is consistent with Elisa’s strategy to grow digital businesses internationally and to accelerate the Elisa IndustrIQ business. TenForce provides Elisa with cross-selling opportunities across its customer base and brings a complementary offering and skills, especially with its deep understanding of process industries and their critical features. The price paid for the acquisition carried out as directed share issue was EUR 15.1 million, of which EUR 10 million was carried out as a directed share issue. EUR 0.8 million of the total acquisition price was allocated to the customer base, which will be amortised over four years, and EUR 0.6 was allocated to software, which will also be amortised over four years. The acquisition resulted in EUR 9.1 million of goodwill relating to Group’s growth in digital services internationally and strengthening Elisa IndustIQ business. The acquisition generated a non-controlling interest amounting to EUR 4.9 million, which is included in the Non-controlling interest balance sheet item. The non-controlling interest is measured at a proportionate share of the acquiree’s identifiable net assets. The acquisition contract includes an option for Elisa to redeem and for non-controlling interests conditional right to sell the remaining 49.9 per cent of the shares in 2026. The liability for the redemption of the remaining shares has been recognised in the financial statements. The initial recognition of the liability and any changes in it will be treated as equity transactions. The acquired company has been consolidated from 1 September 2021 onwards. External revenue after the acquisition was EUR 1.9 million, and the impact on Group’s profit for the period was EUR –0.4 million. Had the acquisition been made as of the beginning of the year 2021, the impact on Group revenue would have been EUR 5.5 million and the effect on profit for the period EUR –0.6 million. FINANCIAL STATEMENTS 2022 32 Consideration transferred EUR million Carrying amount Cash paid 15.1 Total acquisition 15.1 Analysis of net assets acquired EUR million Tangible assets 0.1 Right-of-use assets 1.0 Customer base 0.8 Intangible assets 1.6 Trade and other receivables 1.0 Cash and cash equivalents 11.7 Deferred tax liabilities –0.3 Interest-bearing liabilities –0.3 Lease liabilities –1.0 Trade payables and other liabilities –3.6 Tax liabilities –0.1 10.9 Effects of acquisition on cash flow EUR million Acquisition price paid in cash –15.1 Cash and cash equivalents of the acquired entity 11.7 –3.4 Goodwill arising from business combination EUR million Consideration transferred 15.1 Identifiable net assets of the acquired entity 10.9 Non-controlling interest's proportionate share of identifiable net assets acquired –4.9 Goodwill 9.1 EUR 0.2 million of acquisition-related costs, such as professional fees, were recorded in other operating expenses in 2021. Acquisition of Process Data Control Corp In November 2021, TenForce NV’s subsidiary TenForce USA LLC, acquired Process Data Control Corp. The acquisition price was EUR 1.5 million. The acquisition resulted in EUR 1.5 million of goodwill. EUR 0.1 million of acquisition-related costs, such as professional fees, were recorded in other operating expenses in 2022. FINANCIAL STATEMENTS 2022 33 Disposals of businesses in 2022 Withdrawal from business in Russia Elisa sold OOO LNR in Russia on 7 July 2022.The divestment of Polystar Ryssland LLC is in progress. The costs of the withdrawal from the Russian operations, EUR 1.1 million, are presented in other operating expenses. Disposals of businesses in 2021 There were no significant disposals during the reporting period. FINANCIAL STATEMENTS 2022 34 Accounting principles – Business acquisitions and disposals: Subsidiaries are consolidated from the date the Group obtains control, and divested companies until the loss of control. Acquisitions are measured at amortised costs. Identifiable assets acquired and assumed liabilities are measured at their fair value on the acquisition date. Possible investments in non-controlling interests are measured either at a proportionate share of the acquiree’s identifiable net assets or at fair value. The method to be used is selected on a case-by-case basis. Subsequent changes in non-controlling interests are treated as equity transactions. In business combinations carried out in stages, previously held equity share in the acquiree is measured at fair value and the resulting gain or loss is recognised through profit or loss. The acquisition price consists of the fair value of cash and contingent consideration transferred. The amount of the acquisition price that exceeds the fair value of the acquired net assets is recognised as goodwill. Additional information regarding valuation and impairment testing of goodwill is available under note 5.4.1. The changes in contingent consideration are expensed through profit and loss. Acquisition-related costs, such as consulting fees and transfer tax, are accounted for as expenses for the periods, when the costs were incurred and the services received. The costs are presented as Other operating expenses in the income statement. In connection with loss of control, any investment retained in a former subsidiary is measured at fair value through profit or loss at the date of transaction. Changes in ownership interest that do not result in a loss of control are accounted for as equity transactions. Accounting policies that require management’s judgements – Acquisitions: The identifiable assets and liabilities acquired in a business combination are measured at fair value at the acquisition date. When determining the fair value of the acquired net assets, consideration and estimates may be required. Estimates and judgement are based on the management’s best view of the situation at the time of the acquisition. FINANCIAL STATEMENTS 2022 35 4.1 Employee expenses EUR million 2022 2021 Salaries and wages 314.4 304.7 Share-based payments 14.0 8.0 Pension expenses - defined contribution plans 44.2 40.4 Pension expenses - defined benefit plans 0.3 0.2 Other employee costs 21.8 20.5 I/S 394.8 373.8 Number of personnel at the end of the reporting period 2022 2021 Consumer Customers 2,939 2,845 Corporate Customers 2,684 2,526 5,623 5,371 20222021202020192018 Corporate Customers Consumer Customers Number of personnel at the year end 0 1,000 2,000 3,000 4,000 5,000 6,000 2,033 2,148 2,257 2,754 2,736 2,914 2,526 2,845 2,684 2,939 2. Operational result 2.1 Operating segments and geographical areas 4 Personnel FINANCIAL STATEMENTS 2022 36 Employee bonus and incentive schemes All employees are included in the scope of performance, incentive, commission or provision-based bonus schemes. The Group also has a personnel fund. The costs of the performance-based bonus scheme and personnel fund are recognised on an accrual basis and the costs are based on the best available estimate of realised amounts. Performance-based bonus scheme Rewards are based on financial and operational metrics of Elisa Corporation and its units. Targets are set, and the maximum amount of reward is confirmed semi-annually. Some of the Group’s key personnel also participated in the share-based compensation plan in 2022. Personnel fund The objective of the personnel fund is to secure the commitment of the personnel to Elisa’s long-term objectives and to reinforce their interest in the company’s financial success and its metrics. The evaluation metrics for the performance-based bonus schemes are earnings per share (EPS) and achievement of defined strategic goals. The Board of Directors decides on the performance- based bonus schemes and sets the earning criteria for the profit share reward annually. The members of the personnel fund are the employees of Elisa Group, with the exception for those employees who are part of the share incentive plan. In 2022, EUR 2.2 (2.7) million was recognised in the Group’s personnel fund. Management remuneration EUR million 2022 2021 Managing Directors 8.0 8.1 Members and deputy members of Boards of Directors 0.8 0.7 Employment benefits for key management Key management consists of Elisa’s Board of Directors, the CEO and the Executive Board. The remuneration of the Board members and CEO is presented under Parent company’s Note 4. Benefits recognised on the income statement EUR million 2022 2021 Remunerations and other short-term employee benefits 5.1 4.6 Post-employment benefits 0.3 0.3 Share-based compensation (1 5.1 2.8 10,5 7.7 1) In 2022, the share-based compensation expenses were EUR 14.0 (8.0) million, of which EUR 1.3 (0.7) million is allocated to the CEO and EUR 3.7 (2.1) million to the Executive Board. The terms and conditions of share-based incentive plans are described under Note 4.2. FINANCIAL STATEMENTS 2022 37 Benefits paid EUR million 2022 2021 Board of Directors 0.8 0.7 CEO 1.1 0.9 Executive Board 3.2 2.9 Share-based compensations (1 2.7 3.3 7.8 7.9 1) The reward paid to the CEO under the share-based compensation plans was EUR 0.7 (0.9) million and to the Executive Board members EUR 2.0 (2.5) million. The period of notice for the CEO is six months, if the service contract is terminated by Elisa, and three months, if the contract is terminated by the CEO. Should the service contract be terminated by Elisa, the CEO is entitled to receive a severance payment equalling the total salary of 24 months less the salary for the period of notice. The period of notice for other members of the Executive Board is six months, if the service contract is terminated by Elisa. Should the contract be terminated by Elisa, the member of the Executive Board is entitled to receive a severance payment that equals the total salary of 15 months less the salary for the period of notice. Managing Directors’ pension commitments In 2020, the Board of Directors agreed with the CEO of Elisa Corporation Veli-Matti Mattila that he will continue as CEO until further notice. Under previous executive agreement, the Group CEO would have retired at the age of 60. The defined benefit pension plan includes vested rights. The company is liable for the pension until the age of 63 and the related accumulated liability of EUR 2.1 million is included in pension obligations on the balance sheet. The pension is accrued annually by 5.1 per cent of the annual earnings under Employees Pensions Act (TyEL), and annually by EUR 120,000 during the period 2017–2020. In the management’s cash-based supplementary pension insurance, the pension is accrued from 20.7 per cent of the annual earnings under the Employees Pensions Act (TyEL) starting from the age of 62. The pension arrangement of the CEO is a cash-based plan, and it covers an increase in the statutory retirement age. The executive agreements of the Group Management Board members appointed before year 2013 expire mainly at the age of 62, when they have the right to retire. Pension provisions are cash- based, and they are covered by management supplementary pension insurance, which includes vested rights. Share-based compensation granted to the management The reward paid in 2022 to the CEO under the 2017 plan’s 2019–2021 performance period equals the value of 6,426 shares and for the rest of the Executive Board 17,642 shares. The reward paid in 2021 to the CEO under the 2017 plan’s 2018–2020 performance period equals the value of 8,258 shares and for the rest of the Executive Board 25,752 shares. The maximum reward granted to the CEO under the 2017 plan’s 2020–2022 performance period equals the value of 32,000 shares and for the rest of the Executive Board 97,500 shares. The reward will be paid after the publication of the 2022 financial statements. The maximum reward granted to the CEO under the 2021 plan’s 2021–2023 performance period equals the value of 32,000 shares and for the rest of the Executive Board 94,500 shares. The reward will be paid after the publication of the 2023 financial statements. The maximum reward granted to the CEO under the 2021 plan’s 2022–2024 performance period equals the value of 32,000 shares and for the rest of the Executive Board 89,500 shares. The reward will be paid after the publication of the 2024 financial statements. The maximum reward granted to the CEO under the 2021 plan’s 2023–2025 performance period equals the value of 38,430 shares and for the rest of the Executive Board 109,000 shares. The reward will be paid after the publication of the 2025 financial statements. Elisa shares held by key members of the management The members of Elisa’s Board of Directors, the CEO, the members of the Executive Board and their related parties held a total of 314,185 shares and votes, corresponding to 0.19 per cent of all shares and votes. FINANCIAL STATEMENTS 2022 38 4.2.1 Share-based incentive plan 2021 On 4 March 2021, the Board of Directors of Elisa Corporation has appoved a share-based incentive plan for the Group key employees for years 2021–2025. The Performance Share Plan includes three three-year performance periods, calendar years 2021–2023, 2022–2024 and 2023–2025. The Board of Directors decided the performance criteria for the plan and required performance levels for each criterion at the beginning of a perfomance period. After the end of the performance period, the reward is paid as a combination of company shares and cash after the completion of financial statements. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participant. As a rule, no reward will be paid, if a participant’s employment or service ends before the reward payment. The performance criteria for the performance period 2023–2025 are based on Group’s Earnings per Share (EPS), on the International Digital services growth, on Employee Engagement and annual progress in specific key business growth targets. The rewards to be paid on the basis of the performance period 2023–2025 correspond to the value of a maximum total of 398,500 Elisa Corporation shares. The performance criteria for the performance period 2022–2024 are based on Group’s Earnings per Share (EPS), on the International Digital services growth, on Employee Engagement and annual progress in specific key business growth targets. The rewards to be paid on the basis of the performance period 2022–2024 correspond to the value of a maximum total of 360,500 Elisa Corporation shares. The performance criteria for the performance period 2021–2023 are based on Group’s Earnings per Share (EPS), on the International Digital services growth and on annual progress in specific key business growth targets. The rewards to be paid on the basis of the performance period 2022–2024 correspond to the value of a maximum total of 410,700 Elisa Corporation shares. The CEO of the Company and a member of the Corporate Executive Board must hold a minimum of 50 per cent of the net shares given on the basis of the plan, until the CEO’s shareholding in the Company in total corresponds to the value of his annual salary and, respectively, the member’s shareholding in the Company in total corresponds to the value of half of his or her annual salary. Amount of share incentives and terms and assumptions in the fair value calculation Performance period 2023–2025 Performance period 2022–2024 Performance period 2021–2023 Maximum number of shares granted, pcs 395,800 360,500 410,700 Grant date 31.12.2022 31.12.2021 31.12.2020 Share price at the grant date, EUR 49.46 54.12 49.70 Performance period starts 1.1.2023 1.1.2022 1.1.2021 Performance period ends 31.12.2025 31.12.2024 31.12.2023 Estimated realisation of earning criteria at the beginning of performance period, % 41 44 46 Estimated realisation of earning criteria at the closing date, % 41 78 73 Number of participants in the plan at the closing date 196 180 157 2.2 Items affecting comparability 4.2 Share-based incentives The Group has share-based incentive plans in place. The aim of the plans is to align the objectives of the shareholders and the key employees to increase the value of the Company in the long- term, to retain the key employees at the Company, and to offer them a competitive reward plan that is based on earning and accumulating the Company´s shares. The potential rewards are based on the accomplishment of the goals set. FINANCIAL STATEMENTS 2022 39 4.2.2 Share-based incentive plan 2017 On 15 December 2017, Elisa’s Board of Directors decided on the share-based incentive plan for key personnel for 2018–2022. The performance-based incentive plan has three performance periods: the calendar years 2018–2020, 2019–2021 and 2020–2022. The Board of Directors decides the performance criteria for the plan and required performance levels for each criterion at the beginning of a performance period. After the end of the performance period, the reward is paid as a combination of company shares and cash after the completion of financial statements. The cash portion intends to cover the tax obligations resulting from the share-based payment. As a rule, no reward will be paid, if a participant’s employment or service ends before the reward payment. The earnings criteria for the performance period 2020–2022 are based on earnings per share (EPS), on development of new businesses and other key objectives. The total maximum amount to be paid for the performance period 2020–2022 equals the value of 407,600 Elisa shares. The earnings criteria for the performance period 2019–2021 were based on earnings per share (EPS), on development of new businesses and other key objectives. The total maximum amount to be paid for the performance period 2019–2021 equals the value of 536,000 Elisa shares. The earnings criteria for the performance period 2018–2020 were based on earnings per share (EPS), on development of new businesses and other key objectives. The total maximum amount to be paid for the performance period 2018–2020 equals the value of 550,000 Elisa shares. The CEO of the Company and a member of the Corporate Executive Board must hold a minimum of 50 per cent of the net shares given on the basis of the plan, until the CEO’s shareholding in the Company in total corresponds to the value of his annual salary and, respectively, the member’s shareholding in the Company in total corresponds to the value of half of his or her annual salary. Amount of share incentives and terms and assumptions in the fair value calculation Performance period 2020–2022 Performance period 2019–2021 Performance period 2018–2020 Maximum number of rewards granted, pcs 407,600 536,000 550,000 Grant date 31.12.2019 31.12.2018 31.12.2017 Share price at the grant date, EUR 49.25 36.08 32.72 Performance period starts 1.1.2020 1.1.2019 1.1.2018 Performance period ends 31.12.2022 31.12.2021 31.12.2020 Estimated realisation of earning criteria at the beginning of performance period, % 61 74 85 Estimated realisation of earning criteria at the closing date, % 71 Realisation of earning criteria, % 31 39 Distributed number, pcs 72,394 95,241 Volume weighted average share price at distribution date, EUR 52.52 49.39 Distributed number out of the maximum number of share rewards granted, % 14 17 Number of participants in the plan at the closing date 164 175 164 FINANCIAL STATEMENTS 2022 40 4.2.3 Committed share-based incentive plan 2019 On 31 January 2019, Elisa’s Board of Directors decided on a new committed share-based incentive plan for 2019–2025. The rewards granted under the plan have a restriction period of 1–3 years. The potential reward is based on the validity of the key person’s contract of employment. The maximum number of rewards paid under the plan equals the value of 500,000 Elisa shares. Amount of share incentives and terms and assumptions in the fair value calculation Restriction period 2022–2023 Restriction period 2022–2023 Restriction period 2019–2020 Maximum number of rewards granted, pcs 8,000 3,000 22,500 Grant date 1.8.2022 1.8.2022 10.6.2019 Share price at the grant date, EUR 54.16 54.16 41.50 Restriction period started 1.8.2022 1.8.2022 10.6.2019 Restriction period ends 31.12.2023 31.8.2023 10.6.2021 Estimated realisation of earnings criteria at the beginning of performance period, % 100 100 100 Earning criteria, realised % 100 Shares transferred, pcs 9,152 Average exchange rate on the day of transfer, EUR 51.00 Amount distributed as shares of the maximum amount of share rewards granted, % 41 Number of participants in the plan at the closing date 4 5 8 Expenses of share-based incentive plans In 2022, EUR 14.0 (8.0) million of expenses were recognised for the share incentive plans. FINANCIAL STATEMENTS 2022 41 Accounting principles – Share-based payments: In the share-based payment scheme, the total reward amount is the gross earning of shares granted less the applicable withholding tax, with the remaining net amount being paid to the reward recipient in shares. Compensation costs for the share-based incentive plans are entirely treated as equity-settled arrangements. Share-based incentive costs are recognised based on the number of gross shares issued, even though the employee ultimately receives only net shares. The Group settles a cash payment of a portion, required to meet withholding tax obligations, to the Tax Administration. The withholding tax paid to the Tax Administration is recognised directly in equity. Share-based incentive plans are measured at the fair value at the grant date. If the assumption regarding the realised number of shares changes, an adjustment will be recorded through profit and loss. The share-based incentive plans do not include any other non-market based terms and conditions. Transfer restrictions related to the share-based incentive plans are out of the scope of the fair value measurement and expense recognition. Accounting policies that require management’s judgements – Share-based payments: The expense recognition for the share-based incentive plans is based on an estimate of the fulfilment of the share incentive plan criteria and the development of Elisa Group’s share price. The fulfilment of the share incentive plan criteria and the development of the share price might deviate from the estimates. FINANCIAL STATEMENTS 2022 42 4.3 Pension obligations The Group’s pension obligations are classified as either defined contribution plans or defined benefit plans. Under a defined contribution plan, the Group pays fixed contributions to pension insurance companies. If the pension insurance company does not hold sufficient assets to pay all employees the benefits in question, the Group will have no legal or constructive obligation to pay further contributions. The contributions for defined contribution pension plans are recognised as expenses during the financial year, in which the payment obligation has arisen. All other plans not meeting the above criteria are classified as defined benefit plans. The pension schemes for the Group’s personnel in Finland are covered by the Employees Pensions Act (TyEL) and are arranged through pension insurance companies. The Finnish Employees Pensions Act (TyEL) is a defined contribution plan. Supplementary pensions are arranged through life insurance companies. Some supplementary pension plans and pension plans under the responsibility of some group companies have been classified as defined benefit plans. The defined benefit plans are mainly funded by yearly contributions to the insurance companies, based on actuarial valuation. Local tax and other legislation are applied to the pension plans’ arrangements. Only Elisa Corporation has defined benefit plans. The pension plans in foreign subsidiaries are defined contribution plans. Post-employment benefits of key management are described in Note 4.1. The net defined benefit related to pension liability EUR million 2022 2021 Present value of unfunded obligations –3.1 –3.6 Present value of funded obligations –47.5 –59.0 Fair value of plan assets 37.7 48.2 B/S Net pension liability (-) / receivable (+) in the statement of financial position –12.9 –14.4 Pension expenses recognised in the statement of comprehensive income EUR million 2022 2021 Expense recognised in profit or loss Service cost 0.2 0.1 Net interest 0.1 0.1 0.3 0.2 Remeasurements –0.5 3.5 Tax effect of the remeasurements 0.1 –0.7 I/S –0.4 2.8 2.3 Revenue FINANCIAL STATEMENTS 2022 43 Reconciliation of the net defined benefit obligations in the statement of financial position EUR million 2022 2021 Net defined benefit obligation at the beginning of the period 14.4 11.0 Pension expenses recognised in profit or loss 0.3 0.2 Remeasurements –0.5 3.5 Contributions paid by the employer –1.3 –0.3 Net defined benefit obligation at the end of period 12.9 14.4 Changes in the present value of the defined benefit obligations EUR million 2022 2021 Obligation at the beginning of the period –62.6 –63.9 Current service cost –0.2 –0.1 Interest expenses –0.4 –0.3 Remeasurements Actuarial gain (+) or loss (-) arising from changes in economic assumptions 8.0 –3.5 Gain (+) or loss (-) arising from experience adjustments 0.1 0.8 Benefits paid 4.5 4.5 Obligation at the end of period –50.6 –62.6 Changes in the fair value of plan assets EUR million 2022 2021 Fair value of plan assets at the beginning of the period 48.2 52.9 Interest income 0.3 0.3 Remeasurements, gain (+) or loss (-) –7.7 –0.7 Benefits paid –4.5 –4.5 Contributions paid by the employer 1.3 0.3 Fair value of plan assets at the end of period 37.7 48.2 The principal actuarial assumptions used 2022 2021 Discount rate, % 3.3 0.7 Future pension increase, % 2.8 1.9 Inflation, % 2.6 1.8 Sensitivity analysis of net defined benefit obligation Effect on the net defined benefit obligation, EUR million Change in actuarial assumptions 2022 2021 Discount rate + 0.5% –0.9 –1.2 Future pension increase +0.5% 0.9 3.9 Expected mortality +1 year 0.7 0.8 FINANCIAL STATEMENTS 2022 44 When calculating a change in one assumption of the sensitivity analysis, the other assumptions are assumed to remain unchanged. In practice, this is not likely to happen, and some changes in the assumptions may correlate with each other. The figures in the sensitivity analysis have been calculated using the same method which is applied when calculating defined benefit obligations. Defined benefit obligations expose the Group to various risks. Decreases in the gain of corporate bonds, higher inflation and higher expected retirement age may predispose the Group to the growth of defined benefit obligations. On the other hand, since the fair value of assets is calculated using the same discount rate which is used when calculating the obligation, the change in the discount rate will only affect the net defined benefit obligation. Similarly, a rise in life expectancy will increase the assets and affect the net defined benefit obligation. Weighted average duration of the obligation is 13.6 (12.8) years. The Group expects to contribute EUR 0.7 (0.4) million to defined benefit pension plans in 2023. The assets of the defined benefit obligations are 100 per cent acceptable insurances. Accounting principles – Pension obligations: The Group’s defined benefit obligation has been calculated separately from each plan using the projected unit credit method. Pension expenses calculated by authorised actuaries are recognised in profit or loss over the employees’ working lives. The rate used to discount the present value of the defined benefit obligation is determined by reference to market yields of high-quality corporate bonds. If such information is not available, the market yields on government bonds are used. The maturity of corporate bonds and government bonds are substantially consistent with the maturity of pension obligations. The present value of defined benefit obligation is reduced by the fair value of the plan assets at the end of the reporting period. The net defined benefit pension liability is recognised in the statement of financial position. Current service cost and net interest of the net defined benefit liability are recorded in employee expenses on the income statement. The remeasurements of the net defined benefit liability, for example actuarial gains and losses and the return on plan assets, are recognised in other comprehensive income during the financial period in which they incur. Accounting policies that require management’s judgements – Pension obligations: The book value of defined pension obligations is based on actuarial valuations. Assumptions and estimates used in the valuations include, among others, the discount rate used on the valuation of the pension obligation and plan assets as well as the development of inflation and salary levels. FINANCIAL STATEMENTS 2022 45 5.1 Depreciation, amortisation and impairment EUR million 2022 20 21 Tangible assets Land and water areas Right-of-use assets 1.1 1 .0 Buildings and constructions Owned buildings and constructions 11.9 12 .4 Right-of-use assets 20.3 17 .6 Telecom devices, machinery and equipment Owned telecom devices, machinery and equipment 168.8 173 .2 Right-of-use assets 3.0 3 .1 Other tangible assets 0.1 0 .1 205.2 20 7.5 Intangible assets Customer base 4.3 6 .6 Other intangible assets 53.9 52 .5 58.2 5 9.1 I/S 263.4 26 6.6 EUR 0.0 (0.0) million of impairment losses have been recoded for the assets. Contents THE REPORT OF THE BOARD OF DI- RECTORS 5 Tangible and intangible assets FINANCIAL STATEMENTS 2022 46 5.2 Property, plant and equipment 2022 EUR million Land and water areas Buildings and structures Telecom devices, machinery and equipment Other tangible assets Tangible assets under construction Total Acquisition cost at 1 Jan. 12.3 316.0 3,949.0 36.5 33.9 4,347.7 Business acquisitions 0.0 0.1 0.0 0.1 Additions 0.1 18.1 152.4 0.1 29.6 200.3 Business disposals –1.2 –1.2 Disposals –80.7 0.0 –80.8 Reclassifications –0.6 0.6 26.2 0.0 –30.8 –4.6 Translation differences 0.0 0.0 0.0 0.0 0.0 0.1 Acquisition cost at 31 Dec. 11.7 334.8 4,045.9 36.6 32.7 4,461.7 Accumulated depreciation and impairment at 1 Jan. 0.0 195.9 3,363.3 35.8 3,595.0 Depreciation and impairment –0.1 11.9 168.8 0.1 180.7 Accumulated depreciation on business acquisitions 0.1 0.1 Accumulated depreciation on disposals and reclassifications –1.2 –78.9 0.0 –80.1 Accumulated depreciation on business disposals –0.7 –0.7 Translation differences 0.0 0.0 0.0 0.0 Accumulated depreciation and impairment at 31 Dec. –0.1 206.7 3,452.6 35.9 3,695.0 B/S Book value at 1 Jan. 12.3 120.0 585.7 0.8 33.9 752.7 B/S Book value at 31 Dec. 11.8 128.1 593.3 0.8 32.7 766.7 FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2022 47 2021 EUR million Land and water areas Buildings and structures Telecom devices, machinery and equipment Other tangible assets Tangible assets under construction Total Acquisition cost at 1 Jan. 11.1 298.9 3,781.9 35.7 28.5 4,156.1 Business acquisitions 1.1 –0.4 1.2 0.7 0.2 2.8 Additions 0.1 12.7 162.6 0.1 26.5 201.8 Disposals 0.0 –0.5 –15.0 0.0 –15.4 Reclassifications 0.0 5.3 18.3 –21.3 2.3 Translation differences 0.0 0.0 0.1 0.0 0.0 0.1 Acquisition cost at 31 Dec. 12.3 316.0 3,949.0 36.5 33.9 4,347.7 Accumulated depreciation and impairment at 1 Jan. 0.0 183.7 3,202.2 35.1 3,421.0 Depreciation and impairment 12.4 173.2 0.1 185.7 Accumulated depreciation on business acquisitions 0.1 1.0 0.6 1.7 Accumulated depreciation on disposals and reclassifications –0.3 –13.1 –13.5 Translation differences 0.0 0.0 0.0 0.1 Accumulated depreciation and impairment at 31 Dec. 0.0 195.9 3,363.3 35.8 3,595.0 B/S Book value at 1 Jan. 11.1 115.2 579.7 0.7 28.5 735.1 B/S Book value at 31 Dec. 12.3 120.0 585.7 0.8 33.9 752.7 On 31 December 2022, the investment commitments for tangible and intangible assets were EUR 70.1 (55.7) million. FINANCIAL STATEMENTS 2022 48 Accounting principles – Property, plant and equipment: Property, plant and equipment are recognised in the statement of financial position at the original cost. Property, plant and equipment are valuated at acquisition cost less accumulated depreciation and impairments. Depreciation is recorded on a straight-line basis over the useful lives of tangible assets. The residual value and the useful life of an asset is reviewed at year-end and adjusted, if necessary. Subsequent costs, such as renewals and major renovation projects, are capitalised when it is probable that future economic benefit will flow to the Group. Ordinary repair, service and maintenance costs are recognised as expenses during the financial period in which they incur. Government grants, such as grants received in connection with the acquisition of fixed assets, are recorded as a deduction from the carrying amount of the fixed assets. Government grants are recognised in profit and loss in the form of lower depreciation over the useful life of the fixed asset. Expected useful life of property, plant and equipment: Buildings and structures 25–40 years Machinery and equipment in buildings 10–25 years Telecommunications network (line, backbone, area, subscription, cable TV) 8–15 years Exchanges and concentrators (fixed and mobile core) 6–10 years Equipment for the network and exchanges 3–8 years Telecommunication terminals 2–4 years Other machinery and equipment 3–5 years Land and water areas are not depreciated. FINANCIAL STATEMENTS 2022 49 5.3 Right-of-use assets 2022 EUR million Land and water areas Buildings and structures Telecom devices, machinery and equipment Total Acquisition cost at 1 Jan. 15.5 129.1 130.3 274.9 Business acquisitions 0.0 0.0 Additions 1.6 20.6 3.3 25.5 Disposals –1.6 –1.6 Reclassifications –4.3 –112.6 –117.0 Translation differences –0.2 0.0 –0.2 Acquisition cost at 31 Dec. 17.2 143.6 20.9 181.7 Accumulated amortisation and impairment at 1 Jan. 2.9 56.3 124.7 183.9 Depreciation and impairment 1.1 20.3 3.0 24.4 Accumulated amortisation on disposal and reclassifications –4.3 –112.6 –117.0 Translation differences –0.1 0.0 –0.1 Accumulated depreciation and impairment at 31 Dec. 4.0 72.2 15.1 91.3 B/S Book value at 1 Jan. 12.6 72.8 5.5 91.0 B/S Book value at 31 Dec. 13.2 71.4 5.9 90.4 Consolidated Financial Statements FINANCIAL STATEMENTS 2022 50 2021 EUR million Land and water areas Buildings and structures Telecom devices, machinery and equipment Total Acquisition cost at 1 Jan. 14.0 114.0 131.7 259.7 Business acquisitions 0.8 0.3 1.2 Additions 1.5 14.3 2.1 18.0 Disposals –1.1 –1.1 Reclassifications –0.1 –2.8 –2.9 Translation differences 0.0 0.0 0.0 Acquisition cost at 31 Dec. 15.5 129.1 130.3 274.9 Accumulated depreciation and impairment at 1 Jan. 1.9 38.8 124.4 165.1 Depreciation and impairment 1.0 17.6 3.1 21.8 Accumulated depreciation on disposal and reclassifications –0.2 –2.8 –3.0 Translation differences 0.0 0.0 Accumulated depreciation and impairment at 31 Dec. 2.9 56.3 124.7 183.9 B/S Book value at 1 Jan. 12.1 75.2 7.3 94.6 B/S Book value at 31 Dec. 12.6 72.8 5.5 91.0 On 31 December 2022, the lease commitments for lease contracts commencing in the future in accordance with IFRS 16 were EUR 0.1 (4.8) million. FINANCIAL STATEMENTS 2022 51 Accounting principles – Right-of-use assets: A lease contract is a contract or a part of a contract that conveys the right to use the underlying asset for a specified period in exchange for consideration. When a new contract is made, Elisa assesses whether the contract in question is a lease contract or contains a lease contract. The Group’s leases mainly consist of leases for business premises, telecom and equipment premises, retail facilities and vehicles. Last mile rentals from other operators and indefeasible right to use (IRU) contracts mainly do not fulfil the definition of a lease. The right-of-use assets and lease liabilities recognised in the balance sheet are measured at present value of future lease payments at the time of initial recognition. The lease payments are discounted using industry-specific interest rates considering the length of the lease contracts. The depreciation costs of the right-of-use assets and the interest portion of the lease liabilities are expensed. The depreciation of right-of-use assets is recorded on a straight-line basis starting on the commencement of the agreement over the useful life of the right-of-use asset or over the lease period, depending on which of these is shorter. The right-of-use asset is adjusted in certain cases with remeasurements of the lease liability. Lease liabilities are mainly remeasured when future payments change due to index or interest rate changes or when the Group’s assessment of using a possible extension option changes. When a lease liability is remeasured, the book value of the right-of-use asset is usually adjusted accordingly. Short term and low value leases are recognised in the income statement and presented as off-balance sheet commitments. Leases with the lease term of 12 months or less are short term leases and leases for which the underlying asset is of low value are low value leases. Rental expenses for short term and low value leases are described under Note 8.4 Off-balance sheet leases and other commitments. The Group separates the service components included in the lease agreements of business premises, retail facilities and vehicles and recognises their share as an expense in the income statement. FINANCIAL STATEMENTS 2022 52 5.4 Intangible assets 2022 EUR million Goodwill Customer base Other intangible assets Intangible assets under construction Total Acquisition cost at 1 Jan. 1,160.6 45.0 845.1 13.4 2,064.1 Business acquisitions 22.5 2.1 24.6 Additions 51.4 (1 12.5 63.9 Disposals –0.2 –0.2 Business disposals 0.0 0.0 Reclassifications 8.0 –6.9 1.1 Translation differences –4.7 –0.7 0.0 –5.4 Acquisition cost at 31 Dec. 1,178.4 44.3 906.4 19.0 2,148.1 Accumulated amortisation and impairment at 1 Jan. 21.2 34.5 670.9 726.7 Depreciation and impairment 4.3 53.9 58.2 Accumulated depreciation on business acquisitions 0.1 0.1 Accumulated amortisation on disposal and reclassifications –4.0 –4.0 Accumulated depreciation on business disposals 0.0 0.0 Translation differences –0.1 –0.5 0.0 –0.7 Accumulated depreciation and impairment at 31 Dec. 21.1 38.3 720.8 780.2 Book value at 1 Jan. 1,139.4 10.5 174.2 13.4 1,337.4 Book value at 31 Dec. 1,157.3 6.0 185.5 (2 19.0 1,367.8 Consolidated income statement and state- ment of comprehensive income FINANCIAL STATEMENTS 2022 53 2021 EUR million Goodwill Customer base Other intangible assets Intangible assets under construction Total Acquisition cost at 1 Jan. 1,152.5 126.9 801.7 10.2 2,091.4 Business acquisitions 8.6 0.8 3.6 13.0 Additions 34.4 10.9 45.3 Disposals 0.0 0.0 Reclassifications –82.5 5.3 –7.7 –84.9 Translation differences –0.5 –0.2 0.1 –0.7 Acquisition cost at 31 Dec. 1,160.6 45.0 845.1 13.4 2,064.1 Accumulated depreciation and impairment at 1 Jan. 21.1 110.5 618.3 749.9 Depreciation and impairment 6.6 52.5 59.1 Accumulated depreciation on business acquisitions 2.0 2.0 Accumulated depreciation on disposals and reclassifications –82.5 –1.9 –84.4 Translation differences 0.2 –0.1 0.0 0.1 Accumulated depreciation and impairment at 31 Dec. 21.2 34.5 670.9 726.7 Book value at 1 Jan. 1,131.4 16.4 183.4 10.2 1,341.5 Book value at 31 Dec. 1,139.4 10.5 174.2 (2 13.4 1,337.4 1) Includes Estonian 3,5 GHz spectrum licence in a carrying amount of EUR 7.2 million and 2x10 MHz spectrum licence in carryng amount of EUR 2.11 million. 2) Includes software in carrying amount of EUR 89.6 (85.1) million. FINANCIAL STATEMENTS 2022 54 Accounting principles – Intangible assets: An intangible asset is recognised only if it is probable that the expected future economic benefits attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. Subsequent costs related to the intangible assets are capitalised only if the future economic benefits that will flow to the Group exceed the level of performance originally assessed. In other cases, the costs are recognised the expense is incurred. In connection with the business combinations, intangible assets, such as customer base and brand, are measured at fair value. Other intangible assets are measured at original acquisition cost and amortised on a straight-line basis over their estimated useful life. Amortisation periods for intangible assets: AsCustomer base 3–5 years Brand 10 years Development expenses 3 years IT software 5 years Other intangible assets 3–10 years Research costs are recorded as expenses in the income statement. Development expenses capitalised from the date the product is technically feasible, it can be utilised commercially and the asset is expected to generate future economic benefit. Otherwise, development costs are recorded as an expense. Development costs initially recognised as expenses cannot be capitalised subsequently. Public grants related to research and development projects are recognised as other operating income, when research and development costs are recognised as an annual expense. If the public grant relates to the product development cost to be capitalised, the grant received reduces the capitalised acquisition costs. Implementation costs of SaaS arrangement are generally recognised as an expense and capitalised as an intangible asset only if the capitalisation conditions are met. The Group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If such evidence exists, the recoverable amount of the asset is assessed. Additionally, regardless of any existence of impairment indications, the recoverable amount of intangible assets under construction is assessed annually. The Group does not have any intangible assets with an indefinite useful life. The recoverable amount of the asset is its fair value less cost of disposal or its value in use, if it is higher. Value in use is a discounted present value of future net cash flows expected to be derived from an asset. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. An impairment loss is recognised immediately in the income statement. An impairment loss is reversed, if there are indications that a change in circumstances has taken place, and the asset’s recoverable amount has changed since the impairment loss was recognised. However, the reversal of an impairment loss will never exceed the carrying amount of the asset had no impairment loss been recognised. FINANCIAL STATEMENTS 2022 55 5.4.1 Goodwill Goodwill is allocated to the Group’s cash generating units as follows: EUR million 2022 2021 Consumer Customers 641.0 641.0 Corporate Customers 516.3 498.4 B/S 1,157.3 1,139.4 The reported operating segments based on Elisa’s organisational and management structure are Consumer Customers and Corporate Customers. Impairment testing: In annual impairment tests, the recoverable amount of the segments is determined based on the value in use, which is calculated on the basis of projected discounted cash flows (DCF model). Covering a five-year period, the cash flow projections are based on plans approved by the management. The projections are mostly consistent with information from external sources and reflect actual development. The used discount rate before taxes is 6.6 per cent (5.3 per cent in comparison period ). Cash flows after five years have been projected by estimating the change in future cash flows as 2 per cent growth. As a result of the performed impairment tests, there was no need for impairment of the segments’ goodwill. Usage of the DCF model requires forecasts and assumptions concerning market growth, prices, volume development, investment needs and general interest rate. The major sensitivities in the performance are associated with forecast revenue and profitability levels. Sensitivity analysis Projection parameters applied Consumer Customers 2022 Corporate Customers 2022 Consumer Customers 2021 Corporate Customers 2021 Amount in excess of CGU carrying value, EUR million 5,446 2,452 7,973 3,871 EBITDA margin on average, % (1 38.5 30.0 38.4 31.7 Horizon growth, % 2.0 2.0 2.0 2.0 Pre-tax discount rate, % 6.6 6.6 5.3 5.3 1) On average during a five-year projection period. Change in projection parameters that makes the fair value equal to book value Consumer Customers 2022 Corporate Customers 2022 Consumer Customers 2021 Corporate Customers 2021 EBITDA margin on average, % –18.8 –13.3 –20.9 –16.0 Horizon growth, % –28.9 –22.8 –35.5 –29.0 Pre-tax discount rate, % 17.3 15.3 19.9 16.6 FINANCIAL STATEMENTS 2022 56 Accounting principles – Goodwill: Goodwill arising from business combinations prior to 2004 is accounted for in accordance with the previous financial statements regulations and the book value is the assumed acquisition cost in accordance with IFRS. Business combinations incurred between 1 January 2004 and 31 December 2009 have been accounted for in accordance with IFRS 3 (2004). Goodwill arising from business combinations incurred after 1 January 2010 represents the excess of the consideration transferred over the Group’s interest in the net fair value of the identifiable net assets acquired and the amount of non-controlling interest, and in a business combination achieved in stages, the acquisition-date fair value of the equity interest. Goodwill is not amortised. Goodwill is tested for impairment annually, or more frequently, if there is any indication of a potential impairment. For the purpose of impairment testing, goodwill is allocated to the cash-generating units (CGU’s) – Consumer Customers and Corporate Customers. Goodwill is carried at its cost less any accumulated impairment losses. An impairment loss is recognised, when the carrying amount of an asset exceeds its recoverable amount. An impairment loss is recognised immediately in the income statement. If an impairment loss is allocated to a cash-generating unit, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit on a pro rata basis. An impairment loss recognised for goodwill is never reversed under any circumstances. Accounting policies that require management’s judgements – Goodwill impairment testing: The recoverable amount of cash-generating units is determined by calculations based on value in use, the preparation of which requires estimates and assumptions. The main uncertainties are associated with the estimated levels of revenue and profitability and the discount rate. Any changes may lead to the recognition of impairment losses. FINANCIAL STATEMENTS 2022 57 6.1 Inventories EUR million 2022 2021 Materials and supplies 33.2 23.7 Finished goods 62.4 59.1 B/S 95.5 82.8 An impairment on inventories of EUR 0.4 (2.1) million was recognised during the financial period. Consolidated statement of financial position Consolidated cash flow state- ment Consolidated statement of changes in equity 6 Inventories, trade and other receivables, trade and other liabilities 6.2.1 Current receivables EUR million 2022 202 1 Trade receivables 421.9 395.7 Impaired trade receivables –4.7 –5.4 Contract assets related to revenue 2.0 4.3 Contract assets related to costs 5.7 5.7 Accrued income 79.8 79.5 Finance lease receivables 16.5 11.9 Loan receivables 0.1 0.1 Receivables from associated companies 0.1 0.1 Other receivables 15.6 14.3 B/S 537.1 506.3 Accrued income includes interest receivables as well as income and cost accruals from the operating activities. 6.2 Trade and other receivables FINANCIAL STATEMENTS 2022 58 6.2.2 Non-current receivables EUR million 2022 2021 Loan receivables 0.0 0.0 Trade receivables 99.4 92.0 Finance lease receivables 12.7 6.2 Accrued income 2.4 3.1 Non-current derivatives 1.2 1.6 Other non-current receivables 1.1 0.4 B/S 116.8 103.2 The effective interest rate on receivables (current and non-current) was 0.00 (0.00) per cent. Aging of trade receivables 2022 2021 EUR million Nominal value Impairment Carrying amount Nominal value Impairment Carrying amount Not past due 374.9 0.0 374.9 354.0 –0.3 353.8 Past due Past due less than 30 days 32.8 –0.2 32.6 28.2 –0.2 28.0 Past due 31–60 days 5.1 –0.4 4.7 5.3 –0.4 4.9 Past due 61–90 days 3.0 –0.5 2.5 2.7 –0.3 2.4 Past due 91–180 days 2.7 –1.7 1.0 2.3 –1.5 0.8 Past due more than 181 days 3.4 –1.9 1.5 3.2 –2.7 0.5 421.9 –4.7 417.2 395.7 –5.4 390.3 The book value of trade receivables approximates their fair value. The credit risk associated with trade receivables is described in note 7.1. The maximum exposure to credit risk is the carrying amount of the trade receivables on the closing date, EUR 417.2 million. FINANCIAL STATEMENTS 2022 59 Gross finance lease receivables – maturity of minimum lease receivables EUR million 2022 2021 Within one year 17.0 12.1 Later than one year, not later than five years 13.1 6.3 30.1 18.4 Future finance income –0.8 –0.3 Present value of finance lease receivables 29.3 18.1 Maturity of present value of future minimum lease receivables EUR million 2022 2021 Within one year 16.5 11.9 Later than one year, not later than five years 12.7 6.2 29.3 18.1 Lease periods vary from one to five years, and conditions vary in terms of index clauses. FINANCIAL STATEMENTS 2022 60 6.3 Trade and other liabilities EUR million 2022 2021 Non-current Trade payables (1 1.4 8.1 Advances received 4.3 4.4 Derivative instruments 0.0 0.0 Other liabilities (2 24.6 28.5 B/S 30.3 41.0 Current Trade payables (1 199.0 203.8 Advances received 10.3 9.3 Contract liabilities, from revenue 30.8 27.7 Accrued employee-related expenses 64.9 60.8 Other accruals 8.0 8.4 Liabilities to associated companies 0.0 0.0 Other liabilities (2 99.9 91.6 B/S 412.9 401.6 443.2 442.6 1) Non-current trade payables include liabilities of EUR 0.0 (5.3) million for 3540–3670 MHz spectrum licence and EUR 1.4 (2.8) million for 26 GHz spectrum licence. Current trade payables include liabilities of EUR 5.3 (5.3) million for a 3540–3670 MHz spectrum licence and EUR 1.4 (1.4) million for a 26 GHz spectrum licence. 2) Other non-current liabilities include EUR 18.1 (21.4) million and other current liabilities include EUR 6.9 (0.0) million of contingent considerations and contingent redemption obligations for non-controlling interests related to business acquisitions. Other accruals consist of accrued interest expenses as well as income and cost accruals from the operating activities. Notes FINANCIAL STATEMENTS 2022 61 Accounting principles – Inventories, trade and other receivables, trade and other liabilities: Inventories: Inventories are measured at their acquisition cost or at the net realisable value, if lower than the cost. In ordinary course of business net realisable value is the estimated selling price less necessary estimated costs associated with the eventual sale. The cost is determined using a weighted average price. Receivables: Receivables are valued at amortised cost and recognised at the original invoiced amount. The Group records the provision for the impairment losses arising from trade receivables based on historical default rates over the expected life and recognises the impairment loss when the trade receivables are stated as lost. The impairment loss is adjusted by the amount of factored receivables. Trade receivables and other receivables are classified as non-current receivables, if they mature in more than 12 months. In other cases, they are classified as current receivables. The Group offers the consumer customers various payment methods granting possibility to purchase equipment on 12–36 months credits. At the time of the sale of the equipment, such transactions are recorded as revenue and trade receivable. The trade receivables are classified as non-current, if their maturity exceeds 12 months. Finance lease receivables: The Group acts as a lessor in the lease arrangements for video conferencing and data terminal equipment, which is accounted for as finance leases. At the time of the sale of the equipment, the proceeds is recorded as revenue and receivables at present value. Rental income received is recorded as financial income and a reduction of the receivables, reflecting a constant periodic rate of return on the net investment. Trade payables: The current value of trade payables and other liabilities is a reasonable estimate of their fair value. The payment terms of the Group’s trade payables correspond to conventional corporate payment terms. FINANCIAL STATEMENTS 2022 62 7.1.1 Market risks Interest rate risk Elisa is exposed to interest rate risk mainly through its financial liabilities. In order to manage interest rate risk, the Group’s borrowings and investments are diversified in fixed and variable-rate instruments. Derivative financial instruments may also be used in managing interest rate risk. The purpose is to minimise the negative effects caused by changes in the interest rate level. Timing of interest rate changes for interest-bearing financial liabilities (EUR million) 31 Dec. 2022, at nominal value Time of interest rate change Less than 1 year Between 1 and 5 years Over 5 years Total Variable-rate financing instruments Commercial paper 125.0 125.0 Bank loans 100.0 100.0 Fixed-rate financing instruments Bonds 600.0 300.0 900.0 Bank loans 150.0 3.2 153.2 Lease liabilities 20.4 30.5 40.4 91.2 245.4 780.5 343.6 1,369.4 On 31 December 2022, the Group’s interest-bearing financial assets consisted of commercial papers and bank deposits amounting to EUR 0.0 million and cash in the bank amounting to EUR 85.4 million. Lease contracts contain index-linkages, which affect the amounts of lease liabilities, right-of-use assets and depreciation. The sensitivity analysis includes the financial liabilities at the balance sheet date. The change in interest rate level is assumed to be one percentage point and the effect on income is calculated before taxes. The interest rate position is assumed to include interest-bearing financial liabilities and receivables, as well as interest rate swaps on the balance sheet date, assuming that all the contracts will be valid and stay unchanged for the entire year. EUR million 2022 2021 Change in interest rate level +/- 1% –2.25/2.25 –1.8/+0.0 1. General account- ing principles 1.1 Basic information about the Group 7 Capital structure 7.1 Financial risk management Elisa’s central treasury department manages the exchange rate, interest rate, liquidity and refinancing risks for the entire Group. The financing policies, covering funding and investment principles, are annually discussed and ratified by the Audit Committee of the Board of Directors. Funding risks are monitored as a part of the regular business monitoring procedure. FINANCIAL STATEMENTS 2022 63 Foreign exchange risk Most of Elisa Group’s cash flows are denominated in euros, which means that the company’s exposure to exchange rate risk (economic risk and transaction risk) is low. Business related exchange rate risks arise from Polystar Osix Ab and its subsidiaries, international interconnection traffic and, to a minor extent, other acquisitions. The most essential currencies are the US dollar (USD), the Swedish Krona (SEK), the Canadian dollar (CAD), the British pound (GBP) and the Norwegian Krone (NOK). The impact of other currencies is insignificant. During the financial year, exchange rate hedges have been used against changes in the value of the Swedish Krona. The Group has hedged Swedish Krona denominated expenses with foreign currency forward contracts. The Group’s financial liabilities do not include exchange rate risk. The translation difference exposure from the foreign subsidiaries included in consolidated equity mainly consists of Polystar subgroup. The translation difference exposure has not been hedged during the reporting period. Foreign currency position 2022 2021 EUR million Trade receivables Trade payables Trade receivables Trade payables USD 13.0 7.6 11.8 5.3 SEK 4.0 0.9 4.9 0.4 CAD 3.8 0.0 1.1 0.0 GBP 1.0 0.3 0.4 0.5 NOK 0.4 0.0 0.5 0.0 The Group level currency exposure is the basis for the sensitivity analysis of foreign exchange risk. Assuming euro to appreciate or depreciate 20 percent against all other currencies, the impact on cash flows would be: EUR million 2022 2021 USD +/- 1.1 +/- 1.3 SEK +/- 0.6 +/- 0.9 CAD +/- 0.7 +/- 0.2 GBP +/- 0.2 -/+ 0.0 NOK +/- 0.1 +/- 0.1 FINANCIAL STATEMENTS 2022 64 Commodity risks Elisa is investing strongly in the use of renewable energy and has signed a wind power purchase agreement for the next 10 years for the Puutikankangas Wind -wind farm that is under construction. The agreement covers about half of the electricity consumption of Elisa’s mobile network in Finland. Puutikankangas wind farm will be operational in 2023. Elisa hedges electricity purchases with physical purchase contracts and derivatives. The electricity price risk is assessed for a five-year period. Hedge accounting is applied to contracts hedging future purchases. The effective portion of derivatives that qualify for hedge accounting is recognised in the revaluation reserve of equity and the ineffective portion is recognised in the income statement under other operating income or expenses. The change in the revaluation reserve, recognised in equity, is presented in the statement of comprehensive income under Cash flow hedge. At the end of the year, the ineffective portion of hedge accounting was EUR 0.0 (0.0) million. The hedging rate for purchases in the following years, % 2022 2021 0–1 years 86.6 93.1 1–2 years 60.1 30.6 2–3 years 38.9 3–4 years 37.8 4–5 years 36.7 If the market price of electricity derivatives changed by +/- 10 per cent from the balance sheet date 31 December 2022, it would contribute EUR +1.8/–0.5 (+2.0/–1.2) million to equity. The impact has been calculated before tax. 7.1.2 Liquidity risk The objective of liquidity risk management is to ensure the Group’s financing under all circumstances. The Group’s most important financing arrangement is an EMTN programme of EUR 1,500 million, under which the Company issued bonds for EUR 900 million. Furthermore, the Company has a EUR 350 million commercial paper programme and committed credit limit of EUR 300 million, out of which EUR 130 million credit limit will fall due on 22 September 2026 and EUR 170 million will fall due on 7 July 2024. Both credits were fully undrawn on 31 December 2022. The loan margin is determined based on the Company’s credit rating. Elisa issued EUR 100 million short-term financing under the credit facility, that was arranged by Landesbank Baden-Württemberg. The limit is non-committed and is valid until 31 May 2023. The limit was fully undrawn on 31 December 2022. On 3 February 2022, Elisa has established a Sustainability Finance Framework to support the company’s sustainability goals. Elisa can issue bonds and other financial instruments to finance or refinance sustainable investments and projects in accordance with the Framework. As part of ensuring its financing, Elisa has acquired international credit ratings. Moody’s Investor Services have rated Elisa’s long-term commitments as Baa2 (outlook stable). Standard & Poor Global has rated the company’s long-term commitments as BBB+ (outlook stable) and short-term commitments as A–2. Cash and undrawn committed limits EUR million 2022 2021 Cash and cash equivalents 85.4 114.1 Credit limits 300.0 300.0 385.4 414.1 On 31 December 2022, cash and cash equivalents, as well as undrawn committed credit limits less commercial papers issued by Elisa, were EUR 260.4 (414.1) million. Contract-based cash flows for financial liabilities are presented under Note 7.4.2 FINANCIAL STATEMENTS 2022 65 7.1.3 Credit risk Financial instruments contain an element of risk of the respective parties failing to fulfil their obligations. Liquid assets are invested within confirmed limits in investment targets with good credit ratings. Investments and the limits specified for them are reviewed annually, or more often, if necessary. Derivative contracts are only signed with Finnish and foreign banks with good credit ratings. The business units are liable for credit risk associated with trade receivables. The units have written credit policies that are mainly consistent with uniform principles. The credit ratings of new customers are always reviewed from external sources when selling products or services invoiced in arrears. In case of additional sales to existing customers, creditworthiness is reviewed on the basis of the company’s own accounts. The Group may also collect advance or guarantee payments in accordance with its credit policy. Credit risk concentrations in trade receivables are minor, as the Group’s customer base is wide; the ten largest customers represent approximately 7 per cent of customer invoicing. EUR 4.7 (5.4) million of uncertain receivables have been deducted from consolidated trade receivables. The Group’s previous experience in the collection of trade receivables corresponds to the recognised impairment. Furthermore, the Group regularly sells the past due trade receivables of defined customer groups. Based on these facts, the management is confident that the Group’s trade receivables do not involve any substantial credit risk. The maximum credit risk is the value of trade receivables. On 31 December 2022 short-term trade receivables were EUR 417.2 (390.3) million and long-term trade receivables EUR 99.4 (92.0) million. The aging of short-term trade receivables is described in note 6.2.1. FINANCIAL STATEMENTS 2022 66 7.2.2 Available sources of financing With regard to capital financing, the company’s objective is to maintain sufficient flexibility for the Board of Directors to issue shares. The Annual General Meeting 2021 authorised the Board of Directors to pass a resolution concerning the share issue, right of assignment of treasury shares and/or granting of special rights referred to in the Limited Liability Companies Act. The authorisation entitles the Board of Directors to issue the shares in a proportion other than that of the current shareholdings (directed share issue). A maximum aggregate of 15 million of the company’s shares can be issued under the authorisation. Shareholders’ equity 2022 2021 Treasury shares, 1,000 pcs 7,075 7,148 Share issue authorisation, 1,000 pcs 15,000 14,991 On 31 December 2022, the maximum amount of the share issue authorisation at the share closing price was EUR 741.9 (811.3) million. With regard to capital financing, the company maintains loan programmes and credit arrangements that allow quick issuance. The arrangements are committed and non-committed, and allow issuances for different maturities. Debt capital 2022 2021 Commercial paper programme (non-committed) (1 225.0 350.0 Credit facility (non-committed) 100.0 Revolving credits (committed) (2 300.0 300.0 EMTN programme (non-committed) (3 600.0 600.0 Total, EUR million 1,225.0 1,250.0 On the closing date, the share issue authorisation as well as committed and non-committed credit arrangements totalled EUR 1,966.9 (2,061.3) million. 1) The commercial paper programme amounted to EUR 350 million, of which EUR 125 million was in use on 31 December 2022. 2) Elisa has two committed revolving credit facilities of EUR 300 million in total. Both credits were undrawn on 31 December 2022. 3) Elisa has a European Medium Term Note programme (EMTN) for a total of EUR 1,500 million, of which EUR 900 million was in use on 31 December 2022. The programme was updated on 21 July 2022, and it is valid for one year as of the update. 1.2 Basis of presentation of financial statements 7.2 Capital management Elisa’s capital consists of equity and liabilities. To develop its business, Elisa may carry out expansion investments and acquisitions that may be financed through equity or liabilities, directly or indirectly. The target for the company’s equity ratio is over 35 per cent and comparable net debt / EBITDA 1.5 to 2.0. The company’s distribution of profit to shareholders consists of dividends, capital repayment and acquisition of treasury shares. Effective profit distribution is 80 per cent to 100 per cent of profit for the period. Furthermore, additional profit distribution to the shareholders may occur. When proposing or deciding on the profit distribution, the Board takes into account the company’s financial position, future financing needs, and set financial objectives. 7.2.1 Capital structure and key indicators EUR million 2022 2021 Interest-bearing net debt 1,275.8 1,219.1 B/S Total equity 1,251.9 1,204.1 Total capital 2,527.7 2,423.2 Gearing ratio, % 101.9 101.2 Net debt / EBITDA 1.7 1.7 Equity ratio, % 40.6 39.9 FINANCIAL STATEMENTS 2022 67 1.3 Applied new and revised stan- dards 7.3 Equity 7.3.1 Share capital and treasury shares EUR million Number of shares (thousands) Share capital Treasury shares 1 Jan. 2021 167,335 83.0 –128.4 Disposal of treasury shares 2.3 B/S 31 Dec. 2021 167,335 83.0 –126.1 Disposal of treasury shares 1.6 B/S 31 Dec. 2022 167,335 83.0 –124.5 At the end of the reporting period, the company’s paid-in share capital registered in the Trade Register was EUR 83,033,008 (83,033,008). According to its Articles of Association, Elisa Corporation has only one series of shares, each share entitling to one vote. All issued shares have been paid for. Shares do not have a nominal value. Treasury shares include the acquisition cost of treasury shares held by the Group, and they are deducted from shareholder’s equity in the consolidated financial statements. Treasury shares Shares, pcs Accounting countervalue, EUR Holding, % of share s and votes Treasury shares held by the Group at 1 Jan. 2021 7,252,165 3,598,583 4.33 Disposal of treasury shares –104,393 Treasury shares held by the Group at 31 Dec. 2021 7,147,772 3,546,782 4.27 Disposal of treasury shares –72,394 Treasury shares held by the Group at 31 Dec. 2022 7,075,378 3,510,859 4.23 7.3.2 Dividends The Annual General Meeting has proposed a total dividend of EUR 2.15 per share to be paid for the 2022 result. A dividend of EUR 2.05 per share was paid for the 2021 result. FINANCIAL STATEMENTS 2022 68 7.3.3 Other reserves EUR million Reserve for invested non- restricted equity Contingency reserve Fair value reserve Other reserves Total 1 Jan. 2021 90.9 3.4 –8.7 381.0 466.6 Cash flow hedge 0.9 0.9 Remeasurements of the net defined benefit liability –2.8 –2.8 B/S 31 Dec. 2021 90.9 3.4 –10.6 381.0 464.8 Cash flow hedge –0.3 –0.3 Remeasurements of the net defined benefit liability 0.4 0.4 B/S 31 Dec. 2022 90.9 3.4 –10.5 381.0 464.8 The reserve for invested non-restricted equity includes the proportion of share subscription prices that was not recognised as share capital in accordance with the share issue terms. The contingency reserve includes the amount transferred from distributable equity under the Articles of Association or by General Meeting decision. The fair value reserve includes changes in the fair value of other investments, the remeasurements of the net defined benefit liability and the effective portion of the changes in the fair values of derivatives designated as cash flow hedges. Other reserves were formed through share issues in business acquisitions by the amount exceeding the par value of the share received by the Company. FINANCIAL STATEMENTS 2022 69 7.4.1 Financial income and expenses EUR million 2022 2021 Financial income Dividend income on other financial assets 0.4 0.6 Interest and financial income on loans and other receivables 2.2 1.9 Gain on disposal from financial assets 0.1 0.1 Foreign exchange gain 2.8 2.0 Other financial income 0.0 0.1 I/S 5.6 4.6 Financial expenses Interest expenses on financial liabilities measured at amortised cost –11.1 –10.1 Interest expenses on lease liabilities –2.6 –2.7 Other financial expenses on financial liabilities measured at amortised cost –2.0 –2.5 Other interest expenses –0.2 –0.2 Impairments –0.2 Foreign exchange loss –2.2 –0.6 Other financial expenses –0.5 –0.3 I/S –18.7 –16.5 Accounting principles – Financial income and expenses: Interest income and expenses are recognised using the effective interest rate method, and dividend income is recognised when the right to dividend is incurred. Foreign exchange rate gains and losses are recognised in accordance with their nature either in materials and services or in financial income and expenses. 2. Operational result 7.4 Financial assets and liabilities FINANCIAL STATEMENTS 2022 70 7.4.2 Financial liabilities 2022 2021 EUR million Balance sheet values Fair values Balance sheet values Fair values Non-current Bonds 891.8 819.9 888.1 913.1 Bank loans 103.2 103.2 253.3 253.3 Lease liabilities 70.8 70.8 73.4 73.4 B/S 1,065.9 994.0 1,214.8 1,239.8 Current Bank loans 150.0 150.0 100.2 100.2 Lease liabilities 20.4 20.4 18.1 18.1 Commercial paper 125.0 125.0 B/S 295.4 295.4 118.4 118.4 1,361.2 1,289.3 1,333.2 1,358.2 The financial liabilities include a total of EUR 91.2 (91.6) million of secured lease liabilities. In practice, lease liabilities are secured liabilities, as the rights to the leased property will revert to the lessor if the payments are neglected. All financial liabilities are denominated in euros. Financial liabilities are measured at amortised cost. The fair values of financial liabilities are based on quoted market prices. The average maturity of non-current liabilities was 2.7 (3.7) years and the effective average interest rate was 1.0 (0.7) per cent. FINANCIAL STATEMENTS 2022 71 Contract-based cash flows on the repayment of financial liabilities and costs 2022 EUR million 2023 2024 2025 2026 2027 2028– Yhteensä Bonds 6.8 306.8 4.1 304.1 300.8 922.5 Financial costs 6.8 6.8 4.1 4.1 0.8 22.5 Repayments 0.0 300.0 0.0 300.0 300.0 900.0 Bank loans 153.9 3.3 103.3 0.2 0.2 2.3 263.2 Financial costs 3.7 3.0 3.0 0.0 0.0 0.2 9.9 Repayments 150.3 0.3 100.2 0.2 0.2 2.1 253.2 Commercial paper 125.0 125.0 Financial costs 0.5 0.5 Repayments 124.5 124.5 Lease liabilities 23.4 17.8 14.2 9.8 5.3 66.0 136.5 Financial costs 3.1 5.8 5.0 3.8 2.0 25.6 45.2 Repayments 20.4 11.9 9.2 6.0 3.3 40.4 91.2 Derivatives –1.1 –1.1 Electricity derivatives –1.2 –1.2 Currency derivatives 0.0 0.0 Trade payables 199.0 199.0 Total 507.0 327.8 121.6 314.1 306.3 68.3 1,645.0 Financial costs 12.8 15.6 12.2 7.9 2.7 25.8 77.0 Repayments 494.2 312.2 109.4 306.2 303.5 42.5 1,568.0 FINANCIAL STATEMENTS 2022 72 2021 EUR million 2022 2023 2024 2025 2026 2027– Yhteensä Bonds 6.8 6.8 306.8 4.1 304.1 300.8 929.3 Financial costs 6.8 6.8 6.8 4.1 4.1 0.8 29.3 Repayments 300.0 300.0 300.0 900.0 Bank loans 1.1 151.0 0.4 100.4 0.3 2.1 255.4 Financial costs 0.8 0.8 0.1 0.1 0.0 0.1 1.9 Repayments 0.3 150.3 0.3 100.3 0.3 2.0 253.5 Schuldschein loan 100.0 100.0 Financial costs Repayments 100.0 100.0 Lease liabilities 20.6 16.5 13.3 11.3 8.7 66.3 136.6 Financial costs 2.4 5.6 4.6 4.1 3.2 25.0 45.1 Repayments 18.1 10.9 8.7 7.2 5.4 41.3 91.6 Derivatives –1.6 –1.6 Electricity derivatives –1.6 –1.6 Currency derivatives 0.0 0.0 Trade payables 203.8 203.8 Total 330.6 174.3 320.5 115.9 313.1 369.2 1,623.5 Financial costs 8.4 13.1 11.5 8.4 7.4 25.9 74.6 Repayments 322.3 161.2 309.0 107.5 305.7 343.3 1,548.9 Future financial costs of variable-rate financial liabilities have been calculated at the interest rate prevailing on the period end date. The company has EUR 300 million in credit facilities, of which EUR 130 million matures in 2026 and EUR 170 million in 2024. Both credits were undrawn on 31 December 2022. FINANCIAL STATEMENTS 2022 73 Bonds In the framework of its bond programme, the parent company has issued the following bonds: 31 Dec. 2022 Fair value EUR million Balance sheet value EUR million Nominal value EUR million Nominal interest rate, % Effective interest rate, % Maturity date EMTN programme 2001 / EUR 1,000 million I/2017 291.0 297.7 300.0 0.875 0.974 17.3.2024 I/2019 276.2 295.9 300.0 1.125 1.236 26.2.2026 I/2020 252.7 298.2 300.0 0.250 0.322 15.9.2027 819.9 891.8 900.0 The fair value of bonds is based on market quotes. Maturity of lease liabilities’ cash flows EUR million 2022 2021 Within one year 20.4 18.1 Later than one year, but not later than five years 30.5 32.1 Later than five years 40.4 41.3 91.2 91.6 FINANCIAL STATEMENTS 2022 74 7.4.3 Financial assets and liabilities recognised at fair value Carrying amounts of financial assets and liabilities by category 2022 EUR million Financial assets/liabilities measured at fair value through profit or loss Financial assets/liabilities measured at fair value through other comprehensive income Financial assets/liabilities measured at amortised cost Book values Fair values Note Non-current financial assets Other financial assets (1 0.6 15.6 16.2 16.2 Trade and other receivables 1.2 115.6 116.8 116.8 6.2.2 Current financial assets Trade and other receivables 537.1 537.1 537.1 6.2.1 0.6 1.2 668.3 670.1 670.1 Non-current financial liabilities Financial liabilities 1,065.9 1,065.9 994.0 7.4.2 Trade and other liabilities (2 4.6 0.0 21.4 26.0 26.0 6.3 Current financial liabilities Financial liabilities 295.4 295.4 295.4 7.4.2 Trade and other liabilities (2 0.3 402.3 402.6 402.6 6.3 4.9 0.0 1,785.0 1,789.9 1,718.0 1) Other investments contain the Group’s listed and unlisted equity investments 2) Excluding advances received FINANCIAL STATEMENTS 2022 75 2021 EUR million Financial assets/liabilities measured at fair value through profit or loss Financial assets/liabilities measured at fair value through other comprehensive income Financial assets/liabilities measured at amortised cost Book values Fair values Note Non-current financial assets Other financial assets (1 0.8 15.6 16.4 16.4 Trade and other receivables 1.6 101.6 103.2 103.2 6.2.2 Current financial assets Trade and other receivables 506.3 506.3 506.3 6.2.1 0.8 1.6 623.5 625.9 625.9 Non-current financial liabilities Financial liabilities 1,214.8 1,214.8 1,239.8 7.4.2 Trade and other liabilities (2 3.3 0.0 33.3 36.6 36.6 6.3 Current financial liabilities Financial liabilities 118.4 118.4 118.4 7.4.2 Trade and other liabilities (2 392.3 392.3 392.3 6.3 3.3 0.0 1,758.8 1,762.1 1,787.1 1) Other investments contain the Group’s listed and unlisted equity investments 2) Excluding advances received The fair values of financial asset and liability items are presented in detail under the specified note number. FINANCIAL STATEMENTS 2022 76 Financial assets and liabilities recognised at fair value EUR million 2022 Level 1 Level 2 Level 3 Financial assets and liabilities measured at fair value through other comprehensive income Electricity derivatives 1.2 1.2 Currency derivatives 0.0 0.0 Financial assets and liabilities measured at fair value through profit or loss Listed equity investments 0.6 0.6 Contingent considerations in business combinations –4.9 –4.9 –3.1 0.6 1.1 –4.9 EUR million 2021 Level 1 Level 2 Level 3 Financial assets and liabilities measured at fair value through other comprehensive income Electricity derivatives 1.6 1.6 Currency derivatives 0.0 0.0 Financial assets and liabilities measured at fair value through profit or loss Listed equity investments 0.8 0.8 Contingent considerations in business combinations –3.3 –3.3 –0.9 0.8 1.6 –3.3 Items measured at fair value are categorised using a three-level value hierarchy. Level 1 includes financial instruments with quoted prices in active markets, such are listed shares owned by the Group. Level 2 includes instruments with observable prices based on market data, such are electricity and currency derivatives. Level 3 includes instruments with prices that are not based on observable market data, but instead, on the company’s internal information, such are Group’s contingent considerations relating to business combinations. Level 3 reconciliation Contingent considerations related to business acquisitions EUR million 2022 2021 At the beginning of the period 3.3 4.4 Increase in contingent consideration 1.7 Payment of contingent consideration –0.1 –1.1 Translation differences 0.0 At the end of the period 4.9 3.3 According to the management’s estimation for the financial instruments valued at Level 3, replacing one or more of the pieces of fair value measurement data with a possible alternative assumption would not significantly change the fair value of the items, considering the small total amount of underlying liabilities. FINANCIAL STATEMENTS 2022 77 7.4.4 Derivative instruments Nominal values of derivatives 2022 2021 Period of validity Period of validity EUR million Less than 1 year 1–5 years Over 5 years Less than 1 year 1–5 years Over 5 years Electricity derivatives 5.8 1.9 Currency derivatives 3.3 3.5 9.1 5.5 Fair values of derivatives 2022 2021 EUR million Positive fair value Negative fair value Total Positive fair value Negative fair value Total Electricity derivatives 1.2 1.2 1.6 1.6 Currency derivatives 0.0 0.0 0.0 0.0 1.2 0.0 1.1 1.6 0.0 1.6 Determination of fair value and categorisation The fair value of derivative instruments is determined using quoted prices in active markets. The Group recognises the derivative instruments at the fair value hierarchy Level 2. Please see note 7.4.3. Accounting principles – Derivative instruments: Derivatives are recognised at fair value as financial assets or liabilities on the date of acquisition. Gains and losses arising from the fair value remeasurements are recognised in accordance with the nature of derivative contracts. Outstanding derivatives that do not qualify for hedge accounting are measured at fair value at the end of the reporting period and the fair value changes are immediately recognised in financial items on the income statement. The fair value of derivatives is expected to approximate the quoted market prices or, if the quoted market prices are not available, the value is estimated using commonly used valuation methods. The Group applies hedge accounting for electricity price risk and the Swedish krona, and treats electricity derivative contracts as cash flow hedges. The change in fair value of effective portion of derivatives that qualify for hedge accounting is recognised in other comprehensive income and presented in the equity hedge revaluation reserve (as a part of “Other reserves”). Gains or losses on derivative instruments accumulated in equity are expensed when any hedged item affects profit or loss. The ineffective portion of the derivatives is recognised in other operative income and expenses on the income statement. The hedge accounting is discontinued when the hedge contract is expired, sold, terminated or completed. Any cumulative gain or loss arising from the hedge instrument remains in equity until the expected transaction is realised. FINANCIAL STATEMENTS 2022 78 Accounting principles – Financial assets and liabilities: Financial assets: Acquisition and sale of financial assets are recognised on the settlement date. The Group derecognises financial assets when its contractual rights to the cash flows from the financial asset expire or when it has transferred substantially all the risks and rewards to an external party. Cash and cash equivalents include cash at hand and bank deposits as well as highly liquid short-term investments with maturities up to 3 months. Investments in shares, excluding investments in associated companies and mutual real-estate companies, are classified as other financial assets and generally measured at fair value. Investments in unlisted companies are recognised at original acquisition cost less any impairment. Investments in listed companies are measured at fair value, based on share transactions. Equity investments are included in non-current assets. On 31 December 2022, Group’s equity investments consisted mainly of investments in unlisted companies. Financial liabilities: Financial liabilities are initially recognised at fair value equalling the net proceeds received and subsequently measured at amortised cost, using the effective interest rate method. The transaction costs are included in the original acquisition cost of financial liabilities. Financial liabilities are recognised in non-current and current liabilities, and they may be non-interest-bearing or interest-bearing. In cases where the terms of the financial liability measured at amortised cost are amended in such a way that the change does not result in derecognition of the liability from the balance sheet, the Group must nevertheless recognise the profit or loss in the income statement. The profit or loss is calculated as the difference between the original contractual cash flows and the cash equivalents, discounted at the original effective interest rate of amended agreements. Lease liabilities: Lease liabilities are initially measured at present value of future lease payments. The estimated lease term includes the non-cancellable period of the lease together with periods covered by termination and extension options, if exercise of these options is reasonably certain. Company has discounted the future lease payments using the borrowing rate based on duration of the estimated lease term. The lease liability is initially measured using the actual value of an index at the commencement date. The lease liabilities are remeasured if the changes are reflected in the cash flow or if the Group reassesses whether it is reasonably certain to exercise a possible option. Classification of assets and liabilities: The Group’s financial assets and liabilities are classified as financial assets and liabilities measured at amortised cost, financial assets and liabilities measured at fair value through other comprehensive income, and financial assets and liabilities measured at fair value through profit or loss. Financial assets and liabilities measured at amortised cost include fixed-term contracts the cash flow of which include payments of principal and interest on the principal amount outstanding. Financial assets and liabilities measured at fair value through other comprehensive income include financial items that are expected both to collect contractual cash flows and to sell financial assets/liabilities. Financial assets and liabilities measured at fair value through profit or loss include items that do not meet the criteria of the other groups. The Group categorises electricity and currency derivatives that qualify for hedge accounting as financial assets or liabilities measured at fair value through other comprehensive income. Contingent considerations in business combinations and listed equity investments are recognised as financial assets or liabilities measured at fair value through profit or loss. Other financial assets and liabilities are measured at amortised cost. FINANCIAL STATEMENTS 2022 79 8.1.1 Income taxes EUR million 2022 2021 Taxes for the period –83.0 –77.0 Taxes for previous periods –0.1 0.0 Deferred taxes –0.2 2.1 I/S –83.2 –74.9 Income taxes recognised directly in comprehensive income: 2022 2021 EUR million Before taxes Tax effect After taxes Before taxes Tax effect After taxes Remeasurements of the net defined benefit liability 0.5 –0.1 0.4 –3.5 0.7 –2.8 Cash flow hedge –0.4 0.1 –0.3 1.1 –0.2 0.9 0.0 0.0 0.0 –2.3 0.5 –1.9 Translation differences do not include a tax effect. Reconciliation of the tax expense on the income statement and taxes calculated at the Group’s domestic statutory tax rate 20 (20): EUR million 2022 2021 I/S Profit before tax 456.0 418.4 Tax according to the domestic tax rate –91.2 –83.7 Tax effects of the following: Tax-free income 0.2 0.3 Non-deductible expenses –0.7 –0.2 Tax effect related to the foreign subsidiaries 10.3 9.1 Usage of tax losses, for which no deferred tax was recognised 0.2 Loss for the period, for which no deferred tax asset is recognised –1.6 –0.5 Taxes for previous periods –0.1 0.0 Other items –0.4 0.1 I/S Taxes on the income statement –83.2 –74.9 Effective tax rate, % 18.2 17.9 Accounting principles – Income taxes for the period and deferred taxes: Taxes recognised on the income statement include current and deferred taxes. Income taxes for the financial year are calculated on the net profit for the period at the current tax rate and are adjusted by taxes for the prior periods. The reporting period as well as prior reporting periods may be subject to a tax audit, which may subsequently result in a change in tax decisions, additional tax payments or refunds. Deferred taxes are calculated from all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the consolidated financial statements. Please refer to the next note 8.1.2 for details. The global minimum tax regulation enters into force in 2024 and applies to Elisa. Elisa has started to analyse the impact of the regulation. 2.1 Operating seg- ments and geograph- ical areas 2.2 Items af- fecting com- parability 8 Other notes 8.1 Taxes FINANCIAL STATEMENTS 2022 80 8.1.2 Deferred tax assets and liabilities The change in deferred tax assets and liabilities during 2022 Deferred tax assets EUR million 1 Jan. 2022 Recognised on the income statement Recognised on consolidated statement of comprehensive income Translation differences 31 Dec. 2022 Provisions 1.2 –0.4 0.8 Confirmed losses 0.7 –0.4 0.3 Right-of-use assets 1.6 0.1 1.7 Internal margins 2.8 0.0 2.8 Share-based incentive plans 3.0 0.9 3.9 Pension obligations 3.0 –0.1 –0.1 2.8 Other temporary differences 0.9 –0.2 0.1 0.0 0.8 B/S 13.1 0.0 0.0 0.0 13.1 Deferred tax liabilities EUR million 1 Jan. 2022 Recognised on the income statement Business combinations Translation differences 31 Dec. 2022 Fair value measurement of tangible and intangible assets in business combinations 3.9 –1.2 0.4 0.0 3.0 Accumulated depreciation differences 16.4 1.0 17.4 Finance lease agreements 0.6 0.7 1.3 Customer contracts 1.9 –0.1 1.8 Bonds 0.8 –0.1 0.7 Other temporary differences 1.6 –0.1 1.6 B/S 25.3 0.1 0.4 0.0 25.7 Deferred income tax assets recognised for tax losses are carried forward to the extent that the realisation of the related tax benefit through future profits is probable. On 31 December 2022, EUR 0.3 (0.7) million deferred tax asset was recognised for confirmed losses, that will expire in 2026. At the end of the reporting period, the Group had EUR 18.8 (14.0) million of unused tax losses for which no tax assets have been recognised. FINANCIAL STATEMENTS 2022 81 The change in deferred tax assets and liabilities during 2021 Deferred tax assets EUR million 1 Jan. 2021 Recognised on the income statement Recognised on consolidated statement of comprehensive income Translation differences 31 Dec. 2021 Provisions 0.7 0.5 1.2 Tax losses carried forward 1.0 –0.3 0.7 Right-of-use assets 1.5 0.0 1.6 Internal margins 2.6 0.2 2.8 Share-based incentive plans 2.5 0.4 3.0 Pension obligations 2.6 –0.3 0.7 3.0 Other temporary differences 1.0 0.1 –0.2 0.0 0.9 B/S 11.9 0.8 0.5 0.0 13.1 Deferred tax assets EUR million 1 Jan. 2021 Recognised on the income statement Business combinations Translation differences 31 Dec. 2021 Fair value measurement of tangible and intangible assets in business combinations 4.9 –1.4 0.4 3.9 Accumulated depreciation differences 16.0 0.4 16.4 Finance lease contracts 0.8 –0.2 0.6 Customer contracts 1.8 0.1 1.9 Bonds 0.9 –0.1 0.8 Other temporary differences 1.7 –0.1 0.0 1.6 B/S 26.2 –1.3 0.4 0.0 25.3 Accounting principles – Deferred tax assets and liabilities: Deferred taxes are calculated from the temporary differences arising between carrying amount and the tax base. The temporary tax liabilities are not recognised if they arise from initial recognition of goodwill or from the initial recognition of an asset/liability other than in a business combination which, at the time of the transaction, does not affect either the accounting or the taxable profit. No deferred tax is recognised on valuation differences of shares for which the sales profit would be tax-deductible. Deferred tax assets are recognised only to the extent that it is probable that they can be utilised against future taxable income. Deferred tax liabilities are recognised on the balance sheet in total, with the exception for Estonian subsidiaries where no tax liability has been recognised for the untaxed retained earnings EUR 196.9 million, as no profit distribution decision or plans for profit distribution exist for the time being. Deferred tax liabilities and assets are not offset. Accounting policies that require management’s judgements – Deferred tax assets: Particularly at the end of each financial period, the Group assesses the probability of subsidiaries generating taxable income against which unused tax losses can be utilised. The appropriateness for recognising other deferred tax assets is also determined at the end of each financial period. Changes in the estimates may lead to the recognition of significant tax expenses. FINANCIAL STATEMENTS 2022 82 8.2 Provisions EUR million Termination benefits Other Total 1 Jan. 2021 1.7 1.7 3.4 Increase in provisions 7.6 7.6 Utilised provisions –3.5 –3.5 Release of unused provisions –1.6 –1.6 31 Dec. 2021 4.3 1.7 5.9 Increase in provisions 2.0 2.0 Utilised provisions –3.8 –3.8 Release of unused provisions –0.5 –0.5 31 Dec. 2022 2.0 1.7 3.7 EUR million 2022 2021 B/S Long-term provisions 2.9 2.8 B/S Short-term provisions 0.8 3.1 3.7 5.9 Termination benefits As a part of the Group’s rationalisation, Elisa has carried out statutory employee negotiations leading to personnel reductions in 2022. The restructuring provision includes provisions for both unemployment pensions and other expenses due to redundancies. The provisions associated with redundancies will be realised during 2023–2024 and the provision associated with unemployment pensions will be realised in 2023–2024. Other provisions Other provisions include environmental provisions made for telephone poles. Accounting principles – Provisions and contingent liabilities: A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and the amount of the obligation can be reliably estimated. Contingent liabilities are potential liabilities arising from past events that may occur depending on the outcome of uncertain future events which are beyond the control of the Group. Also a present obligation that is unlikely to require settlement of a payment obligation or the amount of which cannot be reliably measured is a contingent liability. Contingent liabilities are not recognised in the statement of financial position. Contingent liabilities are presented in note 8.4. 2.3 Revenue FINANCIAL STATEMENTS 2022 83 8.3 Related party details The Group’s related parties include the parent company, subsidiaries, associates and joint ventures. The related parties also include Elisa’s Board of Directors, the CEO, the Executive Board as well as entities controlled by them and close members of their family. Transactions carried out with related parties: 2022 EUR million Revenue Purchases Receivables Liabilities Associates 0.5 1.0 0.6 0.0 2021 EUR million Associates 0.5 0.8 0.6 0.0 The employee benefits of the Group’s related parties are presented in Note 4.1 8.3.1 Group companies The parent company of the Group is Elisa Corporation. Subsidiaries Domicile Group’s ownership, % Banana Fingers Limited Bristol, UK 100 Digiset Oy Helsinki, Finland 100 Elisa IndustrIQ Oy Helsinki, Finland 100 Elisa camLine Holding GmbH Petershausen, Germany 100 camLine GmbH Petershausen, Germany 100 camLine Dresden GmbH Dresden, Germany 100 camLine Solutions S.r.l. Iași, Romania 100 camLine USA Inc. Atlanta GA, USA 100 camLine Hungary Kft. Szombathely, Hungary 60 camLine Pte. Ltd. Singapore, Singapore 100 camLine Taiwan New Taipei City, Taiwan 100 camLine sdn. Bhd. Bayan Lepas, Malaysia 100 PT Elisa camLine Indonesia Surabaya, Indonesia 100 TenForce NV Leuven, Belgium 50 TenForce USA LLC Houston TX, USA 50 Process Data Control Corporation Arlington TX, USA 50 Elisa Deutschland GmbH Aachen, Germany 100 Elisa Finance Oü Tallinn, Estonia 100 Elisa France SAS Les Sorinieres, France 100 Elisa Hong Kong Limited Hong Kong, Hong Kong 100 Elisa Santa Monica Oy Helsinki, Finland 100 Elisa Eesti AS Tallinn, Estonia 100 Elisa Videra Oy Helsinki, Finland 100 2.4 Other operating income FINANCIAL STATEMENTS 2022 84 Elisa Videra Inc. Los Angeles CA, USA 10 0 Elisa Videra Italy S.r.l San Genesio, Italia 100 Elisa Videra Norge As Oslo, Norway 100 Elisa Videra Singapore PTE Ltd. Singapore, Singapore 100 Elisa Videra Spain S.L Madrid, Spain 100 Elisa Videra UK Ltd. London, UK 100 Elistar AB Stockholm, Sweden 100 Cardinality Ltd Guildford, England 100 Cardinality SP. z.o.o. Lublin, Poland 100 Cardinality Inc. Delaware DE, USA 100 Frinx s.r.o. Bratislava, Slovakia 100 Frinx Corp New York NY, USA 100 Polystar Egypt LLC Cairo, Egypt 100 Polystar Instruments Canada Inc. Toronto, Kanada 100 Polystar Instruments Inc. Frisco,TX, USA 100 Polystar OSIX AB Stockholm, Sweden 100 Polystar Asia Private Ltd. Singapore, Singapore 100 Polystar Australia Pty Sydney, Australia 100 P-OSS Solutions S.L.U. Bilbao, Spain 100 Polystar Ryssland LLC Moscow, Russia 100 Enia Oy Helsinki, Finland 100 Epic TV SAS Sallanches, France 100 Fenix Solutions Oy Turku, Finland 100 Fonum Oy Helsinki, Finland 100 Karelsat Oy Joensuu, Finland 100 Kepit Systems Oy Vaasa, Finland 70 Kiinteistö Oy Raision Luolasto Espoo, Finland 100 Kiinteistö Oy Rinnetorppa Kuusamo, Finland 100 Kiinteistö Oy Tapiolan Luolasto Espoo, Finland 100 LE-Kuitu Oy Salo, Finland 100 LNS Kommunikation AB Stockholm, Sweden 100 Preminet Oy Helsinki, Finland 100 Sutaria Services Inc. Murphy TX, USA 57 Watson Nordic Oy Vaasa, Finland 100 Joint arrangements Kiinteistö Oy Brahenkartano Turku, Finland 60 Significant changes in ownership of subsidiaries are presented in note 3. Other changes in group structure is described further. On 25 October 2022 Elisa Eesti AS ja Santa Monica Networks AS have merged with Elisa Teleteenused AS. After the mergers the name of Elisa Teleteenused AS has changed to Elisa Eesti AS. Subsidiaries Domicile Group’s ownership, % FINANCIAL STATEMENTS 2022 85 Accounting principles – Consolidation principles, subsidiaries: The consolidated financial statements include the parent company, Elisa Corporation, and those subsidiaries over which the Group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date the Group obtains control and divested companies until the loss of control. Acquisition method is used in the accounting for the elimination of internal ownership. All intra-group transactions, gains on the sale of inventories and fixed assets, intra-group receivables, payables and dividends are eliminated. Profit for the period attributable to the equity holders of the parent and non-controlling interests is presented separately in the consolidated income statement. Non-controlling interests are presented separately from the equity of the owners of the parent in the consolidated statement of financial position. Losses of subsidiaries are allocated to non-controlling interests even if they exceed their share of ownership. Accounting principles – Consolidation principles, joint arrangements: Joint arrangements are arrangements over which the Group exercises joint control with one or more parties. A joint arrangement is either a joint venture or a joint operation. A joint venture is a joint arrangement, where the Group has rights to the net assets of the arrangement. A joint operation is a joint arrangement where the Group has rights to the assets and obligations for the liabilities relating to the arrangement. The only joint arrangement owned by the Group, Kiinteistö Oy Brahenkartano, is a joint operation, which is consolidated using the proportional consolidation method. 60 per cent of the assets, liabilities, income and expenses of the joint operation are consolidated to the Group’s financial statements. The company owns and manages a building and a site in Turku. Elisa is mainly entitled to manage office and telecom facilities with the shares owned. FINANCIAL STATEMENTS 2022 86 8.3.2 Investments in associated companies Aggregated financial information of associates EUR million 2022 2021 I/S Group’s share of associated companies’ profit –0.7 –0.5 B/S Group’s investments in associated companies 9.9 10.6 EUR million 2022 2021 Balance at the beginning of the period 10.6 1.4 Additions 0.0 9.8 Reclassifications 0.0 –0.1 Share of profits for the period –0.7 –0.5 Dividends received 0.0 B/S Balance at the end of the period 9.9 10.6 During comparison period Elisa acquired 19 per sent of Italian industrial software provider specialised in innovative IT solutions for Digital Supply Chain and Smart Manufacturing, sedApta Group. The companies are consolidated as associates on the basis of significant influence. FINANCIAL STATEMENTS 2022 87 Associates Domicile ownership,% FNE-Finland Oy Kontiolahti, Finland 45.9 Kiinteistö Oy Helsingin Sentnerikuja 6 Helsinki, Finland 50.0 Kiinteistö Oy Herrainmäen Luolasto Tampere, Finland 50.0 Kiinteistö Oy Lauttasaarentie 19 Helsinki, Finland 41.7 Kiinteistö Oy Pohjanplassi Lapua, Finland 39.0 Kiinteistö Oy Riihimäen Maisterinkatu 9 Riihimäki, Finland 37.0 Kiinteistö Oy Runeberginkatu 43 Helsinki, Finland 29.6 Kiinteistö Oy Stenbäckinkatu 5 Helsinki, Finland 40.0 sedApta Group Milan, Italy 19.0 Suomen Numerot NUMPAC Oy Helsinki, Finland 33.3 Tele Scope Oy Espoo, Finland 22.0 KE-Masto Oy Kajaani, Finland 49.5 Accounting principles – Consolidation principles, associated companies Associated companies are entities over which the Group exercises significant influence. Significant influence is presumed to exist when the Group owns over 20 per cent of the voting rights of the company or when the Group otherwise exercises significant influence, but does not exercise control. Associated companies are consolidated in accordance with equity method. If the Group’s share of losses of an associated company exceeds its interest in the associated company, the investment is recognised on the balance sheet at zero value and the Group discontinues recognising its share of further losses unless the Group has other obligations for the associated company. Associated companies are consolidated from the date the Group obtains significant influence and divested associated companies are consolidated until the loss of significant influence. FINANCIAL STATEMENTS 2022 88 8.4 Off-balance sheet leases and other commitments Leases Group as a lessee Lease payments related to off-balance sheet lease commitments: EUR million 2022 2021 Lease payments associated with short-term leases 31.9 32.8 Lease payments associated with low-value assets 4.6 4.2 36.5 37.0 Future minimum lease payments under non-cancellable off-balance sheet leases: EUR million 2022 2021 Within one year 13.2 12.5 Later than one year, but not later than five years 4.3 4.7 Later than five years 1.0 1.2 18.4 18.4 Lease payments are presented without value added tax. Group as a lessor Future minimum lease receivables under non-cancellable operating leases: EUR million 2022 2021 Within one year 3.6 2.5 Later than one year, but not later than five years 0.7 0.9 4.3 3.3 2.5 Operating expenses FINANCIAL STATEMENTS 2022 89 Accounting principles – Leases: The group as a lessee The Group recognises rental expenses for short-term leases and low-value assest in the income statements and presents such contracts as off-balance sheet liabilities. The group as a lessor The Group acts as a lessor in two different types of lease arrangements that are accounted for as operating leases: rental income from telecom premises and carrier services is recognised as revenue over the lease period, and rental income from real estate is recognised as other operating income. The lease contract periods are mainly short with durations of 1–6 months. Rental income is recognised over the lease period. Collateral, commitments and other liabilities EUR million 2022 2021 On behalf of own commitments Mortgages 3.8 3.8 Guarantees 0.6 0.4 Deposits 0.6 0.4 On behalf of others Guarantees 0.3 5.2 4.6 Other contractual obligations Venture Capital investment obligation 0.5 0.8 Repurchase obligations 0.0 0.5 0.8 Real estate investments VAT refund liability for real estate investments indicates the amount that may become completely non tax-deductible if the intended use of the property was to change. On 31 December 2022, VAT refund liability for real estate investments was EUR 36.1 (33.2) million. 8.5 Events after the end of the reporting period There were no significant events after the balance sheet date. . 2.6 Earnings per share FINANCIAL STATEMENTS 2022 90 9.1 Key indicators describing the Group’s financial development 2022 2021 2020 2019 2018 INCOME STATEMENT Revenue, EUR million 2,130 1,998 1,895 1,844 1,832 Change of revenue, % 6.6 5.5 2.8 0.7 2.5 EBITDA, EUR million 733 697 685 661 640 EBITDA as % of revenue 34.4 34.9 36.2 35.8 34.9 EBIT, EUR million 470 431 409 395 404 EBIT as % of revenue 22.1 21.6 21.6 21.4 22.0 Profit before tax, EUR million 456 418 398 372 381 Profit before tax as % of revenue 21.4 20.9 21.0 20.2 20.8 Return on equity (ROE), % 30.4 28.8 28.1 26.6 29.2 Return on investment (ROI), % 18.3 16.9 16.7 17.2 18.3 Research and development costs, EUR million 21 16 10 8 8 Research and development costs as % of revenue 1.0 0.8 0.5 0.4 0.5 BALANCE SHEET Gearing ratio, % 101.9 101.2 101.9 103.0 94.8 Current ratio 1.0 1.4 1.3 1.2 1.0 Equity ratio, % 40.6 39.9 39.1 41.0 42.4 Non-interest bearing liabilities, EUR million 488 491 430 428 393 Interest bearing net debt 1,276 1,219 1,207 1,184 1,068 Balance sheet total, EUR million 3,101 3,028 3,041 2,814 2,669 INVESTMENTS Investments in shares and business combinations, EUR million 25 28 70 83 14 CAPITAL EXPENDITURE Gross investments, EUR million 290 265 266 256 254 Gross investments as % of revenue 13.6 13.3 14.1 13.9 13.9 PERSONNEL Average number of employees during the period 5,523 5,391 5,097 4,882 4,814 Revenue/employee, EUR 1,000 386 371 372 378 380 The order book is not presented, as the information is not relevant due to the nature of the Group’s business. 3. Business acquisi- tions and disposals 4. Personnel 9 Key Indicators The key indicator tables are unaudited. FINANCIAL STATEMENTS 2022 91 FORMULAE FOR FINANCIAL SUMMARY INDICATORS EBITDA EBIT + depreciation, amortisation and impairment EBIT Profit for the period + income taxes + financial income and expenses + share of associated companies’ profit Return on equity (ROE), % Profit for the period X 100 Total shareholders’ equity on average Return on investment (ROI), % Profit before taxes + interest and other financial expenses X 100 Total equity + interest-bearing liabilities on average Gearing ratio, % Interest-bearing liabilities - cash and cash equivalents and financial assets at fair value through profit or loss X 100 Total shareholders’ equity Current ratio Current assets Current liabilities - advance payments received Equity ratio, % Total shareholders’ equity X 100 Balance sheet total - advance payments received FINANCIAL STATEMENTS 2022 92 9.2 Alternative performance measures (1 2022 2021 2020 2019 2018 INCOME STATEMENT Comparable EBITDA, EUR million 735 706 685 668 639 Comparable EBITDA as % of revenue 34.5 35.3 36.2 36.2 34.9 Comparable EBIT, EUR million 472 439 415 402 403 Comparable EBIT as % of revenue 22.2 22.0 21.9 21.8 22.0 Comparable profit before tax, EUR million 458 427 399 379 380 Comparable profit before tax as % of revenue 21.5 21.4 21.0 20.5 20.8 Comparable return on equity (ROE), % 30.5 29.3 28.1 27.1 28.8 Comparable return on investment (ROI), % 18.4 17.2 16.7 17.5 18.3 Comparable earnings per share (EPS) 2.34 2.19 2.05 1.93 1.95 1) Other than the financial indicators defined by IFRS 4.1 Employee expenses FINANCIAL STATEMENTS 2022 93 FORMULAE FOR ALTERNATIVE PERFORMANCE MEASURES Comparable EBITDA EBIT + depreciation, amortisation and impairment +/- items affecting comparability Comparable EBIT Profit for the period + income taxes + financial income and expenses + share of associated companies’ profit +/- items affecting comparability Comparable profit for the period Profit for the period +/- items affecting comparability Profit attributable to owners of the parent company +/- items affecting comparability Comparable EPS Average number of shares during the period adjusted for share issues Comparable return on equity (ROE), % Profit for the period +/- items affecting comparability X 100 Total shareholders' equity on average Comparable return on investment (ROI), % Profit before taxes + interest and other financial expenses +/- items affecting comparability X 100 Total equity + interest-bearing liabilities on average Comparable cash flow after investments Net cash flow from operating activities - net cash used in investing activities +/- items affecting comparability FINANCIAL STATEMENTS 2022 94 9.3. Per-share indicators (1 2022 2021 2020 2019 2018 Share capital, EUR 83,033,008 83,033,008 83,033,008 83,033,008 83,033,008 Number of shares at year-end 160,259,695 160,187,301 160,082,908 159,897,796 159,723,252 Average number of shares 160,253,348 160,174,453 160,065,712 159,880,581 159,736,826 Number of shares at year-end, diluted 160,416,729 160,187,301 160,082,908 159,897,796 159,723,252 Average number of shares, diluted 160,410,382 160,174,453 160,065,712 159,880,581 159,736,826 Market capitalisation, EUR million (2 8,276 9,056 7,508 8,241 6,037 Earnings per share (EPS), EUR 2.33 2.15 2.05 1.90 1.98 Dividend per share, EUR 2.15 (6 2.05 1.95 1.85 1.75 Payout ratio, % 92.1 95.6 95.1 97.6 88.5 Equity per share, EUR 7.78 7.48 7.39 7.19 7.05 P/E ratio 21.2 25.2 21.9 26.0 18.2 Effective dividend yield, % (3 4.3 3.8 4.3 3.8 4.9 Share performance on Nasdaq Helsinki Mean price, EUR 51.99 51.00 51.08 42.26 36.34 Closing price at year-end, EUR 49.46 54.12 44.87 49.25 36.08 Lowest price, EUR 45.57 45.10 40.79 35.51 31.68 Highest price, EUR 56.90 56.18 58.88 49.91 41.95 Trading of shares on Nasdaq Helsinki (4 Total trading volume, 1,000 shares 71,229 81,557 122,497 96,662 104,879 Percentage of shares traded (5 43 49 73 58 63 1) The numbers of shares are presented without treasury shares held by Elisa Group. 2) Calculated on the basis of the closing price on the last trading day of the year and the total number of shares at the end of the period (167 335 073). 3) Calculated on the basis of the closing price on the last trading day of the year. 4) Elisa share is also traded in alternative marketplaces. According to Bloomberg and the Fidessa Fragmentation report, the trading volumes in these markets in 2022 were approximately 293 (205) per cent of Nasdaq Helsinki’s volumes. 5) Calculated in proportion to the total number of shares at the end of the period. 6) The Board of Directors proposes a dividend payment of EUR 2.15 per share. 4.2 Share-based incentives FINANCIAL STATEMENTS 2022 95 FORMULAE FOR PER-SHARE INDICATORS Earnings per share (EPS) Profit for the period attributable to the equity holders of the parent Average number of shares during the period adjusted for share issues Dividend per share (1 Dividend adjusted for share issues Number of shares at the balance sheet date adjusted for share issues Effective dividend yield, % (1 Dividend per share X 100 Share price at the balance sheet date adjusted for share issues Payout ratio, % (1 Dividend per share X 100 Earnings per share Equity per share Equity attributable to equity holders of the parent Number of shares at the balance sheet date adjusted for share issues P/E ratio (price/earnings) Share price on the balance sheet date Earnings per share 1) The calculation formulae apply also to the capital repayment indicators. FINANCIAL STATEMENTS 2022 96 EUR million Note 31 Dec. 2022 31 Dec. 2021 Revenue 1 1,731.1 1,657.8 Other operating income 2 7.9 8.8 Materials and services 3 –670.9 –642.8 Employee expenses 4 –253.9 –253.4 Depreciation, amortisation and impairment 5 –261.4 –265.8 Other operating expenses –165.5 –156.9 Operating profit 387.3 347.6 Financial income and expenses 7 –13.5 –15.2 Profit before tax and appropriations 373.8 332.3 Appropriations 8 –10.9 –5.2 Income taxes 9 –78.9 –73.9 Profit for the period 284.1 253.2 Income statement, parent company, FAS Contents THE REPORT OF THE BOARD OF DIREC- TORS FINANCIAL STATE- MENTS FINANCIAL STATEMENTS 2022 97 EUR million Note 31 Dec. 2022 31 Dec. 2021 ASSETS Non-current assets Intangible assets 10 276.4 304.5 Property, plant and equipment 10 694.3 682.1 Investments 11 863.7 861.0 1,834.4 1,847.6 Current assets Inventories 12 64.6 56.1 Non-current receivables 13 123.7 122.0 Current receivables 14 439.1 419.3 Cash and bank receivables 53.0 72.7 680.4 670.3 TOTAL ASSETS 2,514.8 2,517.9 EQUITY AND LIABILITIES Equity 15 Share capital 83.0 83.0 Treasury shares –124.4 –125.9 Reserve for invested non-restricted equity 77.8 77.8 Contingency reserve 3.4 3.4 Retained earnings 257.5 334.2 Profit for the period 284.1 253.2 581.5 625.7 Accumulated appropriations 83.3 77.8 Provisions 16 5.0 6.9 Liabilities Non-current liabilities 17 1,007.3 1,163.8 Current liabilities 18 837.7 643.7 1,845.0 1,807.5 TOTAL EQUITY AND LIABILITIES 2,514.8 2,517.9 Balance sheet, parent company, FAS Consolidated Financial State- ments FINANCIAL STATEMENTS 2022 98 EUR million 2022 2021 Cash flow from operating activities Profit before appropriations and taxes 373.8 332.3 Adjustments: Depreciation and amortisation 261.4 265.8 Other income and expenses with no payment relation 0.3 1.9 Other financial income (-) and expenses (+) 13.5 15.3 Gains (-) and losses (+) on the disposal of fixed assets –1.7 Gains (-) and losses (+) on the disposal of investments 0.0 –0.1 Change in provisions in the income statement –2.0 2.8 Cash flow before changes in working capital 647.1 616.5 Change in working capital Increase (-) / decrease (+) in current non-interest-bearing trade receivables –12.8 –29.0 Increase (-) / decrease (+) in inventories –8.8 –10.0 Increase (+) / decrease (-) in trade and other payables 0.9 38.0 Cash flow before financial items and taxes 626.3 615.5 Dividends received 6.1 0.9 Interests received 1.6 1.9 Interests paid –15.9 –19.8 Income taxes paid –81.7 –72.4 Net cash flow from operating activities 536.4 526.1 Cash flow statement, parent company, FAS Consolidated income statement and statement of comprehensive income FINANCIAL STATEMENTS 2022 99 EUR million 2022 2021 Cash flow from investing activities Capital expenditure –252.1 –248.3 Proceeds from disposal of property, plant and equipment and intangible assets 2.4 Investments in shares and other investments –4.9 –0.5 Proceeds from disposal of shares and other investments 0.0 0.1 Loans granted –17.5 –38.4 Repayment of loan receivables 10.9 3.1 Net cash flow used in investing activities –263.7 –281.7 Cash flow after investing activities 272.7 244.4 Cash flow from financing activities Increase in long-term borrowings (+) 100.0 Decrease in long-term borrowings (-) –100.0 –174.0 Increase (+) / decrease (-) in short-term borrowings 138.2 31.2 Group contributions received (+) / paid (-) –2.7 0.0 Dividends paid –327.9 –310.8 Net cash flow used in financing activities –292.4 –353.6 Change in cash and cash equivalents –19.8 –109.2 Cash and cash equivalents at the beginning of the period 72.7 181.9 Cash and cash equivalents at the end of the period 53.0 72.7 Cash flow statement, parent company, FAS FINANCIAL STATEMENTS 2022 100 Accounting principles Elisa Corporation’s financial statements have been prepared in accordance with the accounting principles based on Finnish accounting legislation. Foreign currency items Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the dates of transactions. At the end of the reporting period, assets and liabilities denominated in foreign currencies are valued at the exchange rates quoted by the European Central Bank on the closing date. Fixed assets The carrying value of intangible and tangible assets is stated at cost less accumulated depreciation, amortisation and impairment. Internally generated fixed assets are measured at variable costs. The difference between depreciation according to plan and total depreciation is presented under appropriations of the parent company’s income statement and the accumulated depreciation difference is presented under accumulated appropriations in shareholders’ equity and liabilities on the balance sheet. Depreciation according to plan is recognised on a straight-line basis over the useful life from the original acquisition cost. The useful life according to plan for the different asset groups: Intangible rights 3–5 years Goodwill 5–20 years Other expenditure with long-term effects 5–10 years Buildings and structures 25–40 years Machinery and equipment in buildings 10–25 years Telephone exchanges 6–10 years Cable network 8–15 years Telecommunication terminals 2–4 years Other machines and equipment 3–5 years Inventories Inventories are stated at the lowest of variable cost, acquisition price or the likely disposal or repurchase price. Cost is determined using a weighted average price. Marketable securities Investments in money market funds are recognised at the repurchase price. Investments in certificates of deposit and commercial paper are recognised at the acquisition cost, as the difference between the repurchase price and cost of acquisition is not significant. Revenue recognition principles Revenue from deliverables is recognised at the time of ownership transfer and revenue from services is recognised when the services have been performed. Interconnection fees that are invoiced from the customers and paid as such to other telecommunication companies are presented as an adjustment to revenue (Finnish Accounting Standards Board 1995/1325). The profit from the sale of business operations and fixed assets, subsidies received and rental income from premises are presented under other operating income. The loss from the sale of fixed assets is presented under other operating expenses. The profit or loss from the sale of shares is presented in financial income and expenses. Research and development Research costs are expensed as they incur, with the exception of development costs, which are capitalised. The capitalisation criteria are met when the product is technically and commercially feasible, and it is expected to generate future economic benefit. Development costs initially recognised as expenses cannot be capitalised subsequently. Public grants associated with development projects are recognised as other operating income when the related costs are recognised as expenses. Public grants, associated with capitalised development costs, are recorded as a reduction of cost. Future expenses and losses Probable future expenses and losses related to the reported or a prior financial period without corresponding income are recognised on the income statement. Such items are recognised on the balance sheet under provisions, if a reliable estimate of the amount or timing of the obligation cannot be made. Otherwise the obligation is recognised as accrual. Income taxes Income taxes for the financial year are recognised on the income statement. No deferred tax liabilities or receivables have been recognised in the financial statements. Notes to the financial statements of the parent company position Consolidated cash FINANCIAL STATEMENTS 2022 101 1. Revenue EUR million 2022 2021 Revenue 1,794.3 1,721.0 Interconnection fees and other adjustments –63.2 –63.2 1,731.1 1,657.8 Geographical distribution Finland 1,704.1 1,640.7 Rest of Europe 25.2 16.1 Other countries 1.8 1.0 1,731.1 1,657.8 2. Other operating income EUR million 2022 2021 Gain on disposals of fixed assets 1.7 Other income (1 7.9 7.1 7.9 8.8 1) Other income include rental income from the real estate, management fee income charged from subsidiaries and other income not associated with ordinary operating activities. 3. Materials and services EUR million 2022 2021 Materials, supplies and goods Purchases during reporting period 370.1 340.2 Change in inventories –8.5 –8.1 361.6 332.2 External services 309.3 310.7 670.9 642.8 Notes 1. General accounting principles 1.1 Basic information about the Group Consolidated statement of changes in equity FINANCIAL STATEMENTS 2022 102 4. Employee expenses EUR million 2022 2021 Salaries and wages 211.8 213.7 Pension costs 36.3 33.8 Other social security costs 5.8 5.9 253.9 253.4 Personnel on average 3,295 3,280 CEO remuneration, EUR 2022 2021 Fixed salaries 674,640.00 661,180.00 Performance-based bonus 365,376.72 251,030.79 Fringe benefits 20,077.03 23,363.00 Share-based payments (1 715,958.19 865,204.04 1,776,051.94 1,800,777.83 1) 1 The maximum award allocated to the CEO under the share-based compensation plans equals the value of 134,430 shares. See Note 4.1 of the consolidated In 2020, the Board of Directors agreed with the CEO of Elisa Corporation Veli-Matti Mattila that he will continue as CEO until further notice. Under previous executive agreement, the Group CEO would have retired at the age of 60. The defined benefit pension plan includes vested rights. See Note 4.1 of the consolidated financial statements. The remuneration of the Board members, EUR 2022 2021 Clarisse Berggårdh 95,400.00 95,050.00 Maher Chebbo 87,600.00 81,800.00 Kim Ignatius 97,000.00 81,650.00 Katariina Kravi 78,000.00 Pia Kåll 78,800.00 Topi Manner 79,600.00 80,850.00 Eva-Lotta Sjöstedt 85,200.00 82,450.00 Seija Turunen 2,400.00 96,650.00 Anssi Vanjoki 138,000.00 133,900.00 Antti Vasara 82,000.00 80,050.00 824,000.00 732,400.00 For year 2022, following compensations were decided by the Annual General Meeting to the Members of the Board: remuneration fee for the Chair EUR 130,000, for Deputy Chair and the Chairs of the Committees EUR 85,000, and other Board members EUR 70,000; and additionally EUR 800 per meeting of the Board and of a Commetee. However, if a Board member lives permanently outside Finland and is physically present in the Board or Committee meeting, which is held in a country other than his/her permanent home country, the meeting fee is EUR 1,600. According to the decision of the Board on 6 April 2022, the annual remuneration was paid in Company shares on 27 April 2022. The outstanding remuneration amounts were paid net of tax, 60 per cent. - nancial statements FINANCIAL STATEMENTS 2022 103 6. Auditor fees EUR million 2022 2021 Auditing 0.2 0.1 Tax advisory services 0.0 0.0 Other services 0.0 0.1 0.2 0.2 7. Financial income and expenses EUR million 2022 2021 Interest income and other financial income Dividends received From the Group companies 5.5 0.3 From others 0.4 0.6 5.9 0.9 Other interest and financial income From the Group companies 0.4 0.2 Capital gains from investments 0.0 0.1 From others 1.7 1.6 2.1 1.9 8.0 2.8 Interest costs and other financial expenses To the Group companies –6.1 –5.5 Impairment of investments in subsidiaries –2.1 To others –13.3 –12.6 –21.5 –18.1 –13.5 –15.2 5. Depreciation, amortisation and impairment EUR million 2022 2021 Intangible assets 87.6 91.2 Property, plant and equipment 173.7 174.7 261.4 265.8 Specification of depreciation, amortisation and impairment by balance sheet items is included in note 10. - dards 2. Operational result 2.1 Operating segments and geo- graphical areas FINANCIAL STATEMENTS 2022 104 9. Income taxes EUR million 2022 2021 Income taxes for the reporting period –78.9 –73.9 Taxes for previous periods 0.0 –78.9 –73.9 10. Intangible assets and property, plant and equipment Intangible assets 2022 EUR million Development costs Intangible assets Goodwill Other intangible assets Intangible assets under construction Total Acquisition cost at 1 Jan. 59.6 157.2 886.3 569.7 13.3 1,686.1 Additions 7.4 5.5 27.9 12.3 53.1 Reclassifications 7.0 0.4 5.7 –6.8 6.4 Acquisition cost at 31 Dec. 74.0 163.2 886.3 603.3 18.8 1,745.6 Accumulated depreciation and amortisation at 1 Jan. 50.5 86.5 758.6 485.9 1,381.5 Accumulated depreciation on disposals and reclassifications 0.0 0.0 0.0 Amortisation and depreciation for the period 7.7 8.6 38.9 32.5 87.6 Accumulated depreciation and amortisation at 31 Dec. 58.2 95.1 797.5 518.4 1,469.2 Book value at 31 Dec. 15.9 68.1 88.7 84.9 18.8 276.4 8. Appropriations EUR million 2022 2021 Change in appropriations –5.5 –2.5 Group contributions received 8.1 4.2 Group contributions paid –13.5 –6.8 –10.9 –5.2 2.3 Revenue 2.4 Other operating in- come 2.5 Operating expenses FINANCIAL STATEMENTS 2022 105 Property, plant and equipment 2022 EUR million Land and water areas Buildings and constructions Machinery and equipment Other assets Assets under construction Total Acquisition cost at 1 Jan. 10.0 227.7 3,943.8 35.1 31.8 4,248.4 Additions 0.0 15.6 155.3 21.4 192.3 Reclassifications –0.6 0.5 15.7 –21.9 –6.4 Acquisition cost at 31 Dec. 9.4 243.8 4,114.8 35.1 31.3 4,434.3 Accumulated depreciation at 1 Jan. 143.2 3,388.6 34.5 3,566.3 Accumulated depreciation on disposals and reclassifications 0.0 0.0 0.0 Depreciation for the period 8.0 165.7 0.0 173.7 Accumulated depreciation at 31 Dec. 151.2 3,554.3 34.6 3,740.0 Book value at 31 Dec. 9.4 92.6 560.5 0.6 31.3 694.3 FINANCIAL STATEMENTS 2022 106 Intangible Assets 2021 EUR million Development costs Intangible rights Goodwill Other intangible assets Intangible assets under construction Total Acquisition cost at 1 Jan. 53.5 154.0 886.3 540.4 10.2 1,644.4 Additions 3.9 3.0 24.4 10.8 42.0 Reclassifications 2.1 0.2 4.9 –7.7 –0.4 Acquisition cost at 31 Dec. 59.6 157.2 886.3 569.7 13.3 1,686.1 Accumulated depreciation and amortisation at 1 Jan. 44.0 78.3 716.0 452.2 1,290.4 Amortisation and depreciation for the period 6.6 8.3 42.7 33.7 91.2 Accumulated depreciation and amortisation at 31 Dec. 50.5 86.5 758.6 485.9 1,381.5 Book value at 31 Dec. 9.1 70.7 127.7 83.8 13.3 304.5 Property, plant and equipment 2021 EUR million Land and water areas Buildings and constructions Machinery and equipment Other assets Assets under construction Total Acquisition cost at 1 Jan. 9.9 216.6 3,766.6 35.1 25.1 4,053.3 Additions 0.0 11.3 163.2 20.7 195.2 Disposals 0.0 –0.5 0.0 –0.5 Reclassifications 0.0 0.3 14.1 –14.0 0.4 Acquisition cost at 31 Dec. 10.0 227.7 3,943.8 35.1 31.8 4,248.4 Accumulated depreciation at 1 Jan. 135.0 3,222.4 34.5 3,392.0 Accumulated depreciation on disposals and reclassifications –0.3 0.0 –0.3 Depreciation for the period 8.5 166.1 0.0 174.7 Accumulated depreciation at 31 Dec. 143.2 3,388.6 34.5 3,566.3 Book value at 31 Dec. 10.0 84.5 555.3 0.6 31.8 682.1 FINANCIAL STATEMENTS 2022 107 11. Investments Investments in Receivables from 2022 EUR million Subsidiaries Associates Other companies Group companies Other Other companies Total Acquisition cost at 1 Jan. 837.7 6.2 22.9 1.6 0.1 868.5 Additions 4.5 0.0 0.3 4.9 Disposals 0.0 0.0 –0.1 –0.1 Acquisition cost at 31 Dec. 842.2 6.3 23.3 1.5 0.0 873.3 Impairment at 1 Jan. –3.3 –0.1 –4.1 –7.5 Additions –1.8 –0.2 –2.1 Impairment at 31 Dec. –5.1 –0.1 –4.3 –9.6 Book value at 31 Dec. 837.1 6.2 18.9 1.5 0.0 863.7 A list of the Group and associated companies is available under Note 8.3 of the consolidated financial statements. Investments in Receivables from 2021 EUR million Subsidiaries Associates Other companies Group companies Other Other companies Total Acquisition cost at 1 Jan. 837.5 6.2 22.5 1.6 0.1 867.9 Additions 0.2 0.4 0.6 Disposals 0.0 0.0 0.0 Acquisition cost at 31 Dec. 837.7 6.2 22.9 1.6 0.1 868.5 Impairment at 1 Jan. –3.3 –0.1 –4.1 –7.5 Impairment at 31 Dec. –3.3 –0.1 –4.1 –7.5 Book value at 31 Dec. 834.4 6.1 18.8 1.6 0.1 861.0 2.6 Earnings per share FINANCIAL STATEMENTS 2022 108 12. Inventories EUR million 2022 2021 Materials and supplies 21.3 13.9 Finished goods 43.4 42.2 64.6 56.1 13. Non-current receivables EUR million 2022 2021 Receivables from the Group companies Loan receivables 26.2 24.6 Receivables from others Trade receivables 84.9 81.8 Prepayments and accrued income (1 12.6 15.7 97.5 97.4 123.7 122.0 1) Breakdown of prepayments and accrued income Rent advances 8.7 8.7 Transaction costs and losses related to loan issuance 3.9 6.9 12.6 15.7 3. Business acquisitions and disposals 4. Personnel FINANCIAL STATEMENTS 2022 109 14. Current receivables EUR million 2022 2021 Receivables from the Group companies Loan receivables 32.8 28.1 Trade receivables 3.3 2.3 Prepayments and accrued income 1.4 1.3 Other receivables 8.1 4.2 45.7 35.8 Receivables from the associated companies Loan receivables 0.0 Trade receivables 0.1 0.1 0.1 0.1 Receivables from others Trade receivables 326.0 309.9 Loan receivables 0.0 Prepayments and accrued income (1 55.5 60.7 Other receivables 11.8 12.9 393.3 383.5 439.1 419.3 1) Breakdown of prepayments and accrued income Interests 0.2 Rent advances 1.4 1.4 Transaction costs and losses related to loan issuance 3.0 3.1 Income taxes 0.9 Other business expense advances paid 50.0 56.2 55.5 60.7 4.1 Employee expenses FINANCIAL STATEMENTS 2022 110 15. Equity EUR million 2022 2021 Share capital at 1 Jan. 83.0 83.0 Share capital at 31 Dec. 83.0 83.0 Treasury shares at 1 Jan. –125.9 –128.2 Disposal of treasury shares 1.6 2.3 Treasury shares at 31 Dec. –124.4 –125.9 Reserve for invested non-restricted equity at 1 Jan. 77.8 77.8 Reserve for invested non-restricted equity at 31 Dec. 77.8 77.8 Contingency reserve at 1 Jan. 3.4 3.4 Contingency reserve at 31 Dec. 3.4 3.4 Retained earnings at 1 Jan. 587.4 648.5 Dividend distribution –328.5 –312.3 Withdrawal of dividend liabilities 0.2 0.3 Disposal of treasury shares –1.6 –2.3 Retained earnings at 31 Dec. 257.5 334.2 Profit for the period 284.1 253.2 Total equity 581.5 625.7 Distributable earnings Retained earnings 257.5 334.2 Treasury shares –124.4 –125.9 Reserve for invested non-restricted equity 77.8 77.8 Development costs –20.5 –12.3 Profit for the period 284.1 253.2 474.6 526.9 4.2 Share-based incentives FINANCIAL STATEMENTS 2022 111 16. Provisions EUR million 2022 2021 Provision for unemployment pensions 4.2 4.3 Other provisions (1 0.8 2.6 5.0 6.9 1) Other provisions consist of salaries, including related statutory employee costs for employees not required to work during their severance period and a provision for other operating expenses. Provisions of EUR 3,0 (3,5) million were used and EUR 1,1 (1,6) million were reversed as unused in 2022. 17. Non-current liabilities EUR million 2022 2021 Interest-bearing Liabilities to others Bonds 900.0 900.0 Loans from the financial institutions 100.0 250.0 1,000.0 1,150.0 Non-interest bearing Liabilities to others Trade payables 1.4 8.1 Accruals and deferred income (1 5.9 5.7 7.3 13.8 1,007.3 1,163.8 Liabilities maturing after five years Bonds 300.0 300.0 1) Breakdown of accruals and deferred income Rent advances 5.9 5.7 4.3 Pension obligations 5. Tangible and Intangible assets FINANCIAL STATEMENTS 2022 112 18. Current liabilities EUR million 2022 2021 Interest-bearing Liabilities to the Group companies Cash Pool account 232.8 219.6 232.8 219.6 Liabilities to others Loans from the financial institutions 150.0 100.0 Commercial paper 125.0 275.0 100.0 507.8 319.6 Non-interest bearing Liabilities to the Group companies Trade payables 6.8 7.2 Other liabilities 13.7 7.0 20.5 14.2 Liabilities to the associates Trade payables 0.0 0.0 0.0 0.0 Liabilities to others Advances received 5.2 4.9 Trade payables 173.3 174.8 Accrued liabilities (1 56.0 54.7 Other liabilities 75.0 75.4 309.4 309.9 329.9 324.1 837.7 643.7 1) Breakdown of accrued liabilities Salaries, wages and social security costs 48.2 45.5 Interests 5.5 5.5 Direct taxes 1.9 Rent advances 1.0 0.9 Income received in advance 0.9 0.5 Others 0.4 0.4 56.0 54.7 5.1 Depreciation, amortisation and impairment FINANCIAL STATEMENTS 2022 113 19. Lease commitments and other liabilities Collateral EUR million 2022 2021 On behalf of own commitments Bank deposits 0.3 0.3 Guarantees 0.2 0.5 0.3 Lease commitments EUR million 2022 2021 Real estate leases (1 Within one year 28.7 27.7 Later that one year, but not later that five years 40.1 47.6 Later than five years 62.6 63.6 131.4 138.9 Other lease commitments (2 Within one year 3.4 3.8 Later that one year, but not later that five years 3.7 3.8 7.1 7.5 Total leases 138.6 146.4 Other commitments EUR million 2022 2021 Venture Capital investment obligation 0.5 0.8 Repurchase obligations 0.0 0.5 0.8 1) 2) Lease liabilities consist mainly of car and IT equipment leases. Real estate leases are presented at nominal values. Rental liabilities are exclusive of value added tax, except for vehicle lease liabilities. 5.2 Property, plant and equipment FINANCIAL STATEMENTS 2022 114 Derivative instruments EUR million 2022 2021 Currency derivatives Nominal value 3.3 3.5 Fair value 0.0 0.0 Electricity derivatives Nominal value 5.8 1.9 Fair value 1.2 1.6 Elisa hedges electricity purchases through physical purchase agreements and derivatives. The electricity price risk is assessed at a five-year period. Electricity derivatives are subject to hedge accounting. The hedging rate for purchases during following years,% 2022 2021 0–1 years 86.6 93.1 1–2 years 60.1 30.6 2–3 years 38.9 3–4 years 37.8 4–5 years 36.7 Real-estate investments On 31 December 2022, the VAT refund liability of real-estate investments was EUR 36.1 (33.2) million. FINANCIAL STATEMENTS 2022 115 OSAKKEET JA OSAKKEENOMISTAJAT 1. Share capital and shares The company’s paid-up share capital registered in the Trade Register stood at EUR 83,033,008 at the end of the financial year. At the end of the financial year, the number of Elisa Corporation shares was 167,335,073, all within one share series. 2. Authorisations of the Board of Directors On 8 April 2022, the Annual General Meeting authorised the Board of Directors to decide on a new share issue, transfer of treasury shares owned by the company and/or granting of special rights referred to in Chapter 10, Section 1 of the Finnish Companies Act subject to the following: The authorisation allows the Board of Directors to issue a maximum of 15,000,000 shares in one or several issues. The share issue and shares granted by virtue of special rights are included in the aforementioned maximum number. The maximum number is approximately 9 per cent of the entire stock. The share issue can be free or for consideration and can also be directed to the Company itself. The authorisation entitles the Board to make a directed issue. The authorisation may be used for making acquisitions or implementing other arrangements related to the Company’s business, to finance investments, to improve the Company’s financial structure, or for other purposes decided by the Board of Directors. The Board of Directors shall have the right to decide on all other matters related to the share issue. The authorisation is valid for 18 months, and it annuls the authorisation given by the Annual General Meeting to the Board of Directors on 8 April 2021. On 8 April 2022, the Annual General Meeting also authorised the Board of Directors to decide on the acquisition of treasury shares subject to the following: The Board of Directors may decide to acquire or pledge on non- restricted equity a maximum of 5,000,000 treasury shares. The acquisition may take place as one or several blocks of shares. The consideration payable for the shares shall not be more than the ultimate market price. In purchasing the Company’s own shares derivative, share lending and other contracts customary in the capital market may be concluded pursuant to law and the applicable legal provisions. The authorisation entitles the Board of Directors to pass a resolution to purchase the shares by making an exception to the purchase of shares relative to the current holdings of the shareholders. The treasury shares may be used for making acquisitions or implementing other arrangements related to the Company’s business, to finance investments, to improve the Company’s financial structure, to be used as part of the incentive compensation plan, or for the purpose of otherwise assigning or cancelling the shares. The Board of Directors shall have the right to decide on all other matters related to the acquisition of the Company’s own shares. The authorisation is valid for 18 months, and it annuls the respective authorisation given by the Annual General Meeting to the Board of Directors on 8 April 2021. 3. Treasury shares, share issues and cancellations At the beginning of the financial period, Elisa held 7,147,772 treasury shares. The Annual General Meeting held on 8 April 2022 authorised the Board of Directors to acquire and assign treasury shares. The authorisation applies to a maximum of 5,000,000 treasury shares. On the basis of the authorisation, Elisa has not acquired any treasury shares. A total of 72,394 treasury shares were disposed during the financial year. At the end of the financial period, Elisa held 7,075,378 treasury shares. The treasury shares held by Elisa Corporation do not have any substantial impact on the distribution of holdings and votes in the Company. They represent 4.23 per cent of all shares and votes. 4. Management interests The aggregate number of shares held by Elisa’s Board of Directors and the CEO on 31 December 2022 was 124,417 shares and votes, which represented 0.07 per cent of all shares and votes. 5. Share performance The Elisa share closed at EUR 49.46 on 31 December 2022. The highest quotation of the year was EUR 56.90 and the lowest EUR 45.57. The average price was EUR 51.99. Information is based on the share trades made on Nasdaq Helsinki stock exchange. At the end of the financial year, the market capitalisation of Elisa’s total number of shares was EUR 8,276.4 million. Shares and shareholders 5.3 Right-of-use assets FINANCIAL STATEMENTS 2022 116 OSAKKEET JA OSAKKEENOMISTAJAT 6. Quotation and trading The Elisa share is quoted on the Main List of the Nasdaq Helsinki with the ticker ELISA. The aggregate volume of trading on the Nasdaq Helsinki between 1 January and 31 December 2022 was 71,229,057 shares for an aggregate price of EUR 3,703.2 million. The trading volume represented 42.6 per cent of the total number of shares at the end of the financial year. 7. Distribution of holding by shareholder groups at 31 December 2022 Number of shares Proportion of all shares, % 1 Private companies 3,272,026 1.96 2 Financial and insurance institutions 4,393,230 2.63 3 Public corporations 29,617,730 17.70 4 Non-profit organisations 5,198,591 3.11 5 Households 36,944,882 22.08 6 Foreign 357,449 0.21 7 Nominee registered 80,475,787 48.09 Elisa Group, treasury shares 7,075,378 4.23 167,335,073 100.00 8. Distribution of holding by amount at 31 December 2022 Size of holding Number of shareholders % Number of shares % 1–100 49,581 27.74 2,161,685 1.29 101–1 000 124,804 69.82 27,614,086 16.50 1 001–10 000 4,127 2.31 9,743,808 5.82 10 001–100 000 200 0.11 5,063,431 3.03 100 001–1 000 000 27 0.02 6,807,391 4.07 1 000 001– 7 0.00 28,255,787 16.89, Nominee registered 80,475,787 48.09 178,746 100.00 Elisa Common Clearing account (1 137,720 0.08 Elisa Corporation, treasury shares 7,075,378 4.23 Issued amount 167,335,073 100.00 1) Shares on the Common Clearing account include shares that had not been transferred to the share owners’ book-entry accounts at the time of, or after, entering the shares into the Finnish book-entry system. FINANCIAL STATEMENTS 2022 117 OSAKKEET JA OSAKKEENOMISTAJAT 9. Largest shareholders at 31 December 2022 Name Number of shares % 1 Solidium Oy 16,802,800 10.04 2 Keskinäinen Eläkevakuutusyhtiö Ilmarinen 4,090,118 2.44 3 Keskinäinen Työeläkevakuutusyhtiö Varma 3,096,976 1.85 4 Keskinäinen Työeläkevakuutusyhtiö Elo 2,238,000 1.34 5 Helsingin kaupunki 1,124,690 0.67 6 Valtion Eläkerahasto 1,100,000 0.66 7 OP Finland Fund 769,906 0.46 8 Nordea Pro Finland Fund 502,619 0.30 9 Föreningen Konstsamfundet rf 500,000 0.30 10 Stiftelsen För Åbo Akademi Sr 403,223 0.24 11 Keva 398,479 0.24 12 Sijoitusrahasto Seligson & Co 371,954 0.22 13 Juselius Sigrid Stiftelse 348,800 0.21 14 Nordea Finnish Stars Fund 321,610 0.19 15 Samfundet Folkhälsan i Svenska Finland R F 315,263 0.19 16 Op-Henkivakuutus Oy 289,825 0.17 17 Sijoitusrahasto Evli Suomi Select 281,024 0.17 18 Vantaan Kaupunki 258,738 0.15 19 Suomen Kulttuurirahasto Sr 224,356 0.13 20 Fjarde Ap-Fonden 188,202 0.11 33,626,583 20.10 Elisa Corporation, treasury shares 7,075,378 4.23 Nominee registered 1) 80,475,787 48.09 Shareholders not specified above 46,157,325 27.58 167,335,073 100.00 1) On 27 February 2017, BlackRock, Inc gave a notice in accordance with Chapter 9, Section 5 of the Finnish Securities Market Act, that the direct share ownership of Elisa Corporation shares owned by BlackRock, Inc. was 8,533,440 and by its funds 1,232,577 shares, totaling 9,766,017 shares, which was 5.84 per cent of Elisa Corporation’s entire stock. FINANCIAL STATEMENTS 2022 118 OSAKKEET JA OSAKKEENOMISTAJAT Share trading volumes are based on the trades made on Nasdaq Helsinki. Elisa share is also traded in alternative marketplaces. 11. Trading volume Shares per month (million) 10. Daily price development Closing price in EUR 1) Rebalanced to Elisa share. 40 42 44 46 48 50 52 54 56 58 Elisa OMX Helsinki 25 -indeksi (1 Kurssikehitys päivittäin Päätöskurssi, euroa 1/2022 2/2022 3/2022 4/2022 5/2022 6/2022 7/2022 8/2022 9/2022 10/2022 11/2022 12/2022 1) Suhteutettuna Elisan osakekurssiin 0 2 4 6 8 10 Osakevaihto milj. kpl/kk 1/2022 2/2022 3/2022 4/2022 5/2022 6/2022 7/2022 8/2022 9/2022 10/2022 11/2022 12/2022 6.0 5.1 8.6 6.8 6.5 6.4 5.4 5.1 6.0 5.2 5.6 4.4 FINANCIAL STATEMENTS 2022 119 SIGNATURES TO THE BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS Helsinki, 26 January 2023 Anssi Vanjoki Clarisse Berggårdh Maher Chebbo Chairman of the Board of Directors Kim Ignatius Katariina Kravi Pia Kåll Topi Manner Eva-Lotta Sjöstedt Antti Vasara Veli-Matti Mattila President and CEO According to the balance sheet of 31 December 2022, the parent company’s equity is EUR 581,469,661.80, of which distributable funds account for EUR 474,553,183.53. The parent company’s profit for the period from 1 January to 31 December 2022 was EUR 284,090,605.60. Board’s proposal for profit distribution The Board of Directors proposes to the General Meeting of Shareholders that the distributable funds be used as follows: • a dividend of EUR 2.15 per share shall be paid for a total of EUR 344,558,344.25 • no dividend shall be paid on shares in the parent company’s possession • EUR 129,994,839.28 shall be retained in shareholders’ equity. 5.4 Intangible assets 6. Inventories, trade and other receivables, trade and other liabilities FINANCIAL STATEMENTS 2022 120 To the Annual General Meeting of Elisa Corporation Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Elisa Corporation (business identity code 0116510–6) for the year ended 31 December 2022. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes. In our opinion • the consolidated financial statements give a true and fair view of the group’s financial position, financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU • the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report submitted to the Audit Committee. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 2.5 to the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Materiality The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements. Auditor’s Report 6.1 Inventories FINANCIAL STATEMENTS 2022 121 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The significant risks of material misstatement referred to in the EU Regulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit matters below. We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud. THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT Valuation of goodwill, € 1 157.3 million (Consolidated accounting principles 1.2 and note 5.4) • The amount of goodwill in the consolidated statement of financial position is significant due to the acquisitions carried out in the previous years. The amount of goodwill equals approximately to the consolidated equity. • Goodwill is tested for impairment annually and the group prepares impairment tests for the financial statements or when needed on a discounted cash flow basis with sensitivity analyses. • Estimating future cash flows underlying the impairment tests involves a significant amount of management judgment, particularly in respect of growth in net sales, profitability and discount rates. • Due to management judgments about the estimates used in the impairment tests, as well as the significant carrying amount involved, impairment of goodwill is considered a key audit matter. • We assessed critically those management judgments and the assumptions made, which were used to prepare the cash flow projections for the coming years. In addition, we compared previous years’ estimates to the actual amounts to be able to evaluate the reliability of the estimating methods applied. • We used KPMG valuation specialists when considering the appropriateness of the discount rate used and the technical correctness of the calculations, as well as comparing the assumptions used to market and industry-specific information. • In addition, we assessed the adequacy of the sensitivity analyses and the appropriate presentation of the notes related to impairment tests in the consolidated financial statements. FINANCIAL STATEMENTS 2022 122 Revenue recognition, € 2 129.5 million (Consolidated accounting principles 1.2 and note 2.3) • Revenues are recognized once the service has been rendered to the customer or once the significant risks and rewards related to the ownership of the goods have been transferred to the buyer. • The IT system environment related to billing transactions is complex and the volume of billing data is large containing wide variety of different products. • Due to large volumes of data, revenue recognition involves the risk of revenue being recognized in an incorrect period as well as the risk that all transactions are not recorded as complete. • Revenue recognition accrual is partially based on estimates from the management’s past experience. • We evaluated the sales-related IT control environment and the key controls in the billing process over the completeness and accuracy of revenue. • The majority of the group’s billing data is processed in a single IT system. We evaluated the reliability of the associated IT control environment by assessing, among others, the processes related to the user authorization management and back-up and recoveries, as well as by testing the key application controls over the billing process. • We also evaluated the group’s internal control procedures over the control environment in the billing process, as well as assessed the group’s monthly revenue monitoring procedures at business unit level. • In addition to control testing, we performed substantive procedures to sales accruals to assess the completeness and the accuracy of the recognized revenues. Capital expenditures (Consolidated accounting principles 1.2 and note 5) • The group invests heavily especially in its own telecommunication network and IT environments as well as new technology to remain competitive. • The group’s capital expenditures (investments) amount to € 289.7 million in 2022, and therefore capital expenditures comprise a significant part of the consolidated statement of financial position • We observed the group’s investment budget for the year 2022 and followed up developments quarterly. • We evaluated the group’s internal control environment. We also tested the controls over the approval of investment projects; over the authorization process when placing individual orders under an investment project; over the associated approval process when approving purchase invoices; and over recording transactions in the asset register (for property, plant and equipment and intangible assets). • Our substantive procedures focused on assessing the appropriateness of the accounting treatment in respect of the most significant investment projects. In addition, we tested whether the assets under construction met the capitalization requirements and assessed whether they were disclosed appropriately in the financial statements. FINANCIAL STATEMENTS 2022 123 Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of Financial Statements Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. FINANCIAL STATEMENTS 2022 124 Other Reporting Requirements Information on our audit engagement We were first appointed as auditors by the Annual General Meeting on 31 March 2004, and our appointment represents a total period of uninterrupted engagement of 19 years. The current auditor in charge, Toni Aaltonen, Authorised Public Accountant, KHT, was elected on 6 April 2017. Other Information The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Helsinki, 26 January 2023 KPMG Oy Ab Toni Aaltonen Authorised Public Accountant, KHT FINANCIAL STATEMENTS 2022 125 To the Board of Directors of Elisa Corporation We have undertaken a reasonable assurance engagement in respect of whether the consolidated financial statements for the year ended 31 December 2022 included in the digital financial statements 743700TU2S3DXWGU7H32-2022-12-31 -en.zip of Elisa Corporation (Business ID 0116510-6) have been marked up with iXBRL markups in accordance with the requirements of Article 4 of EU Delegated Regulation 2018/815 (ESEF RTS). The Responsibility of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for preparing the report of the Board of Directors and financial statements (ESEF financial statements) that comply with the requirements of ESEF RTS. This responsibility includes: • preparation of ESEF financial statements in XHTML format in accordance with Article 3 of the ESEF RTS • marking up the primary statements and the notes to the consolidated financial statements, and the company identification data included in the ESEF financial statements with iXBRL tags in accordance with Article 4 of the ESEF RTS; and • ensuring consistency between ESEF financial statements and audited financial statements. The Board of Directors and the Managing Director are also responsible for such internal control as they deem necessary to prepare the ESEF financial statements in accordance with the requirements of the ESEF RTS. Auditor’s Independence and Quality Management We are independent of the company in accordance with the ethical requirements applicable in Finland, which apply to the engagement we have performed, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The auditor applies International Standard on Quality Management ISQM 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulations requirements. Auditor’s Responsibility In accordance with the Engagement Letter our responsibility is to express an opinion on whether the marking up of the consolidated financial statements included in the ESEF financial statements comply in all material respects with the Article 4 of the ESEF RTS. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000. The engagement involves procedures to obtain evidence whether; • the primary statements of the consolidated financial statements included in the ESEF financial statements are, in all material respects, marked up with iXBRL tags in accordance with Article 4 of the ESEF RTS, and; • whether the notes to the consolidated financial statements and the company identification data included in the ESEF financial statements data, have been marked up, in all material respects, with iXBRL tags in accordance with Article 4 of the ESEF RTS; and • whether the ESEF financial statements and the audited financial statements are consistent with each other. The nature, timing and the extent of procedures selected depend on practitioner’s judgement. This includes the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the primary statements of the consolidated financial statements, the notes to the consolidated financial statements and the company identification data included in the ESEF financial statements of Elisa Corporation identified as 743700TU2S3DXWGU7H32-2022-12-31 -en.zip for the year ended 31 December 2022 are, in all material respects, marked up in compliance with the ESEF Regulatory Technical Standard. Our audit opinion on the audit of the consolidated financial statements of Elisa Corporation for the year ended 31 December 2022 is set out in our Auditor’s Report dated 26 January 2023. In this report, we do not express any audit opinion or other assurance conclusion on the consolidated financial statements. Helsinki 13 March 2023 KPMG OY AB Toni Aaltonen Authorised Public Accountant, KHT Independent Auditor’s Reasonable Assurance Report on Elisa Corporation’s ESEF Financial Statements 6.2 Trade and other receivables
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