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1. Segment information
Wärtsilä´s highest operative decision maker (CODM, Chief Operating Decision Maker) is the President and CEO with the support of the Board of Management and in some cases the Board of Directors. The President and CEO assesses the Group´s profitability, financial position and development as a whole. Consequently to the management approach by the Chief Operating Decision Maker, Wärtsilä is one operating segment.
The operating segment is subdivided into two mutually supportive market areas, Marine Solutions and Energy Solutions, which are supported by Services. Wärtsilä provides advanced technologies and lifecycle solutions to its marine and energy market customers. These technologies and solutions are sold and delivered globally by the same Wärtsilä companies. Manufacturing supplies products to both Energy Solutions and Marine Solutions from the same assembly lines, allowing for synergies in the production process and in research and development. Also sourcing function supports both market areas and Services. Due to the business model, integrated operations, and governance structure, the Group is reported as one segment. However, to enable better understanding of the different market areas’ development and the business cycles, Wärtsilä discloses the net sales by market areas and Services.
Net sales by market areas and Services
Restated
MEUR 2018 2017
Energy Solutions 1 517 1 401
Marine Solutions 1 232 1 104
Services 2 426 2 407
Total 5 174 4 911
As geographical information, Wärtsilä reports the geographical areas Finland, other European countries, Asia, the Americas, and other continents. In the geographical information net sales are split by customer´s destination and non-current assets by origin.
During the financial period 1 January - 31 December 2018 and 1 January - 31 December 2017 Wärtsilä did not have any individual significant customers or countries. The sales to the USA represented 14% (12) of the total net sales.
Geographical information
Restated
2018 2017
MEUR Net sales Non-current
assets*
Net sales Non-current
assets*
Finland 56 242 115 249
Other European countries 1 429 1 534 1 411 1 378
Asia 1 867 90 1 933 112
The Americas 1 245 266 1 132 265
Other 577 5 321 5
Total 5 174 2 137 4 911 2 009
* Non-current assets consist of goodwill, intangible assets, property, plant and equipment, and investments in associates and joint ventures.
2. Acquisitions
Acquisitions 2018
Transas Group
In May, Wärtsilä acquired 100% of Transas, a global company headquartered in the UK.
Transas is a global market leader in marine navigation solutions that include complete bridge systems, digital products and electronic charts. The company is also a leader in professional training and simulation services, ship traffic control, as well as monitoring and support.
The following tables summarise the preliminary amounts for the consideration paid for Transas, the cash flow from the acquisition, and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.
Preliminary consideration MEUR
Consideration transferred 183
Total consideration transferred 183
Preliminary cash flow from the acquisition MEUR
Consideration paid in cash 183
Cash and cash equivalents of the acquired company -12
Total cash flow from the acquisition 171
Provisional values of the assets and liabilities arising from the acquisition MEUR
Intangible assets 66
Property, plant and equipment 2
Inventories 8
Trade and other receivables 50
Deferred tax assets 2
Cash and cash equivalents 12
Total assets 140
Provisions 3
Interest-bearing debt 29
Trade payables and other liabilities 39
Deferred tax liabilities 13
Total liabilities 83
Total net assets 57
Preliminary goodwill 113
The preliminary fair values of the acquired identifiable intangible assets at the date of the acquisition (including technology, customer relations, and trade marks) amounted to EUR 55 million. The fair value of the current trade receivables and other receivables is approximately EUR 50 million. The fair value of the trade receivables does not include any significant risk.
The preliminary goodwill of EUR 113 million reflects the value of know-how and expertise in digital marine solutions and services. The acquisition takes Wärtsilä a significant step closer to achieving its mission of enabling sustainable societies with smart technologies. It will also speed delivery on the company’s promise to disrupt the industry by establishing an ecosystem that is digitally connected across the entire supply chain, through applications that are secure, smart and cloud-based.
During 2018 the Group incurred acquisition-related costs of EUR 3 million related to external legal fees and due diligence costs. The costs have been included in the other operating expenses in the consolidated statement of income.
Pro forma
If the acquisition had occurred on 1 January 2018, management estimates that the consolidated net sales would have been EUR 5,213 million. The impact in the consolidated operating result would not have been significant. In determining these amounts, management has assumed that the fair value adjustments which arose on the date of the acquisition would have been the same if the acquisition had occurred on 1 January 2018.
Other acquisitions
In February, Wärtsilä acquired 100% of Trident B.V. and LOCK-N-STITCH Inc. In October, Wärtsilä acquired 100% of Burriel Navarro, S.L.
Trident B.V. is a Netherland based company specialised in underwater ship maintenance, inspection, and repair services. With this acquisition, Wärtsilä builds in-house competence, captures the full potential of services’ product synergies, and strengthens its position in the market.
LOCK-N-STITCH Inc. is an American engineering company serving customers within the marine and energy sectors as well as other industries. It specialises in cast iron repairs. The acquisition strengthens Wärtsilä’s service portfolio for customers operating multiple brands.
Burriel Navarro, S.L is a company operating in underwater services in the main ports of Spain. The acquisition supports the growth of Wärtsilä’s underwater services and expands the company’s local presence in the European market.
The following tables summarise the preliminary amounts for the consideration paid, the cash flow from the acquisitions, and the amounts of the assets acquired and liabilities assumed recognised at the acquisition dates.
Preliminary consideration MEUR
Consideration transferred 27
Total consideration transferred 27
Preliminary cash flow from the acquisitions MEUR
Consideration paid in cash 23
Contingent consideration 4
Cash and cash equivalents of the acquired companies -1
Total cash flow from the acquisitions 26
Provisional values of the assets and liabilities arising from the acquisitions MEUR
Intangible assets 10
Property, plant and equipment 2
Inventories 1
Trade and other receivables 6
Cash and cash equivalents 1
Total assets 19
Trade payables and other liabilities 4
Deferred tax liabilities 3
Total liabilities 6
Total net assets 13
Preliminary goodwill 13
The preliminary fair values of acquired identifiable intangible assets at the dates of the acquisitions (including technology, customer relations, and trade marks) amounted to EUR 10 million. The fair value of current trade receivables and other receivables is approximately EUR 6 million. The fair value of the trade receivables does not include any significant risk.
The preliminary goodwill of EUR 13 million reflects the value of know-how and expertise in advanced underwater services.
During 2018, the acquisition-related costs the Group incurred related to external legal fees and due diligence costs were insignificant. The costs have been included in the other operating expenses in the consolidated statement of income.
Pro forma
If the acquisitions had occurred on 1 January 2018, management estimates that the consolidated net sales would have been EUR 5,176 million. The impact in the consolidated operating result would not have been significant. In determining these amounts, management has assumed that the fair value adjustments which arose on the dates of the acquisitions would have been the same if the acquisitions had occurred on 1 January 2018.
Acquisitions 2017
Greensmith Energy Management Systems Inc.
On 3 July 2017, Wärtsilä acquired 100% of Greensmith Energy Management Systems Inc.
Greensmith Energy Management Systems Inc. is a market leader in grid-scale energy storage software and integrated solutions. The acquisition of Greensmith enables Wärtsilä to rapidly expand its footprint in the energy storage market globally and position as a premier energy system integrator.
The following tables summarise the amounts for the consideration paid for Greensmith, the cash flow from the acquisition, and the amounts of the assets acquired and liabilities assumed recognised at the acquisition date.
Total consideration MEUR
Consideration transferred 144
Total consideration transferred 144
Cash flow from the acquisition MEUR
Consideration paid in cash 144
Total cash flow from the acquisition 144
The assets and liabilities arising from the acquisition MEUR
Intangible assets 42
Trade and other receivables 5
Deferred tax assets 4
Total assets 51
Provisions 5
Trade payables and other liabilities 5
Deferred tax liabilities 17
Total liabilities 27
Total net assets 24
Goodwill 120
The fair values of the acquired identifiable intangible assets at the date of the acquisition (including trademark and tehcnology related IP) amounted to EUR 42 million. The fair value of the current trade receivables and other receivables is approximately EUR 5 million. The fair value of the trade receivables does not include any significant risk.
The goodwill of EUR 120 million reflects the value of know-how and expertise in grid-scale energy storage and integrated solutions. Wärtsilä foresees that the acquisition will strengthen its position as an energy system integrator as well as support its growth strategy by improving Wärtsilä's offering and services towards customers.
During 2017 the Group incurred acquisition-related costs of EUR 1 million related to external legal fees and due diligence costs. The costs have been included in the other operating expenses in the consolidated statement of income.
Pro Forma
If the Greensmith acquisition had occurred on 1 January 2017, management estimates that the consolidated net sales would have been EUR 4,928 million. The impact in the consolidated operating result would not have been significant. In determining these amounts, management has assumed that the fair value adjustments which arose on the date of the acquisition would have been the same if the acquisition had occurred on 1 January 2017.
Other acquisitions
In October, Wärtsilä acquired 100% of Puregas Solutions Ab and Guidance Navigation Holdings Limited.
Puregas Solutions is a Sweden based leader in turnkey biogas upgrading solutions. The acquisition complements Wärtsilä’s existing position in the biogas liquefaction market.
Guidance Navigation Holdings Limited is a UK based privately owned company. The company is a technology leader in the marine industry for sensor solutions relating to dynamic positioning and other vessel control systems. The acquisition enhances Wärtsilä’s capabilities in the areas of situational awareness and near-field measurement, both essential for more intelligent vessel navigation.
The following tables summarise the amounts for the consideration paid, the cash flow from the acquisitions, and the amounts of the assets acquired and liabilities assumed recognised at the acquisition dates.
Total consideration MEUR
Consideration transferred 63
Total consideration transferred 63
Cash flow from the acquisitions MEUR
Consideration paid in cash 53
Contingent consideration 9
Cash and cash equivalents of the acquired companies -10
Total cash flow from the acquisitions 52
The assets and liabilities arising from the acquisitions MEUR
Intangible assets 17
Inventories 1
Trade and other receivables 14
Cash and cash equivalents 10
Total assets 43
Provisions 1
Trade payables and other liabilities 9
Advances received 4
Deferred tax liabilities 4
Total liabilities 17
Total net assets 26
Goodwill 37
The fair values of the acquired identifiable intangible assets at the dates of acquisitions (including customer relations, technology and trade marks) amounted to EUR 17 million. The fair value of the current trade receivables and other receivables is approximately EUR 14 million. The fair value of the trade receivables does not include any significant risk.
The goodwill of EUR 37 million reflects the value of know-how and expertise in turnkey biogas upgrading solutions and more intelligent vessel navigation. Wärtsilä foresees that the acquisition of Puregas Solutions Ab will strengthen and complement its position in the biogas liquefaction market as well as improve Wärtsilä's offering and reach in the gas value chain. The acquisition of Guidance Navigation Holdings Limited enhances Wärtsilä’s capabilities in the areas of situational awareness and near-field measurement, both essential for more intelligent vessel navigation.
During 2017, the Group incurred acquisition-related costs of EUR 1 million related to external legal fees and due diligence costs. The costs have been included in the other operating expenses in the consolidated statement of income.
Pro forma
If the other acquisitions had occurred on 1 January 2017, management estimates that the consolidated net sales would have been EUR 4,940 million. The impact in the consolidated operating result would not have been significant. In determining these amounts, management has assumed that the fair value adjustments which arose on the dates of the acquisitions would have been the same if the acquisitions had occurred on 1 January 2017.
3. Disposals
Disposals 2018
Disposal of pumps business
On 31 October 2018, Wärtsilä divested its pumps business to Solix Group, a Scandinavian investment company. Wärtsilä Pumps has belonged to the Wärtsilä Marine Solutions organisation and became part of the Group along with the acquisition of Hamworthy in 2012. The Wärtsilä Pumps business recorded sales of approximately EUR 50 million in 2017. The cash consideration of the transaction was EUR 45 million, and in addition EUR 20 million of the transaction price is reported as a receivable in the non-current other receivables in the consolidated statement of financial position. Wärtsilä reported a gain of EUR 27 million in other operating income from the transaction according to the preliminary sales profit calculation.
Other disposals
On 20 October 2018, Wärtsilä sold its majority interest in Wärtsilä Yuchai Engine Co. Ltd. The consideration received and the impact on profit for the financial period were not significant.
Disposals 2017
In 2017, there were no disposals.
4. Disaggregation of revenue
Revenue from the contracts with customers is derived over time and at a point in time in the following revenue types.
Net sales by revenue type
MEUR 2018 2017
Products 1 145 1 149
Goods and services 557 567
Projects 2 992 2 785
Long-term agreements 480 410
Total 5 174 4 911
Timing of satisfying performance obligations
MEUR 2018 2017
At a point in time 3 740 3 555
Over time 1 434 1 356
Total 5 174 4 911
Product sales consist of sales of spare parts and standard equipment for which the revenue is recognised at a point in time when the control of the products has transferred to customer, in general at the delivery of the goods.
Goods and services -type of revenue involves short-term field service jobs, which includes the delivery of a combination of service and equipment. The revenue is recognised at a point in time when service is rendered.
Projects contain short-term and long-term projects. Depending on the contract terms and the duration of the project, the revenue is recognised at a point in time or over time. Revenue related to long-term projects, such as construction contracts, integrated solutions projects, ship design, and energy solutions contracts, is recognised over time. Revenue for tailor-made equipment delivery projects is recognised at a point in time.
Long-term agreements contain long-term operating and maintenance agreements for which the revenue is recognised over time.
5. Other operating income
MEUR 2018 2017
Capital gains 32 18
Government grants 7 10
Sale of scrapped material 3 3
Sale of by-products 2 1
Income related to cancelled orders* 10 6
Insurance indemnities 4 4
Other 24 19
Total 80 60
* Expenses related to cancelled orders are recorded on respective expense accounts.
6. Material and services
Restated
MEUR 2018 2017
Purchases during the financial period -1 598 -1 418
Change in inventories 40 1
External services -1 294 -1 144
Total -2 852 -2 561
7. Employee benefit expenses
MEUR 2018 2017
Wages and salaries 954 1 000
Pension costs
Defined benefit plans 7 9
Defined contribution plans 71 66
Other compulsory personnel costs 142 139
Total 1 175 1 214
Management remuneration is specified in Note 30. Related party disclosures.
Long-term incentive schemes
Wages and salaries include a release of provision for expenses arising from bonus schemes 2016-2018 and 2017-2019 totalling EUR 21 million (previous year increase 40). The provision is recognised at fair value. The bonus schemes are tied to the price development of the company’s share during a pre-determined timeframe, and an upper limit is set for the bonus. When a bonus scheme ends and the employment requirement is fulfilled, the bonus is settled in cash. Board of Management members shall acquire Wärtsilä shares with 50% of the net bonuses received, until the share ownership corresponding to the individuals' annual gross base salary level has been achieved.
The bonus payment for bonus schemes is based on the share price development during a three-year period. The decision about the share issue without payment has been reflected to the amount and criteria of long-term incentive schemes. The 2016-2018 bonus scheme comprises 4,857,000 incentive rights, the 2017-2019 bonus scheme 5,490,000 incentive rights and the 2018-2020 bonus scheme 4,845,000 incentive rights. For the bonus scheme 2016-2018 the basis of a share price is EUR 15.82, for the bonus scheme 2017-2019 EUR 16.19, and for the bonus scheme 2018-2020 EUR 22.58. The bonus schemes take into account 100% of dividends paid, and the paid bonus cannot exceed EUR 4.61 per incentive right in the 2016-2018 bonus scheme, EUR 6.07 in the 2017-2019 bonus scheme, or EUR 8.47 in the 2018-2020 bonus scheme.
2018 2017
Personnel on average 18 899 17 866
Personnel at the end of the financial period 19 294 18 065
8. Depreciation, amortisation and impairment
MEUR 2018 2017
Development expenses 11 12
Purchase price allocation amortisation 43 36
Other intangible assets 12 12
Buildings and structures 16 15
Machinery and equipment 43 45
Other tangible assets 1 1
Impairments 3 14
Total 130 134
9. Other operating expenses
MEUR 2018 2017
Travel costs 145 138
Rental costs 90 90
Legal and consultancy costs 89 71
Information technology costs 61 55
Other personnel related costs 58 51
Other 204 173
Total 648 577
10. Financial income and expenses
MEUR 2018 2017
Interest income on loans and receivables 2 2
Interest income on financial assets at fair value through the statement of income 20 9
Interest income on investments at amortised cost 1
Other financial income 1 2
Total financial income 24 12
Interest expenses on financial liabilities recognised at amortised cost -11 -10
Interest expenses on financial liabilities at fair value through the statement of income -34 -14
Net interest from defined benefit plans -3 -3
Changes in fair values of financial assets/liabilities at fair value through the statement of income -4 1
Write-down of financial receivables -1
Exchange rate differences* -6 -27
Fee expenses -2 -1
Other financial expenses -4 -4
Total financial expenses -65 -59
Total -40 -47
* In 2018, the result from the ineffective portion of cash flow hedges related to cancelled orders, EUR -2 million (-15), and exchange rate differences from unhedged internal loans, EUR -5 million (-7) were included in exchange rate differences in the consolidated statement of income.
11. Income taxes
Restated
MEUR 2018 2017
Income taxes
for the financial period -126 -121
for prior financial periods 1 -2
Change in deferred tax
origination and reversal of temporary differences 10 2
changes in tax rates 1 4
Total -116 -117
Reconciliation of effective tax rate:
Profit before taxes 502 491
Tax calculated at the domestic corporate tax rate 20.0% -100 -98
Effect of changed tax rates 1 4
Effect of different tax rates in foreign subsidiaries 6 4
Effect of income not subject to tax and non-deductible expenses 2 -3
Effect of share of result of associates and joint ventures 3 3
Utilisation of previously unrecognised tax losses carried forward 4
Unrecognised taxes on losses carried forward -17 -14
Other taxes* -10 -14
Other temporary differences -1 -1
Income taxes for prior financial periods 1 -2
Tax charge in the consolidated statement of income -116 -117
Effective tax rate (%) 23.1 23.7
* Other taxes consist mainly of witholding taxes not utilised and taxes not directly based on taxable income.
Income taxes related to other comprehensive income are presented in Consolidated statement of comprehensive income. Changes in deferred tax assets and liabilities are presented in Note 22. Deferred taxes.
Wärtsilä is subject to tax audits in some countries, which can result in tax reassessment decisions and obligations to pay additional taxes and related payments.
12. Earnings per share
Earnings per share is calculated by dividing the profit for the financial period attributable to equity holders of the parent company by the weighted average number of shares outstanding. During the financial periods there were no programmes with dilutive effect.
Restated
MEUR 2018 2017
Profit for the financial period attributable to equity holders of the parent company 386 375
Thousands of shares
weighted average number of shares outstanding* 591 723 591 723
Earnings per share attributable to equity holders of the parent company (basic and diluted):
Earnings per share (EPS), basic and diluted, EUR 0.65 0.63
* Additional information on the number of shares is presented in Note 24. Equity.
Earnings per share for the comparison period has been restated to reflect the increased number of shares.
13. Intangible assets
Goodwill
Goodwill allocation
Goodwill arising from business acquisitions is allocated to the Group cash-generating unit (CGU) that is the Group´s operating segment. The operating segment represents the lowest level within the Group at which the goodwill is monitored. The companies acquired during the financial period are integrated to the Group CGU at the acquisition date. Previously separately presented CGU’s have also been integrated to the Group CGU during the financial period. The goodwill is presented in the table below:
Goodwill/Cash Generating Unit
MEUR 2018 2017
Wärtsilä on 1 January 1 237 1 112
Acquisitions and disposals 113 157
Other changes 1
Changes in exchange rates 4 -33
Total 1 355 1 237
Impairment testing of goodwill
The Group performs its annual impairment testing of goodwill on 30 September. Impairment of goodwill is also carried out when changes in circumstances indicate that the carrying amount may not be recoverable.
The recoverable amount from the CGU is determined based on value-in-use calculation. The calculation is made on a discounted cash flow method basis, derived from the order book and five-year cash flow projections from management approved strategic plans. The estimated cash flow of CGU is based on utilisation of the existing property, plant and equipment in their current condition with normal maintenance capital expenditure, excluding any potential future acquisitions. Cash flow beyond the five-year period is calculated using the terminal value method. The terminal growth rate used in projections is based on management’s assessment on conservative long-term growth. The terminal growth rate used is 2%.
The key driver for the valuation is the growth in the global economy and in particular the development of the global power market, the global shipbuilding industry, and the demand for related services. The projected development of total costs in the market affects the profitability, whereas no single cost item is considered to have a material impact. The valuation driver for the new equipment sales is the growth in the global economy, whereas for after sales the drivers are also the demand for related services and the projected development in labour cost.
The applied discount rate is the weighted average pre-tax cost of capital (WACC) as defined by Wärtsilä. The components of the WACC are risk-free rate, market risk premium, industry specific beta, cost of debt and debt equity ratio. When defining the WACC for 2018, it has been considered that the general interest rate is currently on a lower level. Wärtsilä has used a WACC of 8.9% (9.4) in the calculations.
As a result of the impairment test, no impairment loss for the CGU was recognised for the financial periods ended 31 December 2018 and 2017 respectively. The recoverable amount from the CGU exceeded its carrying value remarkably.
Sensitivity analysis
The management has assessed that no reasonable possible changes in the key assumptions would cause the CGU´s carrying amount to exceed its recoverable amount. Sensitivity analyses have been carried out for the valuation of the recoverable amount for the CGU by changing the assumptions used in the calculation. A change in an assumption that would cause the recoverable amount to equal the carrying amount is presented in the table below.
Change
Pre-tax discount rate increase more than 20 percentage points
Terminal growth rate decrease more than 68 percentage points
Profitability decrease more than 82 percentage
In management’s opinion, the changes in the basic assumptions shall not be seen as an indication that these factors are likely to materialise. The sensitivity analyses are hypothetical and should therefore be treated with caution.
2018
MEUR Develop-
ment
expenses
Construc-
tion in
progress
and
advances
paid
Other
intangible
assets
Goodwill Total
Cost on 1 January 2018 142 21 783 1 243 2 189
Changes in exchange rates -2 4 2
Acquisitions and disposals -2 10 66 113 187
Additions 2 35 8 1 45
Decreases and other changes -12 -1 -13
Reclassifications -13 13
Cost on 31 December 2018 141 53 857 1 361 2 411
Accumulated amortisation and impairment on 1 January 2018 -85 -521 -6 -612
Changes in exchange rates 1 1
Accumulated amortisation on decreases and other changes 2 12 1 15
Amortisation during the financial period -11 -55 -66
Impairments -1 -1 -2
Accumulated amortisation and impairment on 31 December 2018 -94 -565 -6 -665
Carrying amount on 31 December 2018 47 53 292 1 355 1 747
Development costs for internally generated assets capitalised during the financial period amounted to EUR 30 million (16). The carrying amount was EUR 91 million (73).

Purchase price allocation amortisation amounted to EUR 43 million (36) and the carrying amount was EUR 248 million (227).
2017
MEUR Develop-
ment
expenses
Construc-
tion in
progress
and
advances
paid
Other
intangible
assets
Goodwill Total
Cost on 1 January 2017 107 41 743 1 118 2 008
Changes in exchange rates -15 -33 -49
Acquisitions 61 157 217
Additions 1 19 5 25
Decreases and other changes -12 1 -12
Reclassifications 34 -39 5
Cost on 31 December 2017 142 21 783 1 243 2 189
Accumulated amortisation and impairment on 1 January 2017 -73 -495 -5 -574
Changes in exchange rates 9 10
Accumulated amortisation on decreases and other changes 12 12
Amortisation during the financial period -12 -48 -60
Impairments -1 -1
Accumulated amortisation and impairment on 31 December 2017 -85 -521 -6 -612
Carrying amount on 31 December 2017 57 21 262 1 237 1 577
14. Property, plant & equipment
2018
MEUR Land
and
water
Build-
ings
and
struc-
tures
Machin-
ery
and
equip-
ment
Construc-
tion in
progress
and
advances
paid
Other
tangible
assets
Total
Cost on 1 January 2018 43 313 787 18 23 1 185
Changes in exchange rates -1 -1 -3
Acquisitions and disposals -9 -22 -19 -50
Additions 1 5 23 35 64
Decreases -4 -4 -22 -30
Reclassifications 7 12 -14 5
Cost on 31 December 2018 31 297 780 40 24 1 171
Accumulated depreciation and impairment on 1 January 2018 -2 -172 -642 -20 -835
Changes in exchange rates 1 1 1
Accumulated depreciation on decreases and disposals 1 11 41 53
Depreciation during the financial period -16 -43 -1 -60
Impairments -2 -2
Reclassifications -1 -4 -5
Accumulated depreciation and impairment on 31 December 2018 -1 -177 -648 -21 -847
Carrying amount on 31 December 2018 30 120 132 39 3 324
Value of finance-leased assets included in carrying amount 1 1 3
2017
MEUR Land
and
water
Build-
ings
and
struc-
tures
Machin-
ery
and
equip-
ment
Construc-
tion in
progress
and
advances
paid
Other
tangible
assets
Total
Cost on 1 January 2017 46 349 834 12 25 1 266
Changes in exchange rates -1 -10 -18 -30
Additions 2 20 17 39
Decreases -2 -22 -45 -69
Reclassifications -6 -5 -11 -1 -22
Cost on 31 December 2017 43 313 787 18 23 1 185
Accumulated depreciation and impairment on 1 January 2017 -1 -179 -660 -21 -861
Changes in exchange rates 4 13 18
Accumulated depreciation on decreases 15 44 59
Depreciation during the financial period -15 -45 -1 -61
Impairments -6 -7 -13
Reclassifications 9 13 1 22
Accumulated depreciation and impairment on 31 December 2017 -2 -172 -642 -20 -835
Carrying amount on 31 December 2017 41 142 146 18 3 349
Value of finance-leased assets included in carrying amount 1
15. Investments in associates and joint ventures
MEUR 2018 2017
Carrying amount on 1 January 83 84
Investments 1
Share of result 13 13
Dividends -17 -12
Translation differences -1 -1
Reduction of share capital in associates and joint ventures -13
Carrying amount on 31 December 66 83
In 2018, Wärtsilä invested EUR 1 million in the joint venture CSSC Wärtsilä Electrical & Automation Co., Ltd., and received EUR 13 million as return of capital from Wärtsilä Hyundai Engine Co Ltd.
Summary of financial information (100%):
2018
MEUR Holding % Assets Equity Liabil-
ities
Net
sales
Profit
for the
financial
period
Joint ventures
Wärtsilä Qiyao Diesel Company Ltd. China 50.0 26 19 8 17
Wärtsilä Hyundai Engine Co Ltd. South Korea 50.0 111 91 20 164 29
CSSC Wärtsilä Electrical & Automation Co., Ltd. China 49.0 2 2 1 -1
CSSC Wärtsilä Engine (Shanghai) Co., Ltd. China 49.0 70 19 51 49 -3
Repropel Sociedad de reparacao de helices Portugal 50.0 1 1 1 1
Associated companies
Wärtsilä Land & Sea Academy, Inc. Philippines 40.0 -2 2
Neptun Maritime AS Norway 40.0 1 1 1
CSSC Wärtsilä Engine (Shanghai) Co., Ltd. factory is manufacturing medium and large bore medium speed diesel and dual-fuel engines at Lingang, Shanghai. Wärtsilä Hyundai Engine Co Ltd. manufactures Wärtsilä 50DF dual-fuel engines for LNG carriers and other marine application in Mokpo, South Korea. Wärtsilä Qiyao Diesel Company Ltd. manufactures marine auxiliary engines in Shanghai, China. CSSC Wärtsilä Electrical & Automation Co., Ltd. manufactures advanced electronical and automation solutions for the cruise industry.
2017
MEUR Holding % Assets Equity Liabil-
ities
Net
sales
Profit
for the
financial
period
Joint ventures
Wärtsilä Qiyao Diesel Company Ltd. China 50.0 25 19 7 13
Wärtsilä Hyundai Engine Co Ltd. South Korea 50.0 192 122 70 176 34
CSSC Wärtsilä Engine (Shanghai) Co., Ltd. China 49.0 62 22 40 26 -9
Repropel Sociedad de reparacao de helices Portugal 50.0 1 1 1 1
Associated companies
Wärtsilä Land & Sea Academy, Inc. Philippines 40.0 -2 2
Neptun Maritime AS Norway 40.0 1 1 1
16. Financial assets and liabilities by measurement category
2018
MEUR Measured
at
amortised
cost
At fair
value
through
the
statement
of income
At fair
value
through
other
compre-
hensive
income
Carrying
amounts
of the
statement
of financial
position
items
Fair
value
Non-current financial assets
Interest-bearing investments 3 3 3
Trade receivables 49 49 49
Derivatives 3 3 3
Other investments 16 16 16
Other receivables 20 20 20
Current financial assets
Trade receivables 1 219 1 219 1 219
Trade receivables for sale 3 3 3
Derivatives 5 3 8 8
Other financial receivables 3 3 3
Cash and cash equivalents 466 21 487 487
Carrying amount by measurement category 1 758 52 3 1 813 1 813
Non-current financial liabilities
Interest-bearing debt 748 748 754
Derivatives 16 16 16
Current financial liabilities
Interest-bearing debt 74 74 74
Trade payables 596 596 596
Derivatives 27 36 63 63
Other financial liabilities 9 9 9
Carrying amount by measurement category 1 428 43 36 1 507 1 513
2017
MEUR Measured
at
amortised
cost
At fair
value
through
the
statement
of income
At fair
value
through
other
compre-
hensive
income
Carrying
amounts
of the
statement
of financial
position
items
Fair
value
Non-current financial assets
Interest-bearing investments 5 5 5
Trade receivables 109 109 109
Other investments 13 13 13
Other receivables 3 3 3
Current financial assets
Trade receivables 1 306 1 306 1 306
Trade receivables for sale 1 1 1
Derivatives 15 14 28 28
Other financial receivables 4 4 4
Cash and cash equivalents 360 19 379 379
Carrying amount by measurement category 1 782 53 14 1 848 1 848
Non-current financial liabilities
Interest-bearing debt 517 517 524
Derivatives 19 19 19
Current financial liabilities
Interest-bearing debt 102 102 102
Trade payables 539 539 539
Derivatives 12 10 22 22
Other financial liabilities 11 11 11
Carrying amount by measurement category 1 169 31 10 1 211 1 218
Fair value hierarchy
Financial instruments measured at fair value are classified according to the following fair value hierarchy: instruments measured using quoted prices in active markets (level 1), instruments measured using inputs other than quoted prices included in level 1 observable either directly or indirectly (level 2), and instruments measured using inputs that are not based on observable market data (level 3). Financial instruments measured at fair value include financial assets and liabilities at fair value through the statement of income. Due to the short nature of the current receivables, their carrying amount is considered to be same as their fair value.
Specific valuation techniques used to value financial instruments include:
• the fair value of forward foreign exchange contracts is determined by using forward rates at the closing date
• the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves
• the use of quoted market prices or dealer quotes for similar instruments
2018 2017
MEUR Level 2 Level 3 Level 2 Level 3
Financial assets
Other investments 16 13
Interest-bearing investments, non-current 3 5
Other receivables, non-current 3 3
Derivatives 12 28
Financial liabilities
Interest-bearing debt, non-current* 754 524
Derivatives 79 41
* Measured at amortised cost in the consolidated statement of financial position.
Additional information on financial liabilities is presented in Note 26. Financial liabilities.
Other investments
Other investments include unlisted shares carried at fair value. These investments are valued using certain DCF models where critical assumptions relate to WACC level and expected cash flows from future dividends. However, the results from different scenarios vary a lot. Thus, the management considers that the valuation at amortised cost is the best estimate of fair value.
MEUR 2018 2017
Carrying amount on 1 January 13 15
Acquired shares 3
Disposal of shares -1
Impairment -1
Carrying amount on 31 December 16 13
In 2018, the cost for other unlisted shares (level 3) was EUR 16 million (13), and the market value of them was EUR 16 million (13).
17. Inventories
MEUR 2018 2017
Materials and consumables 471 432
Work in progress 615 557
Finished products 35 27
Advances paid 43 36
Total 1 165 1 051
In 2018, EUR 1 million (4) impairment for obsolete inventories has been recognised in the consolidated statement of income. Acquisition-related increase in inventories is EUR 8 million (1).
18. Contract balances
MEUR 2018 2017
Trade receivables 1 271 1 416
Contract assets 557 351
Contract liabilities
Advances received 584 523
Deferred income 345 265
Trade receivables and contract assets
Non-current 49 109
Current 1 779 1 658
Contract liabilities
Non-current 41 64
Current 888 724
Revenue recognised in the financial period that was included in the contract liability on 1 January 724 615
Remaining performance obligations from projects and contracts under execution* 3 794
* As permitted under the transitional provision in IFRS 15, the transaction price allocated to unsatisfied performance obligations as of 31 December 2017 is not disclosed.
Trade receivables related to contracts with customers are non-interest-bearing receivables. Trade receivables have decreased during 2018 through collection of some sizable overdue receivables.

Contract assets primarily relate to the Group’s right to consideration for transferred goods or services, but which is not yet billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional.

The contract liabilities mainly relate to the advance consideration received from customers for contracts, but for which the corresponding good or service has not yet been transferred.

The contract assets and liabilities arise from long-term service agreements and projects recognised over time such as gas solutions construction contracts, integrated solutions projects, ship design, and energy solutions turn key contracts. The increase in contract assets in 2018 is the result of usual business-related variation mainly in Energy Solutions projects, as well as the impact of new acquisitions amounting to EUR 15 million. In addition, the accrued revenue has increased in some larger long-term service agreements. The increase in contract liabilities in 2018 arises mainly from the usual business-related variation in Energy Solutions projects as well as the acquisition impact of EUR 1 million.
19. Other receivables
Restated
MEUR 2018 2017
Derivatives 12 28
Interest and other financial items 3 4
Insurance receivables 5 3
Rental accruals 3 4
Prepaid expenses 6
Other accruals 42 46
Loan receivables 3 3
Defined benefit plans 1
VAT receivables 104 97
Other* 83 52
Total 262 238
Non-current 34 18
Current 228 221
* Includes payroll related tax receivables of EUR 9 million (10) in Brazil, which cannot be utilised within a year.
20. Cash and cash equivalents
MEUR 2018 2017
Cash and bank balances* 461 359
Cash equivalents 26 20
Total 487 379
* EUR 128 million (122) of cash and bank balances relate to cash in countries where repatriation is limited due to local regulation and consequently the cash is not immediately available to the parent company.
21. Net debt reconciliation
Net interest-bearing debt
MEUR 2018 2017
Interest-bearing debt, non-current 748 517
Interest-bearing debt, current 74 102
Total interest-bearing liabilities 823 619
Interest-bearing receivables -3 -5
Cash and cash equivalents -487 -379
Total interest-bearing assets -490 -385
Total net interest-bearing debt 333 234
Net debt reconciliation
MEUR Carrying
amount on
1 January 2018
Cash
flows
Changes
in
exchange
rates
Acquistions
and
disposals
Carrying
amount on
31 December 2018
Interest-bearing debt, non-current 517 231 -1 748
Interest-bearing debt, current 102 -40 -6 18 74
Interest-bearing receivables -5 -2 6 -3
Cash and cash equivalents -379 -101 4 -11 -487
Net debt as at 31 December 2018 234 87 -2 13 333
MEUR Carrying
amount on
1 January 2017
Cash
flows
Changes
in
exchange
rates
Acquistions Carrying
amount on
31 December 2017
Interest-bearing debt, non-current 520 -12 9 517
Interest-bearing debt, current 108 10 -14 102
Interest-bearing receivables -7 1 2 -5
Cash and cash equivalents -472 94 9 -10 -379
Net debt as at 31 December 2017 150 92 6 -10 234
22. Deferred taxes
Changes in deferred taxes during 2018
MEUR 1 January 2018 Recog-
nised in
the con-
solidated
statement
of income
Other
compre-
hensive
income
Transla-
tion dif-
ferences
Acquisi-
tions and
disposals
31 December 2018
Deferred tax assets
Tax loss carry-forwards 18 2 18
Pension obligations 23 -2 21
Provisions 30 -2 28
Elimination of intragroup margin in inventories 5 5
Fair value reserve 6 3 9
Other temporary differences 49 6 1 -7 49
Total 131 1 3 1 -6 129
Deferred tax liabilities
Intangible assets and property, plant and equipment 57 -6 14 66
Fair value reserve 2 -2
Other temporary differences 42 -2 -7 32
Total 102 -8 -2 7 99
Net deferred tax assets/liabilities 29 9 5 1 -13 30
On 31 December 2018, the Group had temporary differences on which no deferred tax assets were booked totalling EUR 63 million (47), as it is uncertain if they will be realised. Most of the unrecognised deferred tax assets are related to cumulative tax losses. Of these, EUR 18 million (8) will expire within the next five years and the rest will expire later or never. Most of the cumulative tax losses on which deferred tax assets have been booked will never expire.
Changes in deferred taxes during 2017
Restated
MEUR 1 January 2017 Recog-
nised in
the con-
solidated
statement
of income
Other
compre-
hensive
income
Transla-
tion dif-
ferences
Acquisi-
tions and
disposals
31 December 2017
Deferred tax assets
Tax loss carry-forwards 19 -1 -1 2 18
Pension obligations 25 -2 -1 23
Provisions 32 -2 -2 2 30
Elimination of intragroup margin in inventories 9 -3 5
Fair value reserve 12 -6 -1 6
Other temporary differences 44 5 -3 49
Total 141 -3 -6 -7 4 131
Deferred tax liabilities
Intangible assets and property, plant and equipment 59 -19 -1 21 57
Fair value reserve 1 2 2
Other temporary differences 35 8 -3 42
Total 93 -10 2 -3 21 102
Net deferred tax assets/liabilities 48 7 -8 -4 -17 29
23. Pension obligations
MEUR 2018 2017
Net defined benefit liabilities on 31 December 149 154
Liability for other long term employee benefits on 31 December 13 11
Wärtsilä has defined benefit plans for its employees mainly in Europe and Asia. The major plans are located in Switzerland, Germany, Great Britain and Sweden. The Swiss defined benefit plan accounts for 31% of the Group's total defined benefit obligations and 57% of the plans' assets. Most of the plans provide a lifetime pension to the members at the normal retirement age but there are also plans, which provide a lump sum payment at the retirement date. Most of these defined benefit pension plans are managed by pension funds. Their assets are not included in the Group's assets. The plans' assets are typically invested according to the investment strategies approved by the funds' Board of Trustees, or in some cases they are completely administered by insurance companies. Wärtsilä's subsidiaries make their payments to pension funds in accordance with the local legislation and practice. Authorised actuaries in each country have performed the actuarial calculations required for the defined benefit plans.
The Swiss Plan
Wärtsilä operates a defined benefit plan in Switzerland in accordance with the local pension laws and regulations. The plan provides benefits to the members in the form of a pension payable after retirement. The level of benefits provided depends on the accrued retirement savings capital, which is a result of contributions paid up to retirement plus respective interest. The plan is run as a pension fund by the Board of Trustees separately from the company.

Contributions to the plan are paid both by the employees as well as by the employers based on a percentage of the insured salary as defined in the pension fund regulations. Contributions by the employers vary depending on the age of the employee and cover on average two thirds of the total contributions.

The investment strategy for a pension fund's asset is the responsibility of the Board of Trustees. Assets are invested in accordance with the strategy and the corridors for different investment categories as defined by local laws. Other risks of the plan are longevity of plan members as well as death or disability of employees before their retirement. The pension plan is reinsured for the risk of death and disability until 31 December 2018. Inflationary increases for pensions in payment are at the discretion of the Board of Trustees as benefits paid by the plan are exceeding the minimum level required by law.
The German Plans
Wärtsilä operates defined benefit plans in Germany in accordance with the local pension laws and regulations. The plans provide benefits to the members in the form of a pension payable after retirement. The level of benefits provided depends on the accrued retirement savings capital, which is a result of contributions paid up to retirement plus respective interest. The plans vary from unfunded plans to a plan run as a pension fund.

In some of the plans, contributions are paid to the plan both by the employees and the employers based on a percentage of the insured salary as defined in the pension fund regulations. However, in some plans only the employer is obliged to make the payments. Contributions by the employers vary depending on the age of the employee, the duration of the employment, and also on the position of the employee.

The main risks of the plans are longevity of plan members and death or disability of employees before their retirement. In a funded plan, also the investment strategy chosen includes certain risk. Inflationary increases for pensions in payment are valuated on a yearly basis.
MEUR 2018 2017
Present value of unfunded defined benefit obligations 108 111
Present value of funded defined benefit obligations 177 197
Fair value of plan assets -135 -154
Net liability in the statement of financial position 149 154
% Present
value of
defined
benefit
obligations
Fair
value
of plan
assets
Switzerland 31 57
Germany 24 5
Other Europe 35 25
Asia 10 13
Total 100 100
MEUR Present
value of
defined
benefit
obligation
Fair
value
of plan
assets
Net
defined
benefit
liability
Balance on 1 January 2017 323 -156 168
Changes in exchange rates -14 10 -4
Acquisitions 4 4
Recognised in the statement of income:
Current service cost 8 9
Interest cost (+) / interest income (-) 5 -2 3
Remeasurements recognised in other comprehensive income:
Return on plan assets, excluding interest income -3 -3
Experience adjustments 8 8
Changes in demographic assumptions -1 -1
Changes in financial assumptions -10 -10
Contribution paid by the plan members 1 -1
Contribution paid by the employer -10 -10
Benefits paid -19 10 -9
Balance on 31 December 2017 307 -154 154
Balance on 1 January 2018 307 -154 154
Changes in exchange rates 2 -2 -1
Recognised in the statement of income:
Current service cost 10 10
Past service cost (- credit) -1 -1
Gains (-) / losses (+) on curtailments and settlements -21 20 -2
Interest cost (+) / interest income (-) 5 -3 3
Remeasurements recognised in other comprehensive income:
Return on plan assets, excluding interest income 11 11
Experience adjustments -6 -6
Changes in financial assumptions -2 -2
Contribution paid by the plan members 1 -1
Contribution paid by the employer -11 -11
Benefits paid -13 5 -8
Balance on 31 December 2018 282 -134 149
Plan assets invested in:
% 2018 2017
Shares and other equity instruments 17 26
Bonds and other debt instruments 33 35
Property 17 16
Other assets 33 23
The main actuarial assumptions at the end of the financial period are (expressed as weighted averages):
% 2018 2017
Discount rate 1.78 1.65
Future salary growth 2.16 2.15
Future pension growth 1.18 1.14
On 31 December 2018, the weighted average duration of the defined benefit obligation was 12 years. The Group expects to contribute EUR 5 million to the plans during the next financial period.
Assumptions regarding future mortality are set based on actuarial advice in accordance with the published statistics and experience in each country. These assumptions translate into a weighted average life expectancy in years for a pensioner at the retirement age as follows:
2018 2017
Plan participants retiring at the end of the financial period:
Male 17.0 17.7
Female 17.1 19.6
Plan participants retiring 20 years after the end of the financial period:
Male 16.1 19.5
Female 18.1 21.9
The following table presents a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at the end of the financial period. This sensitivity analysis applies to the defined benefit obligation only and not to the net defined benefit pension liability in its entirety.
Sensitivity analysis
Effect to defined
benefit obligation, MEUR
Change in assumption 2018 2017
Discount rate increase 1% -33 -36
Discount rate decrease 1% 41 44
Future salary growth increase 1% 9 13
Future salary growth decrease 1% -8 -10
Future pension growth increase 1% 25 28
Future pension growth decrease 1% -15 -15
24. Equity
Equity consists of share capital, share premium, translation differences, fair value reserve, remeasurements of defined benefit liabilities and retained earnings.
Share capital and number of shares
MEUR
Share capital Number
of shares
and votes
Share
capital
Share
premium
Total
1 January 2017 197 241 130 336 61 397
31 December 2017 197 241 130 336 61 397
Share issue without payment on 12 March 2018 394 482 260
31 December 2018 591 723 390 336 61 397
Wärtsilä's share does not have a nominal value. Wärtsilä has one series of shares. Each share is assigned one vote in the Annual General Meeting and has equal right to dividend.
Share Capital
The subscription price of a share received by the company in connection with share issues is credited to the share capital, unless it is provided in the share issue decision that a part of the subscription price is to be recorded in the fund for invested non-restricted equity.
Share Premium
Share premium is restricted equity. It may be reduced in accordance with the rules applying to decreasing share capital in accordance with the Finnish Limited Liability Companies Act. It can also be used to increase the share capital.
Translation differences
Translating foreign subsidiaries' financial statements by using different exchange rates in the statement of comprehensive income and in the statement of financial position causes translation differences, which are recognised in equity. Translation differences of foreign subsidiaries’ acquisition cost eliminations and post acquisition gains and losses are also presented in equity. Also translation differences arising from subsidiary net investment and non-current subsidiary loan without agreed settlement dates are presented in equity. The change in translation differences is recognised in other comprehensive income.
Fair value reserve
Fair value reserve includes the changes in fair value of derivative financial instruments, if the hedging is effective and eligible for hedge accounting. The changes in items included in fair value reserve are recognised in other comprehensive income.
MEUR Cash flow
hedges
Difference between fair value and carrying amount on 1 January 2017 -50
Taxes related to fair value adjustments 12
Fair value reserve on 1 January 2017 -39
Transferred to the statement of income, net of taxes 28
Fair value adjustments 1
Taxes related to fair value adjustments -1
Fair value reserve on 31 December 2017 -10
Transferred to the statement of income, net of taxes -6
Fair value adjustments -17
Taxes related to fair value adjustments 3
Fair value reserve on 31 December 2018 -31
Parent company's distributable funds
After the balance sheet date, the Board of Directors proposed that a dividend of EUR 0.48 per share be paid for the financial period 2018, the total dividend payable being EUR 284 million. The remaining part of the retained profits will be carried further in the unrestricted equity. For the profit for the financial period 2017, a dividend of EUR 0.46 per share was distributed, totalling EUR 272 million, and the rest of the retained profits were carried further in the unrestricted equity. The dividend per share for the comparison period has been restated to reflect the increased number of shares.
Additional information on equity is presented in Notes to the parent company financial statements, in Note 10. Shareholders' equity.
25. Provisions
2018
MEUR Litigation Warranties Onerous
contracts
Restruc-
turing
Other
provisions
Total
Provisions on 1 January 2018 19 173 27 6 35 261
Acquisitions 1 1 1 3
Additions 12 60 107 9 11 198
Used provisions -2 -62 -64 -6 -5 -138
Released provisions -9 -5 -4 -4 -21
Provisions on 31 December 2018 21 172 67 7 38 305
Non-current 54
Current 251
2017
Restated
MEUR Litigation Warranties Onerous
contracts
Restruc-
turing
Other
provisions
Total
Provisions on 1 January 2017 17 170 17 18 29 250
Changes in exchange rates -2 -1 -1 -4
Acquisitions 1 5 6
Additions 10 57 20 6 11 104
Used provisions -2 -52 -10 -17 -3 -84
Released provisions -6 -3 -1 -10
Provisions on 31 December 2017 19 173 27 6 35 261
Non-current 52
Current 209
Warranty provisions include estimated future warranty costs relating to products delivered. The amount of future warranty costs is based on accumulated historical experience. The standard warranty period is one year from the delivery onwards.
The Group is a defendant in a number of legal cases which arise out of, or are incidental to, the ordinary course of its business. These lawsuits concern mainly issues such as contractual and other liability, labour relations, property damage, and regulatory matters. The Group receives from time to time claims of different amounts and with varying degrees of substantiation. There is currently one unusually sizeable claim, but it is highly unlikely that the outcome of it would be unfavourable. The claim is treated as a contingent liability as it is the Group’s policy to provide for amounts related to the claims as well as for the litigation and arbitration matters when an unfavourable outcome is probable and the amount of loss can be reasonably estimated.
26. Financial liabilities
2018
Current Non-current
MEUR < 1 year 1-3 years 3-5 years > 5 years Total
Loans from other financial institutions* 63 186 311 250 809
Finance lease liabilities* 1 2 2
Other interest-bearing debt* 11 11
Trade payables 596 596
Derivatives** 63 12 3 79
Other liabilities 9 9
Total 744 199 314 250 1 507
* Estimated interest expenses, total 8 13 11 7 39
Estimated contractual cash flows 752 212 326 257 1 546
2017
Current Non-current
MEUR < 1 year 1-3 years 3-5 years > 5 years Total
Loans from pension insurance companies* 8 8
Loans from other financial institutions* 90 112 237 166 605
Finance lease liabilities* 1 1
Other interest-bearing debt* 4 4
Trade payables 539 539
Derivatives** 23 1 17 41
Other liabilities 11 11
Total 676 114 255 166 1 211
* Estimated interest expenses, total 7 12 10 5 34
Estimated contractual cash flows 683 126 265 171 1 245
** Valuation for derivatives with negative market value by maturity date. Nominal contractual amounts are presented in Note 28. Derivative financial instruments.
Interest expenses for long-term loans are calculated by using the average interest rate prevailing on 31 December 2018. Fair values of financial liabilities are presented in Note 16. Financial assets and liabilities by measurement category.
27. Other liabilities
Restated
MEUR 2018 2017
Accrued expenses 295 335
Personnel costs 124 191
Derivatives 79 41
Interest and other financial items 9 11
Other accruals 45 52
VAT liabilities 26 26
Other 67 70
Total 645 726
Non-current 1 1
Current 645 726
28. Derivative financial instruments
The Group applies hedge accounting to significant foreign currency forward contracts. Detailed financial information is presented in Note 31. Financial risks.
MEUR 2018 of which
closed
2017 of which
closed
Nominal values of derivative financial instruments (level 2)
Interest rate swaps 270 165
Cross currency swaps 238 74
Currency forwards, included in hedge accounting 1 227 314 814 312
Currency forwards, no hedge accounting 1 600 721 1 134 435
Total 3 335 1 035 2 187 746
Fair values of derivative financial instruments (level 2)
Interest rate swaps -4 -2
Cross currency swaps -8 -17
Currency forwards, included in hedge accounting -22 2
Currency forwards, no hedge accounting -33 3
Total -67 -13
In addition, the Group had copper futures and swaps amounting to 264 tons (254) valued at EUR 1 million (2).
Foreign currency forward contracts are against transactional risks and fall due during the following 12 months (12). A currency forward is considered closed when there are offsetting cash flows in the same currency with the same value date. Interest rate swaps are denominated in euros and their average maturity is 48 months (18). The average maturity for cross currency swaps is 54 months (40).
Normally all of the Groups' derivatives are done under International Swaps and Derivatives Association's Master Agreements (ISDA). In case of an event of default under these agreements the non-defaulting party may request early termination and set-off of all outstanding transactions. These agreements do not meet the criteria for offsetting in the statement of financial position. The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.
MEUR 2018 2017
Gross fair values of derivative financial instruments subject to ISDAs
Assets
Cross currency swaps 3
Currency forwards 8 28
Total 12 28
Liabilities
Interest rate swaps -4 -19
Cross currency swaps -11
Currency forwards -63 -22
Total -79 -41
Net fair values of derivative financial instruments subject to ISDAs
Assets 12
Liabilities -67 -27
Total -67 -16
29. Collateral, contingent liabilities and other commitments
2018 2017
MEUR Debt in the
statement
of financial
position
Collateral Debt in the
statement
of financial
position
Collateral
Mortgages given as collateral for liabilities and commitments
Other commitments 15 10 16 10
Total 15 10 16 10
Chattel mortgages and other pledges and securities given as collateral for liabilities and commitments
Loans from credit institutions 8 2 11 4
Other commitments 17 16
Total 8 19 11 19
MEUR 2018 2017
Guarantees and contingent liabilities
on behalf of Group companies 775 737
Total 775 737
Nominal amounts of rents according to leasing contracts
Payable within one year 53 35
Payable between one and five years 148 101
Payable later 83 48
Total 284 185
30. Related party disclosures
Related parties comprise the Board of Directors, the President and CEO, the Board of Management, the associated companies, and joint ventures.
Management remuneration
Benefits recognised in the statement of income
TEUR 2018 2017
President and CEO
Salaries and other short-term benefits 862 785
Bonuses 234
Share based bonuses* -1 742 3 438
Statutory pension costs 119 145
Voluntary pension costs 170 156
Deputy of President and CEO
Salaries and other short-term benefits 384 425
Bonuses 80
Share based bonuses* -871 1 719
Statutory pension costs 115
Voluntary pension costs 107 88
Other members of the Board of Management
Salaries and other short-term benefits 2 263 2 153
Bonuses 456
Share based bonuses* -5 716 9 896
Statutory pension costs 315 322
Voluntary pension costs 368 493
Total -3 627 20 389
Board of Directors on 31 December 2018
Mikael Lilius, Chairman 175 153
Tom Johnstone, Deputy Chairman 119 108
Maarit Aarni-Sirviö, member 96 78
Kaj-Gustaf Bergh, member 82 74
Karin Falk, member 78 71
Johan Forssell, member 82 72
Risto Murto, member 94 79
Markus Rauramo, member 103 81
Board of Directors, until 2 March 2017
Sune Carlsson, Deputy Chairman 1
Gunilla Nordström, member 1
Total 829 718
Management remuneration, total -2 798 21 107
* Share based bonuses are measured at fair value at the reporting date. Due to the development of Wärtsilä share price during 2018, impact to the result for the financial period is positive.
The holdings of Wärtsilä shares of the President and CEO, and the members of the Board of Directors and Board of Management at the year end were 304,439 shares (97,605).
The President and CEO is entitled to retire on reaching 63 years of age. The members of the Board of Management are entitled to retire on reaching the statutory retirement age. One member of the Board of Management is entitled to retire earlier, on reaching 60 years of age. The Group has no loan receivables from the executive management or the Board of Directors. No pledges or other commitments have been given on behalf of management or shareholders.
Business transactions with the associated companies and joint ventures
MEUR 2018 2017
Sales to the associates and joint ventures 40 49
Purchases from the associates and joint ventures 27 53
Receivables from the associates and joint ventures 10 14
Advances paid to the associates and joint ventures 11
Payables to the associates and joint ventures 7 8
Detailed financial information on the associated companies and joint ventures is presented in Note 15. Investments in associates and joint ventures.