1. Segment information
As of 2019 Wärtsilä is organised into two business areas, Wärtsilä Marine Business and Wärtsilä Energy Business, according to its two main customer markets. The Businesses cover both new equipment sales and services for their respective markets. The new organisational structure enables Wärtsilä to accelerate growth and the implementation of its Smart Marine and Smart Energy strategies. Integrating newbuild and service activities enhances customer value by strengthening the focus on complete lifecycle solutions tailored to specific market needs. Wärtsilä Marine Business and Wärtsilä Energy Business constitute Wärtsilä’s operating and reportable segments. 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. Wärtsilä Marine Business and Wärtsilä Energy Business are both led by Presidents of respective business area and both are supported by Business management teams. Discrete financial information for the Businesses is provided to the CODM to support decision-making. The segment information presented by Wärtsilä reflects the internal management reporting. The segment information is reported to the level of operating result, as items below the operating result are not allocated to segments. The comparable operating result is used by the CODM also to measure the performance, both on segment and Group level. Assets and liabilities are measured on Group level and not allocated to segments. Internal sales between segments is not reported in the management reporting, revenue and costs of sales are recognised directly to the respective customer projects and orders. The main factors affecting the allocation of indirect and administration costs to the segments are net sales and personnel amount. Management considers these allocation principles the most suitable to reflect the cost carried by each segment. The allocation principles are reviewed regularly.
Wärtsilä Energy Business
Wärtsilä Energy Business leads the transition towards a 100% renewable energy future. Wärtsilä helps its customers unlock the value of the energy transition by optimising their energy systems and future-proofing their assets. Wärtsilä’s offering comprises flexible power plants, energy management and storage systems, as well as lifecycle services that enable increased efficiency and guaranteed performance. Wärtsilä’s three main customer segments in the energy markets are utilities, independent power producers and industrial customers. Wärtsilä’s energy solutions are used for a wide variety of applications. These include baseload generation, capacity for grid stability, peaking and load-following generation, and for the integration of wind and solar power. Wärtsilä provides its customers with a comprehensive understanding of energy systems, including fully integrated assets and software, complete with value adding lifecycle services.
Wärtsilä Marine Business
Wärtsilä’s aim is to lead the industry’s transformation towards a Smart Marine Ecosystem. Building on a sound foundation of being a leading provider of innovative products, integrated solutions and lifecycle services to the marine and oil & gas industries, Wärtsilä Marine aims to unlock new customer values through connectivity, digitalisation and smart technology. Wärtsilä provides marine power solutions, processing solutions and voyage solutions, which are supported by a broad scope of services ranging from spare part delivery to optimising customer operations, providing performance guarantees and offering cyber intelligence and incident support. Wärtsilä Marine Business derives its revenues from the following products and services:
Marine power solutions		Processing solutions		Voyage solutions
· Power supply		· Water and waste treatment		· Automation, navigation & communication
· Power conversion		· Gas solutions for marine		· Simulation & training solutions
· Propulsion		and land-based applications		· Fleet operations solutions
· Exhaust treatment				· Ship traffic control solutions
				· Special products
				· Entertainment systems
Wärtsilä’s marine customer base covers all the main vessel segments, including traditional merchant vessels, gas carriers, cruise & ferry, navy, and special vessels. In the oil & gas industry, Wärtsilä is active in serving offshore installations and related industry vessels, as well as land-based gas installations. Wärtsilä’s customers comprise ship owners, shipyards and ship management companies. In Wärtsilä Marine Business, order intake and net sales for retrofit scrubber projects have been transferred from services to new equipment. The comparison period figures for the segment reporting and the service information have been adjusted to reflect the new reporting structure.
MEUR				2019	2018
Net sales
Wärtsilä Marine Business				3 330	2 815
Wärtsilä Energy Business				1 840	2 359
Total				5 170	5 174
Depreciation, amortisation and impairment
Wärtsilä Marine Business				-147	-102
Wärtsilä Energy Business				-33	-28
Total				-180	-130
Share of result of associates and joint ventures
Wärtsilä Marine Business				-9	13
Total				-9	13
Operating result
Wärtsilä Marine Business				237	349
Wärtsilä Energy Business				125	194
Total				362	543
Operating result as a percentage of net sales (%)
Wärtsilä Marine Business				7.1	12.4
Wärtsilä Energy Business				6.8	8.2
Total				7.0	10.5
Comparable operating result
Wärtsilä Marine Business				305	380
Wärtsilä Energy Business				152	197
Total				457	577
Comparable operating result as a percentage of net sales (%)
Wärtsilä Marine Business				9.1	13.5
Wärtsilä Energy Business				8.3	8.4
Total				8.8	11.2
Alternative performance measures
Wärtsilä provides certain financial performance measures, which are not defined by IFRS. These alternative performance measures are followed and used by management to measure the Group's performance and financial position. These alternative performance measures also provide useful information to the capital markets. The alternative performance measures should not be evaluated in isolation from the IFRS measures. The alternative performance measure calculation definitions are disclosed in Calculations of financial ratios.
Wärtsilä discloses comparable performance measures to enhance comparability between periods. Certain income and expenses are presented as items affecting comparability when they have significant impact on the consolidated statement of income. Items affecting comparability consist of income and expenses, which result from restructuring activities aiming to adjust the capacity of Wärtsilä’s operations. They may also include other income and expenses incurred outside Wärtsilä’s normal course of business, such as impairment charges, acquisition related costs, settlements recorded as a result of legal proceedings with third parties or unforeseen obligations from earlier discontinued businesses. The reconciliation of comparable operating result to operating result is presented in the table below:
Measures of profit and items affecting comparability
MEUR				2019	2018
Comparable adjusted EBITA				498	621
Purchase price allocation amortisation				-41	-43
Comparable operating result				457	577
Items affecting comparability:
Restructuring costs
Social plan costs				-31	-8
Impairment and write-downs				-23	-19
Other restructuring costs and transfer costs				-17	-2
Other items affecting comparability
Impairment and write-downs				-13
Litigation settlements				-6
Acquisition related costs					-6
Other				-4
Items affecting comparability, total				-95	-35
Operating result				362	543
Entity wide information
In addition to segment information, Wärtsilä reports the services revenue and order intake for both segments. Wärtsilä continues to report information for the geographical areas Finland, other European countries, Asia, the Americas, and other. In the geographical information net sales are split by customer destination and non-current assets by customer origin. Non-current assets consist of goodwill, intangible assets, property, plant and equipment, right-of-use assets, and investments in associates and joint ventures.
Geographical information
During the financial period 1 January - 31 December 2019 and 1 January - 31 December 2018 Wärtsilä did not have any individual significant customers or countries. The sales to the USA represented 11% (14) and sales to China 11% (7) of the total net sales.
			2019		2018
MEUR		Net sales	Non-current assets	Net sales	Non-current assets
Finland		78	324	56	242
Other European countries		1 612	1 595	1 429	1 534
Asia		1 968	114	1 867	90
The Americas		1 098	271	1 245	266
Other		414	7	577	5
Total		5 170	2 310	5 174	2 137
Service information
MEUR				2019	2018
Net sales
Marine service				1 639	1 577
Energy service				863	842
Total				2 502	2 419

2. Acquisitions
Acquisitions 2019
Ships Electronic Services Ltd
In May, Wärtsilä acquired 100% of Ships Electronic Services Ltd (“SES”), a UK based company specialising in navigation and communication electronics, installation, maintenance and repair services, mainly for commercial and leisure vessels. SES’ turnover was approximately GBP 10 million and the company employed a staff of 47. The enterprise value of the transaction was GBP 3.2 million. The consideration paid and the impact on profit for the financial period are not significant.
Acquisitions 2018
Transas Group
In May, Wärtsilä acquired 100% of Transas, a global company headquartered in the U.K.
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 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.
Total consideration	MEUR
Consideration transferred	183
Total consideration transferred	183
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
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
Goodwill	113
The fair values of the acquired identifiable intangible assets at the date of the acquisition (including technology, customer relations, and trademarks) 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 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 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	27
Total consideration transferred	27
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
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
Goodwill	13
The fair values of acquired identifiable intangible assets at the dates of the acquisitions (including technology, customer relations, and trademarks) 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 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.

3. Disposals

Disposals 2019

In 2019, there were no 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 was reported as a receivable in the non-current other receivables in the consolidated statement of financial position in 2018. Wärtsilä reported a gain of EUR 27 million in other operating income from the transaction.

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.

4. Assets held for sale
In December, Wärtsilä announced the divestment of shares in Wärtsilä ELAC Nautik GmbH (ELAC Nautik) to Cohort plc. ELAC Nautik's main market focus is on hydroacoustic products, including sonars, underwater communication systems and echo systems for small and medium sized military submarines. Wärtsilä, through its Smart Marine Ecosystem approach, is leading the marine industry’s transition into a new era of high efficiency, greater safety, and outstanding environmental performance. As this is Wärtsilä's core strategy for Marine Business, and ELAC Nautik business has no clear synergistic link to Wärtsilä’s Smart Marine activities in transforming the marine sector, the portfolio is aligned to those growth businesses that can drive this transition. Additionally, Wärtsilä has started preparations to divest its Entertainment business, which is also classified as assets held for sale. The assets held for sale belong to the Wärtsilä Marine Business segment and they are valued at the lower of book value or fair value. Subject to approvals, completion of these transactions is expected in the early part of 2020.
Items on statement of financial position
MEUR		31.12.2019
Property, plant and equipment		3
Right-of-use assets		4
Deferred tax assets		8
Inventories		18
Other receivables, current		39
Cash and cash equivalents		11
Assets held for sale		82
Interest-bearing debt, non-current		4
Deferred tax liabilities		8
Other liabilities, non-current		8
Other liabilities, current		47
Liabilities directly attributable to assets held for sale		68
Net assets		14

5. 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		2019	2018
Products
Wärtsilä Marine Business		846	765
Wärtsilä Energy Business		338	380
Total		1 184	1 145
Goods and services
Wärtsilä Marine Business		509	469
Wärtsilä Energy Business		93	88
Total		603	557
Projects
Wärtsilä Marine Business		1 786	1 377
Wärtsilä Energy Business		1 113	1 615
Total		2 899	2 992
Long-term agreements
Wärtsilä Marine Business		189	204
Wärtsilä Energy Business		296	276
Total		484	480
Total		5 170	5 174
Timing of satisfying performance obligations
MEUR		2019	2018
At a point in time
Wärtsilä Marine Business		2 622	2 210
Wärtsilä Energy Business		1 105	1 531
Total		3 728	3 740
Over time
Wärtsilä Marine Business		708	606
Wärtsilä Energy Business		735	828
Total		1 442	1 434
Total		5 170	5 174
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.

6. Other operating income
MEUR	2019	2018
Capital gains	15	32
Government grants	8	7
Sale of scrapped material	3	3
Sale of by-products	2	2
Rental income	1
Income related to cancelled orders*	2	10
Insurance indemnities	9	4
Other	27	24
Total	67	80
* Expenses related to cancelled orders are recorded on respective expense accounts.

7. Material and services
MEUR	2019	2018
Purchases during the financial period	-1 723	-1 598
Change in inventories	7	40
External services	-1 287	-1 294
Total	-3 003	-2 852

8. Employee benefit expenses
MEUR		2019	2018
Wages and salaries		1 028	954
Pension costs
Defined benefit plans		12	7
Defined contribution plans		74	71
Other compulsory personnel costs		146	142
Total		1 260	1 175
Management remuneration is specified in Note 32. Related party disclosures.
Long-term incentive schemes
Wages and salaries include EUR 4 million expenses arising from share based long-term incentive schemes (previous year positive impact EUR 21 million). At the end of 2019 Wärtsilä had three long-term incentive schemes active. These 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 payable incentive. When an incentive scheme ends and the employment requirement is fulfilled, the incentive is settled in cash (2017-2019 and 2018-2020 incentives schemes) or in company shares (2019-2021 incentive scheme). The 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 payment for incentive schemes is based on the share price development during a three-year period. The 2017-2019 incentive scheme comprises 4,332,000 rights, the 2018-2020 incentive scheme 3,609,000 rights and the 2019-2021 incentive scheme 5,108,000 rights. For the incentive scheme 2017-2019 the basis of a share price is EUR 16.19, for the incentive scheme 2018-2020 EUR 22.58 and for the incentive scheme 2019-2021 EUR 16.76. The incentive schemes take into account 100% of dividends paid, and the paid bonus cannot exceed EUR 6.07 per incentive right in the 2017-2019 scheme, EUR 8.47 in the 2018-2020 scheme or EUR 6.56 in the 2019-2021 scheme.
The incentive rights, which are settled in cash, are valued and recognised at fair value at the balance sheet date taking into account the proportion of vesting period passed. The incentive rights, which are settled in company shares, are valued at fair value at the grant date of the scheme and expensed evenly during the vesting period. The fair value determined for the incentive right in 2019-2021 scheme is EUR 2.69.
		2019	2018
Personnel on average		19 110	18 899
Personnel at the end of the financial period		18 795	19 294

9. Depreciation, amortisation and impairment
MEUR	2019	2018
Development expenses	11	11
Purchase price allocation amortisation	41	43
Other intangible assets	10	12
Buildings and structures	13	16
Land and buildings, right-of-use assets	43
Machinery and equipment	40	43
Machinery and equipment, right-of-use assets	6
Other tangible assets	1	1
Impairments	15	3
Total	180	130

10. Other operating expenses
MEUR	2019	2018
Travel costs	134	145
Rental costs	48	90
Legal and consultancy costs	95	89
Information technology costs	65	61
Other personnel related costs	59	58
Administrative costs	49	51
Other	128	153
Total	578	648

11. Financial income and expenses
MEUR	2019	2018
Interest income on loans and receivables	1	2
Interest income on financial assets at fair value through the statement of income	23	20
Interest income on investments at amortised cost	2	1
Other financial income	1	1
Total financial income	27	24
Interest expenses on financial liabilities recognised at amortised cost	-10	-11
Interest expenses on lease liabilities recognised at amortised cost	-5
Interest expenses on financial liabilities at fair value through the statement of income	-36	-34
Net interest from defined benefit plans	-3	-3
Changes in fair values of financial assets/liabilities at fair value through the statement of income	-5	-4
Write-down of financial receivables		-1
Exchange rate differences*	-10	-6
Fee expenses	-2	-2
Other financial expenses	-4	-4
Total financial expenses	-74	-65
Total	-47	-40
* In 2019, the result from the ineffective portion of cash flow hedges related to cancelled orders, EUR -5 million (-2), and exchange rate differences from unhedged internal loans, EUR -8 million (-5) were included in exchange rate differences in the consolidated statement of income.

12. Income taxes
MEUR		2019	2018
Income taxes
for the financial period		-130	-126
for prior financial periods		-8	1
Change in deferred tax
origination and reversal of temporary differences		43	10
changes in tax rates		-2	1
Total		-97	-116
Reconciliation of effective tax rate:
Profit before taxes		315	502
Tax calculated at the domestic corporate tax rate 20.0%		-63	-100
Effect of changed tax rates		-2	1
Effect of different tax rates in foreign subsidiaries		15	6
Effect of income not subject to tax and non-deductible expenses		-1	2
Effect of share of result of associates and joint ventures		-2	3
Utilisation of previously unrecognised tax losses carried forward		1
Unrecognised taxes on losses carried forward		-13	-17
Other taxes*		-10	-10
Other temporary differences**		-13	-1
Income taxes for prior financial periods		-8	1
Tax charge in the consolidated statement of income		-97	-116
Effective tax rate (%)		30.7	23.1
* Other taxes consist mainly of withholding taxes not utilised and taxes not directly based on taxable income.
** Includes EUR -11 million utilisation of deferred tax assets.
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 24. 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.

13. 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 adjusted average number of shares outstanding. During the financial periods there were no programmes with dilutive effect.
MEUR		2019	2018
Profit for the financial period attributable to equity holders of the parent company		217	386
Thousands of shares
adjusted 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		0.37	0.65
* Additional information on the number of shares is presented in Note 26. Equity.

14. Intangible assets
Goodwill 2019
MEUR					2019
Wärtsilä Group
Wärtsilä on 1 January					1 355
Acquisitions					-1
Changes in exchange rates					26
Total					1 380
Goodwill allocation
Goodwill arising from business acquisitions is allocated to the Group cash generating units (CGU) that are the Group´s operating segments Wärtsilä Marine Business and Wärtsilä Energy Business. As of 1 January 2019 the goodwill formerly allocated to the Group CGU has been allocated to the respective CGUs based on the fair value of the operating segments. The operating segments represent the lowest level within the Group at which the goodwill is monitored. The companies acquired during the financial period are integrated to the the respective CGU at the acquisition date. The goodwill per CGU is presented in the table below.
Goodwill per cash generating unit
MEUR					2019
Wärtsilä Marine Business					847
Wärtsilä Energy Business					533
Total					1 380
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 CGUs 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 the CGUs 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 rates are the weighted average pre-tax cost of capital (WACC) for each CGU as defined by Wärtsilä. The components of the WACC rates are risk-free rate, market risk premium, industry specific beta, cost of debt and debt equity ratio. Wärtsilä has used a WACC rate of 9.1% in the calculations for Wärtsilä Marine Business CGU and a WACC rate of 9.4% for Wärtsilä Energy Business CGU.
As a result of the impairment test, no impairment loss for the CGUs was recognised for the financial period ended 31 December 2019. The recoverable amounts from both the CGUs exceeded their respective carrying value substantially.
Sensitivity analysis
The management has assessed that no reasonable possible changes in the key assumptions would cause carrying amount of either CGU to exceed its recoverable amount. Sensitivity analysis has been carried out for the valuation of the recoverable amount for each 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 separately for each CGU.
				Change
Wärtsilä Marine Business
Pre-tax discount rate		increase more than 15 percentage points
Terminal growth rate		decrease more than 35 percentage points
Profitability		decrease more than 66 percentage
Wärtsilä Energy Business
Pre-tax discount rate		increase more than 13 percentage points
Terminal growth rate		decrease more than 28 percentage points
Profitability		decrease more than 64 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.
Goodwill 2018
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 CGUs have also been integrated to the Group CGU during the financial period. The goodwill per CGU is presented in the table below:
Goodwill per cash generating unit
MEUR					2018
Wärtsilä on 1 January					1 237
Acquisitions and disposals					113
Changes in exchange rates					4
Total					1 355
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% in the calculations.
As a result of the impairment test, no impairment loss for the CGU was recognised for the financial period ended 31 December 2018. 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 analysis 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.
Intangible assets
2019
MEUR	Develop- ment expenses	Construc- tion in progress and advances paid	Other intangible assets	Goodwill	Total
Cost on 1 January 2019	141	53	857	1 361	2 411
Changes in exchange rates			11	26	37
Acquisitions			1	-1
Additions	1	55	8		65
Decreases and other changes	-1		-13		-14
Reclassifications	28	-24	-4
Cost on 31 December 2019	169	85	860	1 386	2 500
Accumulated amortisation and impairment on 1 January 2019	-94		-565	-6	-665
Changes in exchange rates			-7		-8
Accumulated amortisation on decreases and other changes			11		11
Amortisation during the financial period	-11		-52		-62
Accumulated amortisation and impairment on 31 December 2019	-104		-613	-6	-723
Carrying amount on 31 December 2019	65	85	247	1 380	1 776
Development costs for internally generated assets capitalised during the financial period amounted to EUR 49 million (30). The carrying amount was EUR 135 million (91). Purchase price allocation amortisation amounted to EUR 41 million (43) and the carrying amount was EUR 209 million (248).
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

15. Property, plant and equipment
2019
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 2019	31	297	780	40	24	1 171
Transfer to right-of-use assets		-1	-1			-2
Changes in exchange rates		1	2			3
Additions		3	27	18	1	49
Decreases	-1	-18	-30			-50
Reclassifications		1	22	-25		-2
Cost on 31 December 2019	30	283	798	32	25	1 167
Accumulated depreciation and impairment on 1 January 2019	-1	-177	-648		-21	-847
Changes in exchange rates			-1			-1
Accumulated depreciation on decreases		11	29			41
Depreciation during the financial period		-13	-40		-1	-54
Impairments			-1			-1
Accumulated depreciation and impairment on 31 December 2019	-1	-179	-659		-21	-860
Carrying amount on 31 December 2019	29	104	139	31	3	307
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

16. Leases
MEUR	2019
Land and buildings, right-of-use assets
Carrying amount on 1 January 2019	203
Additions	28
Depreciation and impairment	-43
Decreases and reclassifications	-14
Carrying amount on 31 December 2019	174
Machinery and equipment, right-of-use assets
Carrying amount on 1 January 2019	12
Additions	6
Depreciation and impairment	-6
Decreases and reclassifications	-1
Carrying amount on 31 December 2019	11
Lease liabilities
Carrying amount on 1 January 2019	215
Additions	33
Interest expense	2
Payments	-49
Other adjustments	-13
Carrying amount on 31 December 2019	188
Total lease liabilities
Non-current	146
Current	42
MEUR	2019
Amounts recognised in statement of income
Depreciation and impairment of right-of-use assets	-49
Interest expense	-5
Expense – short-term leases	-32
Expense – leases of low-value assets	-6
Expense – variable lease payments	-4

17. Investments in associates and joint ventures
MEUR							2019	2018
Carrying amount on 1 January							66	83
Investments								1
Share of result							-9	13
Dividends							-1	-17
Translation differences							-1	-1
Reduction of share capital in associates and joint ventures								-13
Impairment							-13
Carrying amount on 31 December							42	66
Summary of financial information (100%):
2019
MEUR			Holding %	Assets	Equity	Liabil- ities	Net sales	Profit for the financial period
Joint ventures
Wärtsilä Qiyao Diesel Company Ltd.		China	50.0	39	19	20	30	2
Wärtsilä Hyundai Engine Co Ltd.		South Korea	50.0	71	68	3	19	-21
CSSC Wärtsilä Electrical & Automation Co., Ltd.		China	49.0	11	2	9	9
CSSC Wärtsilä Engine (Shanghai) Co., Ltd.		China	49.0	96	20	76	78	1
Repropel Sociedad de reparacao de helices		Portugal	50.0	1	1		1
Associated companies
Wärtsilä Land & Sea Academy, Inc.		Philippines	40.0		-2	2
Neptun Maritime AS		Norway	40.0	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 cruise industry.
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

18. Financial assets and liabilities by measurement category
2019
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			1		1	1
Trade receivables		19			19	19
Derivatives			5		5	5
Other investments			18		18	18
Other receivables		2			2	2
Current financial assets
Trade receivables		1 232			1 232	1 232
Trade receivables for sale			4		4	4
Derivatives			5	14	18	18
Other financial receivables		6			6	6
Cash and cash equivalents		343*	15		358	358
Carrying amount by measurement category		1 600	48	14	1 662	1 662
Non-current financial liabilities
Interest-bearing debt		997			997	1 005
Derivatives			14	2	16	16
Current financial liabilities
Interest-bearing debt		99			99	99
Trade payables		624			624	624
Derivatives			1	6	7	7
Other financial liabilities		4			4	4
Carrying amount by measurement category		1 724	15	8	1 747	1 756
* In addition, the Group has cash and cash equivalents measured at amortised cost of EUR 11 million related to assets held for sale.
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
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
				2019		2018
MEUR			Level 2	Level 3	Level 2	Level 3
Financial assets
Other investments				18		16
Interest-bearing investments, non-current			1		3
Other receivables, non-current			2		3
Derivatives			24		12
Financial liabilities
Interest-bearing debt, non-current*			1 005		754
Derivatives			23		79
* Measured at amortised cost in the consolidated statement of financial position.
Additional information on financial liabilities is presented in Note 28. 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					2019	2018
Carrying amount on 1 January					16	13
Acquired shares					2	3
Carrying amount on 31 December					18	16
In 2019, the cost for other unlisted shares (level 3) was EUR 18 million (16), and the market value of them was EUR 18 million (16).

19. Inventories
MEUR	2019	2018
Materials and consumables	484	471
Work in progress	736	615
Finished products	53	35
Advances paid	93	43
Total	1 365	1 165
In 2019, EUR 4 million (1) impairment for obsolete inventories has been recognised in the consolidated statement of income. Acquisition-related increase in inventories is EUR 1 million (8).
In 2019, the principles for estimating inventory write-down have been adjusted. The current principles are based on a range of coverage, which specifies how long the available quantity of material at a certain date or period can cover the requirements in a subsequent period. In 2019, the total impact is EUR 11 million from the change of write-down estimates to the value of the inventories.

20. Contract balances
MEUR	2019	2018
Trade receivables	1 255	1 271
Contract assets	515	557
Contract liabilities
Advances received	452	584
Deferred income	465	345
Trade receivables and contract assets
Non-current	19	49
Current	1 752	1 779
Contract liabilities
Non-current	38	41
Current	880	888
Revenue recognised in the financial period that was included in the contract liability on 1 January	888	724
Unsatisfied performance obligations, all revenue types	7 427	7 242
of which remaining performance obligations from projects and contracts under execution	3 959	3 794
Trade receivables related to contracts with customers are non-interest-bearing receivables. Trade receivables have decreased during 2019 due to reclassification to assets held for sale as well as through collection of 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 turnkey contracts. The decrease in contract assets in 2019 contains reclassification to assets held for sale and usual business-related variation mainly in Marine Business projects. In addition, the accrued revenue has decreased in long-term service agreements. The decrease in contract liabilities in 2019 arises from usual business-related variation in projects in both segments.

21. Other receivables
MEUR	2019	2018
Derivatives	24	12
Interest and other financial items	6	3
Insurance receivables	6	5
Rental accruals	3	3
Prepaid expenses	14	6
Other accruals	41	42
Loan receivables	2	3
Defined benefit plans	1
VAT receivables	111	104
Other*	88	83
Total	296	262
Non-current	15	34
Current	281	228
* Other receivables includes payroll related tax receivables of EUR 9 million (9) in Brazil, which cannot be utilised likely within a year. Other receivables also includes a receivable of EUR 21 million (20) relating to disposal of pumps business. The receivable has been classified as current receivable in 2019.

22. Cash and cash equivalents
MEUR	2019	2018
Cash and bank balances*	343	461
Cash equivalents	15	26
Total	358	487
* EUR 171 million (128) 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.
In addition, the Group has cash and cash equivalents of EUR 11 million related to assets held for sale.

23. Net debt reconciliation
Net interest-bearing debt
MEUR					2019	2018
Interest-bearing debt, non-current					851	748
Lease liabilities, non-current					146
Interest-bearing debt, current					58	74
Lease liabilities, current					42
Total interest-bearing liabilities					1 096	823
Interest-bearing receivables					-1	-3
Cash and cash equivalents					-358	-487
Cash and cash equivalents pertaining to assets held for sale					-11
Total interest-bearing assets					-370	-490
Total net interest-bearing debt					726	333
Net debt reconciliation
MEUR		Carrying amount on 1 January 2019	Cash flows	Changes in exchange rates	Other non-cash movements	Carrying amount on 31 December 2019
Interest-bearing debt, non-current		746*	104			851
Interest-bearing debt, current		73*	-11	-5		58
Lease liabilities		215**	-52		26	188
Interest-bearing receivables		-3	2			-1
Cash and cash equivalents		-487	119			-369***
Net debt		545	162	-5	26	726
* Finance lease liabilities have been classified in line with IFRS 16 separately under lease liabilities.
** Lease liabilities according to IFRS 16.
*** Includes cash and cash equivalents pertaining to assets held for sale.
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		234	87	-2	13	333

24. Deferred taxes
Changes in deferred taxes during 2019
MEUR		1 January 2019	Recog- nised in the con- solidated statement of income	Other compre- hensive income	Transla- tion dif- ferences	Acquisi- tions	31 December 2019
Deferred tax assets
Tax loss carry-forwards		18	17			-1	34
Pension obligations		21	1	5			27
Provisions		28	7				35
Elimination of intragroup margin in inventories		5	1				6
Fair value reserve		9		-3			6
Other temporary differences		49	6			-1	55
Reclassification to assets held for sale							-8
Total		129	32	2		-2	155
Deferred tax liabilities
Intangible assets and property, plant and equipment		66	-10		2		59
Fair value reserve				1			1
Other temporary differences		32					32
Reclassification to assets held for sale							-8
Total		99	-10	1	1		83
Net deferred tax assets/liabilities		30	41	1	-1	-2	72
On 31 December 2019, the Group had temporary differences on which no deferred tax assets were booked totalling EUR 64 million (63), 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 29 million (18) 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 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

25. Pension obligations
MEUR			2019	2018
Net defined benefit liabilities on 31 December			155	149
Liability for other long-term employee benefits on 31 December			15	13
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 55% 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 2019. 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			2019	2018
Present value of unfunded defined benefit obligations			119	108
Present value of funded defined benefit obligations			182	177
Fair value of plan assets			-146	-135
Net liability in the statement of financial position			155	149
%			Present value of defined benefit obligations	Fair value of plan assets
Switzerland			31	55
Germany			23	5
Other Europe			37	28
Asia			9	12
Total			100	100
MEUR		Present value of defined benefit obligation	Fair value of plan assets	Net defined benefit liability
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		-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
Balance on 1 January 2019		282	-134	149
Changes in exchange rates		5	-4
Recognised in the statement of income:
Current service cost		13		13
Gains (-) / losses (+) on curtailments and settlements		-1		-1
Interest cost (+) / interest income (-)		5	-2	3
Remeasurements recognised in other comprehensive income:
Return on plan assets, excluding interest income			-11	-11
Experience adjustments		1		1
Changes in demographic assumptions		-1		-1
Changes in financial assumptions		30		30
Contribution paid by the plan members		1	-1
Contribution paid by the employer			-10	-10
Benefits paid		-21	10	-12
Reclassification to assets held for sale		-15	7	-8
Balance on 31 December 2019		299	-146	155
Plan assets invested in:
%			2019	2018
Shares and other equity instruments			18	17
Bonds and other debt instruments			35	33
Property			17	17
Other assets			30	33
The main actuarial assumptions at the end of the financial period are (expressed as weighted averages):
%			2019	2018
Discount rate			1.08	1.78
Future salary growth			2.03	2.16
Future pension growth			1.14	1.18
On 31 December 2019, the weighted average duration of the defined benefit obligation was 12 years. The Group expects to contribute EUR 7 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:
			2019	2018
Plan participants retiring at the end of the financial period:
Male			17.4	17.0
Female			20.0	17.1
Plan participants retiring 20 years after the end of the financial period:
Male			18.4	16.1
Female			20.4	18.1
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	2019	2018
Discount rate		increase 1%	-41	-33
Discount rate		decrease 1%	51	41
Future salary growth		increase 1%	10	9
Future salary growth		decrease 1%	-8	-8
Future pension growth		increase 1%	30	25
Future pension growth		decrease 1%	-16	-15

26. 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 2018	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
31 December 2019	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 2018				-14
Taxes related to fair value adjustments				3
Fair value reserve on 1 January 2018				-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
Transferred to the statement of income, net of taxes				16
Fair value adjustments				4
Fair value reserve on 31 December 2019				-11
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 2019, 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 2018, a dividend of EUR 0.48 per share was distributed, totalling EUR 284 million, and the rest of the retained profits were carried further in the unrestricted equity.
Additional information on equity is presented in Notes to the parent company financial statements, in Note 10. Shareholders' equity.

27. Provisions
2019
MEUR	Litigation	Warranties	Onerous contracts	Restruc- turing	Other provisions	Total
Provisions on 1 January 2019	21	172	67	7	38	305
Changes in exchange rates						1
Additions	4	52	100	20	14	190
Used provisions	-14	-51	-71	-13	-9	-159
Released provisions	-1		-7	-2	-5	-14
Provisions on 31 December 2019	10	174	89	13	38	323
Non-current						45
Current						278
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
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.

28. Financial liabilities
2019
	Current	Non-current
MEUR	< 1 year	1–3 years	3–5 years	> 5 years	Total
Loans from other financial institutions*	56	263	258	328	906
Lease liabilities	48	65	37	64	215
Other interest-bearing debt*	2				2
Trade payables	624				624
Derivatives**	7	10	5	2	23
Other liabilities	4				4
Total	741	339	301	392	1 774
* Estimated interest expenses, total	8	12	8	3	31
Estimated contractual cash flows	748	351	309	395	1 804
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
** Valuation for derivatives with negative market value by maturity date. Nominal contractual amounts are presented in Note 30. Derivative financial instruments.
Interest expenses for long-term loans are calculated by using the average interest rate prevailing on 31 December 2019. Fair values of financial liabilities are presented in Note 18. Financial assets and liabilities by measurement category.

29. Other liabilities
MEUR	2019	2018
Accrued expenses	320	295
Personnel costs	125	124
Derivatives	23	79
Interest and other financial items	4	9
Other accruals	41	45
VAT liabilities	39	26
Other	70	67
Total	623	645
Non-current	1	1
Current	622	645

30. Derivative financial instruments
The Group applies hedge accounting to significant foreign currency forward contracts. Detailed financial information is presented in Note 33. Financial risks.
MEUR		2019	of which closed	2018	of which closed
Nominal values of derivative financial instruments (level 2)
Interest rate swaps		400		270
Cross currency swaps		246		238
Currency forwards, included in hedge accounting		1 769	873	1 227	314
Currency forwards, no hedge accounting		597	213	1 600	721
Total		3 012	1 086	3 335	1 035
Fair values of derivative financial instruments (level 2)
Interest rate swaps		-7		-4
Cross currency swaps		-4		-8
Currency forwards, included in hedge accounting		8		-22
Currency forwards, no hedge accounting		4		-33
Total				-67
In addition, the Group had copper futures and swaps amounting to 173 tons (264) valued at EUR 1 million (1).
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 69 months (48). The average maturity for cross currency swaps is 41 months (54).
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				2019	2018
Gross fair values of derivative financial instruments subject to ISDAs
Assets
Cross currency swaps				5	3
Currency forwards				18	8
Total				24	12
Liabilities
Interest rate swaps				-7	-4
Cross currency swaps				-9	-11
Currency forwards				-7	-63
Total				-23	-79
Net fair values of derivative financial instruments subject to ISDAs
Assets				8
Liabilities				-8	-67
Total					-67

31. Collateral, contingent liabilities and other commitments
			2019		2018
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		18	10	15	10
Total		18	10	15	10
Chattel mortgages and other pledges and securities given as collateral for liabilities and commitments
Loans from credit institutions		5	1	8	2
Other commitments			21		17
Total		5	22	8	19
MEUR				2019	2018
Guarantees and contingent liabilities