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Note 10 Depreciation, amortisation and impairment charges
Accounting principles
Depreciation, amortisation and impairment charges
Depreciation or amortisation of an asset begins when it is available for use in the location and condition necessary for it to be operated in the manner intended by management. Depreciation or amortisation ceases when the asset is derecognised or classified as held for sale in accordance with IFRS 5. Depreciation or amortisation does not cease when the asset becomes idle. Tangible and intangible assets are depreciated and amortised on a straight-line basis over their useful lives. Useful lives are reviewed periodically. In case an asset is disposed, proceeds exceeding the carrying value of the asset up to its historical cost are netted against depreciation, amortisation and impairment charges. Only disposal proceeds exceeding the historical cost of an asset are presented as other operating income (note 5). If the asset’s book value is higher than the disposal proceeds, the difference is recognised as an impairment in the period when a binding sales contract is signed.

The carrying amounts of intangible assets and property, plant and equipment are reviewed at each reporting date to determine whether there is any indication of impairment, whereas goodwill is tested annually. If any such indication exists, the recoverable amount is estimated as the higher of the fair value less costs of disposal and the value in use, with an impairment loss being recognised whenever the carrying amount exceeds the recoverable amount.

A previously recognised impairment loss on property, plant and equipment is reversed if there has been a change in the estimates used to determine the recoverable amount, however, not to an extent higher than the carrying amount that would have been had no impairment loss been recognised in prior years. For goodwill, however, a recognised impairment loss is not reversed.

Whilst intangible assets and property, plant and equipment are subject to impairment testing at the cash generating unit (CGU) level, goodwill is subject to impairment testing at the level of CGU or groups of CGUs, which represents the lowest level within the group at which goodwill is monitored for internal management purposes.
Depreciation, amortisation and impairment charges
Year Ended 31 December
EUR million 2016 2015
Depreciation and Amortisation
Intangible assets 18 17
Buildings and structures 85 89
Plant and equipment 389 404
Other tangible assets 12 12
Total 504 522
Impairment and Disposal Gains/Losses
Goodwill 11 -
Intangible assets - -
Land - 3
Buildings and structures 25 32
Plant and equipment 60 204
Other tangible assets 7 7
Gain on sale of fixed assets -159 -
Total -56 246
Reversal of Impairment
Buildings and structures -9 -3
Plant and equipment -41 -2
Total -50 -5
Depreciation, Amortisation and Impairment Charges 398 763
Depreciation and amortisation
The total depreciation and amortisation charge amounted to EUR 504 million and was EUR 18 million less than in 2015. A breakdown of depreciation, amortisation and impairment charges by divisions is set out in Note 3 Segment information.
Disposal gains and losses
On 6 June 2016 Stora Enso announced the divestment of key assets of its Suzhou Mill in China, including the land-use rights and buildings, to the local government of Suzhou National New & Hi-tech Industrial Development Area (SND). The cash consideration for the assets was EUR 240 million. According to Stora Enso’s accounting policy, disposal proceeds exceeding the carrying value of the asset but not its historical cost are netted against depreciation, amortisation and impairment charges. In 2016, the depreciation, amortisation and impairment charges included a disposal profit of EUR 159 million as well as a reversal of previous impairment charges of EUR 41 million. Suzhou Mill was part of the Paper division.
Impairment testing
The recoverable amount of CGUs has been determined based on a value-in-use calculation using cash flow projections from financial budgets approved by the Board of Directors and management. The pre-tax discount rates are calculated for each cash generating unit taking into account the tax and risk profile of the country in which the cash flow is generated. The table in the goodwill impairment testing section below sets out the pre-tax discount rates used for goodwill impairment testing, which are similar to those used in the impairment testing of other intangible assets and property, plant and equipment.

Impairments were calculated with a value-in-use method for each CGU based on the following main assumptions:
• Sales price estimates in accordance with internal and external specialist analysis
• Inflation estimates of approximately 2% per year
• Current cost structure to remain unchanged
• For goodwill testing a four-year future period was used after which the perpetuity value was based on zero growth rates, whereas for intangible assets, property, plant and equipment testing the period was the remaining expected economic life of the assets.
Other intangible assets and property, plant and equipment impairment
The total impairment charges on other intangible assets and property, plant and equipment in 2016 amounted to EUR 92 million (EUR 248 million) and resulted from impairment testing and restructurings. The impairments are mostly attributable to:
• EUR 78 million (EUR 216 million) resulted from impairment testing in Newsprint Europe CGU in Paper division. The result is explained in more detail in the following paragraphs.
• EUR 6 million for idle machinery relating to the consolidation of corrugated packaging production in Finland.


Newsprint Europe CGU in Paper division was tested for impairment in 2016 due to the further weakened long-term earnings expectations resulting from decline in the European paper markets. The recoverable amount was based on the value-in-use and amounted to EUR 233 million. The pre-tax discount rate used for impairment testing was 6.8% (7.3%). The group recorded an impairment charge of EUR 78 million (EUR 120 million) in Newsprint Europe CGU in 2016.

Uncoated Magazine Paper Europe CGU in Paper division was not tested for impairment in 2016. In 2015, the impairment test for Uncoated Magazine Paper resulted in a value-in-use of EUR 301 million with a discount rate of 7.3% The group recorded an impairment charge of EUR 93 million in Uncoated Magazine Paper Europe CGU in 2015.
Goodwill impairment testing
In 2016 the total goodwill impairment charge amounted to EUR 11 million and was fully related to Corrugated China operations in Packaging Solutions division. The main reason for the impairment is the challenging market situation and a change in the customer base. Stora Enso recognises goodwill only to the extent of its interest in the net assets acquired (the partial goodwill method). As such, the impairment of goodwill is fully allocated to the owners of the parent. After the impairment no Goodwill was left in Corrugated China CGU.

There was no goodwill impairment in 2015.
Groups of cash generating units containing goodwill
Year Ended 31 December
2016 2015
EUR million Goodwill at Year End Intangible Assets and Property, Plant and Equipment at Year End Recoverable Amount at Year End Impairment Charge Pre-tax Discount Rate Goodwill at Year End Intangible Assets and Property, Plant and Equipment at Year End Recoverable Amount at Year End Impairment Charge Pre-tax Discount Rate
Packaging Solutions - Europe 19 671 1 529 - 10.0% 19 686 1 461 - 10.6%
Packaging Solutions - Corrugated China - 56 56 11 8.0% 11 66 145 - 8.6%
Biomaterials - Innovation and Nordic Operations 32 343 769 - 7.5% 31 321 930 - 8.0%
Wood Products - Central Europe 104 160 713 - 6.8% 104 163 672 - 7.3%
Paper - Newsprint and Book Paper 43 261 542 - 6.8% 43 359 679 - 7.3%
Paper - Uncoated Magazine Paper 40 290 774 - 6.8% 40 314 529 - 7.3%
Goodwill 238 1 781 4 383 11 248 1 909 4 416 -
Segment impairment and disposal losses less reversals
Year Ended 31 December
EUR million 2016 2015
Consumer Board - 2
Packaging Solutions 18 -1
Biomaterials - 1
Wood Products -1 -4
Paper 32 243
Other 4 -
Total (impairment + / reversal -) 53 241
The calculation of value-in-use is most sensitive to discount rate, sales price and costs. The Sensitivity Analysis table summarises what effect a 1% change in the discount rate, 1% decrease in sales prices and 1% increase in costs would have had on the recoverable amounts of group of CGUs carrying the most of the group’s total goodwill.
Goodwill testing sensitivity analysis, impact on recoverable amount
EUR million Wood Products - Central Europe Paper - Newsprint and Book Paper - Uncoated Magazine Paper
1% increase in the discount rate -113 -78 -123
1% annual decrease in the sales price -117 -89 -71
1% annual increase in the costs -106 -81 -62

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