TVO Group restates Consolidated Financial Statements (IFRS) due to restatement of interest rate swaps accounting

TVO Group has so far applied hedge accounting of cash flows to interest rate swaps by recording fair values in the statement of comprehensive income as well as in equity. The application of hedge accounting to hedging subordinated shareholder loans (hybrid equity) does not meet the criteria specified in the IFRS standard for the application of hedge accounting to consolidated financial statements. One of the criteria for applying cash flow hedge accounting is that cash flows might have an impact on the income statement. Interest payments on subordinated shareholder loans have no effect on the Group's income statement and thus the interest rate hedges related to subordinated shareholder loans do not meet the criteria for applying cash flow hedge accounting. The correct practice is to recognise changes in the fair value of interest rate swaps related to subordinated shareholder loans to finance income and expenses in the profit and loss account.

The impact of restatement is on the finance income and expenses in the income statement and on cash flow hedges in the consolidated statement of comprehensive income as well as the fair value and other reserves and retained earnings in the balance sheet. The restatement has been made by adjusting each line of financial statements affected by the change. The restatement has no effect on the total equity or cash flow. In the financial statement of 2024, the opening balances for financial years 2023 and 2024 will be adjusted for the fair value and other reserves and the retained earnings.

• At the end of 2022, the fair value of interest rate swaps related to subordinated shareholder loans amounted to EUR 177 million. At the end of 2023, the fair value of interest rate swaps related to subordinated shareholder loans amounted to EUR 119 million. The impact on the profit/loss for the financial year 2023 was EUR -58 million and in the consolidated statement of comprehensive income in cash flow hedges by EUR 58 million. The adjustment for 2023 reduces the fair value and other reserves by EUR 119 million and increases retained earnings by EUR 119 million (including the impact of profit and loss for the financial year).
• The impact of the profit/loss for the period in the interim report January 1- March 31 2024 was EUR 4 million and in the consolidated statement of comprehensive income in cash flow hedges by EUR -4 million. The correction reduces the fair value and other reserves by EUR 123 million and increases retained earnings by EUR 123 million (including the impact of profit and loss for the period).
• The impact of the profit/loss for the period in the interim report January 1 – June 30 2024 was EUR 9 million and in the consolidated statement of comprehensive income in cash flow hedges by EUR -9 million. The correction reduces the fair value and other reserves by EUR 128 million and increases retained earnings by EUR 128 million (including the impact of profit and loss for the period).
• The impact of the profit/loss for the period in the interim report January 1 – September 2024 was
  EUR -23 million and in the consolidated statement of comprehensive income in cash flow hedges by EUR 23 million. The correction reduces the fair value and other reserves by EUR 97 million and increases retained earnings by EUR 97 million (including the impact of profit and loss for the period).

The financial information in the stock exchange release is unaudited.

For further information, please contact:
Anja Ussa, Senior Vice President, Finance, TVO, tel. +358 (0) 50 342 34 64.

Attachment 1.: The corrections of the financial statements for 2023 (pdf, 19.9 kt)
Attachment 2.: The corrections of the interim report for 1 January–31 March 2024 (pdf, 105.1 kt)
Attachment 3.: The corrections of the interim report for 1 January–30 June 2024 (pdf, 104.8 kt)
Attachment 4.: The corrections of the interim report for 1 January–30 September 2024 (pdf, 105.5 kt)

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