Investor Presentaiton

CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE 4.2 GOODWILL Goodwill allocation Goodwill is allocated to cash-generating units (CGUS). A cash generating unit is typically defined as the country unit in which the acquired business operates in accordance with KONE'S business model and organization structure. As at Dec 31, 2021 the carrying amount of goodwill is allocated to 24 different CGUS. The five largest CGUS carry 74% of the goodwill. The carrying amount of goodwill is below EUR 10 million for 10 CGUS. The geographical allocation of goodwill and the weighted average discount rates are presented in the adjacent table. Impairment testing The value-in-use calculations based on CGU specific cash flow projections are based on financial estimates prepared by the management. The explicit forecast period covers the following three years for each CGU. The business growth, sales price and cost development assumptions embedded in the CGU specific cash flow projections are based on management assessment of the market demand and environment, which are examined against external information sources. The productivity and efficiency assumptions are based on internal targets, which are evaluated against actual performance. The cash flows for subsequent terminal year are assumed prudently without growth. The discount rates are based on the risk-free interest rates, risk factors (beta coefficient) and market risk premiums available on financial markets. The value-in-use calculations are validated against KONE's market capitalization. No goodwill impairment losses were recognized during the accounting period. The impairment testing process includes a sensitivity analysis in which the CGU specific cash flow estimates were reduced by 10-40 percent and the discount rates were increased by 1-4 percentage points. Based on the sensitivity analysis, the probability for material impairment losses was very low. Under the basic scenario, the value-in- use calculations were on average 10.0 times higher than the CGUs' assets employed. The respective ratio for the five largest CGUS was 8.5; for the five smallest 12.7 and respectively for the other CGUS 13.5. Accounting principles Goodwill Acquisitions are accounted for using the acquisition method. Goodwill is calculated as the excess of acquisition cost over the fair values of identified assets and liabilities acquired. Goodwill typically represents the value of the acquired market share, business knowledge and the synergies obtained in connection with the acquisition. The carrying amount of goodwill is not amortized, but is tested for impairment. Impairment testing The Group assesses the carrying amount of goodwill annually or more frequently if any indication of impairment exists. Goodwill is allocated to the cash generating units (CGUS) of the Group, which are identified according to the Goodwill, MEUR EMEA Americas Asia-Pacific Total Goodwill reconciliation Goodwill, MEUR Opening net book value Translation differences Increase Decrease Companies acquired (note 4.1) Closing net book value country of operation and business area at the level at which goodwill is monitored for internal management purposes. The recoverable amount of a CGU is determined by value-in-use calculations. In assessing the recoverable amount, estimated future cash flows are discounted to their present value. Cash flow estimates are based on operative managerial estimates. The discount rate is the weighted average cost of capital (WACC) for the main currency area in the location of the CGU (country or business area), which reflects the market assessment of the time value of money and the risks specific in KONE's business. Any impairment loss of goodwill is recognized immediately as an expense and is not subsequently reversed. Discount interest rates used (pre-tax), Discount interest rates used (pre-tax), Dec 31, 2021 814.9 58 349.0 25 241.4 17 1,405.2 % % Dec 31, 2020 5.52 7.22 % 784.9 59 319.6 24 % 5.15 6.46 8.91 222.6 1,327.0 17 9.19 Dec 31, 2021 1,327.0 58.6 Dec 31, 2020 1,366.5 -39.7 0.2 -0.9 -3.8 20.5 4.0 1,405.2 1,327.0 60 KONE ANNUAL REVIEW 2021

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