Investor Presentaiton

CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS Accounting principles The parent company financial statements have been prepared according to the Finnish Accounting Standards. Financial statements have been prepared for the period of 12 months between January 1 and December 31, 2022. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION Transactions in foreign currencies are recorded at the rate of exchange prevailing on the date of the individual transaction. Foreign currency denominated receivables and liabilities are translated using the period end exchange rates. Foreign exchange gains and losses associated with loans, deposits and other statement of financial position items are included under financing income and expenses. LOAN RECEIVABLES AND FINANCIAL INVESTMENTS Loan receivables are initially recognized at nominal values and subsequently measured at amortized cost. Management estimates that the fair values of the loan receivables do not materially differ from the carrying values at the statement of financial position dates. Financial investments in commercial papers, short-term bank deposits, interest rate funds and other money market instruments are initially recognized at fair value and thereafter at amortized cost using the effective interest rate method except for interest rate funds which are classified and measured as investments at fair value through profit or loss. DERIVATIVE INSTRUMENTS Derivative financial instruments are used to hedge currency and the interest rate risks. Derivatives are measured at fair value in accordance with Accounting Act 5:2a §. The fair values of foreign exchange forward contracts are estimated by discounting the future cash flows of the contracts with the relevant market interest rate yield curves on the valuation date and by calculating the difference between the discounted values as at the forward contract date and balance sheet date in euros. The fair values of derivative financial instruments are presented in note 18. Changes in the fair values of foreign exchange derivatives are recognized in financing income and expenses if the hedged item is a loan receivable, deposit or a financial asset or liability denominated in a foreign currency. REVENUE RECOGNITION Revenues related to the utilization of intangible property rights are recognized as sales on an accrual basis, according to the existing contracts. The sales of services are recognized as sales when the services have been rendered or when the work is being carried out. RESEARCH AND DEVELOPMENT COST Research and development costs of new products and services are expensed as they incur. PENSIONS An external pension insurance company manages the parent company statutory pension plan. Contributions to the pension plan are charged directly to the statement of income in the year to which these contributions relate. LEASES Leasing payments are charged to the statement of income on a straight-line basis over the leasing term. Remaining future leasing liabilities from existing contracts are presented in note 17. TAXES Tax expense includes taxes based on taxable income for the period, together with tax adjustments for previous periods and changes in deferred taxes. Deferred taxes are provided for temporary differences arising between the tax basis of assets and liabilities and their book values in financial reporting and measured with enacted tax rates. Deferred tax liabilities arising from temporary differences are fully recognized with prudency, whereas the deferred tax assets are recognized only to the extent of the probable future tax benefit. NON-CURRENT ASSETS Intangible assets and property, plant and equipment are stated at the cost less accumulated depreciation and amortization. Depreciation and amortization are recorded on a straight-line basis over the economic useful lives of the assets as follows: Buildings Machinery and equipment Other long-term expenditure Land is not depreciated. 5-40 years 4-10 years 4-10 years Investments in subsidiaries and other companies are measured at cost, or fair value in case the fair value is less than cost. PROVISIONS Future outflows of cash to which the parent company has committed to and which probably will not contribute in future revenues and unavoidable losses the occurrence of which are probable recognized in provisions. Parent company provisions consist of warranty provisions 95 KONE ANNUAL REVIEW 2022

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