Key accounting estimates and decisions based on management judgement
In impairment testing, the recoverable amounts are determined based on value-in-use. The cash flow fore-
casts used in the value-in-use calculations in impairment testing are based on cash flow forecasts of the seg-
ments prepared by the management and approved by the Board of Directors.
For the impairment testing, the cash flow forecasts cover a 5-year period in terms of the Private
Healthcare Services and the terminal period. Regarding the Public Services, the cash flow forecasts cover a
7-year period and the terminal period. The management\u2019s view is that using a 7-year forecast period is justi-
fied because the Group has significant long-term and fixed-term complete social and healthcare outsourcing
agreements. These agreements will expire during the 7-year forecast period, which is why management\u2019s
view is that extending the forecast period provides a more accurate picture of the segment\u2019s future cash
flow by making it possible to include the expiration of the agreements in the modelling of cash flows. The
terminal growth rate applied after the forecast period is two per cent, which corresponds to the long-term
inflation forecast for the Finnish economy.
For the period 2026\u20132028, the management forecasts that revenue, operating profit and cash flows will
develop in line with the Group\u2019s mid-term strategic targets. In addition, in terms of the Public Services, in
the forecasts for 2026\u20132031 consider the impacts of the expiration of the complete outsourcing agreements
in accordance with the agreement period of each agreement. More details on the duration of the agree-
ments and unsatisfied performance obligations are provided in note 2
Revenue from contracts with custom-
ers
.
The assumptions of the development of prices and costs used in the cash flow estimates are based on the
management\u2019s estimates of the development of demand and the markets, which are compared with exter-
nal information sources. The productivity and efficiency assumptions used in the calculations are based on
internal targets, with previous actual development considered in their estimation.
Key assumptions defined by the management and used in the calculation in 2025:
Assumption
Description
Projected revenue
Determined based on a segment-specific forecast prepared by the
management and approved by the Board.
Projected operating profit
Determined based on a segment-specific forecast prepared by the
management and approved by the Board.
Duration of the forecast period
The length of the forecast period is 5\u20137 years plus the terminal period.
Terminal growth rate
assumption
The terminal growth rate assumption is 2 per cent.
Discount rate
Determined using the weighted average cost of capital (WACC), which
describes the total cost of equity and liabilities, taking into account
the time value of money and the specific risks associated with
Pihlajalinna\u2019s business. Uncertainty in forecasting has been taken into
account in determining the additional risk premium.