Nokia 2003 Annual Report Download - page 123
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Notes to the Consolidated Financial Statements (Continued)
1. Accounting principles (Continued)
Stock options
Stock options are granted to employees. The options are granted with a fixed exercise price set on
a date outlined in the plan. When the options are exercised, the proceeds received, net of any
transaction costs, are credited to share capital (nominal value) and share premium. Treasury
shares are acquired by the Group to meet its obligations under employee stock option plans in the
United States. When treasury shares are issued on exercise of stock options any gain or loss is
recognized in share issue premium. Tax benefits on options exercised in the United States are
credited to share issue premium.
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation
and a reliable estimate of the amount can be made. Where the Group expects a provision to be
reimbursed, the reimbursement would be recognized as an asset but only when the
reimbursement is virtually certain.
The Group recognizes the estimated liability to repair or replace products still under warranty at
the balance sheet date. The provision is calculated based on historical experience of the level of
repairs and replacements.
The Group recognizes the estimated liability for non-cancellable purchase commitments for
inventory in excess of forecasted requirements at each balance sheet date.
The Group recognizes a provision for the estimated future settlements related to asserted and
unasserted Intellectual Property Rights (IPR) infringements, based on the probable outcome of each
case as of each balance sheet date.
The Group recognizes a provision for social security costs on unexercised stock options granted to
employees at the date options are granted. The provision is measured based on the fair value of
the options, and the amount of the provision is adjusted to reflect the changes in the Nokia share
price.
Dividends
Dividends proposed by the Board of Directors are not recorded in the financial statements until
they have been approved by the shareholders at the Annual General Meeting.
Earnings per share
The Group calculates both basic and diluted earnings per share in accordance with IAS 33,
Earnings per share, (IAS 33). Under IAS 33, basic earnings per share is computed using the
weighted average number of shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of shares outstanding during the period plus the
dilutive effect of stock options outstanding during the period.
F-14