Nokia 2003 Annual Report Download - page 132

Notes to the Consolidated Financial Statements (Continued)
7. Impairment (Continued)
In 2003 and 2002 Nokia has evaluated the carrying value of goodwill arising from certain
acquisitions by determining if the carrying values of the net assets of the cash generating unit to
which the goodwill belongs exceeds the recoverable amounts of that unit. In 2003 and 2002, in the
Nokia Networks business, Nokia recorded an impairment charge of EUR 151 million and
EUR 104 million, respectively, on goodwill related to the acquisition of Amber Networks. The
recoverable amount for Amber Networks was derived from the value in use discounted cash flow
projections, which covers the estimated life of the Amber platform technology, using a discount
rate of 15%. At December 31, 2003, there is EUR 0 million of Amber goodwill. The impairment is a
result of significant declines in the market outlook for products under development. In the Nokia
Networks business in 2001, Nokia recognized a goodwill impairment charge of EUR 170 million
related to the aquisition of Nokia DiscoveryCom, as a result of a decision to discontinue the related
product development.
In 2002 and 2001, Nokia recognized impairment losses of EUR 36 million and EUR 88 million,
respectively, on goodwill related to the acquisition of Ramp Networks. In 2002 and 2001, Nokia
recognized impairment losses of EUR 25 and EUR 181 million, respectively, on goodwill related to
the acquisition of Network Alchemy. Both of these entities are part of The Nokia Internet
Communications business unit of Nokia Ventures Organization. For the impairments in 2001 the
recoverable amounts were calculated based on value in use discounted cash flow projections using
a discount rate of 13%. The impairments in 2001 resulted from the restructuring of these
businesses. In 2002, the remaining goodwill balances were written off as a result of decisions to
discontinue the related product development.
Nokia recognized various minor goodwill impairment charges totaling EUR 0 million in 2003
(EUR 17 million in 2002).
During 2003 the company’s investment in certain equity securities suffered a permanent decline in
fair value resulting in an impairment charge of EUR 27 million relating to non-current
available-for-sale investments (EUR 77 million in 2002 and EUR 80 million in 2001).
8. Acquisitions
In 2003 Nokia made three minor purchase acquisitions for a total consideration of EUR 38 million,
of which EUR 20 million in cash and EUR 18 million in non-cash consideration.
In 2002, Nokia increased its voting percentage of 39.97% and holding percentage of 59.97% in
Nextrom Holding S.A. to voting percentage of 86.21% and a holding percentage of 79.33%. These
increases resulted from rights offering by Nextrom in June 2002 and by acquiring new registered
and bearer shares in an offering by Nextrom in December 2002 both totalling EUR 13 million.The
fair value of net assets acquired was EUR 4 million giving rise to goodwill of EUR 9 million.
In August 2001 Nokia acquired Amber Networks, a networking infrastructure company, for
EUR 408 million, for its ability to develop fault-tolerant edge routers, to build on our strong market
share established in the 3G mobile networks and as part of a broader strategy to shape future
mobile network architectures. The acquisition was paid in 20,861,212 shares of Nokia stock and
2,624,434 Nokia stock options. The fair value of net assets acquired was EUR (13) million giving
rise to goodwill of EUR 421 million which represented the future cash flow projections.
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