Nokia 2003 Annual Report Download - page 161

Notes to the Consolidated Financial Statements (Continued)
36. Differences between International Accounting Standards and U.S. Generally Accepted
Accounting Principles (Continued)
Stock compensation
Under IAS, no compensation expense is recorded on stock options granted. Under U.S. GAAP, the
Group follows the methodology in APB Opinion 25, Accounting for Stock Issued to Employees
(APB 25), to measure employee stock compensation.
Certain employees have been granted stock options with an exercise price less than the quoted
market value of the underlying stock on the date of grant. Also, certain employees have been
granted restricted shares. This intrinsic value of the stock options and the restricted shares is
recorded as deferred compensation within shareholders’ equity and recognized in the profit and
loss account over the vesting period of the stock options. The stock options issued are recorded as
share issue premium.
Cash flow hedges
As a result of a specific difference in the rules under IAS 39 and FAS 133, Accounting for Derivative
Instruments and Hedging Activities, relating to hedge accounting, certain foreign exchange gains
and losses classified within equity under IAS would be included in the income statement under
U.S. GAAP.
Net investment in foreign companies
Under IAS, on the disposal of a foreign entity, the cumulative amount of the exchange differences
which have been deferred and which relate to that foreign entity should be recognized as income
or as expenses in the same period in which the disposal is recognized. An enterprise may dispose
of its interest in a foreign entity through sale, liquidation, repayment of share capital and
permanent loans, or abandonment of all, or part of, that entity.
Under U.S. GAAP, the cumulative translation differences are reported in the profit and loss account
only upon the sale or upon complete or substantially complete liquidation of the investment in a
foreign entity.
Acquisition purchase price
Under IAS, when the consideration paid in a business combination includes shares of the acquirer,
the purchase price of the acquired business is determined at the date on which the shares are
exchanged.
Under U.S. GAAP, the measurement date for shares of the acquirer is the first day on which both
the number of acquirer shares and the amount of other considerations become fixed. The average
share price for a few days before and a few days after the measurement date is then used to
value the shares.
Amortization of identifiable intangible assets acquired
Under IAS, acquired unpatented technology is not separately recognized on acquisition but is
included within goodwill.
Under U.S. GAAP, any unpatented technology acquired in a business combination is recorded as an
identifiable intangible asset with a related deferred tax liability. The intangible asset is amortized
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