Nokia 2003 Annual Report Download - page 171

Notes to the Consolidated Financial Statements (Continued)
36. Differences between International Accounting Standards and U.S. Generally Accepted
Accounting Principles (Continued)
Weighted average assumptions used in calculation of the Domestic plans’ net periodic benefit cost
for years ending December 31 are as follows:
2003 2002
Domestic Domestic
%%
Discount rate for determining present values ............................ 5.50 5.80
Expected long term rate of return on plan assets ........................ 7.25 7.50
Annual rate of increase in future compensation levels .................... 3.50 4.00
Pension increases .................................................. 2.30 2.80
The assumption for weighted average expected return on plan assets is based on the target asset
allocation at the beginning of the year. The expected returns for the various asset classes are
based on 1) a general inflation expectation and 2) asset class specific long-term historical real
returns, which are assumed to be indicative of future expectations without requiring further
adjustments.
Foreign currency translation
Net foreign exchange gains/(losses) of EUR 182 million, EUR (63) million and EUR (256) million
were included in the determination of net income of which EUR (717) million, EUR (476) million
and EUR (309) million were included in cost of sales for the year ended December 31, 2003, 2002,
and 2001, respectively. EUR 867 million, EUR 442 million and EUR 78 million of the net foreign
exchange gains/(losses) were included in the determination of net sales in 2003, 2002 and 2001,
respectively.
Cash and cash equivalents
Under U.S. GAAP bank overdrafts of EUR 119 million and EUR 78 million in 2003 and 2002,
respectively, for which there is a legal right of offset would be included within cash and cash
equivalents and would be excluded from short-term borrowings, which has been reflected in total
U.S. GAAP assets in Item 3 of the Form 20-F.
Consolidation
In 2002 Nokia had an investment in a subsidiary in which it owned 50% of the voting shares, and
was consolidated under IAS as Nokia has control of its operating and financial policies. In 2002
under US GAAP this entity would have been accounted for as a joint venture using the equity
method. The impact of deconsolidation would have increased net sales by approximately 4% and
would have had an immaterial effect on operating profit after adjusting for the impact of sales
from Nokia to the subsidiary and the subsidiary’s sales to Nokia. In addition, there would have
been no impact on net profit as a result of the deconsolidation. In 2003 the ownership of the
subsidiary was increased to 52.9% and the subsidiary is consolidated under both IAS and U.S.
GAAP. The application of FASB Interpretation No. 46, Consolidation of Variable Interest Entities,
(FIN 46), would have had a similar effect on the consolidation as the increase in ownership.
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