Nokia 2003 Annual Report Download - page 60

operations discussed above, Nokia’s balance sheet is also affected by the translation into euro for
financial reporting purposes of the shareholders’ equity of our foreign subsidiaries that are
denominated in currencies other than the euro. In general, this translation increases our
shareholders’ equity when the euro depreciates, and affects shareholders’ equity adversely when
the euro appreciates against the relevant other currencies (year-end rate to previous year-end
rate).
For a discussion on the instruments used by Nokia in connection with our hedging activities, see
Note 34 to our consolidated financial statements included in Item 18 of this Form 20-F. See also
‘‘Item 11. Quantitative and Qualitative Disclosures About Market Risk’’ and ‘‘Item 3.D Risk Factors—
Our sales, costs and results are affected by exchange rate fluctuations, particularly between the
euro, which is our reporting currency, and the US dollar, UK pound sterling and the Japanese yen
as well as certain other currencies.’’
Principal Differences Between IAS and US GAAP
Nokia’s consolidated financial statements are prepared in accordance with IAS.
Our net profit in 2003 under IAS was EUR 3 592 million, compared to EUR 3 381 million in 2002
and EUR 2 200 million in 2001. Under US GAAP, Nokia would have reported net income of
EUR 4 097 million in 2003, compared to EUR 3 603 million in 2002 and EUR 1 903 million in 2001.
The principal differences between IAS and US GAAP that affect our net profit or loss, as well as our
shareholders’ equity, relate to the treatment of development costs, impairment of capitalized
development costs, pension costs, provision for social security costs on stock options, stock
compensation expense, identifiable intangible assets acquired, amortization and impairment of
goodwill, translation of goodwill, net investment in foreign companies and certain cash flow
hedges. See Note 36 to our consolidated financial statements included in Item 18 of this Form 20-F
for a description of the principal differences between IAS and US GAAP and for a description of the
anticipated impact on the consolidated financial statements of the adoption of recently issued US
GAAP accounting standards.
5.B Liquidity and Capital Resources
At December 31, 2003, Nokia’s cash and cash equivalents increased to EUR 11 296 million,
compared to EUR 9 351 million at December 31, 2002, primarily as a result of continued good
profitability as well as a result of a decline in cash used in investing activities and a decline in the
amount of income taxes paid. We hold our cash and cash equivalents predominantly in euros.
Cash and cash equivalents totaled EUR 6 125 million at December 31, 2001.
Net cash from operating activities was EUR 5 244 million in 2003, compared to EUR 5 814 million
in 2002 and EUR 6 547 million in 2001. Net cash generated from operating activities decreased
primarily due to high year-end sales increasing receivables in working capital. At the beginning of
2002, a significant amount of 2001 taxes became payable in addition to normal advances for 2002
taxes.
Net cash used in investing activities in 2003 was EUR 313 million, compared to EUR 868 million in
2002 and EUR 2 679 million in 2001. Cash flow from investing activities in 2003 included additions
to capitalized R&D expenses of EUR 218 million, representing a decrease compared to
EUR 418 million in year 2002 and EUR 431 million in 2001. Long-term loans made to customers
decreased to EUR 97 million in 2003, compared to EUR 563 million in 2002 and EUR 1 129 million
in 2001. Capital expenditures for 2003 were EUR 432 million, remaining unchanged from 2002.
Capital expenditures totaled EUR 1 041 million in 2001. Major items of capital expenditure
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