Nokia 2004 Annual Report Download - page 132

Notes to the Consolidated Financial Statements
1. Accounting principles
Basis of presentation
The consolidated financial statements of Nokia Corporation (‘‘Nokia’’ or ‘‘the Group’’), a Finnish
limited liability company with domicile in Helsinki, are prepared in accordance with International
Financial Reporting Standards (IFRS). The consolidated financial statements are presented in
millions of euros (EURm), except as noted, and are prepared under the historical cost convention
except as disclosed in the accounting policies below. The notes to the consolidated financial
statements also conform with Finnish Accounting legislation. On January 27, 2005, the Group’s
Board of Directors authorized these financial statements for issue.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of Nokia’s parent company (‘‘Parent
Company’’), and each of those companies in which it either owns, directly or indirectly through
subsidiaries, over 50% of the voting rights, or over which it has control of their operating and
financial policies. The Group’s share of profits and losses of associated companies (generally 20%
to 50% voting rights or over which the Group has significant influence) is included in the
consolidated profit and loss account in accordance with the equity method of accounting.
All inter-company transactions are eliminated as part of the consolidation process. Minority
interests are presented separately in arriving at the net profit. They are also shown separately
from shareholders’ equity and liabilities in the consolidated balance sheet.
Profits realized in connection with the sale of fixed assets between the Group and associated
companies are eliminated in proportion to share ownership. Such profits are deducted from the
Group’s equity and fixed assets and released in the Group accounts over the same period as
depreciation is charged.
The companies acquired during the financial periods presented have been consolidated from the
date on which control of the net assets and operations was transferred to the Group. Similarly the
result of a Group company divested during an accounting period is included in the Group accounts
only to the date of disposal.
Goodwill
Acquisitions of companies are accounted for using the purchase method of accounting. Goodwill
represents the excess of the purchase cost over the fair value of assets less liabilities of acquired
companies. Goodwill is amortized on a straight-line basis over its expected useful life. Useful lives
vary between two and five years depending upon the nature of the acquisition. Expected useful
lives are reviewed at each balance sheet date and, where these differ significantly from previous
estimates, amortization periods are changed accordingly.
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