Nokia 2004 Annual Report Download - page 137

Notes to the Consolidated Financial Statements (Continued)
1. Accounting principles (Continued)
impairment exists, the carrying amount of any intangible asset is assessed and written down to
its recoverable amount. Costs of software licenses associated with internal-use software are
capitalized. These costs are included within other intangible assets and are amortized over a
period not to exceed three years.
Pensions
The Group companies have various pension schemes in accordance with the local conditions and
practices in the countries in which they operate. The schemes are generally funded through
payments to insurance companies or to trustee-administered funds as determined by periodic
actuarial calculations.
The Group’s contributions to defined contribution plans and to multi-employer and insured plans
are charged to the profit and loss account in the period to which the contributions relate.
For defined benefit plans, principally the reserved portion of the Finnish TEL system, pension costs
are assessed using the projected unit credit method: the cost of providing pensions is charged to
the profit and loss account so as to spread the service cost over the service lives of employees. The
pension obligation is measured as the present value of the estimated future cash outflows using
interest rates on government securities that have terms to maturity approximating the terms of
the related liabilities. Actuarial gains and losses outside the corridor are recognized over the
average remaining service lives of employees.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is
recorded on a straight-line basis over the expected useful lives of the assets as follows:
Buildings and constructions ................................ 20–33 years
Production machinery, measuring and test equipment ........... 3 years
Other machinery and equipment ............................ 3–10 years
Land and water areas are not depreciated.
Maintenance, repairs and renewals are generally charged to expense during the financial period in
which they are incurred. However, major renovations are capitalized and included in the carrying
amount of the asset when it is probable that future economic benefits in excess of the originally
assessed standard of performance of the existing asset will flow to the Group. Major renovations
are depreciated over the remaining useful life of the related asset.
Gains and losses on the disposal of fixed assets are included in operating profit/loss.
Leases
The Group has entered into various operating leases, the payments under which are treated as
rentals and charged to the profit and loss account on a straight-line basis over the lease terms.
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