Nokia 2004 Annual Report Download - page 166

Notes to the Consolidated Financial Statements (Continued)
25. Deferred taxes
2004 2003
EURm EURm
Deferred tax assets:
Intercompany profit in inventory ....................................... 41 40
Tax losses carried forward ............................................. 12 36
Warranty provision .................................................. 118 157
Other provisions ..................................................... 174 179
Other temporary differences ........................................... 190 233
Untaxed reserves .................................................... 88 98
Total deferred tax assets ................................................ 623 743
Deferred tax liabilities:
Untaxed reserves .................................................... (30) (33)
Fair value gains/losses ................................................ (28) (22)
Undistributed earnings ................................................ (60) —
Other .............................................................. (61) (186)
Total deferred tax liabilities .............................................. (179) (241)
Net deferred tax asset .................................................. 444 502
The tax charged to shareholders’ equity is as follows:
Fair value and other reserves, fair value gains/losses ......................... (7) (22)
In 2005, the corporate tax rate in Finland will be reduced from 29% to 26%. The impact of the
change on the deferred tax assets in 2004 was a reduction of EUR 28 million and on the deferred
tax liabilities an increase of EUR 2 million. Accordingly, the impact of the change in the tax rate on
the profit and loss account through change in deferred taxes in 2004 was EUR 26 million tax
expense.
During 2004, the Group analyzed the majority of its future foreign investment plans with respect
to foreign investments. As a result of this analysis, the Group concluded that it could no longer
represent that all foreign earnings may be permanently reinvested. Accordingly, the Group
recorded the recognition of a EUR 60 million deferred tax liability during the year.
At December 31, 2004 the Group had loss carry forwards of EUR 67 million (EUR 75 million in
2003) for which no deferred tax asset was recognized due to uncertainty of utilization of these
loss carry forwards. These loss carry forwards will expire in years 2005 through 2010.
26. Short-term borrowings
Short-term borrowings consist primarily of borrowings from banks denominated in different
foreign currencies. The weighted average interest rate at December 31, 2004 and 2003 was 3.07%
and 6.73%, respectively.
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