Nokia 2004 Annual Report Download - page 183

Notes to the Consolidated Financial Statements (Continued)
37. Differences between International Financial Reporting Standards and U.S. Generally
Accepted Accounting Principles (Continued)
Net investment in foreign companies
Under IFRS, on the disposal of a foreign entity, the cumulative amount of the exchange differences
which have been deferred and which relate to that foreign entity should be recognized as income
or as expenses in the same period in which the disposal is recognized. An enterprise may dispose
of its interest in a foreign entity through sale, liquidation, repayment of share capital and
permanent loans, or abandonment of all, or part of, that entity.
Under U.S. GAAP, the cumulative translation differences are reported in the profit and loss account
only upon the sale or upon complete or substantially complete liquidation of the investment in a
foreign entity.
Acquisition purchase price
Under IFRS, when the consideration paid in a business combination includes shares of the
acquirer, the purchase price of the acquired business is determined at the date on which the
shares are exchanged.
Under U.S. GAAP, the measurement date for shares of the acquirer is the date the acquisition is
announced or, if the number of shares is uncertain on such date, the first day on which both the
number of acquirer shares and the amount of other considerations become fixed. The average
share price for a few days before and a few days after the measurement date is then used to
value the shares.
Amortization and impairment of identifiable intangible assets acquired
Prior to April 1, 2004, unpatented technology acquired was not separately recognized on
acquisition under IFRS but was included within goodwill.
Under U.S. GAAP, any unpatented technology acquired in a business combination is recorded as an
identifiable intangible asset with a related deferred tax liability. The intangible asset is amortized
over its estimated useful life. The adjustment to U.S. GAAP net income and shareholders’ equity
relates to the amortization and accumulated amortization, respectively, of Amber Networks’
intangible asset.
During 2004 the carrying value of Amber Network upatented technology was impaired since Nokia
no longer develops nor uses the technology acquired and its carrying amount is not recoverable
through estimated future cash flows. The total impact on net income in 2004 amounted to EUR 58
million of which the write-down recognized under U.S. GAAP was EUR 47 million.
The net carrying amount of other intangible assets under U.S. GAAP is EUR 419 million in 2004
(EUR 623 million in 2003) and consists of capitalized development costs of EUR 210 million
(EUR 438 million in 2003) and acquired patents, trademarks and licenses of EUR 209 million
(EUR 185 million in 2003). The Group does not have any indefinite lived intangible assets. The
amortization expense under U.S. GAAP of other intangible assets subject to amortization as of
December 31, 2004, is expected to be approximately EUR 172 million for each of the next five
years.
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