Nokia 2004 Annual Report Download - page 184

Notes to the Consolidated Financial Statements (Continued)
37. Differences between International Financial Reporting Standards and U.S. Generally
Accepted Accounting Principles (Continued)
Amortization of goodwill
The Group adopted the transition provisions of IFRS 3, Business Combinations, with effect from
April 1, 2004. As a result, goodwill relating to purchase acquisitions and acquisitions of associated
companies for which the agreement date was on or after March 31, 2004, is no longer subject to
amortization. Goodwill arising in business combinations completed before March 31, 2004 will
continue to be amortized over its estimated useful life until the standard is fully adopted as of
January 1, 2005.
The Group adopted the provisions of FAS 142, Goodwill and Other Intangible Assets (FAS 142), on
January 1, 2002 and as a result, under U.S. GAAP goodwill relating to purchase acquisitions and
acquisitions of associated companies is no longer subject to amortization subsequent to the date of
adoption.
The U.S. GAAP adjustment reverses the amortization expense recorded under IFRS and also
reverses the movement in accumulated amortization under IFRS during the period subsequent to
the adoption of FAS 142.
Impairment of goodwill
As of January 1, 2002, the Group performed the transitional impairment test under FAS 142 and
compared the carrying value for each reporting unit to its fair value, which was determined based
on discounted cash flows. Upon completion of the transitional impairment test, the Group
determined that there was no impairment as of January 1, 2002, as the carrying value of each
reporting unit did not exceed its fair value. The Group has also completed the annual impairment
test required by FAS 142 during the fourth quarter of 2004, 2003 and 2002, which was also
performed by comparing the carrying value of each reporting unit to its fair value based on
discounted cash flows.
Under IFRS, goodwill is allocated to ‘‘cash generating units’’, which are the smallest group of
identifiable assets which includes the goodwill under review for impairment, and that generates
cash inflows from continuing use that are largely independent of the cash inflows from other
assets. Under IFRS, the Group recorded in 2003 and 2002 an impairment of goodwill of EUR 151
million and EUR 104 million, respectively, related to Amber Networks as the carrying amount of
the cash generating unit exceeded the recoverable amount of the unit. Upon completion of the
annual impairment test, the Group determined that the impairment recorded for Amber Networks
should be reversed for U.S. GAAP purposes because, at the Core Networks reporting unit level in
2003 and IP Mobility Network reporting unit level in 2002, where Amber Networks resides, the
fair value of the reporting unit exceeded the book value of the reporting unit.
The Group recorded no goodwill impairments during 2004.
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