Nokia 2005 Annual Report Download - page 187

Notes to the Consolidated Financial Statements (Continued)
27. Deferred taxes
2005 2004
EURm EURm
Deferred tax assets:
Intercompany profit in inventory ....................................... 49 41
Tax losses carried forward ............................................. 712
Warranty provision .................................................. 107 118
Other provisions ..................................................... 170 174
Fair value gains/losses ................................................ 43 —
Untaxed reserves .................................................... 88 88
Other temporary differences ........................................... 228 190
Total deferred tax assets ................................................ 692 623
Deferred tax liabilities:
Untaxed reserves .................................................... (24) (30)
Fair value gains/losses ................................................ —(28)
Undistributed earnings ................................................ (68) (60)
Other .............................................................. (59) (61)
Total deferred tax liabilities .............................................. (151) (179)
Net deferred tax asset .................................................. 541 444
The tax charged to shareholders’ equity is as follows:
Fair value and other reserves, fair value gains/losses ......................... 93 (7)
In 2005, the corporate tax rate in Finland reduced from 29% to 26%. The decrease of tax rate had
no impact in deferred taxes in 2005 (a reduction of EUR 26 million in net deferred tax assets in
2004).
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 As a result of this analysis, the Group concluded that it could no longer
represent that all foreign earnings may be permanently reinvested.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 68 million deferred tax liability during 2005 (EUR 60 million in
2004).
At December 31, 2005 the Group had loss carry forwards of EUR 71 million (EUR 67 million in
2004) 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 2006 through 2011.
28. 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, 2005 and 2004 was 4.68%
and 3.07%, respectively.
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