Nokia 2006 Annual Report Download - page 145

Notes to the Consolidated Financial Statements
1. Accounting principles
Basis of presentation
The consolidated financial statements of Nokia Corporation (‘‘Nokia’’ or ‘‘the Group’’), a Finnish
public limited liability company with domicile in Helsinki, in the Republic of Finland, are prepared in
accordance with International Financial Reporting Standards (‘‘IFRS’’). The consolidated financial
statements are presented in millions of euros (‘‘EURm’’), except as noted, and are prepared under
the historical cost convention, except as disclosed in the accounting policies below. The notes to the
consolidated financial statements also conform with Finnish Accounting legislation. On January 25,
2007, Nokia’s Board of Directors authorized the financial statements for issuance.
Adoption of pronouncements under IFRS
In the current year, the Group has adopted all of the new and revised standards, amendments and
interpretations to existing standards issued by the International Accounting Standards Board (the
IASB) that are relevant to its operations and effective for accounting periods prospectively from
January 1, 2006.
)The Group adopted Amendment to IAS 19, Actuarial Gains and Losses, Group Plans and
Disclosures, which introduced the option of an alternative recognition approach for actuarial
gains and losses. The Group did not adopt this alternative option.
)The Group adopted Amendment to IAS 39, Cash Flow Hedge Accounting of Forecast Intragroup
Transactions, where an entity may designate intragroup transactions as hedged items if
certain criteria are fulfilled.
)The Group adopted Amendment to IAS 39, The Fair Value Option, which restricts use of the
fair value option for financial instruments to certain circumstances.
)The Group adopted Amendments to IAS 39 and IFRS 4, Financial Guarantee Contracts, in which
all financial guarantee contracts are initially recognized at fair value and subsequently
measured at the higher of either the amount determined in accordance with IAS 37 or the
amount initially recognized less any cumulative amortization.
)The Group adopted IFRIC 4, Determining whether an Arrangement contains a Lease, where if
fulfillment of an arrangement is dependent on the use of a specific asset and conveys a right
to use, the arrangement contains a lease.
The adoption of each standard did not have any impact to the Group’s balance sheet, profit and loss
or cash flows.
Change in method of quantifying misstatements
During the year, the Group changed its method of quantifying misstatements. The Group previously
quantified misstatements based on the amount of the error originating in the current year profit
and loss account statement. The Group has now decided to consider the effect of any misstatements
based on both (1) the amount of the misstatement originating in the current year profit and loss
account statement and (2) the effects of correcting the misstatement existing in the balance sheet at
the end of the current year irrespective of the year in which the misstatement originated.
As a result of this change, management has adjusted its financial statements and previously reported
deferred tax assets and retained earnings have been increased by EUR 154 million for each period
presented. Under the previous method of quantifying misstatements these adjustments were
considered to be immaterial. These deferred tax assets relate to certain of the Group’s warranty and
other provisions recorded in periods prior to 2002, for which no corresponding tax amounts were
deferred.
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