Nokia 2006 Annual Report Download - page 147

Notes to the Consolidated Financial Statements (Continued)
1. Accounting principles (Continued)
Transactions in foreign currencies
Transactions in foreign currencies are recorded at the rates of exchange prevailing at the dates of
the individual transactions. For practical reasons, a rate that approximates the actual rate at the date
of the transaction is often used. At the end of the accounting period, the unsettled balances on
foreign currency receivables and liabilities are valued at the rates of exchange prevailing at the year
end. Foreign exchange gains and losses arising from balance sheet items, as well as fair value
changes in the related hedging instruments, are reported in Financial Income and Expenses.
Foreign Group companies
In the consolidated accounts all income and expenses of foreign subsidiaries are translated into euro
at the average foreign exchange rates for the accounting period. All assets and liabilities of foreign
Group companies are translated into euro at the yearend foreign exchange rates with the exception
of goodwill arising on the acquisition of foreign companies prior to the adoption of IAS 21 (revised
2004) on January 1, 2005, which is translated to euro at historical rates. Differences resulting from
the translation of income and expenses at the average rate and assets and liabilities at the closing
rate are treated as an adjustment affecting consolidated shareholders’ equity. On the disposal of all
or part of a foreign Group company by sale, liquidation, repayment of share capital or abandonment,
the cumulative amount or proportionate share of the translation difference is recognized as income
or as expense in the same period in which the gain or loss on disposal is recognized.
Fair valuing principles
Financial assets and liabilities
Under IAS 39(R), Financial Instruments: Recognition and Measurement, the Group classifies its
investments in marketable debt and equity securities and investments in unlisted equity securities
into the following categories: heldtomaturity, held for trading, or availableforsale depending on
the purpose for acquiring the investments as well as ongoing intentions. All investments of the
Group are currently classified as availableforsale. Availableforsale investments are fair valued by
using quoted market rates, discounted cash flow analyses or other appropriate valuation models at
each balance sheet date. Certain unlisted equities for which fair values cannot be measured reliably
are reported at cost less impairment. All purchases and sales of investments are recorded on the
trade date, which is the date that the Group commits to purchase or sell the asset.
The fair value changes of availableforsale investments are recognized in shareholders’ equity. When
the investment is disposed of, the related accumulated fair value changes are released from
shareholders’ equity and recognized in profit or loss. The weighted average method is used when
determining the costbasis of publicly listed equities being disposed of. The Firstin Firstout (FIFO)
method is used to determine the cost basis of fixed income securities being disposed of. An
impairment is recorded when the carrying amount of an availableforsale investment is greater than
the estimated fair value and there is objective evidence that the asset is impaired. The cumulative
net loss relating to that investment is removed from equity and recognized in the profit and loss
account for the period. If, in a subsequent period, the fair value of the investment increases and the
increase can be objectively related to an event occurring after the loss was recognized, the loss is
reversed, with the amount of the reversal recognized in the profit and loss account.
The fair values of other financial assets and financial liabilities are assumed to approximate their
carrying values, due either to their short maturities or that their fair values cannot be measured
reliably.
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