Nokia 2006 Annual Report Download - page 174
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Notes to the Consolidated Financial Statements (Continued)
(2) In 2005, reported deductions inadvertently excluded certain items. The previously reported 2005
deductions of EUR 249 million were adjusted to the current amount of EUR 372 million and the
reported ending balance was similarly adjusted. This matter affected the disclosure only and had
no impact on the balance sheet, profit and loss or cash flow.
21. Fair value and other reserves
Hedging Availableforsale
reserve investments Total
Gross Tax Net Gross Tax Net Gross Tax Net
Balance at December 31, 2003 ********** 14 (2) 12 83 (14) 69 97 (16) 80
Cash flow hedges:
Fair value losses in period************** — (1) (1) — — — — (1) (1)
Availableforsale investments:
Net fair value gains/(losses) ************ — — — 18 (1) 17 18 (1) 17
Transfer to profit and loss account on
impairment************************* — — — 11 — 11 11 — 11
Transfer of fair value gains to profit and
loss account on disposal ************* — — — (105) 10 (95) (105) 10 (95)
Transfer of fair value losses to profit and
loss account on disposal ************* —— — ——— —— —
Balance at December 31, 2004 ********** 14 (3) 11 7 (5) 2 21 (8) 13
Cash flow hedges:
Fair value gains/(losses) in period ******* (177) 45 (132) — — — (177) 45 (132)
Availableforsale investments:
Net fair value gains/(losses) ************ — — — (69) 6 (63) (69) 6 (63)
Transfer to profit and loss account on
impairment************************* —— — 9— 9 9— 9
Transfer of fair value gains to profit and
loss account on disposal ************* — — — (5) — (5) (5) — (5)
Transfer of fair value losses to profit and
loss account on disposal ************* —— — 2— 2 2— 2
Balance at December 31, 2005 ********** (163) 42 (121) (56) 1 (55) (219) 43 (176)
Cash flow hedges:
Fair value gains/(losses) in period ******* 232 (61) 171 — — — 232 (61) 171
Availableforsale investments:
Net fair value gains/(losses) ************ — — — (42) 1 (41) (42) 1 (41)
Transfer to profit and loss account on
impairment************************* — — — 18 — 18 18 — 18
Transfer of fair value losses to profit and
loss account on disposal ************* — — — 14 — 14 14 — 14
Balance at December 31, 2006 ********** 69 (19) 50 (66) 2 (64) 3 (17) (14)
In order to ensure that amounts deferred in the cash flow hedging reserve represent only the
effective portion of gains and losses on properly designated hedges of future transactions that
remain highly probable at the balance sheet date, Nokia has adopted a process under which all
derivative gains and losses are initially recognized in the profit and loss account. The appropriate
reserve balance is calculated at the end of each period and posted to the Hedging reserve.
The Group continuously reviews the underlying cash flows and the hedges allocated thereto, to
ensure that the amounts transferred to the Hedging reserve do not include gains/losses on forward
exchange contracts that have been designated to hedge forecasted sales or purchases that are no
longer expected to occur. Because of the number of transactions undertaken during each period and
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