Nokia 2006 Annual Report Download - page 201

Notes to the Consolidated Financial Statements (Continued)
38. Differences between International Financial Reporting Standards and US Generally
Accepted Accounting Principles (Continued)
Change in method of quantifying misstatements
As discussed in Note 1, the Group changed its method of quantifying misstatements. As a result of
this change management has adjusted its financial statements. Previously reported deferred tax
assets have been increased by EUR 154 million, previously reported goodwill has been decreased by
EUR 90 million and previously reported retained earnings have been increased by EUR 64 million for
each period presented. Under the previous method of quantifying misstatements these adjustments
were considered to be immaterial. The deferred tax asset adjustment relates to certain of the
Group’s warranty and other provisions recorded in periods prior to 2002, for which no corresponding
tax amounts were deferred. The goodwill adjustment relates to an item that was not separately
recognized by the Group from the date of acquisition.
Pensions
Under IFRS, pension assets, defined benefit pension liabilities and pension expense are actuarially
determined in a similar manner to US GAAP. To the extent that the benefits related to transition
adjustments and plan amendments are already vested immediately following the introduction of, or
changes to, a defined benefit plan, the Group recognizes past service cost immediately under IFRS. If
the benefits have not vested, the related past service cost is recognized as expense over the average
period until the benefits become vested. Under US GAAP, transition adjustments and prior service
cost related to plan amendments are generally recognized over the remaining service period of
active employees.
In addition, prior to December 31, 2006, US GAAP required recognition of an additional minimum
pension liability when the accumulated benefit obligation (ABO) exceeded the fair value of the plan
assets and this amount was not covered by the liability recognized in the balance sheet. An
intangible asset was recognized to the extent of unrecognized prior service cost with the excess of
the additional minimum liability over unrecognized prior service cost recognized in other
comprehensive income. The calculation of the ABO is based on approach two as described in EITF 88
1, Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan, under which the
actuarial present value is based on the date of separation from service.
At December 31, 2006, in accordance with the transition provisions of FAS 158, Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, the Group made an
adjustment net of tax to accumulated other comprehensive income to record unrecognized actuarial
losses, unrecognized prior service costs and unamortized transition assets and to eliminate the
additional minimum liability. The following table presents the impact of the adoption of FAS 158 on
total shareholders’ equity under US GAAP at December 31, 2006:
2006
EURm
Total shareholders’ equity under US GAAP before adoption of FAS 158 ******************** 12 274
Adoption of FAS 158 **************************************************************** (222)
Deferred tax *********************************************************************** 60
Total shareholders’ equity under US GAAP after adoption of FAS 158 ********************** 12 112
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