Nokia 2008 Annual Report Download - page 158

1. Accounting principles (Continued)
Financial assets
The Group has classified its financial assets as one of the following categories: availableforsale
investments, loans and receivables, bank and cash and financial assets at fair value through profit or
loss.
Availableforsale investments
The Group classifies the following investments as available for sale based on the purpose for
acquiring the investments as well as ongoing intentions: (1) highly liquid, interestbearing
investments with maturities at acquisition of less than 3 months, which are classified in the balance
sheet as current availableforsale investments, cash equivalents, (2) similar types of investments as
in category (1), but with maturities at acquisition of longer than 3 months, classified in the balance
sheet as current availableforsale investments, liquid assets, (3) investments in technology related
publicly quoted equity shares, or unlisted private equity shares and unlisted funds, classified in the
balance sheet as noncurrent availableforsale investments.
Current fixed income and moneymarket investments are fair valued by using quoted market rates,
discounted cash flow analyses and other appropriate valuation models at the balance sheet date.
Investments in publicly quoted equity shares are measured at fair value using exchange quoted bid
prices. Other available for sale investments carried at fair value include holdings in unlisted shares.
Fair value is estimated by using various factors, including, but not limited to: (1) the current market
value of similar instruments, (2) prices established from a recent arm’s length financing transaction of
the target companies, (3) analysis of market prospects and operating performance of the target
companies taking into consideration the public market of comparable companies in similar industry
sectors. The remaining available for sale investments are carried at cost less impairment, which are
technology related investments in private equity shares and unlisted funds for which the fair value
cannot be measured reliably due to nonexistence of public markets or reliable valuation methods
against which to value these assets. The investment and disposal decisions on these investments are
business driven.
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 fair value and other
reserves as part of shareholders’ equity, with the exception of interest calculated using effective
interest method and foreign exchange gains and losses on monetary assets, which are recognized
directly in profit and loss. Dividends on available for sale equity instruments are recognized in profit
and loss when the Group’s right to receive payment is established. When the investment is disposed
of, the related accumulated fair value changes are released from shareholders’ equity and recognized
in the profit and loss account. The weighted average method is used when determining the costbasis
of publicly listed equities being disposed of. FIFO (Firstin Firstout) 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 including but not limited to counterparty default and
other factors causing a reduction in value that can be considered permanent. 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 in a nonequity instrument
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 included in the profit and loss
account.
F14
Notes to the Consolidated Financial Statements (Continued)