Nokia 2008 Annual Report Download - page 176

7. Impairment (Continued)
determined that recognition of an impairment loss of EUR 8 million in 2008 (EUR 7 million in
2007) was necessary to adjust the Group’s net investment in the associate to its recoverable amount.
Capitalized development costs
During 2007, Nokia Siemens Networks recorded an impairment charge on capitalized development
costs of EUR 27 million. The impairment loss was determined as the full carrying amount of the
capitalized development programs costs related to products that will not be included in future
product portfolios. This impairment amount is included within research and development expenses in
the consolidated profit and loss statement.
Other intangible assets
In connection with the restructuring of its CDMA business, the Group recorded an impairment charge
of EUR 33 million during 2006 related to an acquired CDMA license. The impaired CDMA license was
included in Devices & Services segment.
Goodwill
Goodwill is allocated to the Group’s cashgenerating units (CGU) for the purpose of impairment
testing. The allocation is made to those cashgenerating units that are expected to benefit from the
synergies of the business combination from which the goodwill arose.
The recoverable amounts of each CGU are determined based on a value in use calculation. The pretax
cash flow projections employed in the value in use calculation are based on financial plans approved
by management. These projections are consistent with external sources of information, wherever
available. Cash flows beyond the explicit forecast period are extrapolated using an estimated terminal
growth rate that does not exceed the longterm average growth rates for the industry and economies
in which the CGU operates.
Rapid deterioration in the macroeconomic environment during 2008 has negatively affected cash flow
expectations for all of the Group’s CGUs. The global slowdown in consumer spending, unprecedented
currency volatility and reductions in the availability of credit have dampened growth and profitability
expectations during the short to medium term.
Goodwill of EUR 1 106 million has been allocated to the Devices & Services CGU for the purpose of
impairment testing. The impairment testing has been carried out based on Management’s
expectation of moderate market share growth and stable profit margins in the medium to long term.
Goodwill amounting to EUR 905 million has been allocated to the NSN CGU. The impairment testing
has been carried out based on Management’s expectation of a constant market share, and a declining
total market value in the shorter term, stabilizing on the longer term. Tight focus on profitability and
cash collection is expected to improve operating cash flow.
Goodwill amounting to EUR 4 119 million has been allocated to the NAVTEQ CGU. The impairment
testing has been carried out based on Management’s expectation of longer term strong growth in
mobile device navigation services with increased volumes driving profitability. The recoverable
amount of the NAVTEQ CGU is less than 1% higher than its carrying amount. A reasonably possible
change of 1% in the valuation assumptions for longterm growth rate and pretax discount rate
would give rise to an impairment loss.
The aggregate carrying amount of goodwill allocated across multiple CGUs amounts to
EUR 127 million and the amount allocated to each individual CGU is not individually significant.
F32
Notes to the Consolidated Financial Statements (Continued)