Nokia 2008 Annual Report Download - page 72

Sharebased Compensation
We have various types of equity settled sharebased compensation schemes for employees. Employee
services received, and the corresponding increase in equity, are measured by reference to the fair
value of the equity instruments as at the date of grant, excluding the impact of any nonmarket
vesting conditions. Fair value of stock options is estimated by using the Black Scholes model on the
date of grant based on certain assumptions. Those assumptions are described in Note 22 to our
consolidated financial statements included in Item 18 of this annual report and include, among
others, the dividend yield, expected volatility and expected life of stock options. The expected life of
stock options is estimated by observing general option holder behavior and actual historical terms of
Nokia stock option programs, whereas the assumption of the expected volatility has been set by
reference to the implied volatility of stock options available on Nokia shares in the open market and
in light of historical patterns of volatility. These variables make estimation of fair value of stock
options difficult.
Nonmarket vesting conditions attached to the performance shares are included in assumptions about
the number of shares that the employee will ultimately receive relating to projections of sales and
earnings per share. On a regular basis, we review the assumptions made and revise the estimates of
the number of performance shares that are expected to be settled, where necessary. At the date of
grant, the number of performance shares granted that are expected to be settled is assumed to be
two times the amount at threshold. Any subsequent revisions to the estimates of the number of
performance shares expected to be settled may increase or decrease total compensation expense.
Such increase or decrease adjusts the prior period compensation expense in the period of the review
on a cumulative basis for unvested performance shares for which compensation expense has already
been recognized in the profit and loss account, and in subsequent periods for unvested performance
shares for which the expense has not yet been recognized in the profit and loss account. Significant
differences in employee option activity, equity market performance, and our projected and actual net
sales and earnings per share performance may materially affect future expense. In addition, the value,
if any, an employee ultimately receives from sharebased payment awards may not correspond to the
expense amounts recorded by the Group.
Results of Operations
2008 compared with 2007
As of January 1, 2008, our three mobile device business groups, Mobile Phones, Multimedia and
Enterprise Solutions, and the supporting horizontal groups were replaced by an integrated business
segment, Devices & Services. Results for Nokia and its reportable segments for the year ended
December 31, 2007 have been regrouped for comparability purposes according to the new reportable
segments.
On July 10, 2008, Nokia completed the acquisition of NAVTEQ Corporation. NAVTEQ is a separate
reportable segment of Nokia starting from the third quarter 2008. Accordingly, the results of NAVTEQ
are available only for the period from July 10, 2008 to December 31, 2008.
As of April 1, 2007, Nokia results include those of Nokia Siemens Networks on a fully consolidated
basis. Nokia Siemens Networks, a company jointly owned by Nokia and Siemens, is comprised of the
former Nokia Networks and Siemens’ carrierrelated operations for fixed and mobile networks.
Accordingly, the results of Nokia Group and Nokia Siemens Networks for the full year 2008 are not
directly comparable to the results for the year ended December 31, 2007. The results from January 1,
2007 to March 31, 2007 included our former Networks business group only.
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