Nokia 2009 Annual Report Download - page 189

1. Accounting principles (Continued)
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 income statement. 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 income statement 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 income statement.
Investments at fair value through profit and loss, liquid assets
The investments at fair value through profit and loss, liquid assets include highly liquid financial
assets designated at fair value through profit or loss at inception. For investments designated as at
fair value through profit or loss, the following criteria must be met: (1) the designation eliminates or
significantly reduces the inconsistent treatment that would otherwise arise from measuring the
assets or recognizing gains or losses on a different basis; or (2) the assets are part of a group of
financial assets, which are managed and their performance evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy.
These investments are initially recorded at fair value. Subsequent to initial recognition, these
investments are remeasured at fair value. Fair value adjustments and realized gain and loss are
recognized in the income statement.
Loans receivable
Loans receivable include loans to customers and suppliers and are initially measured at fair value and
subsequently at amortized cost using the effective interest method less impairment. Loans are subject
F15
Notes to the Consolidated Financial Statements (Continued)