Nokia 2009 Annual Report Download - page 190

1. Accounting principles (Continued)
to regular and thorough review as to their collectability and as to available collateral; in the event
that any loan is deemed not fully recoverable, a provision is made to reflect the shortfall between the
carrying amount and the present value of the expected cash flows. Interest income on loans
receivable is recognized by applying the effective interest rate. The long term portion of loans
receivable is included on the statement of financial position under longterm loans receivable and the
current portion under current portion of longterm loans receivable.
Bank and cash
Bank and cash consist of cash at bank and in hand.
Accounts receivable
Accounts receivable are carried at the original amount due from customers, which is considered to be
fair value, less allowances for doubtful accounts based on a periodic review of all outstanding
amounts including an analysis of historical bad debt, customer concentrations, customer
creditworthiness, current economic trends and changes in our customer payment terms. Bad debts
are written off when identified as uncollectible, and are included within other operating expenses.
Financial liabilities
Loans payable
Loans payable are recognized initially at fair value, net of transaction costs incurred. Any difference
between the fair value and the proceeds received is recognized in profit and loss at initial
recognition. In the subsequent periods, they are stated at amortized cost using the effective interest
method. The long term portion of loans payable is included on the statement of financial position
under longterm interestbearing liabilities and the current portion under current portion of longterm
loans.
Accounts payable
Accounts payable are carried at the original invoiced amount, which is considered to be fair value due
to the shortterm nature.
Derivative financial instruments
All derivatives are initially recognized at fair value on the date a derivative contract is entered into
and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or
loss varies according to whether the derivatives are designated and qualify under hedge accounting
or not. Generally the cash flows of a hedge are classified as cash flows from operating activities in the
consolidated statement of cash flows as the underlying hedged items relate to company’s operating
activities. When a derivative contract is accounted for as a hedge of an identifiable position relating
to financing or investing activities, the cash flows of the contract are classified in the same manner as
the cash flows of the position being hedged.
Derivatives not designated in hedge accounting relationships carried at fair value through profit and
loss
Fair values of forward rate agreements, interest rate options, futures contracts and exchange traded
options are calculated based on quoted market rates at each balance sheet date. Discounted cash
flow analyses are used to value interest rate and currency swaps. Changes in the fair value of these
contracts are recognized in the income statement.
F16
Notes to the Consolidated Financial Statements (Continued)