Nokia 2009 Annual Report Download - page 89

and accordingly the current year goodwill assessment is based on a discounted cash flow calculation
to estimate the fair value less costs to sell. The cash flow projections employed in the discounted
cash flow calculation have been determined by management based on the best information available
to reflect the amount that an entity could obtain from the disposal of the Nokia Siemens Networks
CGU in an arm’s length transaction between knowledgeable, willing parties, after deducting the
estimated costs of disposal.
The discount rates applied in the value in use calculation for each CGU have been determined
independently of capital structure reflecting current assessments of the time value of money and
relevant market risk premiums. Risk premiums included in the determination of the discount rate
reflect risks and uncertainties for which the future cash flow estimates have not been adjusted.
Overall, the discount rates applied in the 2009 impairment testing have decreased in line with
declining interest rates and narrowing credit spreads.
In case there are reasonably possible changes in estimates or underlying assumptions applied in our
goodwill impairment testing, such as growth rates and discount rates, which could have a material
impact on the carrying amount of the goodwill or result in an impairment loss, those are disclosed
below in connection with the relevant CGU.
The Group recorded an impairment loss of EUR 908 million in the third quarter of 2009 to reduce the
carrying amount of the Nokia Siemens Networks CGU to its recoverable amount. The impairment loss
was allocated in its entirety to the carrying amount of goodwill arising from the formation of Nokia
Siemens Networks and from subsequent acquisitions completed by Nokia Siemens Networks. The
impairment loss is presented as impairment of goodwill in the consolidated income statement. As a
result of the impairment loss, the amount of goodwill allocated to the Nokia Siemens Networks CGU
has been reduced to zero.
The recoverability of the Nokia Siemens Networks CGU has declined as a result of a decline in
forecasted profits and cash flows. The Group evaluated the historical and projected financial
performance of the Nokia Siemens Networks CGU taking into consideration the challenging
competitive factors and market conditions in the infrastructure and related service business. As a
result of this evaluation, the Group lowered its net sales and gross margin projections for the Nokia
Siemens Networks CGU. The reduction in the projected scale of the business had a negative impact on
the projected profits and cash flows of the Nokia Siemens Networks CGU.
We have performed our annual goodwill impairment testing during the fourth quarter of 2009 on the
opening fourth quarter balances. During 2009, the conditions in the world economy have shown signs
of improvement as countries have begun to emerge from the global economic downturn. However,
significant uncertainty exists regarding the speed, timing and resiliency of the global economic
recovery and this uncertainty is reflected in the impairment testing for each of the Group’s CGUs.
Goodwill amounting to EUR 1 227 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 stable market share and normalized profit margins in the medium to longterm. The
goodwill impairment testing conducted for the Devices & Services CGU for the year ended
December 31, 2009 did not result in any impairment charges.
Goodwill amounting to EUR 3 944 million has been allocated to the NAVTEQ CGU. The impairment
testing has been carried out based on management’s expectations and assessment of the financial
performance and future strategies of the NAVTEQ CGU in light of current and expected market and
economic conditions. The goodwill impairment testing conducted for the NAVTEQ CGU for the year
ended December 31, 2009 did not result in any impairment charges. The recoverable amount of the
NAVTEQ CGU is between 5 to 10% higher than its carrying amount. The Group expects that a
reasonably possible change of 1% in the valuation assumptions for longterm growth rate or discount
rate would give rise to an impairment loss.
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