Nokia 2010 Annual Report Download - page 202

1. Accounting principles (Continued)
depreciated over the remaining useful life of the related asset. Leasehold improvements are
depreciated over the shorter of the lease term or useful life.
Gains and losses on the disposal of fixed assets are included in operating profit/loss.
Leases
The Group has entered into various operating leases, the payments under which are treated as rentals
and recognized in the income statement on a straightline basis over the lease terms unless another
systematic approach is more representative of the pattern of the user’s benefit.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard
cost, which approximates actual cost on a FIFO (Firstin Firstout) basis. Net realizable value is the
amount that can be realized from the sale of the inventory in the normal course of business after
allowing for the costs of realization.
In addition to the cost of materials and direct labor, an appropriate proportion of production
overhead is included in the inventory values.
An allowance is recorded for excess inventory and obsolescence based on the lower of cost or net
realizable value.
Financial assets
The Group has classified its financial assets as one of the following categories: availableforsale
investments, loans and receivables, financial assets at fair value through profit or loss and bank and
cash.
Availableforsale investments
The Group invests a portion of cash needed to cover projected cash needs of its ongoing operations
in highly liquid, interestbearing investments. The following investments are classified as
availableforsale based on the purpose for acquiring the investments as well as ongoing intentions:
(1) Highly liquid, interestbearing investments that are readily convertible to known amounts of cash
with maturities at acquisition of less than 3 months, which are classified in the balance sheet as
current availableforsale investments, cash equivalents. Due to the high credit quality and shortterm
nature of these investments, there is an insignificant risk of changes in value. (2) Similar types of
investments as in category (1), but with maturities at acquisition of longer than 3 months, classified
in the balance sheet as current availableforsale investments, liquid assets. (3) Investments in
technology related publicly quoted equity shares, or unlisted private equity shares and unlisted funds,
are classified in the balance sheet as noncurrent availableforsale investments.
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
F14
Notes to the Consolidated Financial Statements (Continued)