Nokia 2011 Annual Report Download - page 115

principally on existing market conditions. If quoted market prices are not available for 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 of public market comparable companies in similar industry
sectors. Changes in these assumptions may cause the Group to recognize impairments or losses in
the future periods. During 2011 the Group received distributions of EUR 45 million (EUR 69 million in
2010) included in other financial income from a private fund held as non-current available-for-sale. Due
to a reduction in estimated future cash flows the Group also recognized an impairment loss of
EUR 38 million (EUR 94 million in 2010) for the fund included in other financial expenses.
Income Taxes
The Group is subject to income taxes both in Finland and in numerous other jurisdictions. Significant
judgment is required in determining income tax expense, tax provisions, deferred tax assets and
liabilities recognized in the consolidated financial statements. We recognize deferred tax assets to the
extent that it is probable that sufficient taxable income will be available in the future against which the
temporary differences and unused tax losses can be utilized. We have considered future taxable
income and tax planning strategies in making this assessment. Deferred tax assets are assessed for
realizability each reporting period, and when circumstances indicate that it is no longer probable that
deferred tax assets will be utilized, they are adjusted as necessary.
At December 31, 2011, the Group had loss carry forwards, temporary differences and tax credits of
EUR 4 302 million (EUR 3 323 million in 2010) for which no deferred tax assets were recognized in the
consolidated financial statements due to uncertainty of utilization of these items.
We recognize tax provisions based on estimates and assumptions when, despite our belief that tax
return positions are supportable, it is more likely than not that certain positions will be challenged and
may not be fully sustained upon review by tax authorities.
If the final outcome of these matters differs from the amounts initially recorded, differences may
positively or negatively impact the current taxes and deferred taxes in the period in which such
determination is made.
Pensions
The determination of our pension benefit obligation and expense for defined benefit pension plans is
dependent on our selection of certain assumptions used by actuaries in calculating such amounts.
Those assumptions are described in Note 5 to our consolidated financial statements included in
Item 18 of this annual report and include, among others, the discount rate, expected long-term rate of
return on plan assets and annual rate of increase in future compensation levels. A portion of our plan
assets is invested in equity securities. The equity markets have experienced volatility, which has
affected the value of our pension plan assets. This volatility may make it difficult to estimate the long-
term rate of return on plan assets. Actual results that differ from our assumptions are accumulated and
amortized over future periods and therefore generally affect our recognized expense and recorded
obligation in such future periods. Our assumptions are based on actual historical experience and
external data regarding compensation and discount rate trends. While we believe that our assumptions
are appropriate, significant differences in our actual experience or significant changes in our
assumptions may materially affect our pension obligation and our future expense. The financial impact
of the pension assumptions affects mainly the Devices & Services and Nokia Siemens Networks
businesses.
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