Nokia 2011 Annual Report Download - page 220

Principles of consolidation
The consolidated financial statements include the accounts of Nokia’s parent company (“Parent
Company”), and each of those companies over which the Group exercises control. Control over an
entity is presumed to exist when the Group owns, directly or indirectly through subsidiaries, over 50%
of the voting rights of the entity, the Group has the power to govern the operating and financial policies
of the entity through agreement or the Group has the power to appoint or remove the majority of the
members of the board of the entity.
The Group’s share of profits and losses of associates is included in the consolidated income statement
in accordance with the equity method of accounting. An associate is an entity over which the Group
exercises significant influence. Significant influence is generally presumed to exist when the Group
owns, directly or indirectly through subsidiaries, over 20% of the voting rights of the company.
All inter-company transactions are eliminated as part of the consolidation process. Profit or loss and
each component of other comprehensive income are attributed to the owners of the parent and to the
non-controlling interests. In the consolidated statement of financial position, non-controlling interests
are presented within equity, separately from the equity of the owners of the parent.
The entities or businesses acquired during the financial periods presented have been consolidated
from the date on which control of the net assets and operations was transferred to the Group. Similarly,
the result of a Group entity or business divested during an accounting period is included in the Group
accounts only to the date of disposal.
Business Combinations
The acquisition method of accounting is used to account for acquisitions of separate entities or
businesses by the Group. The consideration transferred in a business combination is measured as the
aggregate of the fair values of the assets transferred, liabilities incurred towards the former owners of
the acquired business and equity instruments issued. Acquisition-related costs are recognized as
expense in profit and loss in the periods when the costs are incurred and the related services are
received. Identifiable assets acquired and liabilities assumed by the Group are measured separately at
their fair value as of the acquisition date. Non-controlling interests in the acquired business are
measured separately based on their proportionate share of the identifiable net assets of the acquired
business. The excess of the cost of the acquisition over the interest in the fair value of the identifiable
net assets acquired and attributable to the owners of the parent, is recorded as goodwill.
Assessment of the recoverability of long-lived assets, intangible assets and goodwill
For the purposes of impairment testing, goodwill is allocated to cash-generating units that are expected
to benefit from the synergies of the acquisition in which the goodwill arose.
The Group assesses the carrying amount of goodwill annually or more frequently if events or changes
in circumstances indicate that such carrying amount may not be recoverable. The Group assesses the
carrying amount of identifiable intangible assets and long-lived assets if events or changes in
circumstances indicate that such carrying amount may not be recoverable. Factors that could trigger
an impairment review include significant underperformance relative to historical or projected future
results, significant changes in the manner of the use of the acquired assets or the strategy for the
overall business and significant negative industry or economic trends.
The Group conducts its impairment testing by determining the recoverable amount for the asset or
cash-generating unit. The recoverable amount of an asset or a cash-generating unit is the higher of its
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