Nokia 2011 Annual Report Download - page 224

Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is
recorded on a straight-line basis over the expected useful lives of the assets as follows:
Buildings and constructions .................. 20–33years
Production machinery, measuring and test
equipment .............................. 1 – 5 years
Other machinery and equipment .............. 3–10years
Land and water areas are not depreciated.
Maintenance, repairs and renewals are generally charged to expense during the financial period in
which they are incurred. However, major renovations are capitalized and included in the carrying
amount of the asset when it is probable that future economic benefits in excess of the originally
assessed standard of performance of the existing asset will flow to the Group. Major renovations are
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 lease contracts. The related payments 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 and certain equity instruments. 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
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