Nokia 2011 Annual Report Download - page 226

These investments are initially recorded at fair value. Subsequent to initial recognition, these
investments are remeasured at fair value. Fair value adjustments and realized gain and loss are
recognized in the income statement.
Loans receivable
Loans receivable include loans to customers and suppliers and are initially measured at fair value and
subsequently at amortized cost using the effective interest method less impairment. Loans are subject
to regular and thorough review as to their collectability and as to available collateral; in the event that
any loan is deemed not fully recoverable, a provision is made to reflect the shortfall between the
carrying amount and the present value of the expected cash flows. Interest income on loans receivable
is recognized by applying the effective interest rate. The long-term portion of loans receivable is
included on the statement of financial position under long-term loans receivable and the current portion
under current portion of long-term loans receivable.
Bank and cash
Bank and cash consist of cash at bank and in hand.
Accounts receivable
Accounts receivable are carried at the original amount due from customers, which is considered to be
fair value, less allowances for doubtful accounts. Allowance for doubtful accounts is based on a
periodic review of all outstanding amounts, where significant doubt about collectability exists, including
an analysis of historical bad debt, customer concentrations, customer creditworthiness, current
economic trends and changes in our customer payment terms. Bad debts are written off when
identified as uncollectible, and are included within other operating expenses.
Financial liabilities
Loans payable
Loans payable are recognized initially at fair value, net of transaction costs incurred. Any difference
between the fair value and the proceeds received is recognized in profit and loss at initial recognition.
In subsequent periods, they are stated at amortized cost using the effective interest method. The
long-term portion of loans payable is included on the statement of financial position under long-term
interest-bearing liabilities and the current portion under current portion of long-term loans.
Accounts payable
Accounts payable are carried at the original invoiced amount, which is considered to be fair value due
to the short-term nature of the Group’s accounts payable.
Derivative financial instruments
All derivatives are initially recognized at fair value on the date a derivative contract is entered into and
are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss
varies according to whether the derivatives are designated and qualify under hedge accounting or not.
Generally, the cash flows of a hedge are classified as cash flows from operating activities in the
consolidated statement of cash flows as the underlying hedged items relate to the company’s operating
activities. When a derivative contract is accounted for as a hedge of an identifiable position relating to
financing or investing activities, the cash flows of the contract are classified in the same manner as the
cash flows of the position being hedged.
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