Nokia 2011 Annual Report Download - page 230

tax liabilities are recognized for temporary differences that arise between the amounts initially
recognized and the tax base of identifiable net assets acquired in business combinations. Deferred tax
assets and deferred tax liabilities are offset for presentation purposes when there is a legally
enforceable right to set off current tax assets against current tax liabilities, and the deferred tax assets
and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities, which intend either to settle current tax liabilities and
assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or
recovered.
The enacted or substantively enacted tax rates as of each balance sheet date that are expected to
apply in the period when the asset is realized or the liability is settled are used in the measurement of
deferred tax assets and liabilities.
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and a
reliable estimate of the amount can be made. When the Group expects a provision to be reimbursed,
the reimbursement is recognized as an asset only when the reimbursement is virtually certain. The
Group assesses the adequacy of its pre-existing provisions and adjusts the amounts as necessary
based on actual experience and changes in future estimates at each balance sheet date.
Warranty provisions
The Group provides for the estimated liability to repair or replace products under warranty at the time
revenue is recognized. The provision is an estimate calculated based on historical experience of the
level of volumes, product mix and repair and replacement cost.
Intellectual property rights (IPR) provisions
The Group provides for the estimated future settlements related to asserted and unasserted past
alleged IPR infringements based on the probable outcome of potential infringement.
Tax provisions
The Group recognizes a provision for tax contingencies based upon the estimated future settlement
amount at each balance sheet date.
Restructuring provisions
The Group provides for the estimated cost to restructure when a detailed formal plan of restructuring
has been completed, the restructuring plan has been announced by the Group and a reliable estimate
of the amount can be made.
Other provisions
The Group recognizes the estimated liability for non-cancellable purchase commitments for inventory
in excess of forecasted requirements at each balance sheet date.
The Group provides for onerous contracts based on the lower of the expected cost of fulfilling the
contract and the expected cost of terminating the contract.
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