Nokia 2011 Annual Report Download - page 286

(b) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. Credit risk arises from bank and cash, fixed income and money-market
investments, derivative financial instruments, loans receivable as well as credit exposures to
customers, including outstanding receivables, financial guarantees and committed transactions. Credit
risk is managed separately for business related and financial credit exposures.
Except as detailed in the following table, the maximum exposure to credit risk is limited to the book
value of the financial assets as included in Group’s balance sheet:
2011 2010
EURm EURm
Financial guarantees given on behalf of customers and other third parties ........ ——
Loan commitments given but not used ..................................... 86 85
86 85
Business Related Credit Risk
The Company aims to ensure highest possible quality in accounts receivable and loans due from
customers and other third parties. The Group Credit Policy, approved by the Nokia Leadership Team,
lays out the framework for the management of the business related credit risks in all Nokia group
companies.
Credit exposure is measured as the total of accounts receivable and loans outstanding due from
customers and other third parties, and committed credits.
Group Credit Policy provides that credit decisions are based on credit evaluation including credit rating
for larger exposures. Nokia & Nokia Siemens Networks Rating Policy defines the rating principles.
Ratings are approved by Nokia & Nokia Siemens Networks Rating Committee. Credit risks are
approved and monitored according to the credit policy of each business entity. These policies are
based on the Group Credit Policy. Concentrations of customer or country risks are monitored at the
Nokia Group level. When appropriate, credit risks are mitigated with the use of approved instruments,
such as letters of credit, collateral or insurance and sale of selected receivables.
The accounts receivable do not include any major concentrations of credit risk by customer or by
geography. Top three customers account for approximately 3.2%, 2.3% and 1.9% (2.2%, 2.1% and
2.1% in 2010) of Group accounts receivable and loans due from customers and other third parties as
at December 31, 2011, while the top three credit exposures by country amounted to 10.6%, 7.5% and
4.4% (8.5%, 7.4% and 5.5% in 2010), respectively.
The Group has provided allowances for doubtful accounts as needed on accounts receivable and
loans due from customers and other third parties not past due, based on the analysis of debtors’ credit
quality and credit history. The Group establishes allowances for doubtful accounts that represent an
estimate of incurred losses as of the end of reporting period. All receivables and loans due from
customers and other third parties are considered on an individual basis in establishing the allowances
for doubtful accounts.
As at December 31, 2011, the carrying amount before deducting any allowances for doubtful accounts
as well as amounts expected to be uncollectible for acquired receivables relating to customers for
which an allowance was provided or an uncollectible amount has been identified amounted to
EUR 2 109 million (EUR 2 521 million in 2010). The amount of provision taken against that portion of
these receivables considered to be impaired as well as the amount expected to be uncollectible for
acquired receivables was a total of EUR 395 million (EUR 363 million in 2010) (see also Note 9 and
Note 20).
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