Nokia 2012 Annual Report Download - page 105

Group and estimated average revenue per user with regard to mobile media advertising. The average
revenue per user was estimated based on peer market data for mobile advertising revenue. Projected
device sales volumes impacted the overall forecasted intercompany and advertising revenues. This
took into consideration the market dynamics in digital map data and related location-based content
markets, including the Group’s long-term view at the time of the 2011 annual impairment testing, that
the market will move from fee-based models towards advertising-based models especially in some
more mature markets. It also reflected recently announced results and related competitive factors in
local search and advertising market resulting in lower estimated growth prospects from location-based
assets integrated with different advertising platforms. After consideration of all relevant factors, the
Group reduced the net sales projections for the Location & Commerce CGU which, in turn, reduced
projected profitability and cash flows.
The Group’s goodwill impairment testing did not result in impairment charges for the years ended
December 31, 2012 or 2010. An impairment loss was recorded with respect to the Group’s Location &
Commerce CGU in 2011, as discussed above. No further impairment charges were recorded with
respect to the other CGUs in 2011.
See Note 8 to our consolidated financial statements included in Item 18 of this annual report for further
information regarding “Valuation of long-lived and intangible assets and goodwill.”
Fair Value of Derivatives and Other Financial Instruments
The fair value of financial instruments that are not traded in an active market, for example unlisted
equities, are determined using valuation techniques. We use judgment to select an appropriate
valuation methodology and underlying assumptions based principally on existing market conditions. If
quoted market prices are not available for unlisted shares, fair value is estimated by using various
factors, including, but not limited to: (1) the current market value of similar instruments, (2) prices
established from a recent arm’s length financing transaction of the target companies, (3) analysis of
market prospects and operating performance of the target companies taking into consideration of
public market comparable companies in similar industry sectors. Changes in these assumptions may
cause the Group to recognize impairments or losses in the future periods. During 2012 the Group
received distributions of EUR 49 million (EUR 45 million in 2011) included in other financial income
from a private fund held as non-current available-for-sale. Due to a reduction in estimated future cash
flows the Group also recognized an impairment loss of EUR 7 million (EUR 38 million in 2011) for the
fund included in other financial expenses.
Income Taxes
The Group is subject to income taxes both in Finland and in numerous other jurisdictions. Significant
judgment is required in determining income tax expense, tax provisions, deferred tax assets and
liabilities recognized in the consolidated financial statements. We recognize deferred tax assets to the
extent that it is probable that sufficient taxable income will be available in the future against which the
temporary differences, tax losses and unused tax credits can be utilized. We have considered future
taxable income and tax planning strategies in making this assessment. Deferred tax assets are
assessed for realizability each reporting period, and when circumstances indicate that it is no longer
probable that deferred tax assets will be utilized, they are adjusted as necessary. In 2012 Nokia taxes
continued to be unfavorably affected by Nokia Siemens Networks taxes as no tax benefits are
recognized for certain Nokia Siemens Networks deferred tax items. Additionally Nokia taxes were
adversely affected by allowances related to Devices & Services’ Finnish deferred tax assets and
discontinuation of recognizing tax benefits for Devices & Services’ Finnish deferred tax items due to
uncertainty of utilization of these items.
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