Nokia 2012 Annual Report Download - page 217

These investments are initially recognized and subsequently remeasured at fair value. Fair value
adjustments and realized gains and losses are recognized in profit and loss.
Loans receivable
Loans receivable include loans to customers and suppliers. Loans receivable are initially measured at fair
value and subsequently at amortized cost less impairment using the effective interest method. Loans are
subject to regular and thorough review as to their collectability and available collateral. In the event that a
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. Loan interest is recognized in interest income.
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
monthly review of all outstanding amounts where significant doubt about collectability exists. Monthly
review includes an analysis of historical bad debt, customer concentrations, customer creditworthiness,
current economic trends and changes in our customer payment terms. Allowance for doubtful accounts
is included in profit and loss within other operating expenses.
Financial liabilities
Compound financial instruments
Compound financial instruments have both a financial liability and an equity component from the
issuers’ perspective. The components are defined based on the terms of the financial instrument and
presented and measured separately according to their substance. At initial recognition of a compound
financial instrument, the financial liability component is recognized at fair value and residual amount is
allocated to the equity component. This allocation is not revised subsequently. The Group has issued a
convertible bond, which is a compound financial instrument, and its financial liability component is
accounted for as a loan payable.
Loans payable
Loans payable are recognized initially at fair value, net of transaction costs incurred. In subsequent
periods loans payable are measured at amortized cost using the effective interest method. Transaction
costs and loan interest are recognized in interest expenses over the life of the instrument. 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 under and qualify for hedge accounting or not.
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