Nokia 2012 Annual Report Download - page 220

change in fair value that reflects the change in forward exchange rates less the change in spot
exchange rates is recognized in profit and loss in financial income and expenses. For qualifying foreign
exchange options, the change in intrinsic value is deferred in translation differences within consolidated
shareholder’s equity. Changes in the time value are at all times recognized directly in profit and loss as
financial income and expenses. If a foreign currency denominated loan is used as a hedge, all foreign
exchange gains and losses arising from the transaction are recognized in translation differences within
consolidated shareholder’s equity. In all cases, the ineffective portion is recognized immediately in
profit and loss as financial income and expenses.
Accumulated changes in fair value from qualifying hedges are released from translation differences on
the disposal of all or part of a foreign Group company by sale, liquidation, repayment of share capital or
abandonment. The cumulative amount or proportionate share of the changes in the fair value from
qualifying hedges deferred in translation differences is recognized as income or as expense when the
gain or loss on disposal is recognized.
Income taxes
The tax expense comprises current tax and deferred tax. Current taxes are based on the results of the
Group companies and are calculated according to local tax rules. Taxes are recognized in the income
statement, except to the extent that it relates to items recognized in the other comprehensive income
or directly in equity, in which case, the tax is recognized in other comprehensive income or equity,
respectively.
Deferred tax assets and liabilities are determined, for all temporary differences arising between tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements using
liability method. Deferred tax assets are recognized to the extent that it is probable that future taxable
profit will be available against which the tax losses, unused tax credits or deductible temporary
differences can be utilized. Each reporting period they are assessed for realizability and when
circumstances indicate it is no longer probable that deferred tax assets will be utilized, they are
adjusted as necessary. Deferred 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 liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when the deferred tax assets and
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the balances on a net basis.
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.
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