Nokia 2014 Annual Report Download - page 172

170 NOKIA IN 2014
Notes to consolidated nancial statements continued
28. Provisions
EURm Restructuring
Divestment
related Warranty
Project
losses
Litigation
and IPR
infringements(1)
Material
liability Other Total
Continuing operations
At January 1, 2013 747 –407 149 421 242 326 2 292
Transfer to liabilities of disposal groups held forsale(2) (165) –(333) –(371) (207) (214) (1 290)
Translation dierences (2) –(2) –(4) –(6) (14)
Reclassication(3) 25 – – – – – – 25
Additional provisions 283 –65 170 28 679 631
Changes in estimates (63) –(12) (57) (1) (6) (13) (152)
Charged to income statement 220 –53 113 27 –66 479
Utilized during year (382) –(31) (110) (3) (16) (28) (570)
At December 31, 2013 443 –94 152 70 19 144 922
Translation dierences 2 – 3 – (1) – 3 7
Reclassication(4) 794 –17 (7) –(17) 94
Additional provisions 116 72 70 64 15 28 87 452
Changes in estimates (56) (5) (10) (30) (6) (9) (15) (131)
Charged to income statement 60 67 60 34 919 72 321
Utilized during year (265) (24) (40) (96) (3) (14) (29) (471)
At December 31, 2014 247 137 117 107 68 24 173 873
(1) Litigation provisions have been reclassied from other to litigation and IPR infringements provisions in 2014 and reclassied in 2013 for comparability purposes.
(2) Provision balances before movements during the year.
(3) Consists of a reclassication from accrued expenses for the settlement of remaining claims with Adtran Inc. related to assets and liabilities transferred in connection with the sale of the xed line
broadband access business.
(4) The reclassication from other provisions consists of EUR 17 million to project losses relating to a settlement agreement with a customer. The reclassication from litigation and IPR infringements
consists of EUR 7 million to restructuring. The reclassication of EUR 94 million is from accrued expenses to divestment-related provisions.
The restructuring provision includes EUR 247 million (EUR 437 million in 2013) relating to restructuring activities in Nokia Networks including
personnel and other restructuring-related costs, such as real estate exit costs. The majority of restructuring-related outows is expected to
occur over the next two years. Restructuring and other associated expenses incurred by Nokia Networks totaled EUR 57 million (EUR 570 million
in 2013) including mainly personnel-related expenses and expenses arising from country and contract exits based on Nokia Networks’ strategy
that focuses on key markets and product segments and costs incurred in connection with the divestments of businesses.
Divestment-related provisions relate to the Sale of the D&S Business and include certain liabilities for which the Group is required to indemnify
Microsoft. Outows related to the indemnications are inherently uncertain.
The warranty provisions relate to products sold. Outows of warranty provisions are generally expected to occur within the next 18 months.
Provisions for project losses relate to Nokia Networks’ onerous contracts. Utilization of provisions for project losses is generally expected to
occur over the next 12 months.
The litigation and IPR infringements provisions include estimated potential future settlements for litigation and asserted past IPR infringements.
Outows related to the litigation and IPR infringements provisions are inherently uncertain and generally occur over several periods.
The material liability provision relates to non-cancellable purchase commitments with suppliers. Outows are expected to occur over the next
12 months.
Other provisions include provisions for various contractual obligations and other obligations. Outows related to other provisions are generally
expected to occur over the next two years.
Legal matters
A number of Group companies are and will likely continue to be subject to various legal proceedings and investigations that arise from time to
time, including proceedings regarding intellectual property, product liability, sales and marketing practices, commercial disputes, employment,
and wrongful discharge, antitrust, securities, health and safety, environmental, tax, international trade and privacy matters. As a result, the
Group may incur substantial costs that may not be covered by insurance and could aect business and reputation. While management does not
expect any of these legal proceedings to have a material adverse eect on the Group’s nancial position, litigation is inherently unpredictable
and the Group may in the future incur judgments or enter into settlements that could have a material adverse eect on its results of operations
and cash ows.
Litigation and proceedings
Beijing Capital
In 2010, Beijing Capital Co., Ltd. (“Beijing Capital”), a former shareholder in a Chinese joint venture, Nokia Capital Telecommunications Ltd.,
initiated an arbitration against Nokia China Investment Co., Ltd. (“Nokia China”) in respect of dividends it claims are owed. The Group disputes
that dividends are owed to Beijing Capital or otherwise payable by Nokia China. A hearing on the case was held in June 2014 and a judgment is
expected in 2015.