Nokia 2015 Annual Report Download - page 130

128 NOKIA IN 2015
Termination benets
Termination benets are payable when employment is terminated
before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benets. The Group
recognizes termination benets when it is demonstrably committed
toeither terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal, or providing
termination benets as a result of an oer made to encourage
voluntary redundancy. Local laws may provide employees with the
right to benets from the employer upon termination whether the
termination is voluntary or involuntary. For these specic termination
benets, the portion of the benet that the company would be
required to pay to the employee in the case of voluntary termination
istreated as a constructive obligation determined by local law and
accounted for as a dened benet arrangement as described in the
pensions section above.
Share-based payment
The Group oers three types of global equity-settled share-based
compensation plans for employees: stock options, performance
shares and restricted shares.
Employee services received and the corresponding increase in
equityare measured by reference to the fair value of the equity
instruments at the grant date, excluding the impact of any non-market
vesting conditions. Non-market vesting conditions attached to the
performance shares are included in assumptions about the number
ofshares that the employee will ultimately receive. The Group reviews
the assumptions made on a regular basis and, where necessary,
revises its estimates of the number of performance shares that
areexpected to be settled. Plans that apply tranched vesting are
accounted for under the graded vesting model. Share-based
compensation is recognized as anexpense in the consolidated
incomestatement over the relevant service periods.
The Group has issued certain stock options which are accounted for as
cash-settled. The related employee services received and the liabilities
incurred are measured at the fair value of the liability. The fair value of
stock options is estimated based on the reporting date market value
less the exercise price of the stock options. The fair value of the liability
is remeasured at each statement of nancial position date and at
thedate of settlement, with changes in fair value recognized in the
consolidated income statement over the relevant service periods.
Income taxes
The income tax expense comprises current tax and deferred tax.
Taxisrecognized in the consolidated income statement except to
theextent that it relates to items recognized in other comprehensive
income or directly in equity, then the related tax is recognized in
othercomprehensive income or equity, respectively.
Current taxes are based on the results of the Group companies and
are calculated using the local tax laws and tax rates that are enacted
orsubstantively enacted at each consolidated statement of nancial
position date. Corporate taxes withheld at the source of the income
onbehalf of the Group companies, both recoverable and irrecoverable,
as well as penalties and interests on income taxes are accounted for
inincome taxes.
The Group periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
interpretation. It adjusts the amounts recorded, where appropriate,
onthe basis of amounts expected to be paid to the tax authorities.
The amount of current income tax liabilities for uncertain income tax
positions is recognized when it is more likely than not that certain
taxpositions will be challenged and may not be fully sustained upon
review by tax authorities. The amounts recorded are based upon the
estimated future settlement amount at each consolidated statement
of nancial position date.
Deferred tax assets and liabilities are determined using the liability
method for all temporary dierences arising between the tax bases
ofassets and liabilities and their carrying amounts in the consolidated
nancial statements. Deferred tax assets are recognized to the extent
that it is probable that future taxable prot will be available against
which the unused tax losses, unused tax credits or deductible
temporary dierences can be utilized before the unused tax losses
orunused tax credits expire. Deferred tax assets are assessed
forrealizability at each statement of nancial position date. When
circumstances indicate it is no longer probable that deferred tax
assetswill be utilized, adjustments are made as necessary. Deferred
tax liabilities are recognized for temporary dierences that arise
between the fair value and the tax base of identiable net assets
acquired inbusiness combinations. Deferred tax assets and deferred
tax liabilities are oset for presentation purposes when there is a
legally enforceable right to set o current tax assets against current
tax liabilities, and the deferred tax assets and deferred tax liabilities
relate to income taxes levied by the same taxation authority on either
the same taxable entity or dierent taxable entities which intend
either to settle current tax liabilities and assets on a net basis, or
torealize the assets and settle the liabilities simultaneously in each
future period inwhich signicant amounts of deferred tax liabilities
ordeferred tax assets are expected to be settled or recovered.
Deferred tax liabilities are not recognized if they arise from the initial
recognition of goodwill. Deferred tax liabilities are provided on taxable
temporary dierences arising from investments in subsidiaries,
associates and joint arrangements, except for deferred tax liability
where the timing of the reversal of the temporary dierence is
controlled by the Group, and it is probable that the temporary
dierence will not reverse in the foreseeable future.
The enacted or substantively enacted tax rates at each consolidated
statement of nancial position 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 deferred tax liabilities.
Foreign currency translation
Functional and presentation currency
The nancial statements of all Group entities are measured using
functional currency, which is the currency of the primary economic
environment in which the entity operates. The consolidated nancial
statements are presented in euro, the functional and presentation
currency of the parent.
Transactions in foreign currencies
Transactions in foreign currencies are recorded at exchange rates
prevailing at the dates of the individual transactions. For practical
reasons, a rate that approximates the actual rate at the date of the
transaction is often used. At the end of the accounting period,
theunsettled balances on foreign currency monetary assets and
liabilities are valued at the exchange rates prevailing at the end of the
accounting period. Foreign exchange gains and losses arising from
statement of nancial position items and fair value changes of related
hedging instruments are recognized in nancial income and expenses.
Unrealized foreign exchange gains and losses related to non-current
available-for-sale investments, such as equity investments, are
recognized in other comprehensive income.
Foreign Group companies
All income and expenses of foreign Group companies where the
functional currency is not euro are translated into euro at the average
foreign exchange rates for the accounting period. All assets and
liabilities of foreign Group companies are translated into euro at
foreign exchange rates prevailing at the end of the accounting period.
Dierences resulting from the translation of income and expenses
atthe average rate and assets and liabilities at the closing rate are
recognized as translation dierences in other comprehensive income.
Notes to consolidated nancial statements continued