Nokia 2006 Annual Report Download - page 167

Notes to the Consolidated Financial Statements (Continued)
9. Acquisitions (Continued)
)Loudeye Corporation, based in Bristol, England a global leader of digital music platforms and
digital media distribution services. The Group acquired a 100% ownership interest in Loudeye
Corporation on October 16, 2006.
)gate5 AG, based in Berlin, Germany, a leading supplier of mapping, routing and navigation
software and services. The Group acquired a 100% ownership interest in gate5 AG on October
15, 2006.
Goodwill and aggregate net assets acquired in these three transactions amounted to EUR 198 million
and EUR 168 million, respectively. Goodwill has been allocated to the Multimedia segment and to the
Mobile Phone segment. The goodwill arising from these acquisitions is attributable to assembled
workforce and post acquisition synergies. None of the goodwill recognized in these transactions is
expected to be tax deductible.
Goodwill is allocated to the Group’s cashgenerating units (CGU) for the purpose of impairment
testing. The allocation is made to those cashgenerating units that are expected to benefit from the
synergies of the business combination in which the goodwill arose.
The carrying amount of goodwill allocated to the Intellisync CGU amounts to EUR 223 million and is
significant relative to the Group’s total carrying amount of goodwill. The Intellisync CGU is part of the
Enterprise Solutions segment. The carrying amount of goodwill allocated to other Group CGU’s are
not individually significant to the Group’s total carrying amount of goodwill.
The recoverable amount of the Intellisync CGU is determined based on a valueinuse calculation. The
pretax cash flow projections employed in the valueinuse calculation are based on financial plans
approved by management. These projections are consistent with external sources of information.
Cash flows beyond the explicit forecast period are extrapolated using an estimated terminal growth
rate of 4.9%. The terminal growth rate does not exceed the longterm average growth rates for the
industry and economies in which the Intellisync CGU operates. Management expects that moderate
market share growth in a highgrowth industry segment will drive strong revenue growth. Increased
volume is expected to cause operating profit margins to improve to prevailing levels in the industry.
The pretax cash flow projections are discounted using a pretax discount rate of 18.5%.
The aggregate carrying amount of goodwill allocated across multiple CGUs amounts to
EUR 309 million at the end of 2006 and the amount allocated to each individual CGU is not
individually significant.
10. Depreciation and amortization
2006 2005 2004
EURm EURm EURm
Depreciation and amortization by function
Cost of sales *********************************************************** 279 242 196
Research and development ********************************************** 312 349 431
Selling and marketing ************************************************** 9914
Administrative and general ********************************************** 111 99 123
Other operating expenses *********************************************** 113 8
Amortization of goodwill************************************************ ——96
Total****************************************************************** 712 712 868
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