Nokia 2007 Annual Report Download - page 157

1. Accounting principles (Continued)
sheet as
current availableforsale investments, liquid assets , (3) investments in technology related
publicly quoted equity shares, or unlisted private equity shares and unlisted funds, classified in the
balance sheet as
noncurrent availableforsale investments .
Current fixed income and moneymarket investments are fair valued by using quoted market rates,
discounted cash flow analyses and other appropriate valuation models at the balance sheet date.
Investments in publicly quoted equity shares are measured at fair value using exchange quoted bid
prices. Other available for sale investments carried at fair value include holdings in unlisted shares.
Fair value for these unlisted shares is estimated by using various factors, including, but not limited to:
(1) the current market value of similar instruments, (2) prices established from a recent arm’s length
financing transaction of the target companies, (3) analysis of market prospects and operating
performance of the target companies taking into consideration of public market comparable
companies in similar industry sectors. The remaining available for sale investments are carried at cost
less impairment, which are technology related investments in private equity shares and unlisted
funds for which the fair value cannot be measured reliably due to nonexistence of public markets or
reliable valuation methods, against which to value these assets. The investment and disposal
decisions on these investments are business driven.
All purchases and sales of investments are recorded on the trade date, which is the date that the
Group commits to purchase or sell the asset.
The fair value changes of availableforsale investments are recognized in fair value and other
reserves as part of shareholders’ equity, with the exception of interest calculated using effective
interest method and foreign exchange gains and losses on monetary assets, which are recognized
directly in profit and loss. Dividends on available for sale equity instruments are recognized in profit
and loss when the Group’s right to receive payment is established. When the investment is disposed
of, the related accumulated fair value changes are released from shareholders’ equity and recognized
in the profit and loss account. The weighted average method is used when determining the costbasis
of publicly listed equities being disposed of. FIFO (Firstin Firstout) method is used to determine the
cost basis of fixed income securities being disposed of. An impairment is recorded when the carrying
amount of an availableforsale investment is greater than the estimated fair value and there is
objective evidence that the asset is impaired. The cumulative net loss relating to that investment is
removed from equity and recognized in the profit and loss account for the period. If, in a subsequent
period, the fair value of the investment in a nonequity instrument increases and the increase can be
objectively related to an event occurring after the loss was recognized, the loss is reversed, with the
amount of the reversal included in the profit and loss account.
Loans receivable
Loans receivable include loans to customers and suppliers and are measured at amortized cost using
the effective interest method less impairment. Loans are subject to regular and thorough review as to
their collectibility and as to available collateral; in the event that any 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. Interest income on loans receivable is recognized by applying the
effective interest rate. The long term portion of loans receivable is included on the balance sheet
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.
F14
Notes to the Consolidated Financial Statements (Continued)