Nokia 2008 Annual Report Download - page 156

1. Accounting principles (Continued)
estimated reliably, it is probable that the economic benefits associated with the contract will flow to
the Group and the stage of contract completion can be measured reliably. When the Group is not able
to meet those conditions, the policy is to recognize revenues only equal to costs incurred to date, to
the extent that such costs are expected to be recovered.
Progress towards completion is measured by reference to cost incurred to date as a percentage of
estimated total project costs, the costtocost method.
The percentage of completion method relies on estimates of total expected contract revenue and
costs, as well as dependable measurement of the progress made towards completing a particular
project. Recognized revenues and profits are subject to revisions during the project in the event that
the assumptions regarding the overall project outcome are revised. The cumulative impact of a
revision in estimates is recorded in the period such revisions become likely and estimable. Losses on
projects in progress are recognized in the period they become probable and estimable.
Shipping and handling costs
The costs of shipping and distributing products are included in cost of sales.
Research and development
Research and development costs are expensed as they are incurred, except for certain development
costs, which are capitalized when it is probable that a development project will generate future
economic benefits, and certain criteria, including commercial and technological feasibility, have been
met. Capitalized development costs, comprising direct labor and related overhead, are amortized on a
systematic basis over their expected useful lives between two and five years.
Capitalized development costs are subject to regular assessments of recoverability based on
anticipated future revenues, including the impact of changes in technology. Unamortized capitalized
development costs determined to be in excess of their recoverable amounts are expensed
immediately.
Other intangible assets
Acquired patents, trademarks, licenses, software licenses for internal use, customer relationships and
developed technology are capitalized and amortized using the straightline method over their useful
lives, generally 3 to 6 years, but not exceeding 20 years. Where an indication of impairment exists,
the carrying amount of any intangible asset is assessed and written down to its recoverable amount.
Pensions
The Group companies have various pension schemes in accordance with the local conditions and
practices in the countries in which they operate. The schemes are generally funded through payments
to insurance companies or to trusteeadministered funds as determined by periodic actuarial
calculations.
In a defined contribution plan, the Group has no legal or constructive obligation to make any
additional contributions if the party receiving the contributions is unable to pay the pension
obligations in question. The Group’s contributions to defined contribution plans, multiemployer and
insured plans are recognized in the profit and loss account in the period to which the contributions
relate.
All arrangements that do not fulfill these conditions are considered defined benefit plans. If a defined
benefit plan is funded through an insurance contract where the Group does not retain any legal or
constructive obligations, such a plan is treated as a defined contribution plan.
F12
Notes to the Consolidated Financial Statements (Continued)