Nokia 2009 Annual Report Download - page 84

process of amendment and convergence of worldwide accounting rules continued in 2009 resulting in
amendments to existing rules effective from January 1, 2010 and additional amendments effective
the following year. These are discussed in more detail under “New accounting pronouncements under
IFRS” in Note 1 to our consolidated financial statements included in Item 18 of this annual report.
There were no IFRS accounting developments adopted in 2009 that had a material impact on our
results of operations or financial position.
Critical Accounting Policies
Our accounting policies affecting our financial condition and results of operations are more fully
described in Note 1 to our consolidated financial statements included in Item 18 of this annual
report. Certain of our accounting policies require the application of judgment by management in
selecting appropriate assumptions for calculating financial estimates, which inherently contain some
degree of uncertainty. Management bases its estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the reported carrying values of assets and liabilities and the
reported amounts of revenues and expenses that may not be readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. The
estimates affect all our segments equally unless otherwise indicated.
We believe the following are the critical accounting policies and related judgments and estimates
used in the preparation of our consolidated financial statements. We have discussed the application
of these critical accounting estimates with our Board of Directors and Audit Committee.
Revenue Recognition
Sales from the majority of the Group are recognized when the significant risks and rewards of
ownership have transferred to the buyer, continuing managerial involvement usually associated with
ownership and effective control have ceased, the amount of revenue can be measured reliably, it is
probable that economic benefits associated with the transaction will flow to the Group, and the costs
incurred or to be incurred in respect of the transaction can be measured reliably. The remainder of
revenue is recorded under the percentage of completion method.
Devices & Services and certain NAVTEQ and Nokia Siemens Networks revenues are generally
recognized when the significant risks and rewards of ownership have transferred to the buyer,
continuing managerial involvement usually associated with ownership and effective control have
ceased, the amount of revenue can be measured reliably, it is probable that economic benefits
associated with the transaction will flow to the Group and the costs incurred or to be incurred in
respect of the transaction can be measured reliably. This requires us to assess at the point of delivery
whether these criteria have been met. When management determines that such criteria have been
met, revenue is recognized. We record estimated reductions to revenue for special pricing
agreements, price protection and other volume based discounts at the time of sale, mainly in the
mobile device business. Sales adjustments for volume based discount programs are estimated based
largely on historical activity under similar programs. Price protection adjustments are based on
estimates of future price reductions and certain agreed customer inventories at the date of the price
adjustment. Devices & Services and certain Nokia Siemens Networks service revenue is generally
recognized on a straight line basis over the service period unless there is evidence that some other
method better represents the stage of completion. Devices & Services and NAVTEQ license fees from
usage are recognized in the period when they are reliably measurable which is normally when the
customer reports them to the Group.
Devices & Services, NAVTEQ and Nokia Siemens Networks may enter into multiple component
transactions consisting of any combination of hardware, services and software. The commercial effect of
each separately identifiable element of the transaction is evaluated in order to reflect the substance of
the transaction. The consideration from these transactions is allocated to each separately identifiable
component based on the relative fair value of each component. The consideration allocated to each
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