Nokia 2010 Annual Report Download - page 203

1. Accounting principles (Continued)
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 changes in fair value 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 changes in fair value are released from shareholders’ equity and
recognized in the income statement. The weighted average method is used when determining the
costbasis of publicly listed equities being disposed of by the Group. FIFO (Firstin Firstout) method is
used to determine the cost basis of fixed income securities being disposed of by the Group. 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 including, but not
limited to, counterparty default and other factors causing a reduction in value that can be considered
permanent. The cumulative net loss relating to that investment is removed from equity and
recognized in the income statement 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 income statement.
Investments at fair value through profit and loss, liquid assets
The investments at fair value through profit and loss, liquid assets include highly liquid financial
assets designated at fair value through profit or loss at inception. For investments designated at fair
value through profit or loss, the following criteria must be met: (1) the designation eliminates or
significantly reduces the inconsistent treatment that would otherwise arise from measuring the
assets or recognizing gains or losses on a different basis; or (2) the assets are part of a group of
financial assets, which are managed and their performance evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy.
These investments are initially recorded at fair value. Subsequent to initial recognition, these
investments are remeasured at fair value. Fair value adjustments and realized gain and loss are
recognized in the income statement.
Loans receivable
Loans receivable include loans to customers and suppliers and are initially measured at fair value and
subsequently at amortized cost using the effective interest method less impairment. Loans are subject
to regular and thorough review as to their collectability 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 statement of financial position 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15
Notes to the Consolidated Financial Statements (Continued)