Nokia 2011 Annual Report Download - page 113

Devices & Services CGU has been reallocated to the Smart Devices CGU and the Mobile Phones
CGU based on their relative fair values. Based on the Group’s assessment, no goodwill was allocated
from Devices & Services to Location & Commerce pursuant to the formation of Location & Commerce
business unit and segment on October 1, 2011. The organizational changes were not a driver of, and
did not result in an impairment in the Location & Commerce CGU. Goodwill amounting to EUR
862 million, EUR 502 million and EUR 173 million was allocated to the Smart Devices CGU, Mobile
Phones CGU and Nokia Siemens Networks CGU, respectively, at the date of the 2011 impairment
testing.
In the fourth quarter of 2011, we conducted our annual impairment testing to assess if events or
changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable.
The impairment testing was carried out based on management’s assessment of financial performance
and future strategies in light of current and expected market and economic conditions.
The recoverable amounts for the Smart Devices CGU and the Mobile Phones CGU are based on value
in use calculations. A discounted cash flow calculation was used to estimate the value in use for both
CGUs. Cash flow projections determined by management are based on information available, to reflect
the present value of the future cash flows expected to be derived through the continuing use of the
Smart Devices CGU and the Mobile Phones CGU.
The recoverable amounts for the Location & Commerce CGU and the Nokia Siemens Networks CGU
are based on fair value less costs to sell. A discounted cash flow calculation was used to estimate the
fair value less costs to sell for both CGUs. The cash flow projections employed in the discounted
cashflow calculation have been determined by management based on the information available, to
reflect the amount that an entity could obtain from separate disposal of each of the Location &
Commerce CGU and the Nokia Siemens Networks CGU, in an arm’s length transaction between
knowledgeable, willing parties, after deducting the estimated costs of disposal.
The cash flow projections employed in the value in use and the fair value less costs to sell calculations
are based on detailed financial plans approved by management, covering a three-year planning
horizon. Cash flows in subsequent periods reflect a realistic pattern of slowing growth that declines
towards an estimated terminal growth rate utilized in the terminal period. The terminal growth rate
utilized does not exceed long-term average growth rates for the industry and economies in which the
CGU operates. All cash flow projections are consistent with external sources of information, wherever
available.
The goodwill impairment testing conducted for the Smart Devices CGU, Mobile Phones CGU and
Nokia Siemens Networks CGU did not result in any impairment charges for the year ended
December 31, 2011.
A charge to operating profit of EUR 1 090 million was recorded for the impairment of goodwill in our
Location & Commerce business in the fourth quarter 2011. The impairment loss was allocated in its
entirety to the carrying amount of goodwill in the balance sheet of the Location & Commerce CGU.
This impairment loss is presented as impairment of goodwill in the consolidated income statement. As
a result of the impairment loss, the amount of goodwill allocated to the Location & Commerce CGU has
been reduced to EUR 3 274 million at December 31, 2011.
The impairment charge is the result of an evaluation of the projected financial performance and net
cash flows of the Location & Commerce CGU. The main drivers for management’s net cash flow
projections include license fees related to digital map data, fair value of the services sold within the
Group and estimated average revenue per user with regard to mobile media advertising. The average
revenue per user is estimated based on peer market data for mobile advertising revenue. Projected
device sales volumes impact the overall forecasted intercompany and advertising revenues. This takes
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