Nokia 2012 Annual Report Download - page 224

Restructuring provisions
The Group provides for the estimated future cost related to restructuring programs. The provision
made for restructuring is based on management’s best estimate. Changes in estimates of timing or
amounts of costs to be incurred may become necessary as the restructuring program is implemented.
Business combinations
The Group applies the acquisition method of accounting to account for acquisitions of businesses. The
consideration transferred in a business combination is measured as the aggregate of the fair values of
the assets transferred, liabilities incurred towards the former owners of the acquired business and
equity instruments issued. Identifiable assets acquired, and liabilities assumed by the Group are
measured separately at their fair value as of the acquisition date. Non-controlling interests in the
acquired business are measured separately based on their proportionate share of the identifiable net
assets of the acquired business. The excess of the cost of the acquisition over Nokia’s interest in the
fair value of the identifiable net assets acquired is recorded as goodwill.
The allocation of fair values to the identifiable assets acquired and liabilities assumed is based on
various valuation assumptions requiring management judgment. Actual results may differ from the
forecasted amounts and the difference could be material. See also Note 9.
Assessment of the recoverability of long-lived assets, intangible assets and goodwill
The recoverable amounts for long-lived assets, intangible assets and goodwill have been determined
based on the expected future cash flows attributable to the asset or cash-generating unit discounted to
present value. The key assumptions applied in the determination of recoverable amount include
discount rate, length of an explicit forecast period, estimated growth rates, profit margins and level of
operational and capital investment. Amounts estimated could differ materially from what will actually
occur in the future. See also Note 8.
Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market (for example unlisted
equities and embedded derivatives) are determined using various valuation techniques. The Group
uses judgment to select an appropriate valuation methodology as well as underlying assumptions
based on existing market practice and conditions. Changes in these assumptions may cause the
Group to recognize impairments or losses in future periods.
Income taxes
Management judgment is required in determining current tax expense, tax provisions, deferred tax
assets and liabilities and the extent to which deferred tax assets can be recognized. Each reporting
period they are assessed for realizability and when circumstances indicate it is no longer probable that
deferred tax assets will be utilized, they are adjusted as necessary.
Tax provisions are recognized based on estimates and assumptions when, despite of management’s
belief that tax return positions are supportable, it is more likely than not that certain positions will be
challenged and may not be fully sustained upon review by tax authorities. Furthermore, the Group has
ongoing tax investigations in multiple jurisdictions, including Hungary and India. If the final outcome of
these matters differs from the amounts initially recorded, differences may impact the income tax
expense in the period in which such determination is made.
In Netherlands but also in certain other jurisdictions, the utilization of deferred tax assets is dependent
on future taxable profit in excess of the profits arising from reversal of existing taxable temporary
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