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NOKIA
1(3)
October 11, 2006
Larry Spirgel, Assistant Director
Mail Stop 3120
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, State D.C 20549
USA
Nokia Corporation Form 20-F for fiscal year ended December 31, 2005
(filed March 2, 2006)
Your file No. 1-3202
Response to your letter of September 22, 2006
Dear Mr. Spirgel
We are writing in response to your letter of September 22, 2006
containing comments with respect to the Form 20-F of Nokia Corporation
for the fiscal year ended December 31, 2005. The responses set forth
below have been organized in the same manner in which the Staff's
comments were organized. For your convenience, we have repeated your
comments along with our reply.
Item 4.B Business Overview, page 34
-----------------------------------
1. We note that you omit from the first sentence of the penultimate
paragraph under Item 4.B, Business Overview, language you previously
stated you intended to include. To provide context for your references
to Iran, Syria and Sudan in that paragraph, and to provide context for
the references to U.S. economic sanctions and U.S. foreign policy in
the final paragraph under the same heading, in future filings please
include in the penultimate paragraph language regarding the fact that
Iran, Syria and Sudan are identified as state sponsors of terrorism by
the U.S. government.
We note your comment and in our future filings will include disclosure
to the effect that the US government has identified Iran, Syria and
Sudan as 'state sponsors of terrorism'.
Consolidated Financial Statements
---------------------------------
Note 1. Accounting principles
-----------------------------
Revenue recognition, page F-12
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2. We note your policy is to recognize revenues only equal to costs
incurred to date, to the extent that such costs are expected to be
recovered when you do not meet the conditions for use of the
percentage of completion method. This policy appears to differ from
the completed contract method under SOP 81-1. Tell us how you
considered this difference in your US GAAP reconciliation.
We have historically had an insignificant number of contracts to which
we have applied a percentage-of-completion method based on a zero
profit margin under IAS 11. Our contemporaneous US GAAP analysis
focused on the exception to the completed-contract
NOKIA
2 (3)
October 11, 2006
method contained in SOP 81-1, par 33. In accordance with the
literature, it was our determination at the time that a loss would not
be incurred on the contract; therefore a percentage-of-completion
method based on a zero profit margin was used. The overall revenue
recognized in relation to these contracts was EUR 43 million in 2003
and EUR 52 million in 2004 and the overall margin recognized was EUR 0
million in 2003 and EUR 18 million in 2004. Revenue related to all
other transactions recognized using percentage-of-completion methods
based on a zero profit margin under IFRS has been insignificant to
date.
We will provide IFRS to US GAAP reconciliation details in future
filings where significant application of a percentage-of-completion
method based on a zero profit margin has occurred during the period.
Note 4. Percentaqe of completion, page F-25
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3. Please provide the disclosure required by paragraph 40 of IAS 11
for your contracts.
In future filings we will provide disclosure in Note 4 in line with
paragraph 40 of IAS 11 and respectively identify separately the
disclosure of items (a) - (c) of the stated paragraph.
Note 39. Differences between International Financial Reporting
Standards and US Generally Accepted Accounting Principles
--------------------------------------------------------------
Pension expense and additional minimum liability, page F-69
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4. Tell us how your accounting for prior service cost resulting from
plan amendments complies with paragraphs 96-101 of IAS 19.
Our accounting for prior service cost resulting from plan amendments
complies with paragraphs 96-101 of IAS 19 as follows: To the extent
that the benefits are already vested immediately following the
introduction of, or changes to, a defined benefit plan, prior service
cost is recognized immediately. If the benefits have not vested, prior
service cost resulting from plan amendments is recognized as an
expense over the average period until the benefits become vested.
In future filings we will include disclosure in Note 39 to this effect
to clarify the requirement for immediate recognition and the
circumstances that would lead to future expense recognition.
Share based compensation, page F-70
-----------------------------------
5. Disclose how you determined the exercise price for US GAAP. If you
used the method described on page F-41, disclose your consideration of
the guidance in APB 25 and FAS 123R regarding your US GAAP financial
reporting.
Our determination of the exercise price under US GAAP is consistent
with the method outlined on page F-41. The exercise price is
determined on a quarterly basis equal to the trade volume weighted
average price of Nokia shares on the Helsinki Stock Exchange during
the trading days of the first whole week of the second month of the
respective calendar quarter (i.e. February, May, August or November)
following the approval of the award.
NOKIA
3 (3)
October 11, 2006
Prior to adoption of Statement 123(R), under US GAAP we applied
variable accounting for stock options from the award approval date
pursuant to paragraph 10(b) of Opinion 25 and Question 11(a) of
Interpretation 44. Once a measurement date was established, variable
accounting ceased and incremental unrecognized compensation cost was
recognized over the remaining vesting period of the award.
Upon adoption of Statement 123(R), stock options issued after the date
of adoption are accounted for in accordance with paragraph A78, where
if an award's terms call for the exercise price to be set equal to the
share price in a future period, the recipient does not begin to
benefit from or be adversely affected by changes in the price of the
employer's equity shares until then. Consequently, a grant date is not
established until the exercise price is determined. The impact of the
exercise price determination is reflected in the fair value
calculation of the underlying award at that juncture.
In future filings, we will include disclosure in Note 39 to this
effect to clarify the treatment of stock options.
Nokia acknowledges that
- - Nokia is responsible for the adequacy and accuracy of the
disclosure in its filings with the SEC;
- - The SEC staff comments or changes to Nokia's disclosure in
response to staff comments do not foreclose the SEC from
taking any action with respect to Nokia's filings; and
- - Nokia may not assert the SEC staff comments as a defense
in any proceeding initiated by the SEC or any person under
the federal securities laws of the United States.
With reference to the telephone conference between Larry Spirgel and
Kaarina Stahlberg on October 3, 2006, extending the response time with
5 additional business days, we are sending these comments within 15
business days as from the date of your letter.
In case of additional comments, please contact Kaarina Stahlberg over
the e-mail at kaarina.stahlberg@nokia.com or by phone at +358 40 728
7843.
NOKIA CORPORATION
/s/ Anja Korhonen /s/ Kaarina Stahlberg
- ----------------------- --------------------------
Anja Korhonen Kaarina Stahlberg
Senior Vice President, Vice President, Assitant
Corporate Controller General Counsel
Cc: Kyle Moffatt, Accounting Branch Chief
Sharon Virga, Senior Staff Accountant