XML 157 R28.htm IDEA: XBRL DOCUMENT v3.24.0.1
Trade receivables and other customer-related balances
 12 Months Ended
Dec. 31, 2023
Disclosure of detailed information about financial instruments [abstract]  
Trade receivables and other customer-related balances Accounting policies
Customer contracts
Nokia presents its customer contracts in the statement of
financial position as either a contract asset or a contract
liability, depending on the relationship between Nokia’s
performance and the customer’s payment for each
individual contract. On a net basis, a contract asset position
represents where Nokia has performed by transferring
goods or services to a customer before the customer has
provided the associated consideration or before payment
is due. Conversely, a contract liability position represents
where a customer has paid consideration or payment is due,
but Nokia has not yet transferred goods or services to the
customer. Contract assets presented in the statement of
financial position are current in nature while contract
liabilities can be either current or non-current.
Invoices are generally issued as control transfers and/or as
services are rendered. Invoiced receivables represent an
unconditional right to receive the consideration and only
the passage of time is required before the consideration is
received. Invoiced receivables are presented separately
from contract assets as trade receivables in the statement
of financial position. Trade receivables may be converted to
customer loan receivables in certain cases where extended
payment terms are requested. From time to time Nokia may
also extend loans to other third parties and these loans are
accounted for similarly as customer loan receivables. Nokia
sells trade receivables and customer loan receivables to
various financial institutions primarily without recourse in
the normal course of business, in order to manage credit
risk and working capital cycle.
The business model for managing trade receivables and
customer loan receivables is holding receivables to collect
contractual cash flows and selling receivables. Trade
receivables and customer loan receivables are initially
recognized and subsequently remeasured at fair value
using the discounted cash flow method.
The changes in fair value are recognized in the fair value
reserve through other comprehensive income. Interest
calculated using the effective interest method as well as
foreign exchange gains and losses are recognized in financial
income and expenses.
Discounts without performance obligations presented on
the statement of financial position in other current liabilities
relate to discounts given to customers which will be
executable upon satisfying specific criteria. As these
discounts become executable, they are netted against
related trade receivables or customer loan receivables.
Expected Credit Losses
Loss allowance for expected credit losses (ECL) is recognized
on financial assets measured at amortized cost and financial
assets measured at fair value through other comprehensive
income, as well as on financial guarantee contracts and loan
commitments. Nokia continuously assesses its financial
instruments on a forward-looking basis and accounts
for the changes in ECL on a quarterly basis using the
following method:
■ECL = PD x LGD x EAD
■Probability of Default (PD) is based on the credit rating
profile of the counterparties as well as specific local
circumstances as applicable, unless there are specific
events that would indicate that the credit rating would
not be an appropriate basis for estimating credit risk at
the reporting date.
■For Loss Given Default (LGD), the recovery rate is based
on the type of receivable, specific local circumstances
as applicable and related collateral arrangements,
if any.
■Exposure at Default (EAD) is normally the nominal value
of the receivable.
Nokia applies a simplified approach to recognize a loss
allowance based on lifetime ECL on trade receivables
and contract assets without significant financing
components. Based on quantitative and qualitative
analysis, Nokia has determined that the credit risk
exposure arising from its trade receivables is low risk.
Quantitative analysis focuses on historical loss rates,
historic and projected sales and the corresponding trade
receivables, and overdue trade receivables including
indicators of any deterioration in the recovery
expectation. Qualitative analysis focuses on all relevant
conditions, including customer and country credit rating,
to improve the accuracy of estimating lifetime ECL.
For customer loan receivables, the ECL is calculated
separately for each significant counterparty using the
method described above, including the impact of any
collateral arrangements or other credit enhancements
to LGD. The estimate is based on 12-month ECL unless
there has been a significant increase in credit risk for
the specific counterparty since the initial recognition,
in which case lifetime ECL is estimated. Breaches of
contract, credit rating downgrades and other credit
measures are typical indicators that Nokia takes into
consideration when assessing whether the credit risk on
a financial instrument has increased significantly since
initial recognition. Nokia considers additional indicators
to determine if a financial asset is credit-impaired
including whether the counterparty is in significant
financial difficulties and whether it is becoming probable
that the customer will enter bankruptcy or financial
reorganization. Typically customer loan credit risk is
higher than credit risk of trade receivables and contract
assets on average.
The change in the amount of ECL for trade receivables
and contract assets is recognized in other operating
expenses and for customer loan receivables in financial
expenses. For customer loan receivables, the loss
allowance is recorded as an adjustment in other
comprehensive income instead of adjusting the carrying
amount that has already been recorded at fair value. If
trade receivables and customer loan receivables are sold,
the impact of ECL is reversed and the difference between
the carrying amount derecognized and the consideration
received is recognized in financial expenses.
Customer-related balances
Nokia aims to ensure the highest possible quality in trade receivables and contract assets as well as customer or third-party loan
receivables. The Credit Risk Management Standard Operating Procedure, approved by the CFO, lays out the framework for the
management of business-related credit risks. The Credit Risk Management Standard Operating Procedure sets out that credit
decisions are based on credit evaluation in each business, including credit rating and limits for larger exposures, according to
defined principles. Group level limit approvals are required for material credit exposures. Credit risks are monitored in each
business and, where appropriate, mitigated on a case-by-case basis with the use of letters of credit, collaterals, sponsor
guarantees, credit insurance and sale of selected receivables.
Aging of trade receivables and other customer-related balances at 31 December
Past due
EURm
Current
1-30 days
31-180
days
> 180 days
Total
2023
Trade receivables(1)
4 404
157
279
430
5 270
Contract assets
1 136
—
—
—
1 136
Customer financing-related loan receivables
207
1
20
88
316
Total gross receivables
5 747
158
299
518
6 722
Expected credit loss allowance(2)(3)
(207)
(8)
(80)
(302)
(597)
Total net receivables
5 540
150
219
216
6 125
2022
Trade receivables(1)
5 117
210
267
355
5 949
Contract assets
1 203
—
—
—
1 203
Customer financing-related loan receivables
212
8
5
79
304
Total gross receivables
6 532
218
272
434
7 456
Expected credit loss allowance(2)(3)
(361)
(15)
(65)
(203)
(644)
Total net receivables
6 171
203
207
231
6 812
(1)    Nokia’s payment terms are 104 days on average.
(2)    The total expected credit loss allowance includes EUR 318 million (EUR 311 million in 2022) of credit-impaired assets relating to certain emerging market customers.
(3)    In 2023, the decrease in the expected credit loss allowance includes EUR 29 million transferred to other provisions. In 2022, the expected credit loss allowance included
EUR 33 million transferred from other provisions.
The reversal of expected credit loss charged to the income statement in 2023 was EUR 16 million. The expected credit loss
charged to the income statement was EUR 160 million in 2022 and EUR 10 million in 2021.
Credit risk exposure by customer and country
Credit exposure is measured as the total of trade receivables, contract assets and loans
outstanding from customers and committed credits. Trade receivables do not include any major
concentrations of credit risk by customer.
Credit risk exposure by customer and country as % of total trade receivables and contract assets
as well as loans and loan commitments to customers:
Customer
2023
2022
Customer 1
12.2%
4.5%
Customer 2
3.6%
3.5%
Customer 3
3.4%
3.3%
Total
19.2%
11.3%
Country
2023
2022
Country 1(1)
19.0%
14.7%
Country 2
11.7%
10.8%
Country 3
6.1%
7.3%
Total
36.8%
32.8%
(1) In 2023 Country 1 was India (the United States in 2022).
Contract assets and contract liabilities
Contract asset balances decrease upon reclassification to trade receivables when Nokia’s right
to payment becomes unconditional. Contract liability balances decrease when Nokia satisfies the
related performance obligations and revenue is recognized. There were no material cumulative
adjustments to revenue recognized arising from changes in transaction prices, changes in
measures of progress or changes in estimated variable consideration.
During the year, Nokia recognized EUR 1.4 billion (EUR 1.6 billion in 2022) of revenue that was
included in the current contract liability balance at the beginning of the period.