Trade receivables and other customer-related balances

12 Months Ended

Dec. 31, 2024

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 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, contract assets, and customer financing-related loan receivables at 31 December
		Past due
EURm	Current	1-30 days	31-180 days	> 180 days	Total
2024
Trade receivables(1)	4 894	163	195	213	5 465
Contract assets	694	—	—	—	694
Customer financing-related loan receivables	70	—	—	—	70
Total gross receivables	5 658	163	195	213	6 229
Expected credit loss allowance	(78)	(9)	(31)	(108)	(226)
Total net receivables	5 580	154	164	105	6 003
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)	(207)	(8)	(80)	(302)	(597)
Total net receivables	5 540	150	219	216	6 125
(1)    Nokia’s payment terms are 89 (104 in 2023) days on average. (2)    In 2023, the decrease in the expected credit loss allowance includes EUR 29 million transferred to other provisions.

The reversal of ECL credited to the income statement was EUR 137 million and EUR 16 million in 2024 and 2023 respectively. In

2022, ECL charged to the income statement was EUR 160 million.

At 31 December 2024, the total ECL related to credit-impaired assets amounted to EUR 62 million (EUR 396 million in 2023 and

EUR 379 million in 2022). In 2024, the reduction of ECL related to credit-impaired assets of EUR 334 million includes releases of

EUR 233 million related to assets that were written off during the year and EUR 111 million related to assets for which payments

were received.

The contractual amount outstanding on financial assets that were written off in 2024 and are still subject to enforcement activity

is EUR 68 million (EUR 0 million in 2023)

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	2024	2023
Customer 1	7.5%	12.2%
Customer 2	4.9%	3.6%
Customer 3	4.7%	3.4%
Total	17.1%	19.2%
Country	2024	2023
Country 1(1)	21.5%	19.0%
Country 2	10.6%	11.7%
Country 3	5.8%	6.1%
Total	37.9%	36.8%

(1) In 2024, Country 1 was the United States (India in 2023).

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 1.5 billion (EUR 1.4 billion in 2023) of revenue that was

included in the current contract liability balance at the beginning of the period. The amount

includes EUR 0.1 billion (EUR 0.2 billion in 2023) related to discontinued operations sold in 2024.