Derivative and firm commitment assets and liabilities

12 Months Ended

Dec. 31, 2024

Derivative and firm commitment assets and liabilities

Derivative and firm commitment assets and liabilities

5.3. Derivative and firm commitment assets and liabilities

Accounting policies

Fair value

All derivatives are recognized initially at fair value on the

date a derivative contract is entered into and subsequently

remeasured at fair value. The method of recognizing

the resulting gain or loss varies according to whether

the derivatives are designated and qualify under

hedge accounting.

Foreign exchange forward contracts are valued at market-

forward exchange rates. Changes in fair value are measured

by comparing these rates with the original contract-forward

rate. Currency options are valued at each reporting date

by using the Garman & Kohlhagen option valuation model.

Interest rate swaps and cross-currency swaps are valued

using the discounted cash flow method.

Hedge accounting

Nokia applies hedge accounting on certain foreign exchange

forward contracts, options or option strategies, and interest

rate derivatives. Qualifying options and option strategies

have zero net premium, or a net premium paid. For option

structures, the critical terms of the purchased and written

options are the same and the notional amount of the

written option component is not greater than that of the

purchased option.

In the fair valuation of foreign exchange forward contracts,

Nokia separates the forward element and considers it to be

the cost of hedging for foreign exchange forward contracts.

In the fair valuation of foreign exchange option contracts,

Nokia separates the time value and considers it to be the

cost of hedging for foreign exchange option contracts. In

the fair valuation of cross-currency swaps, Nokia separates

the foreign currency basis spread and considers it to be the

cost of hedging for cross-currency swaps.

Hedge effectiveness is assessed at inception and

subsequently on a quarterly basis during the hedge

relationship to ensure that an economic relationship exists.

As Nokia only enters in hedge relationships where the critical

terms match, the assessment of effectiveness is done on a

qualitative basis with no significant ineffectiveness expected.

Presentation in the statement of cash flows

The cash flows of a hedge are classified as cash flows from

operating activities in cases where the underlying hedged items

relate to Nokia’s operating activities. When a derivative

contract is accounted for as a hedge of an identifiable position

relating to financing or investing activities, the cash flows of

the contract are classified in the same way as the cash flows of

the position being hedged. Cash flows of derivatives used in

hedging the foreign exchange risk of Nokia’s cash position are

presented in cash flows from investing activities.

Cash flow hedges: hedging of forecast foreign currency

denominated sales and purchases

Nokia applies cash flow hedge accounting primarily to foreign

exchange exposure that arises from highly probable forecast

operative business transactions. The risk management strategy

is to hedge material net exposures (identified standard net

sales exposure minus identified standard costs exposure) by

using foreign exchange forwards and foreign exchange options

in a layered hedging style that follows defined hedging level

ranges and hedge maturities in quarterly time buckets. The

hedged item must be highly probable and present an exposure to

variations in cash flows that could ultimately affect profit or loss.

For qualifying foreign exchange forwards and foreign exchange

options, the change in fair value that reflects the change in

spot exchange rates on a discounted basis is recognized in

hedging reserve through other comprehensive income (refer to

Note 5.1. Equity). The changes in the forward element of the

foreign exchange forwards and the time value of the options

that relate to hedged items are deferred in the cost of

hedging reserve through other comprehensive income (refer

to Note 5.1. Equity) and are subsequently accounted for in

the same way as the spot element or intrinsic value.

In each quarter, Nokia evaluates whether the forecast

sales and purchases are still expected to occur. If a portion

of the hedged cash flow is no longer expected to occur,

the hedge accounting criteria are no longer met and all

related deferred gains or losses are derecognized from

fair value and other reserves and recognized in other

operating income and expenses in the income statement.

If the hedged cash flow ceases to be highly probable, but is

still expected to occur, accumulated gains and losses remain

in fair value and other reserves until the hedged cash flow

affects profit or loss.

Nokia’s risk management objective is to hedge forecast cash

flows until the related revenue has been recognized. Each

hedge relationship is discontinued during the quarter when

the hedge matures, which is also the quarter that it had

been designated to hedge. At this point, the accumulated

gain or loss of cash flow hedges is reclassified to other

operating income and expenses in the income statement.

In cases where the forecast amount of revenue is not

recognized during a quarter, the full accumulated gain or

loss of cash flow hedges designated for said quarter is still

reclassified and the portion related to forecast revenue that

was not recognized is disclosed as hedge ineffectiveness.

As cash flow hedges primarily mature in the same quarter

as the hedged item, there is no significant ineffectiveness

resulting from the time value of money. Nokia will validate

the magnitude of the impact of discounting related to the

amount of gain or loss recognized in fair value and other

reserves on a quarterly basis.

Cash flow and fair value hedges: hedging of foreign

exchange risk of future interest cash flows

Nokia also applies cash flow hedging to future interest cash

flows in foreign currency related to issued bonds. These

future interest cash flows are hedged with cross-currency

swaps that have been bifurcated and designated partly as

fair value hedges (see Fair value hedges: hedging of interest

rate exposure below) to hedge both the foreign exchange

and interest rate benchmark risk component of the issued

bond, and partly as cash flow hedges to hedge the foreign

exchange risk related to the remaining portion of interest

cash flows on the issued bond. The accumulated gain or loss

for the part of these cross-currency swaps designated as

cash flow hedges is initially recorded in hedging reserve

through other comprehensive income and reclassified to

profit or loss at the time when the related interest cash

flows are settled.

Fair value hedges: hedging of interest rate exposure

Nokia applies fair value hedge accounting to reduce

exposure to fair value fluctuations of interest-bearing

liabilities due to changes in interest rates and foreign

exchange rates. Nokia uses interest rate swaps and cross-

currency swaps aligned with the hedged items to hedge

interest rate risk and associated foreign exchange risk.

Nokia has entered into long-term borrowings mainly at fixed

rates and has swapped most of them into floating rates in

line with a defined target interest profile. Nokia aims to

mitigate the adverse impacts from interest rate fluctuations

by continuously managing net interest exposure resulting

from financial assets and liabilities by setting appropriate

risk management benchmarks and risk limits. The hedged

item is identified as a proportion of the outstanding loans

up to the notional amount of the swaps as appropriate to

achieve the risk management objective. Nokia enters into

interest rate swaps that have similar critical terms to the

hedged item, such as reference rate, reset dates, payment

dates, maturities and notional amount and hence Nokia

expects that there will be no significant ineffectiveness.

Nokia has not entered into interest rate swaps where it

would be paying fixed rates.

Nokia’s borrowings are carried at amortized cost. Changes

in the fair value of derivatives designated and qualifying as

fair value hedges, together with any changes in the fair value

of hedged liabilities attributable to the hedged risk, are

recorded in financial income and expenses in the income

statement. Nokia separates the foreign currency basis

spread from cross-currency swaps and excludes it from the

hedged risk as cost of hedging that is initially recognized

and subsequently measured at fair value and recorded in

the cost of hedging reserve through other comprehensive

income. If a hedge relationship no longer meets the criteria

for hedge accounting, hedge accounting ceases, the cost

of hedging recorded in the cost of hedging reserve is

immediately expensed and any fair value adjustments

made to the carrying amount of the hedged item while the

hedge was effective are recognized in financial income and

expenses in the income statement based on the effective

interest method.

Fair value hedges: hedging of foreign exchange exposure

In certain cases, related to long-term construction projects

within the Submarine Networks business which is presented

as discontinued operations, Nokia applied fair value hedge

accounting for foreign exchange risk with the objective to

reduce the exposure to fluctuations in the fair value of firm

commitments due to changes in foreign exchange rates. The

change in fair value that reflect the change in spot exchange

rates of the foreign exchange forwards designated and

qualifying as fair value hedges, together with any changes in

the fair value of the hedged firm commitments attributable

to the hedged risk, were recorded in financial income and

expenses in discontinued operations.

At the end of the hedge relationship, the accumulated changes

in the spot element of qualifying fair value hedges were

recorded as adjustments to net sales or cost of sales in

discontinued operations according to the hedge designation.

The changes in the forward element of the foreign exchange

forwards that relate to hedged items were deferred in the

cost of hedging reserve through other comprehensive income

and reclassified to other operating income and expenses in

discontinued operations at the end of the hedge relationship.

Hedges of net investments in foreign operations

Nokia applies hedge accounting for its foreign currency

hedging of selected net investments. The hedged item can

be an amount equal to or less than the carrying amount of

the net assets of the foreign operation in the statement of

financial position. The risk management strategy is to protect

the euro counter value of the portion of this exposure

expected to materialize as non-euro cash repatriation in the

foreseeable future.

For qualifying foreign exchange forwards, foreign exchange

options and option strategies, the change in fair value that

reflects the change in spot exchange rates is recognized in

translation differences in shareholders’ equity (refer to Note

5.1. Equity). The changes in the forward element of foreign

exchange forwards as well as the changes in the time value

of options (collectively known as the “cost of hedging”) is

recognized in the cost of hedging reserve through other

comprehensive income. The cost of hedging at the date of

designation of the foreign exchange forward or option contract

as a hedging instrument is amortized to financial income and

expenses in the income statement over the duration of the

contract. Hence, in each reporting period, the change in fair

value of the forward element of the foreign exchange forward

contract or the time value of the option contract is recorded

in the cost of hedging reserve through other comprehensive

income, while the amortization amount is reclassified from

the cost of hedging reserve to profit or loss.

The cumulative amount or proportionate share of changes

in the fair value of qualifying hedges deferred in translation

differences is recognized as gain or loss on disposal of all or

part of a foreign subsidiary.

Derivatives not designated in hedge accounting

relationships carried at fair value through profit and loss

For derivatives not designated under hedge accounting, but

hedging identifiable forecast exposures such as anticipated

foreign currency denominated sales and purchases, the

gains and losses are recognized in other operating income

and expenses in the income statement. The gains and losses

on all other derivatives not designated under hedge

accounting are recognized in financial income and expenses.

Embedded derivatives included in contracts are identified

and monitored by Nokia. For host contracts that are not

financial assets containing embedded derivatives that are

not closely related, the embedded derivatives are separated

and measured at fair value at each reporting date with

changes in fair value recognized in financial income and

expenses in the income statement. For host contracts that

are financial assets containing embedded derivatives, the

whole contract is measured at fair value at each reporting

date with changes in fair value recognized in financial

income and expenses in the income statement.

Derivatives and firm commitments

	2024				2023
	Assets		Liabilities		Assets		Liabilities
EURm	Fair value(1)	Notional(2)	Fair value(1)	Notional(2)	Fair value(1)	Notional(2)	Fair value(1)	Notional(2)
Cash flow hedges
Foreign exchange forward contracts	7	381	(19)	733	26	1 206	(19)	1 039
Currency options bought	—	90	—	—	3	466	—	—
Currency options sold	—	—	—	—	—	—	—	23
Fuel hedges	—	—	—	—	—	—	(1)	50
Cash flow and fair value hedges(3)
Cross-currency swaps	15	241	(97)	722	—	—	(144)	905
Fair value hedges
Interest rate swaps	28	1 130	(10)	792	24	1 195	(28)	1 105
Foreign exchange forward contracts	—	—	—	—	14	627	(59)	1 337
Firm commitments	—	—	—	—	22	1 788	(9)	434
Hedges on net investment in foreign subsidiaries
Foreign exchange forward contracts	3	527	(8)	971	6	1 111	—	81
Derivatives not designated in hedge accounting relationships carried at fair value through profit and loss
Foreign exchange forward contracts	110	7 129	(165)	6 124	58	6 889	(35)	6 012
Currency options bought	15	770	—	—	—	10	—	—
Embedded derivatives(4)	19	996	—	—	3	620	—	—
Other derivatives	—	—	—	—	—	12	—	—
Total	197	11 264	(299)	9 342	156	13 924	(295)	10 986
(1)Included in other current financial and firm commitment assets and other financial and firm commitment liabilities in the statement of financial position. (2)Includes the gross amount of all notional values for contracts that have not yet been settled or canceled. The amount of notional value outstanding is not necessarily a measure or indication of market risk as the exposure of certain contracts may be offset by that of other contracts. (3)Cross-currency swaps have been designated partly as fair value hedges and partly as cash flow hedges. (4)Embedded derivatives are related to customer contracts.

To manage interest rate and foreign exchange risks related to Nokia’s interest-bearing liabilities, Nokia has designated the following cross-currency swaps as hedges under both fair value hedge

accounting and cash flow hedge accounting, and interest rate swaps as hedges under fair value hedge accounting at 31 December:

				Notional (million in currency)		Fair value EURm
Entity	Instrument	Currency	Maturity	2024	2023	2024	2023
Nokia Corporation	Interest rate swaps	EUR	3/2024	—	378	—	2
Nokia Corporation	Interest rate swaps	EUR	5/2025	292	292	3	—
Nokia Corporation	Interest rate swaps	EUR	3/2026	630	630	(1)	(13)
Nokia Corporation	Cross-currency swaps	USD	6/2027	500	500	9	(28)
Nokia Corporation	Interest rate swaps	EUR	5/2028	500	500	(7)	(13)
Nokia Corporation	Interest rate swaps	EUR	8/2031	500	500	22	20
Nokia Corporation	Cross-currency swaps	USD	5/2039	500	500	(92)	(116)
Total						(66)	(148)