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Financial risk management (Tables)
 12 Months Ended
Dec. 31, 2019
Financial risk management  
Schedule of hedging instruments

 

 

 

 

 

 

 

 

 

EURm 

    

USD

    

GBP

    

CNY

    

INR

2019

 

  

 

  

 

  

 

  

Foreign exchange exposure designated as hedged item for cash flow hedging, net(1)

 

628

 

379

 

 –

 

 –

Foreign exchange exposure designated as hedged item for fair value hedging for FX risk, net(2)

 

423

 

(70)

 

 –

 

 –

Foreign exchange exposure designated as hedged item for net investment hedging, net(3)

 

2 547

 

93

 

981

 

346

Foreign exchange exposure from interest-bearing liabilities, net(4)

 

(1 314)

 

 –

 

 –

 

 –

Foreign exchange exposure from items on the statement of financial position, excluding interest-bearing liabilities, net

 

(2 855)

 

(81)

 

(868)

 

(294)

Other foreign exchange derivatives, carried at fair value through profit and loss, net(5)

 

2 607

 

86

 

711

 

346

2018

 

  

 

  

 

  

 

  

Foreign exchange exposure designated as hedged item for cash flow hedging, net(1)

 

952

 

374

 

 –

 

 –

Foreign exchange exposure designated as hedged item for fair value hedging for FX risk, net(2)

 

314

 

(93)

 

 –

 

 –

Foreign exchange exposure designated as hedged item for net investment hedging, net(3)

 

2 486

 

61

 

944

 

544

Foreign exchange exposure from interest-bearing liabilities, net(4)

 

(1 800)

 

 –

 

 –

 

 –

Foreign exchange exposure from items on the statement of financial position, excluding interest-bearing liabilities, net

 

(2 446)

 

(63)

 

(978)

 

(299)

Other foreign exchange derivatives, carried at fair value through profit and loss, net(5)

 

1 690

 

102

 

886

 

596

(1)

Includes foreign exchange exposure from forecasted cash flows related to sales and purchases. In some currencies, especially the U.S. dollar, the Group has substantial foreign exchange exposures in both estimated cash inflows and outflows. These underlying exposures have been hedged.

(2)

Includes foreign exchange exposure from contractual firm commitments. These underlying exposures have been substantially hedged.

(3)

Includes net investment exposures in foreign operations. These underlying exposures have been hedged.

(4)

Includes interest-bearing liabilities that have been hedged with cross currency swaps and foreign exchange forwards. Refer to Note 23, Interest-bearing liabilities.

(5)

Items on the statement of financial position are hedged by a portion of foreign exchange derivatives not designated in a hedge relationship and carried at fair value through profit and loss.

 

Schedule of VaR from financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

 

Simulated impact on financial statements

 

 

 

Simulated impact on financial statements

EURm

    

Total VaR

 

Profit

OCI

CTA

    

Total VaR

 

Profit

OCI

CTA

As of December 31

 

 8

 

10

18

 –

 

16

 

21

33

 6

Average for the year

 

11

 

10

22

 1

 

14

 

18

38

 5

Range for the year

 

7-25

 

4-17

13-31

0-4

 

5-24

 

7-27

25-58

0-8

 

Schedule of Interest rate profile of interest-bearing assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

EURm

    

Fixed rate

    

Floating rate(1)

    

Fixed rate

    

Floating rate(1)

Current financial investments

 

 4

 

93

 

145

 

466

Cash and cash equivalents

 

80

 

5 830

 

497

 

5 765

Interest-bearing liabilities

 

(3 872)

 

(405)

 

(3 612)

 

(208)

Financial assets and liabilities before derivatives

 

(3 788)

 

5 518

 

(2 970)

 

6 023

Interest rate derivatives

 

1 197

 

(1 197)

 

2 332

 

(2 332)

Financial assets and liabilities after derivatives

 

(2 591)

 

4 321

 

(638)

 

3 691

(1)

All cash equivalents and derivative transaction related collaterals with initial maturity of three months or less are considered floating rate for the purposes of interest rate risk management.
Schedule of sensitivity to interest rate exposure in the investment and debt portfolios.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

    

Impact on

    

Impact

    

Impact

    

Impact on

    

Impact

    

Impact

EURm

 

fair value

 

on profit

 

on OCI

 

fair value

 

on profit

 

on OCI

Interest rates – increase by 100 basis points

 

112

 

 1

 

 2

 

34

 

 3

 

 4

Interest rates – decrease by 50 basis points

 

(58)

 

(1)

 

(1)

 

(17)

 

(1)

 

(2)

 

Schedule of effects of hedge accounting on the financial position and performance

 

 

 

 

 

 

 

 

 

EURm

    

Cash flow hedges (FX forwards and options)(1)

    

Net investment hedges (FX forwards and options)(1)

    

Fair value hedges (FX forwards)(1)

    

Fair value and cash flow hedges (IR swaps and cross currency swaps)(1),(2)

2019

 

 

 

 

 

 

 

 

Carrying amount of hedging instruments

 

(10)

 

34

 

 1

 

(51)

Notional amount of hedging instruments

 

(1 029)

 

(4 106)

 

(348)

 

1 246

Notional amount of hedged items

 

1 043

 

4 106

 

351

 

(1 246)

Change in intrinsic value of hedging instruments since 1 January

 

(31)

 

(51)

 

(4)

 

132

Change in value of hedged items used to determine hedge effectiveness

 

32

 

51

 

 3

 

(133)

2018

 

 

 

 

 

 

 

 

Carrying amount of hedging instruments

 

(13)

 

(11)

 

(4)

 

(46)

Notional amount of hedging instruments

 

(1 451)

 

(4 129)

 

(226)

 

2 330

Notional amount of hedged items

 

1 451

 

4 129

 

231

 

(2 330)

Change in intrinsic value of hedging instruments since 1 January

 

(44)

 

(83)

 

(13)

 

 9

Change in value of hedged items used to determine hedge effectiveness

 

45

 

83

 

17

 

(7)

(1)

No significant ineffectiveness has been recorded during the periods presented and economic relationships have been fully effective

(2)

In 2019 change in fair value of hedging instruments in the income statement includes an additional EUR 9 million positive impact from cost of hedging of discontinued hedge relationships, refer to Note 11, Financial income and expenses and Note 23, Interest-bearing liabilities.

The most significant foreign exchange hedging instruments under cash flow, net investment and fair value hedge accounting as of December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity breakdown of net notional amounts (EURm)(1)

 

 

Currency

 

Instrument

 

Fair value (EURm)

 

Weighted average hedged rate

 

Total

 

Within 3 months

 

Between 3 and 12 months

 

Beyond 1 year

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GBP

 

FX Forwards

 

(8)

 
0.8780

 

(207)

 

(53)

 

(126)

 

(28)

 

 

GBP

 

FX Options

 

 1

 
0.9058

 

(172)

 

(40)

 

(99)

 

(33)

 

 

JPY

 

FX Forwards

 

(2)

 
122.1697

 

(167)

 

(44)

 

(123)

 

 –

 

 

KRW

 

FX Forwards

 

(1)

 

1 310.0412

 

(129)

 

(15)

 

(114)

 

 –

 

 

KRW

 

FX Options

 

 0

 

1 336.2500

 

(46)

 

(31)

 

(15)

 

 –

 

 

PLN

 

FX Forwards

 

 2

 
4.2926

 

139

 

45

 

94

 

 –

 

 

USD

 

FX Forwards

 

 0

 
1.1171

 

(280)

 

(0)

 

(280)

 

 –

 

 

USD

 

FX Options

 

 0

 
1.1489

 

(125)

 

(67)

 

(58)

 

 –

Net investment hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNY

 

FX Forwards

 

 0

 
7.8003

 

(981)

 

(981)

 

 –

 

 –

 

 

INR

 

FX Forwards

 

 6

 
78.4807

 

(346)

 

(346)

 

 –

 

 –

 

 

USD

 

FX Forwards

 

28

 
1.1076

 

(2 547)

 

(2 547)

 

 –

 

 –

Fair value hedge accounting for FX risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD

 

FX Forwards

 

 0

 
1.1082

 

(423)

 

(171)

 

(270)

 

18

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GBP

 

FX Forwards

 

 3

 
0.8866

 

(184)

 

(38)

 

(93)

 

(53)

 

 

GBP

 

FX Options

 

 7

 
0.9064

 

(191)

 

(48)

 

(90)

 

(53)

 

 

JPY

 

FX Forwards

 

(4)

 
130.0618

 

(150)

 

(51)

 

(99)

 

 –

 

 

PLN

 

FX Forwards

 

 1

 
4.2966

 

149

 

46

 

102

 

 –

 

 

USD

 

FX Forwards

 

(19)

 
1.1653

 

(655)

 

(140)

 

(515)

 

 –

 

 

USD

 

FX Options

 

 2

 
1.2029

 

(297)

 

(87)

 

(210)

 

 –

Net investment hedge accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNY

 

FX Forwards

 

 4

 
7.8333

 

(944)

 

(944)

 

 –

 

 –

 

 

INR

 

FX Forwards

 

(15)

 
81.5362

 

(544)

 

(544)

 

 –

 

 –

 

 

USD

 

FX Forwards

 

(2)

 
1.1414

 

(2 246)

 

(2 246)

 

 –

 

 –

 

 

USD

 

FX Options

 

 1

 
1.1703

 

(240)

 

(240)

 

 –

 

 –

Fair value hedge accounting for FX risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USD

 

FX Forwards

 

(3)

 
1.1478

 

(314)

 

(378)

 

64

 

 –

(1)   Negative notional amounts indicate that hedges sell currency and positive notional amounts indicate that hedges buy currency.

Schedule for allowance of doubtful accounts

The aging of trade receivables, contract assets and customer finance loans is as of December 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due

 

Past due

 

Past due

 

 

EURm

 

Current

    

1-30 days

    

31-180 days

    

More than 180 days

    

Total

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

4 364

 

156

 

306

 

345

 

5 171

Contract assets

 

1 489

 

 –

 

 –

 

 –

 

1 489

Customer financing related loan receivables

 

224

 

 –

 

17

 

35

 

276

Total

 

6 077

 

156

 

323

 

380

 

6 936

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

Trade receivables

 

4 224

 

243

 

300

 

284

 

5 051

Contract assets

 

1 875

 

 –

 

 –

 

 –

 

1 875

Customer financing related loan receivables

 

186

 

 –

 

 –

 

 –

 

186

Total

 

6 285

 

243

 

300

 

284

 

7 112

Movements in loss allowances, all of which relate to trade receivables, for the years ended December 31:

 

 

 

 

 

 

 

EURm

    
2019

    
2018

    
2017

As of January 1

 

195

 

192

 

168

Charged to income statement

 

41

 

86

 

61

Deductions(1)

 

(89)

 

(83)

 

(37)

As of December 31

 

147

 

195

 

192

(1)   Deductions include utilization and releases of allowances

Schedule of loans and loan allowances

 

 

 

 

 

EURm

    
2019

    
2018

Loan commitments given undrawn

 

303

 

313

Outstanding customer financing related loan receivables

 

276

 

186

Total 

 

579

 

499

 

Schedule of outstanding fixed income and money market investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EURm

 

Rating(1)(2)

 

Cash

 

Due within
3 months

 

Due between 3
and 12 months

 

Due between
1 and 3 years

 

Due between
3 and 5 years

 

Due beyond
5 years

 

Total(3)(4)

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA

 

 –

 

800

 

 –

 

 –

 

 –

 

 –

 

800

 

 

AA+ - AA-

 

663

 

143

 

 –

 

 –

 

 –

 

 –

 

806

 

 

A+ - A-

 

2 007

 

1 377

 

20

 

20

 

25

 

 –

 

3 449

 

 

BBB+ - BBB-

 

445

 

360

 

13

 

 –

 

 –

 

 –

 

818

 

 

BB+ - BB-

 

 8

 

 –

 

 –

 

 –

 

 –

 

 –

 

 8

 

 

B+ - B-

 

22

 

 –

 

 –

 

 –

 

 –

 

 –

 

22

 

 

Non-rated

 

100

 

 3

 

 1

 

 –

 

 –

 

 –

 

104

Total

 

 

 

3 245

 

2 683

 

34

 

20

 

25

 

 –

 

6 007

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AAA

 

 –

 

317

 

 –

 

 –

 

 –

 

 –

 

317

 

 

AA+ - AA-

 

762

 

176

 

 3

 

 –

 

 –

 

 –

 

941

 

 

A+ - A-

 

1 718

 

1 930

 

310

 

140

 

207

 

 –

 

4 305

 

 

BBB+ - BBB-

 

373

 

427

 

189

 

 –

 

 –

 

 –

 

989

 

 

BB+ - BB-

 

 6

 

 –

 

 –

 

 –

 

 –

 

 –

 

 6

 

 

B+ - B-

 

24

 

18

 

 –

 

 –

 

 –

 

 –

 

42

 

 

Non-rated

 

260

 

10

 

 3

 

 –

 

 –

 

 –

 

273

Total

 

 

 

3 143

 

2 878

 

505

 

140

 

207

 

 –

 

6 873

(1)

Bank Parent Company ratings are used here for bank groups. Actual bank subsidiary ratings may differ from the Bank Parent Company rating.

(2)

Credit rating grades for 2018 previously ranked in line with Moody’s rating categories have been adjusted according to the Standard & Poor’s rating categories.

(3)

Current financial investments and cash equivalents include bank deposits, structured deposits, investments in money market funds and investments in fixed income instruments.

(4)

Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond 3 months include EUR 77 million (EUR 472 million in 2018) of instruments that have a call period of less than 3 months.

 

The Group has restricted bank deposits primarily related to employee benefits of EUR 126 million (EUR 158 million in 2018) that are presented in other non-current financial assets. The Group has assessed the counterparty credit risk for these financial assets and concluded that expected credit losses are not significant.

Schedule of financial assets and liabilities subject to offsetting under enforceable master netting agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related amounts not set off in the
statement of financial position

 

 

EURm

 

Gross amounts of
financial assets/
(liabilities)

 

Gross amounts of
financial liabilities/
(assets) set off in the
statement of financial
position

 

Net amounts of financial
assets/ (liabilities) presented in the
statement of financial
position

 

Financial instruments
assets/(liabilities)

 

Cash collateral
received/(pledged)

 

Net amount

2019

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

81

 

 –

 

81

 

76

 

 –

 

 5

Derivative liabilities

 

(157)

 

 –

 

(157)

 

(83)

 

(37)

 

(37)

Total

 

(76)

 

 –

 

(76)

 

(7)

 

(37)

 

(32)

2018

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

131

 

 –

 

131

 

104

 

15

 

12

Derivative liabilities

 

(178)

 

 –

 

(178)

 

(103)

 

(72)

 

(3)

Total

 

(47)

 

 –

 

(47)

 

 1

 

(57)

 

 9

 

Schedule of undiscounted cash flow analysis for financial liabilities and financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

EURm

 

Total

 

Due within
3 months

 

Due between
3 and  12 months

 

Due between
1 and 3 years

 

Due between
3 and 5 years

 

Due beyond
5 years

2019

 

 

 

 

 

 

 

 

 

 

 

 

Non-current financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Other non-current financial assets(1)

 

252

 

 –

 

 3

 

115

 

54

 

80

Current financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Other current financial assets excluding derivatives(2)

 

53

 

21

 

32

 

 –

 

 –

 

 –

Current financial investments

 

97

 

95

 

 2

 

 –

 

 –

 

 –

Cash and cash equivalents(3)

 

5 913

 

5 835

 

33

 

20

 

25

 

 –

Cash flows related to derivative financial assets gross settled:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts – receipts

 

9 660

 

7 582

 

1 993

 

85

 

 –

 

 –

Derivative contracts – payments

 

(9 639)

 

(7 548)

 

(2 005)

 

(86)

 

 –

 

 –

Trade receivables

 

5 019

 

3 873

 

1 088

 

58

 

 –

 

 –

Non-current financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Long-term interest-bearing liabilities

 

(4 990)

 

(43)

 

(75)

 

(1 209)

 

(1 113)

 

(2 550)

Long-term lease liabilities(4)

 

(841)

 

 –

 

 –

 

(375)

 

(251)

 

(215)

Current financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Short-term interest-bearing liabilities

 

(294)

 

(212)

 

(82)

 

 –

 

 –

 

 –

Short-term lease liabilities(4)

 

(276)

 

(81)

 

(195)

 

 –

 

 –

 

 –

Other financial liabilities excluding derivatives(5)

 

(646)

 

(638)

 

(8)

 

 –

 

 –

 

 –

Cash flows related to derivative financial liabilities gross settled:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts – receipts

 

11 725

 

9 003

 

828

 

616

 

86

 

1 192

Derivative contracts – payments

 

(11 517)

 

(9 078)

 

(808)

 

(569)

 

(43)

 

(1 019)

Trade payables

 

(3 786)

 

(3 653)

 

(111)

 

(21)

 

(1)

 

 –

Contingent financial assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments given undrawn(6)

 

(303)

 

(32)

 

(77)

 

(194)

 

 –

 

 –

Loan commitments obtained undrawn(7)

 

1 971

 

499

 

(4)

 

(11)

 

(11)

 

1 498

Leases committed but not yet commenced(4)

 

(160)

 

 –

 

 –

 

(11)

 

(23)

 

(126)

(1)

Other non-current financial assets include long-term customer and vendor financing related loan receivables as well as certain other long-term loan receivables that have been presented in other non-current financial assets in the consolidated statement of financial position. Convertible instruments are presented at their final contractual maturities.

(2)

Other current financial assets excluding derivatives include short-term customer and vendor financing related loan receivables that have been presented in other financial assets in the consolidated statement of financial position.

(3)

Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond 3 months include EUR 77 million of instruments that have a call period of less than 3 months.

(4)

As a result of adoption of IFRS 16, Leases, in the beginning of 2019, lease liabilities and leases committed but not yet commenced are presented in the liquidity risk table in 2019.

(5)

Other financial liabilities include a conditional obligation to China Huaxin presented in the earliest period as the exercise period is open.

(6)

Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.

(7)

Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EURm

    

Total

    

Due within
 3 months

    

Due between 3
 and 12 months

    

Due between
 1 and 3 years

    

Due between
 3 and 5 years

    

Due beyond
 5 years

2018

 

  

 

  

 

  

 

  

 

  

 

  

Non-current financial assets

 

  

 

  

 

  

 

  

 

  

 

  

Other non-current financial assets(1)

 

146

 

23

 

 –

 

48

 

25

 

50

Current financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Other current financial assets excluding derivatives(2)

 

97

 

35

 

62

 

 –

 

 –

 

 –

Current financial investments

 

612

 

231

 

381

 

 –

 

 –

 

 –

Cash and cash equivalents(3)

 

6 271

 

5 796

 

125

 

142

 

208

 

 –

Cash flows related to derivative financial assets net settled:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts – receipts

 

22

 

 3

 

(6)

 

 8

 

 8

 

 9

Cash flows related to derivative financial assets gross settled:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts – receipts

 

11 428

 

9 506

 

1 017

 

151

 

46

 

708

Derivative contracts – payments

 

(11 093)

 

(9 463)

 

(1 008)

 

(124)

 

(17)

 

(481)

Trade receivables

 

4 851

 

3 998

 

774

 

79

 

 –

 

 –

Non-current financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Long-term interest-bearing liabilities

 

(3 916)

 

(28)

 

(72)

 

(730)

 

(604)

 

(2 482)

Current financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Short-term interest-bearing liabilities

 

(1 024)

 

(470)

 

(554)

 

 –

 

 –

 

 –

Other financial liabilities excluding derivatives(4)

 

(731)

 

 –

 

(731)

 

 –

 

 –

 

 –

Cash flows related to derivative financial liabilities gross settled:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative contracts – receipts

 

12 251

 

9 863

 

1 335

 

68

 

482

 

503

Derivative contracts – payments

 

(12 236)

 

(9 944)

 

(1 347)

 

(20)

 

(459)

 

(466)

Trade payables

 

(4 773)

 

(4 645)

 

(104)

 

(23)

 

 –

 

(1)

Contingent financial assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Loan commitments given undrawn(5)

 

(313)

 

(14)

 

(30)

 

(153)

 

(77)

 

(39)

Loan commitments obtained undrawn(6)

 

2 323

 

249

 

(3)

 

2 077

 

 –

 

 –

(1) Other non-current financial assets include long-term customer and vendor financing related loan receivables as well as certain other long-term loan receivables that have been presented in other non-current financial assets in the consolidated statement of financial position.

(2) Other current financial assets excluding derivatives include short-term customer and vendor financing related loan receivables that have been presented in other financial assets in the consolidated statement of financial position.

(3) Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond 3 months include EUR 472 million of instruments that have a call period of less than 3 months.

(4) Other financial liabilities include a conditional obligation to China Huaxin based on the beginning of the exercise period.

(5) Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.

(6) Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees