Calling on the FX market (TT Dec04 p38-40)

Nokia’s treasury operations are managed by a single global virtual treasury operation staffed by global distribution teams in Espoo, Geneva, New York and Singapore. All four centres are fully integrated by a multi-entity treasury management system which provides them with total visibility of the group’s FX exposures and cash positions worldwide at any point in time. One of Nokia’s greatest ‘risk’ exposures is to adverse currency fluctuations against the euro – its reporting currency. In 2003, its ten largest markets accounted for 61% of total sales. More than half of these countries were non-euro countries.

The most significant sales-driven exposures for the year ended 31 December 2003 were in the US dollar, the UK pound and the Australian dollar. The group has costs in both sterling and the US$. Nokia’s FX exposures are consolidated globally, aggregated and then netted off, eliminating the need for any external FX dealing by the group’s operating companies. The exposures are farmed out to one of the treasury centres for hedging. Nokia was an ‘early adopter’ of IAS in 1987 and has also complied more recently with IAS 39 (2001). The group claims hedge accounting for certain forward exchange contracts and options and, for these, changes in fair value are deferred in shareholders equity – to the extent that the hedge is effective.

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