Nokia Corporation
Case number:
A01-97-0019
Abstract
Nokia restructured itself into a telecommunications company by shedding its non-core businesses. The company s stock price remained well below its previous highs. In 1995, Nokia s operating profit dropped substantially. The company also changed its method of accounting for research and development (R&D) from immediate expensing to capitalization and amortization in accordance with International Accounting Standards (IAS 9). Karla Sibelius, a financial analyst for a mutual fund, must decide whether the fund should buy shares in the company or not.
Teaching
This case focuses on the motivation for and implications of Nokia's R&D accounting change. Students are asked to analyze the effect of the change on the company s financial statements. Students are then asked to analyze the company s financial performance and consider whether the accounting change is an ominous signal of poor future operating performance. The case can be used in a corporate financial reporting course or in a financial statement analysis course.
Case number:
A01-97-0019
Subject:
Accounting and Control
Year:
Setting:
Finland, 1996
Length:
20 pages
Source:
Library Case