The recent downturn in the economy and recent failures in the business have been merged for the creation of a financial environment to make reports unlike any other within present memory. There has been a major impact on the confidence of investors that had been shaken up by an increase in the volatility within the markets of capital. This has further been followed up by unsettlement in the extremely publicized restatements being drafted for the statements of finance (Bond and Cummins 2010). These have resulted in the generation of several questions regarding the quality being presented in the reports of finance.

1. FINANCIAL ENVIRONMENT
ANALYSIS
Nokia, Finland

2. 1
Table of Contents
Introduction................................................................................................................................2
Financial Environmental Factors ...............................................................................................2
Regulatory Framework and Accounting Rules..........................................................................3
Potential Financial Adjustments for UK Users..........................................................................4
Conclusion .................................................................................................................................5
References..................................................................................................................................6
Appendix....................................................................................................................................7

3. 2
Introduction
The recent downturn in the economy and recent failures in the business have been merged for
the creation of a financial environment to make reports unlike any other within present
memory. There has been a major impact on the confidence of investors that had been shaken
up by an increase in the volatility within the markets of capital. This has further been
followed up by unsettlement in the extremely publicized restatements being drafted for the
statements of finance (Bond and Cummins 2010). These have resulted in the generation of
several questions regarding the quality being presented in the reports of finance.
For the purpose of this report, focus will be created on describing the important factors that
have a major impact on the financial environment of an organization. The organization that
has been chosen for the purpose of this assignment is Nokia that is a multinational company
based in Finland. In addition to this, this report will be analysing the regulatory framework
and the rules of accounting being followed by the organization of Nokia.
Financial Environmental Factors
This part of the report will be summarizing certain challenging factors that affect the making
of financial reports in the current era of globalization that are being faced by the organization
of Nokia.
Difficult times in the Economy
The slowdown of the economy had been started by a declining rate in the investment and
spending of the business capital. With the bursting of several other new technologies and
competition, businesses in the industry of telecommunication networks and products, have
been taking up an extremely pessimistic perspective towards the future of the economy and
restricted the spending being made for the purchases of equipment, real estate, software,
stock and inventories, and several other different forms of investments (Halsey 2007). The
industry in which the organization of Nokia had been suffered a lot by the impacts imposed
on reducing the spending in capital, where there had been nose- diving in the prices of shares
and the earnings as well.
Pressures on Performance
The business of Nokia had been dealing with several pressurizing factors that took place from
a number of different sources that were external as well as internal. The external pressures
had made an approach mainly from the markets of capital, along with an involvement of

4. 3
inappropriate behaviour in management (Soffer 2007). Management had often been under
pressure for meeting the performance indicators of short- term, like growth in revenue or
earnings, ratios of finance tied up with the covenants of debt, or several other different types
of measures. The members at the top- most level of management had also faced several
pressurising factors for demonstrating that there had been a growth in the value of
shareholder as a result of their form of leadership.
Sophistication and Complexity of Business Transactions and Structures
There has been an increase in the sophistication in the markets of capital and the creativity
involved in the bankers of investment along with a number of other advisers of finance. This
had resulted in fostering a number of complex instruments of finance along with structures
transactions of finance (Murphy 2009). A number of companies in Finland, along with Nokia,
now have been using complex transactions, where there is an involvement of transactions
with each other as in case of the sales or purchases of assets, intricate the agreements on
operations, and derivative transactions that have been designed for meeting a certain
objective of making reports along with an objective focused on the economy.
Regulatory Framework and Accounting Rules
The general characteristics and principles that govern the legislation for the system of finance
at Nokia and several other businesses in Finland, are determined by the constitution of
Finland. In addition to this, the governance of law is done by the directives and institutions of
European Union. Finland is known to be having a codified system of law. The law of
constitution and the interpretation that had been made by the committee of parliament had
resulted in playing a highly significant role within the internal debate in order to define the
authorities of supervision (Halsey 2007). The framework that helps in the governance of the
regulation related to the system of finance assists in assigning authorities for licensing and
legislation to a ministry of the government. This also involved the conduct of business and
the prudential supervision to the independent authorities of supervision.
As a significant rule of accounting at Nokia in the market of Finland, there has been
utilization of Standards for international reporting in finance. These financial standards have
been issued and adopted for ensuring stability in the financial position of Nokia. This
particular standard has helped in dealing with the cluster in accountancy for the organizations
of Finland. The main requirement being focused upon by these standards are for having a fair
and true view, instead of simply focusing upon the definition of taxes as well as dividends

5. 4
(Bond and Cummins 2010). This particular standard has helped in the achievement of
harmony in the systems of accountancy. Apart from these standards, there has been
consideration of theory related to revenue and expenditure, in which stress is laid upon costs
of history and prudency in the terms of valuation. Also, it is extremely important to involve
principles related to realization and matching (Murphy 2009). This particular standard also
involved the preparation of secondary statements of finance on the basis of the bodies that
had the responsibility for bringing change in the system of finance for the organization of
Finland.
By the adoption of IFRS, the organization of Nokia has received an exposure towards a
number of fresh point of views into the accountancy in Finland. There are a number of points
for contradicting the benefits of this system in comparison with the benefits of following the
traditional form of accountancy (Soffer 2007). In consideration with the IFRS, more
preference is given to the statement of loss and profit in comparison with the balance sheet
for the organizations of Finland.
Potential Financial Adjustments for UK Users
Several adjustments can be made in consideration with the importance and role of corporate
policies in finance as these had been subjected towards a number of controversies considering
the financial statements of Nokia (Halsey 2007). These adjustments contribute in reflecting a
number of different types of issues where the behaviour in corporate finance is important that
includes the policy of corporate tax, encouragement being given to the investment of capital,
and drafting the relationship amongst the financial stability and the company debt.
In addition to this, for the users of UK, there can be several change in the impact that the
monetary policy has over the spending of the organization. In addition to this, if the taxes are
absent, agency problems or asymmetric information, the optimal rate of investment will be
having independence related to the considerations in finance (Bond and Cummins 2010). As
per these particular conditions, there is an increased need for the stabilization of debt stock by
bringing changes within the payments of dividend or the new issues of share, even though
this will not be affecting the entire valuations of the organization. Also, in addition to this,
there is a need to look at the significant impacts of the pressure on finance over the level of
productivity, growth in the wages, and the rate of employment, and through the implications,
understanding an impact on the level of profitability.

6. 5
However, there can be certain debates in the process for the adjustment of balance sheet in
both of the factual descriptions, tax as well as finance. There can be several contrasting points
as well in the models of pecking- order as well as the models of trade- offs in consideration
with the structure of capital (Halsey 2007). In consideration with the model of trade- off, the
organization of Nokia seems to be having an optimal structure of capital, where trading- off is
done for the benefits of tax related to increase in the level of indebtedness against the costs
with highest possibility related to the greater level of risks of being insolvent. These
particular costs will be including the direct form of costs to re- organize the events involving
a number of risks.
Conclusion
In conclusion, it can be stated that within the current era of globalization, specific conditions
being present, at the aggregate level, may result in the creation of several questions and
doubts regarding the ability of the organization for continuing with the principle of going
concern. Viability and liquidity are two extremely important terms that have a close link with
the financial environment factors (Auerbach 2008). In addition to this, the involvement of
specific conditions may result in compromising the control at internal level of the reporting
systems and the accounting of finance for any organization of Finland, as in this particular
report, Nokia. Several adjustments have been made in the financial report of Nokia that can
be considered as being favourable for the users in the United Kingdom. The transactions and
the adjustments being made have the intention for enabling a shift in the assets or the liability
within the statements of finance that mainly involves the balance sheet.

7. 6
References
Auerbach, AJ. 2008, “Wealth maximization and the cost of capital,” Quarterly Journal of
Economics, 94, pp. 433-436.
Bond, SR and Cummins JG., 2010, “The stock market and investment in the new economy:
some tangible facts and intangible fictions,” Brookings Papers on Economic Activity, pp. 61-
108.
Halsey, RF. 2007, “Financial statement analysis,” McGraw–Hill.
Murphy, JJ. 2009, “Technical analysis of the financial markets,” New York Institute of
finance.
Soffer, R. 2007, “Financial statement analysis: a valuation approach,” Prentice Hall: New
Jersey.

8. 7
Appendix
Income Statement of Nokia, Finland