Notes to the financial statements

1.1 Accounting principles for the consolidated financial statements

2.	Business segments
	2007	Vaisala Measurement Systems	Vaisala Instruments	Vaisala Solutions	Other operations	Eliminations	Group
	EUR million

	Net sales to external customers	82.5	70.3	71.3	0.0	0.0	224.1
	Intragroup sales	0.0	10.4	0.4	0.0	-10.9	0.0
	Net sales	82.5	80.8	71.7	0.0	-10.9	224.1

	Operating profit	12.7	19.9	5.3	-2.6	0.0	35.3

	Financial income and expenses						1.6
	Share of associated companies' net profit						0.0
	Net profit before taxes						37.0
	Income taxes						-11.2
	Net profit for the financial year						25.8

	Assets	40.8	19.8	23.8	140.6	0.0	225.1
	Holdings in associated companies	0.5	0.0	0.0	0.0	0.0	0.5
	Liabilities	6.1	3.9	10.6	28.6	0.0	49.2
	Investments	1.5	2.0	0.5	3.3	0.0	7.3

	Depreciation	2.6	1.8	0.5	3.3	0.0	8.2



	2006	Vaisala Measurement Systems	Vaisala Instruments	Vaisala Solutions	Other operations	Eliminations	Group
	EUR million

	Net sales to external customers	93.2	64.3	63.3	0.0	0.0	220.8
	Intragroup sales	0.0	11.1	0.4	0.0	-11.5	0.0
	Net sales	93.2	75.3	63.7	0.0	-11.5	220.8

	Operating profit	19.8	19.5	5.4	-6.1	0.0	38.6

	Financial income and expenses						-0.4
	Share of associated companies' net profit						0.0
	Net profit before taxes						38.2
	Income taxes						-11.6
	Net profit for the financial year						26.6

	Assets	51.8	19.5	22.1	125.5	0.0	218.8
	Holdings in associated companies	0.4	0.0	0.0	0.0	0.0	0.4
	Liabilities	7.6	3.7	8.8	29.4	0.0	49.4
	Investments	15.1	1.5	1.6	2.3	0.0	20.4

	Depreciation	4.8	1.9	0.7	3.4	0.0	10.8
	Restructuring expenses	0.0	0.0	0.0	0.0	0.0	0.0

3.	Geographical segments
	2007
	EUR million	Net sales, by destination country (1	Net sales, by location country (2	Assets (2	Investments
	Europe	80.7	183.2	186.2	5.4
	of which Finland	9.2	160.7	171.9	5.2
	North America	73.2	81.8	48.8	1.7
	Asia and Australia	60.2	20.7	9.1	0.2
	Africa, South and Central America	10.0			0.0
	Group eliminations		-61.6	-23.3
	Unallocated items			4.7

	Total	224.1	224.1	225.6	7.3

1) Sales to external customers have been presented as net sales by destination country
2) Net sales, assets and investments have been presented by the Group's and associated companies' countries of location .

	2006
	EUR million	Net sales, by destination country (1	Net sales, by location country (2	Assets (2	Investments
	Europe	76.0	175.0	178.4	4.0
	of which Finland	7.5	152.4	163.1	3.8
	North America	79.0	89.0	53.5	16.2
	Asia and Australia	52.3	19.3	8.2	0.2
	Africa, South and Central America	13.6			0.0
	Group eliminations		-62.4	-26.2
	Unallocated items			5.2

	Total	220.8	220.8	219.2	20.4

1) Sales to external customers have been presented as net sales by destination country
2) Net sales, assets and investments have been presented by the Group's and associated companies' countries of location.

4.	Company acquisitions
	There were no acquisitions during the year 2007

	Company acquisitions in 2006
	In January 2006 Vaisala acquired all the shares of the US company Sigmet Corp. The company�s net sales in 2005 were EUR 8.8 million. Sigmet is the world�s leading manufacturer of weather radar systems, signal processors and application software. The company has 10 employees and it is located in Westford, Massachusetts. Vaisala announced in November 2005 its decision to enter the weather radar business. The Sigmet acquisition supports this decision by supplementing Vaisala�s range of products and services. Sigmet processors and application software products will continue to be sold to all weather radar manufacturers and end customers. The products will also be part of Vaisala�s own weather radar system, which is expected to come onto the market in 2007. These synergy benefits as well as acquiring control of the Sigmet brand contributed to the generation of goodwill amounting to EUR 3.7 million. The acquisition price was EUR 16.5 million. Auditing and legal fees of EUR 0.2 million relating to the acquisition, as well as taxes of EUR 0.6 million, have also been included in the purchase price. Sigmet�s net sales in January-December 2006 of EUR 10.0 million and operating profit of EUR 2.9 million have been included in the Vaisala Group.

	Purchase consideration
	EUR million

	Purchase price paid	15.7
	Expenses related to the purchase	0.8
	Total purchase cost	16.5
	Fair value of the acquired net identifiable assets	-12.8
		3.7

	Assets and liabilities arising from	Fair value recognised		Acquiree's carrying amount
	the acquisition are as follows	in combination		before combination
	Tangible fixed assets	0.4		0.1
	Intangible assets
	Software	4.1		0.0
	Orderbaclocg	1.7		0.0
	Trademark	3.2		0.0
	Customer value	1.4		0.0
	Inventories	0.5		0.5
	Receivables	1.1		1.1
	Cash and cash equivalents	0.8		0.8
	Non-interest-bearing liabilities	-0.5		-0.5
	Net identifiable assets	12.8		2.0
	Acquisition cost	16.5
	Goodwill	3.7

	Purchase consideration settled in cash	15.7
	Expenses related to the purchase	0.8
	Cash and cash equivalents in subsidiary acquired	-0.8
	Cash outflow on acquisition	15.7


5.	Long-term project
	Net sales include EUR 8.9 million (2006; EUR 2.9 million ) in revenue recognised for long-term projects. Revenue of EUR 0.8 million recognised for long-term projects in progress was included in the consolidated income statement (2006; EUR 0.1 million). Advance payments of EUR 5.4 million recognised for long-term projects in progress were included in the balance sheet at 31.12.2007 (EUR 2.4 million 31.12.2006).

6.	Other operating income
	EUR million		2007		2006
	Gains on the disposal of fixed assets		0.0		0.1
			0.0		0.1

7.	Depreciation and impairment		2007		2006
	EUR million
	Depreciation by function
	Procurement and production		2.2		4.7
	Sales and marketing		2.4		2.3
	Research and development		0.4		0.4
	Other administration		3.2		3.3
			8.2		10.8

	Goodwill not depreciated as of 1 January 2004. Procurement and production depreciation in 2006 includes depreciation of EUR 1.8 million on the order book of company acquisition Sigmet.


8.	Expenses arising from employee benefits		2007		2006
	EUR million
	Salaries		57.2		57.3
	Social costs		6.8		6.5
	Pensions
	Defined-benefit pension schemes		0.1		-0.2
	Defined-contribution pension schemes		5.4		6.0
	Personnel expenses, total		69.5		69.6


	Group personnel, average during the financial year		2007		2006
	By business unit
	Vaisala Instruments		281		345
	Vaisala Measurement Systems		351		335
	Vaisala Solutions		248		277
	Other operations		234		112
			1,113		1,069
	In Finland		677		656
	Outside Finland		436		414
			1,113		1,069

9.	Research and development expenditure
	The income statement includes research and development expenditure of EUR 23.5 million recognised as an expense in 2007 (EUR 20.6 million in 2006).

10.	Financial income and expenses			2007		2006
	EUR million
	Dividend income			0.0		0.0
	Other interest and financial income			2.0		1.2
	Change in fair value of assets recognised at fair value through profit an loss*			1.5		1.1
	Interest expenses
	Short- and long-term liabilities			-0.3		-0.1
	Finance lease agreements			0.0		0.0
	Other financial expenses			-0.1		-0.1

	Realised and unrealised gains arising from changes in fair value of derivative contracts and hedging activities			1.5		1.2

	Realised and unrealised losses arising from changes in fair value of derivative contracts and hedging activities			-0.4		-0.2
	Foreign exchange gains			2.5		1.3
	Foreign exchange losses			-5.1		-4.9
				1.6		-0.5
	*Change in fair value of income fund investments.

11.	Income taxes			2007		2006
	EUR million
	Tax based on taxable income for the financial year			11.1		12.1
	Taxes from previous financial years			-0.1		0.0
	Change in deferred tax assets and liabilities			0.1		-0.5
				11.2		11.6

	Reconciliation statement between income statement tax item and taxes calculated at the
	tax rate of the Group country of domicile
	EUR million
	Profit before taxes			37.0		38.2

	Taxes calculated at Finnish tax rate			9.6		9.9
	Effect of foreign subsidiaries' tax rates			1.2		1.3
	Non-deductible expenses and tax-free revenue			-0.8		0.0
	Use of previously unrecognised tax losses			0.0		-0.1
	Effect of the group eliminations			0.9		0.2
	Others			0.3		0.3
	Tax in income statement			11.2		11.6

	Effective tax rate			30.2%		30.3%

	Deferred taxes in balance sheet
	EUR million			2007		2006
	Deferred tax assets			4.7		5.2
	Deferred tax liabilities			-0.4		-0.4
	Deferred tax asset, net			4.3		4.8

	Deferred tax is presented net in the balance sheet in respect of those companies between which the option exists in taxation for tax equalisation or which are taxed as one taxpayer.

	Gross change in deferred taxes recognised in balance sheet:			2007		2006
	Deferred taxes 1 Jan			4.9		4.7
	Items recognised in income statement			-0.1		0.5
	Translation differences			-0.4		-0.4
	Deferred tax asset, net			4.3		4.9

	Deferred tax assets of EUR 2.1 million (2006: EUR 2.1 million) related to losses of a German subsidiary have not been recognised in the consolidated financial statements because it is not deemed probable that the tax benefit connected with them will be realised in the near future. The losses are connected with company operations discontinued as unprofitable in previous years. The balance sheet includes EUR 0.8 million (2006 EUR 0.8 million) in deferred tax assets for subsidiaries whose result for the current or previous financial years has been loss-making. The recognition of these tax receivables is based on profit forecasts which indicate that the realisation of the tax assets in question is deemed probable.

	Changes in deferred taxes during 2007
	EUR million	31.12. 2006	Recognised in income statement	Translation differences	Purchased subsidiaries	31.12. 2007
	Deferred tax assets:
	Internal margin of inventories and fixed assets	0.2	0.3	0.0	0.0	0.5
	Employee benefits	0.1	0.0	0.0	0.0	0.1
	Unused tax losses	0.8	0.0	0.0	0.0	0.8
	Timing difference of depreciation on intangible items	3.1	-0.3	-0.3	0.0	2.5
	Other temporary differences	1.1	-0.1	-0.1	0.0	0.9
	Total	5.2	-0.1	-0.4	0.0	4.7

	Deferred tax liabilities
	Timing difference between accounting and taxation	0.4	0.0	0.0	0.0	0.4

	Deferred tax asset, net	4.9	-0.1	-0.4	0.0	4.3


	Changes in deferred taxes during 2006
	EUR million	31.12. 2005	Recognised in income statement	Translation differences	Purchased subsidiaries	31.12. 2006
	Deferred tax assets:
	Internal margin of inventories and fixed assets	0.2	0.0	0.0	0.0	0.2
	Employee benefits	0.1	-0.1	0.0	0.0	0.1
	Unused tax losses	1.0	-0.2	0.0	0.0	0.8
	Timing difference of depreciation on intangible items	3.1	0.3	-0.3	0.0	3.1
	Other temporary differences	0.8	0.4	-0.1	0.0	1.1
	Total	5.3	0.4	-0.4	0.0	5.2

	Deferred tax liabilities
	Timing difference between accounting and taxation	0.5	-0.1	0.0	0.0	0.4

	Deferred tax asset, net	4.7	0.5	-0.4	0.0	4.8

	For the EUR 28.9 million undistributed retained earnings of foreign subsidiaries in 2007 (27.1 million in 2006), no deferred tax liability has been recognised, because the assets have been invested permanently in the countries in question.

12.	Earnings per share
	The undiluted earnings per share figure is calculated by dividing the profit for the financial year belonging to
	the parent company's shareholders by the weighted average number of shares outstanding during the financial year.
					2007		2006
	Profit for financial year belonging to parent company shareholders, EUR million				25.8		26,596
	Weighted average number of shares outstanding, 1000 pcs				18,209		18,168
	Earnings per share, EUR				1.42		1.46

	When calculating the earnings per share adjusted by dilution, the weighted average of the number of shares takes into account the dilution of all potentially diluting shares. The Group has share options (option scheme 2000) that increase the number of diluting shares. The share options have a dilution effect when the subscription price of the options is lower than the fair value of the share. A dilution effect arises from the number of shares that have to be issued without consideration because with the funds obtained from the exercising of the options the Group could not issue the same number of shares at fair value. The fair value of the share is based on the average price of the shares during the financial year.

	Profit for financial year belonging to parent company shareholders, EUR million				25.8		26.6

	Weighted average number of shares outstanding, 1000 pcs				18,209		18,168
	Effect of share options 2000, 1000 pcs				0		7
	Diluted weighted average number of shares, 1000 pcs				18,209		18,174

	Diluted earnings per share, EUR				1.42		1.46

13.	Dividend per share

	For 2006 a dividend of 0.85 euros per share was paid. At the Annual General Meeting to held on 27 March 2008 the payment of a dividend of 0.85 euros per share will be proposed, representing a total dividend of EUR 15.5 million. The proposed dividend has not been recognised as a dividend liability in these financial statements.

14.	Intangible assets
	EUR million				Other
		Intangible			intangible
	Intangible assets	rights	Goodwill	Trademark	assets	Total
	Acquisition cost 1 Jan	20.6	10.0	3.2	2.3	36.1
	Translation difference	-1.0	-2.3	-0.3	-0.1	-3.8
	Increases	0.5	-	-	-	0.5
	Acquisition of subsidiary	0.0	-	-	-	0.0
	Decreases	-0.3	-	-	-	-0.3
	Transfers between items	0.6	-	-	-	0.6
	Acquisition cost 31 Dec	20.4	7.7	2.9	2.2	33.1


	Accumulated depreciation and impairment 1 Jan	13.7	-	-	1.4	15.1
	Translation difference	-0.5	-1.3	-	-0.1	-1.8
	Accumulated depreciation
	of decreases and transfers	-0.3	-	-	-	-0.3
	Depreciation in financial year	2.0	-	-	0.3	2.4
	Accumulated depreciation 31 Dec	14.9	-1.3	0.0	1.7	15.3

	Carrying amount 31 Dec 2007	5.5	8.9	2.9	0.5	17.8
	Carrying amount 31 Dec 2006	6.9	10.0	3.2	0.9	21.0

	Goodwill has not been depreciation as of 1 January 2004.

	Goodwill and trademark impairment testing

	Goodwill is attributed to the segments Vaisala Measurement Systems and Vaisala Solutions. Trademark EUR 2.9 (3.2) million is attributed to the segment Vaisala Measurement Systems. The balance sheet value of goodwill and trademarks is assessed at least once per year to ascertain any possible impairment. Trademark value is assessed by the relief-from-royalty method by comparing the present value of the royalty payments saved with the value of thetrademark. For impairment testing the goodwill is attributed to three different cash generating units, i.e. EUR 4.6 million (2006 EUR 5.1 million) to a North American lightning detection systems business unit, EUR 1.1 million (2006 EUR 1.2 million) to a North American airport weather support systems business unit, and EUR 3.3 million (2006 EUR 3.7 million) to a North American radar systems business unit. The value of the recoverable amount of the cash generating unit is based on value-in-use calculations. The cash flow forecasts used in these calculations are based on actual operating profit and management-approved five-year forecasts. Estimated amounts of sales are based on existing fixed assets and the most important assumptions of the forecasts are the sales distribution for each country and the margin received from the products. Vaisala�s sector-specific capital yield requirement before taxes (WACC) has been used as the discount rate. The components of the yield requirement are the risk-free yield percentage, the market risk premium, the sector-specific beta coefficient as well as the cost and target capital structure of borrowing. The discount rate in 2007 was 15.2% (2006 15.9%). Cash flows after the management-approved forecast period have been calculated using the residual value method, in which the average of operating profits of the last four planning periods have been multiplied by four and discounted using the discount rate described above and the zero-growth percentage. On the basis of impairment testing there is no need for impairment recognitions. On the basis of sensitivity analyses made, reasonable changes to the assumptions used do not result in impairment of the goodwill of North American lightning detection systems business unit or North American radar systems business unit. At the North American airport weather business unit, a weakening of more than 6 per cent in sales or the margin receivable from products would result in an impairment recognition.

15.	Tangible assets					Advance
	EUR million				Other	payments and
		Land and	Buildings and	Machinery	tangible	construction
	Tangible assets	waters	structures	and equipment	assets	in progress	Total
	Acquisition cost 1 Jan	2.7	31.5	47.3	2.5	3.2	87.2
	Translation difference	-0.2	-0.3	-1.1	-0.2	0.0	-1.8
	Increases	-	0.0	2.8	0.4	3.7	7.0
	Decreases	-	0.0	-1.9	0.0	-	-1.9
	Transfers between items	-	0.0	1.8	0.0	-2.5	-0.6
	Acquisition cost 31 Dec	2.6	31.2	49.0	2.7	4.4	89.8


	Accumulated depreciation and impairment 1 Jan	-	13.7	38.5	1.6	-	53.8
	Translation difference	-	-0.1	-0.9	0.0	-	-1.0
	Accumulated depreciation
	of decreases and transfers	-	0.0	-1.9	0.0	-	-1.9
	Depreciation in financial year	-	1.7	3.9	0.3	-	5.8

	Accumulated depreciation 31 Dec	0.0	15.3	39.5	1.9	0.0	56.7

	Carrying amount 31 Dec 2007	2.6	15.9	9.5	0.8	4.4	33.1
	Carrying amount 31 Dec 2006	2.7	17.8	8.9	0.9	3.2	33.5

	The undepreciated acquisition cost of machinery and equipment belonging the tangible fixed assets was EUR 25.4 million on 31.12.2007 (EUR 25.0 million 31.12.2006).

	Tangible fixed assets include the following assets acquired on finance leases:

				Machinery and
	2007 EUR million			equipment
	Acquisition cost			1.2
	Accumulated depreciation			-0.7
	Carrying amount 31 Dec 2007			0.4

				Machinery and
	2006 EUR million			equipment
	Acquisition cost			1.3
	Accumulated depreciation			-0.8
	Carrying amount 31 Dec 2006			0.5

16.	Holdings in associated companies
	EUR million				2007		2006
	Acquisition cost 1 Jan				0.4		0.3
	Share of result				0.0		0.0
	Dividends received
	Increases				0.0		0.1
	Disposals and other decreases
	Translation differences				0.0		0.0
	Associated company investments, total 31 Dec				0.5		0.4

	The carrying amount of associated companies does not include goodwill.

	Information on Group associated companies as well as their combined assets, liabilities, net sales and profit/loss

	Associated companies 2006, EUR million	Domicile	Assets	Liabilities	Net sales	Profit/loss	Holding
	Meteorage SA, France	Cedex	1.5	1.0	1.6	0.1	35 %
	The information presented in the table are based on the latest available financial statements.

	Associated companies 2005, EUR million
	Meteorage SA, France	Cedex	1.4	0.5	1.6	0.1	35 %

	The information presented in the table are based on the latest available financial statements. Associated company Meteorage SA maintains lightning detection networks and sales information related to lightning detection.

17.	Other financial assets

	Other financial assets include an insubstantial quantity of unquoted shares, which have been valued at acquisition cost as well as lease guarantee deposits.

18.	Receivables (long-term)	2007		2006
	EUR million	Balance sheet values	Fair values	Balance sheet values	Fair values
	Loan receivables	0.0	0.0	0.0	0.0
	Other receivables *	0.1	0.1	0.2	0.2
		0.1	0.1	0.2	0.2

	*Fair values have been calculated by discounting the future cash flows of every significant receivable at the market interest rate on the closing date.

19.	Inventories				2007		2006
	EUR million
	Materials and supplies				7.8		9.4
	Work in progress				4.4		2.8
	Finished goods				3.8		5.3
					16.1		17.6
	In the financial year expense of EUR 1.37million was recorded, equivalent to the amount by which the carrying amount of inventories was reduced to correspond with their net realisable value (EUR 1.3 million in 2006).

20.	Trade receivables and other receivables				2007		2006
	EUR million
	Trade receivables				39.4		43.1
	Loan receivables				0.0		0.0
	Advanced paid				0.9		0.8
	Other receivables				2.3		3.3
	Receivables from long-term project customers				6.6		3.3
	Value-added tax receivables				2.9		1.6
	Other prepaid expenses and accrued income				1.2		1.7
					53.4		53.9
	The fair values of trade and other receivables essentially correspond to their carrying amounts. Other receivables principally include allocations of maintenance and data sales contracts. Other prepaid expenses and accrued income include interest and exchange rate allocations as well as miscellaneous allocations.

	Age analysis for the trade receivables	2007	provision for impairment	Net 2007	2006	provision for impairment	Net 2006
	M�
	invoices not due	5.1		5.1	5.3		5.3
	due less than 30 days	17.4		17.4	24.5		24.5
	due 31- 90 days	14.0		14.0	8.7		8.7
	due over 90 days	3.2	0.3	2.9	5.0	0.5	4.6
	Total	39.7	0.3	39.4	43.6	0.5	43.1

	The carrying amounts of group's trade and other			2007			2006
	receivables are denominated in the following curencies:
	EUR million
	EUR			17.2			17.3
	USD			16.1			19.9
	GBP			3.4			2.6
	JPY			1.7			2.0
	AUD			0.4			0.5
	CNY			0.0			0.1
	Other			0.6			0.7
				39.4			43.1

21.	Financial assets recognised at fair value through profit and loss				2007		2006
	EUR million
	Income fund investments				42.6		41.2
	Derivative contracts				0.4		0.2

	Fixed income fund investments are publicly quoted securities whose fair value is determined in the market and whose liquidity is good. Investments are directed at euro-denominated fixed income funds of banks that are a good credit risk and under Finnish supervision. A change in fair value is recognised in the income statement in �financial income and expenses�. A change in interest rate of 1 per cent upwards our downwards would correspondingly influence the value of the investments by around EUR 63,900 (94,800 in 2006).

22.	Cash and cash equivalents
	EUR million				2007		2006
	Cash and bank deposits				24.8		21.2
	Certificates of deposit