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Last Update:
March 1, 2012
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12 – Intangible assets

The goodwill of BASF is allocated to 32 cash-generating units which are defined either on the basis of business units or on a higher level.

The annual impairment testing took place in the fourth quarter of the year on the basis of the cash-generating units. The recoverable amount was determined based on the value-in-use; this was done using five-year plans and their respective cash flows that had been approved by corporate management. For the time period after the fifth year, a terminal value is calculated using a forward projection from the last detailed planning year. In accordance with IAS 36, the applied growth rates do not factor in capacity-increasing investments for which no cash outflows have taken place. The planning is based on experience, current performance and best possible corporate management estimates on the future development of individual parameters such as raw material prices and profit margins. Market assumptions regarding, for example, economic development and market growth are included based on external macroeconomic sources as well as sources specific to the industry.

The weighted average cost of capital rate after tax required for the impairment tests is determined using the Capital Asset Pricing Model. It comprises a risk-free rate, the market risk premium and the spread for the credit risk. The calculation also takes into account the capital structure and the volatility of the BASF share in comparison to the capital market (beta) as well as the average tax rate of each cash-generating unit. The impairment tests were conducted assuming a weighted average cost of capital rate between 7.03% and 7.27% (2010: 6.96% to 7.28%). For the cash generating unit Exploration & Production in the Oil & Gas division, a cost of capital rate of 8.49% was applied, which takes country-specific risks into account.

In determining the value-in-use of a cash-generating unit, BASF anticipates that a reasonably possible change in key assumptions will not lead to the carrying amount exceeding its respective recoverable amount.

The impairment tests in the financial year 2011 resulted in an overall impairment loss on goodwill of €11 million. These impairments occurred in relation to the planned sale of the European decorative paints business and were allocated to the Coatings division in the Functional Solutions segment.

In 2010, the impairment tests resulted in no impairment losses on goodwill.

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Goodwill of cash-generating units (million €)

 

2011

 

2010

1

Growth rates of impairment tests to determine terminal values according to IAS 36.

Cash-generating unit

Goodwill

Growth rates1

 

Goodwill

Growth rates1

Crop Protection division

1,410

2.0%

 

1,394

1.0%

Catalysts division

1,322

2.0%

 

1,342

2.0%

Construction Chemicals division

698

1.5%

 

685

1.5%

Personal Care Ingredients in the Care Chemicals division

461

2.0%

 

465

2.0%

Exploration & Production in the Oil & Gas division

389

0.0%

 

389

0.0%

Pigments in the Dispersions & Pigments division

371

2.0%

 

360

2.0%

Other 26 cash-generating units

1,311

0.0–2.0%

 

1,238

0.0–2.0%

Goodwill as of December 31

5,962

 

 

5,873

 

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Development of intangible assets 2011 (million €)

 

 

2

Including licenses on such rights and values

 

Distribution, supply and similar rights

Product rights, licenses and trademarks

Know-how,
patents and production technology

Internally generated intangible assets

Other rights and values2

Goodwill

Total

Cost

 

 

 

 

 

 

 

Balance as of
January 1, 2011

4,791

1,699

1,967

83

819

5,873

15,232

Changes in scope of consolidation

8

(2)

6

Additions

77

155

72

17

74

52

447

Disposals

(113)

(195)

(55)

(22)

(238)

(15)

(638)

Transfers

36

(28)

5

4

(46)

10

(19)

Exchange differences

30

(1)

13

(1)

2

42

85

Balance as of
December 31, 2011

4,829

1,628

2,002

81

611

5,962

15,113

Accumulated valuation adjustments

 

 

 

 

 

 

 

Balance as of
January 1, 2011

1,140

693

635

47

472

2,987

Changes in scope of consolidation

(2)

(2)

Additions

369

132

175

16

86

11

789

Disposals

(113)

(191)

(44)

(17)

(237)

(11)

(613)

Transfers

29

(24)

3

(1)

7

Exchange differences

21

(4)

7

2

26

Balance as of
December 31, 2011

1,446

604

773

49

322

3,194

Net carrying amount as of December 31, 2011

3,383

1,024

1,229

32

289

5,962

11,919

In connection with the acquisition of inge watertechnologies AG and inge GmbH, in 2011 there were additions to intangible assets of €21 million and to goodwill of €50 million. Additions to intangible assets in the amount of €70 million resulted from the acquisition of business activities in the area of chemical injection and cavity filling products from Hock.

Concessions for oil and gas production under the category product rights, licenses and trademarks with a net carrying amount of €498 million in 2011 (2010: €350 million) authorize the exploration and production of oil and gas in certain areas. To a limited extent, these rights entail obligations to deliver a portion of the produced amount to local companies. At the end of the term of a concession, the rights are returned. The additions in 2011 primarily concerned the acquisition of concessions for oil and gas production in the Norwegian North Sea.

Reclassifications under goodwill resulted from the adjustment of the preliminary purchase price allocation related to the acquisition of Cognis.

The market value adjustments of emission rights as of the balance sheet day which are recognized in equity are reported in the column “other rights and values” under “transfers.”

Disposals primarily concerned the derecognition of fully amortized intangible assets.

In 2011, impairments of €114 million were recognized, which included €11 million in goodwill. Impairments are reported under other operating expenses. A significant portion of the impairment occurred in relation to the planned sale of the European decorative paints business.

There were no material reversals of impairments in 2011.

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Development of intangible assets 2010 (million €)

 

 

1

Including licenses on such rights and values

 

Distribution, supply and similar rights

Product rights, licenses and trademarks

Know-how, patents and production technology

Internally generated intangible assets

Other rights and values1

Goodwill

Total

Cost

 

 

 

 

 

 

 

Balance as of
January 1, 2010

3,822

1,666

1,761

128

857

5,069

13,303

Changes in scope of consolidation

34

(39)

2

(3)

Additions

809

93

434

15

70

589

2,010

Disposals

(71)

(90)

(184)

(55)

(190)

(590)

Transfers

(50)

12

(58)

(7)

45

(22)

(80)

Exchange differences

247

18

53

2

35

237

592

Balance as of
December 31, 2010

4,791

1,699

1,967

83

819

5,873

15,232

Accumulated valuation adjustments

 

 

 

 

 

 

 

Balance as of
January 1, 2010

881

603

723

87

560

2,854

Changes in scope of consolidation

(6)

(2)

(63)

(1)

(72)

Additions

313

136

167

17

70

703

Disposals

(69)

(86)

(183)

(55)

(185)

(578)

Transfers

(32)

30

(28)

(3)

2

(31)

Exchange differences

53

12

19

1

26

111

Balance as of
December 31, 2010

1,140

693

635

47

472

2,987

Net carrying amount as of December 31, 2010

3,651

1,006

1,332

36

347

5,873

12,245

In connection with the Cognis acquisition and its preliminary purchase price allocation, in 2010 there were additions of €1,301 million for production technologies, brands, customer relationships and other intangible assets; goodwill amounted to €589 million.

In 2010, impairments of €74 million were recognized. A significant portion of the impairment losses related to concessions for oil and gas production in the British and Norwegian North Sea as well as to intangible assets from the Ciba acquisition in 2009.

The amounts recorded under transfers resulted primarily from the reclassification of intangible assets to assets of disposal groups.

The market value adjustments of emission rights as of the balance sheet date are included in the line item transfers in the column “other rights and values.”

Changes in the scope of consolidation related primarily to N.E. Chemcat Corporation, Tokyo, Japan, which was proportionally consolidated for the first time, and to the deconsolidation of BASF Fuel Cell, Frankfurt am Main, Germany.

There were no material reversals of impairments in 2010.

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