Last Update:
March 1, 2012

1.2 – Accounting policies


Goodwill is only written down if there is an impairment. Impairment testing takes place annually or if there is an indication of an impairment. The goodwill impairment test is based on cash-generating units and compares the recoverable amount of the unit with the respective carrying amount. At BASF, cash-generating units are predominantly the business units, in individual cases, the divisions. The recoverable amount is the higher of fair value less costs to sell and the value-in-use. Value-in-use is generally determined using the discounted cash flow method. Impairment testing relies upon the cash-generating unit’s long-term earnings forecasts, which are based on economic trends.

The weighted average cost of capital (WACC) based on the Capital Asset Pricing Model plays an important role in impairment testing. The WACC is made up of the risk-free interest rate, the country-specific tax rates, the beta of the BASF share as well as assumptions as to the spread for credit risk and the market risk premium for the cost of equity. Additional important assumptions are the forecasts for the detailed planning period and the terminal growth rates used.

If the impairment loss is equal to or exceeds the carrying amount of goodwill, the goodwill is written off completely. Any impairment loss left over is allocated to the remaining assets of the cash-generating unit. Goodwill impairment losses are reported under other operating expenses.

Acquired intangible assets are valued at cost less scheduled straight-line amortization, except for goodwill and intangible assets with indefinite useful lives. The useful life is determined using the period of the underlying contract and the period of time over which the intangible asset is expected to be used. Impairment losses are recognized if the recoverable amount of the asset is permanently lower than the carrying amount. The recoverable amount is the higher of net realizable value and value-in-use. Impairment losses are reversed if the reasons for the impairment no longer exist.

Depending on the type of intangible asset, the amortization expense is recorded as production cost, cost of sales, research and development expenses or other operating expenses.

Intangible assets with indefinite useful lives are trade names and trademarks that have been acquired as part of acquisitions. They are tested for impairment annually.

Internally generated intangible assets primarily comprise internally developed software. Such software, as well as other internally generated assets for internal use, are valued at cost and amortized over their useful lives. Impairments are recorded if the carrying amount of an asset exceeds the recoverable amount.

In addition to those costs directly attributable to the asset, costs of internally generated intangible assets also include an appropriate allocation of overhead cost. Borrowing costs are capitalized to the extent that they are material and relate to the period over which the asset is generated.

The weighted-average useful lives of intangible assets amounted to:

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Average amortization in years





Distribution, supply and similar rights



Product rights, licenses and trademarks



Know-how, patents and production technologies



Internally generated intangible assets



Other rights and values



The estimated useful life and amortization method chosen are based on historical values, plans and estimates. These estimates also consider the period and distribution of future cash inflows. The amortization methods, useful lives and residual values are reviewed at each balance sheet date.

Emission rights: Emission right certificates granted free-of-charge by the German Emissions Trading Authority (Deutsche Emissionshandelsstelle) or a similar authority in other European countries, are recognized at fair value at the time they are credited to the electronic register run by the relevant governmental authority. Purchased emission rights are recorded at cost. Subsequently, they are measured at fair value, up to a maximum of acquisition cost. If the fair value is lower than the carrying amount on the balance sheet date, the emission rights are written down.

Property, plant and equipment are carried at acquisition or production cost less scheduled depreciation over their estimated useful lives. The revaluation method is not used. Low-value assets are fully written off in the year of acquisition and are shown as disposals.

The cost of self-constructed plants includes direct costs, appropriate allocations of material and manufacturing costs, and a share of the general administrative costs of the divisions associated with the construction of the plants. Borrowing costs that are incurred during the period of construction are capitalized. For companies in Germany, borrowing costs were capitalized at 4.5% whereas country-specific rates were used for Group companies outside Germany.

Expenses related to scheduled maintenance turnarounds of large-scale plants are capitalized as part of the asset and depreciated using the straight-line method over the period until the next planned turnaround. The costs for the exchange of components are recognized as assets when an additional future benefit is expected. The book value of the exchanged components is derecognized. The costs for maintenance and repair as part of normal business operations are recognized as an expense.

Both movable and immovable fixed assets are usually depreciated using the straight-line method. The weighted-average depreciation periods used were as follows:

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Average depreciation in years




Buildings and structural installations



Machinery and technical equipment



Long-distance natural gas pipelines



Factory, office equipment and other facilities



The estimated useful life and depreciation method chosen are based on historical values, plans and estimates. These estimates also consider the period and distribution of future cash inflows. The depreciation methods, useful lives and residual values are reviewed at each balance sheet date. The increase in the weighted-average depreciation period of buildings and structural installations in 2011 is due to acquisitions that took place in 2009 and 2010.

Impairment losses are recognized if the recoverable amount of the asset is lower than the carrying amount. The evaluation is based on the present value of the expected future cash flows. An impairment loss is recorded for the difference between the carrying amount and the value of discounted future cash flows. Impairment losses are reversed if the reasons for the impairment no longer exist.

Investment properties held to realize capital gains or rental income are immaterial. They are valued at the lower of acquisition cost less scheduled depreciation or fair value.

Leases: In accordance with IAS 17, leasing contracts are classified as either finance or operating leases. Assets which are subject to operating leases are not capitalized. Lease payments are charged to income in the year they are incurred.

A lease is classified as a finance lease if it substantially transfers all of the risks and rewards related to the leased asset. Assets subject to a finance lease are recorded at the present value of the minimum lease payments. A leasing liability is recorded in the same amount. The periodic lease payments are divided into principal and interest components. The principal component reduces the outstanding liability, while the interest component represents an interest expense. Depreciation takes place over the shorter of the useful life of the asset or the period of the lease.

BASF acts as a lessor for finance leases in a minor capacity only. Leases can be embedded within other contracts. If IFRS requires separation of an embedded lease, then it is recorded separately from its host contract and each component of the contract is carried and measured in accordance with the applicable regulations.

Borrowing costs: If the production phase of intangible assets or the construction phase of property, plant and equipment extends beyond a period of one year, the interest incurred on borrowed capital directly attributable to that asset is capitalized as part of the cost of that asset. Borrowing costs are capitalized up to the date the asset is ready for its intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.

Investment subsidies: Government grants related to the acquisition or construction of property, plant and equipment reduce the acquisition or construction cost of the respective assets. Other government grants or government assistance are treated as deferred income and recognized as income over the underlying period.

Investments in companies accounted for using the equity method: The carrying amounts of these companies are adjusted annually based on the pro rata share of income, dividends and other changes in equity. Should there be indications of a permanent reduction in the value of an investment, an impairment expense is recognized in the income statement.

Inventories are carried at cost. If the listed, market or fair value of the sales product which forms the basis for the net realizable value is lower, then this is applied and an impairment charge is recorded. The net realizable value is based on the estimated selling price in the ordinary course of business less the estimated costs of completion and costs necessary to make the sale.

Production costs include, in addition to direct costs, an appropriate allocation of production overhead costs based on normal utilization rates of the production plants, to the extent they are related to the production process. In addition, pensions, social services and voluntary social benefits are included as well as allocations for administrative costs, provided they relate to the production. Borrowing costs are not included in production costs.

Value adjustments on inventories result from price declines in sales products, lack of saleability and the age of inventory.

IAS 2 “Inventories” does not apply to commodity brokertraders.Accordingly, inventories held exclusively for trading purposes are to be measured at fair value. Changes in fair value are recognized in income.

Deferred taxes: Deferred taxes are recorded for temporary differences between the carrying amount of assets and liabilities in the financial statements and the carrying amounts for tax purposes as well as for tax loss carryforwards and unused tax credits. This also comprises temporary differences arising from business combinations, with the exception of goodwill. Deferred tax assets and liabilities are calculated according to country-specific tax rates. Any changes to the tax rate enacted or substantively enacted on or before the balance sheet date are taken into consideration. The tax rate for corporations based in Germany is 29%. Deferred tax assets are offset against deferred tax liabilities in so far as they are related to the same taxation authority. Surpluses of deferred tax assets are only recognized to the extent that the tax benefits are likely to be realized. The valuation of deferred tax assets depends on the estimated probability of a reversal of the temporary differences and the ability to utilize tax loss carryforwards and unused tax credits. This depends on whether future taxable profits will exist during the period in which temporary differences are reversed and in which tax loss carryforwards and unused tax credits can be claimed. Based on experience and the expected development of taxable income, it is assumed that the benefit of deferred tax assets recognized will be realized. The valuation of deferred tax assets is based on internal projections of the future earnings of the Group company.

Changes made to deferred tax assets or liabilities are recorded as deferred tax expense or income as long as the transaction or event on which they are based is not recognized directly in equity. Deferred tax assets and liabilities for those effects which have been recognized in equity are also recorded outside profit and loss.

No deferred tax liabilities are recognized for differences between the proportional IFRS equity and the taxable book value of participations when a reversal of these differences is not expected in the foreseeable future. Deferred tax liabilities are created for dividend distributions which are planned for the following year insofar as they lead to a reversal of the temporary differences.

Financial instruments

Financial assets and financial liabilities are recorded on the balance sheet when the BASF Group becomes a party to a financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or when the financial asset, with all risks and rewards of ownership, is transferred. Financial liabilities are derecognized when the contractual obligation expires, is discharged or cancelled. Standard purchases and sales of financial instruments are accounted for using the settlement date, and in precious metals trading using the day of trading.

The fair value of a financial instrument is the amount for which an instrument could be exchanged in an arm’s length transaction between knowledgeable, willing parties. When pricing on an active market is available, for example on a stock exchange, this price is used. In other cases, a valuation is based on internal valuation models using current market parameters or external valuations, for example, from banks. These internal valuations predominantly use the net present value method and option pricing models.

If there is objective evidence of a permanent impairment of a financial instrument that is not measured at fair value and recognized through profit or loss, an impairment charge is taken.

If the reason for the impairment of loans and receivables as well as held-to-maturity financial instruments no longer exists, the impairment is reversed up to the amortized cost and recognized as income. Impairment losses on financial instruments are booked separately.

Financial assets and liabilities are divided into the following valuation categories:

  • Financial assets and liabilities that are measured at fair value and recognized through profit or loss consist of derivatives and other trading instruments. At BASF, this valuation category only includes derivatives. Derivatives are reported in miscellaneous assets or other liabilities. BASF does not make use of the fair value option under IAS 39. The calculation of fair values is based on market parameters or valuation methods based on such parameters. In some exceptional cases, the fair value is calculated using parameters which are not observable on the market.
  • Loans and receivables comprise financial assets with fixed or determinable payments, which are not quoted on an active market and are not derivatives or classified as available-for-sale. Included in this category are trade accounts receivable, loans classified under other financial assets as well as other receivables and loans classified under other receivables and miscellaneous long-term assets. Initial valuation is done at fair value, which generally matches the nominal value of the receivable or loan. Interest-free and low-interest long-term loans and receivables are recorded at present value. Subsequent valuations are generally made at amortized cost, under consideration of the effective interest method. If there is objective evidence for an impairment of a receivable or loan, an individual valuation adjustment is made. When assessing the need for a valuation adjustment, regional and sector-specific conditions are considered. In addition, use is made of internal and external ratings as well as the assessments of debt collection agencies and credit insurers, when available. A substantial proportion of receivables is covered by credit insurance. Bank guarantees and letters of credit are used to a limited extent. Only those receivables which are not covered by insurance or other collateral are written down. The value adjustments for receivables whose insurance includes a deductible cannot exceed the amount of the deductible. Valuation adjustments are based on historical values on customer solvency and the age, period overdue, insurance policies and customer-specific risks. In addition, an impairment loss occurs when the contractual conditions which form the basis for the receivable or loan need to be changed through renegotiation in such a way that the present value of the future cash flows decreases. If, in a subsequent period, the amount of the valuation adjustment decreases and the decrease can be related objectively to an event occurring after the valuation adjustment was recognized, the previously recognized valuation adjustment loss is to be reversed through profit or loss. Reversals of value adjustments may not exceed amortized cost. Receivables and loans are written off when their uncollectibility is finally determined. Receivables for which no objective indication for an impairment exists may be impaired, if necessary, based on historical default rates. In addition, valuation adjustments on receivables for transfer risks in certain countries are established.
  • Held-to-maturity financial assets consist of non-derivative financial assets with fixed or determinable payments and a fixed term, for which there is the ability and intent to hold until maturity, and which do not fall under other valuation categories. Initial valuation is made at fair value, which, in most cases, matches the nominal value. Subsequently, measurement is carried out at amortized cost, under consideration of the effective interest method.

    For BASF, there are no material financial assets that fall under this category.
  • Available-for-sale financial assets comprise financial assets which are not derivatives and do not fall under any of the previously stated valuation categories. This valuation category comprises participations not accounted for using the equity method and long-term securities reported under the item “other financial assets.” Securities contained in the item ‘marketable securities’ also fall under this valuation category. Initial valuation is carried out at fair value. Changes in fair value are booked to equity under the item other comprehensive income and are only recorded in the income statement when the assets are disposed of or have been impaired. Subsequent reversals are not recognized in the income statement, but rather directly in equity (other comprehensive income). Reversals to the amount of the original value adjustment are recognized in income in the case of debt instruments; reversals above this amount are recognized in equity. If the fair value of available-for-sale financial assets drops below acquisition costs, objective evidence is needed to determine whether the asset should be impaired. Objective evidence is said to exist when the decrease is ongoing or significant. The fair values are determined using market prices. Participations whose fair value cannot be reliably determined are carried at amortized cost and are written down in the case of an impairment. When determining the value of these participations, the acquisition costs constitute the best estimate of their fair value. This category of participations includes investments in affiliated companies, investments in associated companies and shares in other participations, insofar as these shares are not publicly traded. There are no plans for a large-scale sale of these participations.
  • Financial liabilities which are not derivatives are initially measured at fair value. This normally corresponds to the amount payable. Subsequent measurement is carried out at amortized cost, using the effective interest method.
  • Cash and cash equivalents consist primarily of cash on hand and bank balances.

There were no reclassifications between the valuation categories in 2011 and 2010.


Revenue from interest-bearing assets is recognized on the outstanding receivables at the balance sheet date using interest rates calculated by means of the effective interest method. Dividends from participations not accounted for under the equity method are recognized when the shareholders’ right to receive payment is established.

Derivative financial instruments can be embedded within other contracts. If IFRS requires separation, then the embedded derivative is recorded separately from its host contract and shown at fair value.

Financial guarantees of the BASF Group are contracts that require compensation payments to be made to the guarantee holder if a debtor fails to make payment when due under terms of the financial guarantee. Financial guarantees are measured at fair value upon initial recognition. In subsequent periods, financial guarantees are carried at the higher of amortized cost or the best estimate of the present obligation on the financial reporting date.

Cash flow hedge accounting is applied for selected deals to hedge future transactions. The effective portion of the change in fair value of the derivative is thereby recognized directly in equity under other comprehensive income, taking deferred taxes into account. The ineffective portion is recognized immediately in profit or loss. In the case of future transactions that will lead to a non-financial asset or a non-financial debt, the cumulative fair value changes in equity are either charged against the acquisition costs on initial recognition or recognized in profit or loss in the reporting period in which the hedged item is recorded in the income statement. For hedges based on financial assets or debts, the cumulative fair value changes of the hedges are transferred from equity to the income statement in the reporting period in which the hedged item is recognized in the income statement. The maturity of the hedging instrument is based upon the effective date of the future transaction.

To hedge the translation risk from the net investment in a foreign subsidiary, BASF uses hedge accounting in individual cases (hedge of a net investment in a foreign operation). The effective portion of the hedge is recognized in equity. If the foreign operation is disposed of, these amounts are reclassified to profit and loss. The ineffective portion of the hedge is immediately recognized in profit and loss.

When fair value hedges are used, the asset or liability is hedged against the risk of a change in fair value. Here changes in the market value of the derivative financial instruments are recognized in the income statement. Furthermore, the book value of the underlying transaction is adjusted by the profit or loss resulting from the hedged risk and recognized in the income statement.

The derivatives employed by BASF for hedging purposes are effective hedges from an economic point of view. Changes in the fair value of the derivatives almost completely offset the changes in the value of the underlying contracts.


Provisions for pensions and similar obligations: Provisions for pensions are based on actuarial computations made according to the projected unit credit method, which applies, among others, the following valuation parameters: future developments in compensation, pensions and inflation, the expected performance of plan assets, employee turnover and the life expectancy of beneficiaries. The resulting obligations are discounted by reference to market yields at the balance sheet date on high quality corporate fixed rate bonds with an AA rating. Actuarial gains and losses are recognized directly in retained earnings.

They result from the variance between the actual development in pension obligations and pension assets and the assumptions made at the beginning of the year as well as the updating of actuarial assumptions.

Similar obligations, especially those arising from commitments in North America to pay the healthcare costs and life insurance premiums of retired staff and their dependents, are included in pension provisions.

The calculation of pension provisions is based on actuarial reports.

Other provisions: Other provisions are recognized when there is a present obligation as a result of a past event and when there is a probable outflow of resources whose amount can be reliably estimated. Provisions are recognized at the probable settlement value.

Provisions for German trade income tax, German corporate income tax and similar income taxes are determined and recognized in the amount necessary to meet the expected payment obligations, less any prepayments that have been made. Other taxes assessed are appropriately considered.

Provisions are established for certain environmental protection measures and risks if the measures are considered likely as a result of present legal or constructive obligations arising from a past event. Provisions for restoration obligations primarily concern the filling of wells and the removal of production facilities upon the termination of production in the Oil & Gas segment. The present value of the obligation increases the cost of the respective asset when it is initially recognized.

Other provisions also include expected charges for the rehabilitation of contaminated sites, the recultivation of landfills, the removal of environmental contamination at existing production or storage facilities and other similar measures. If BASF is the only responsible party that can be identified, the provision covers the entire expected claim. At sites operated together with one or more partners, the provision covers only BASF’s share of the expected claim. The determination of the amount of the provision is based on the available technical information on the site, the technology used, legal regulations, and official obligations.

The estimation of future costs is subject to uncertainties. This refers in particular to rehabilitation measures that involve several parties and longer time periods.

Provisions are recognized for expected severance payments or similar personnel expenses as well as for demolition expenses and other charges related to the closing down of operations that have been planned and publicly announced by management.

Provisions for long-service and anniversary bonuses are predominantly calculated based on actuarial principles. For contracts signed under the early retirement programs, provisions for the supplemental payments are recognized in their full amount and the wage and salary payments due during the passive phase of agreements are accrued in installments.

Other provisions also cover risks resulting from legal disputes and proceedings. In order to determine the amount of the provisions, the facts related to each case, the size of the claim, claims awarded in similar cases and independent expert advice are considered along with assumptions regarding the probability of a successful claim and the range of possible claims. The actual costs can deviate from these estimates.

The probable amount required to settle long-term provisions is discounted if the effect of discounting is material. In this case, the provision is recognized at present value. Assumptions have to be made in determining the discount rate to be used in calculating long-term provisions. Financing costs related to the compounding of provisions in subsequent periods are shown in other financial results.

Other accounting policies

Revenue recognition: Revenues from the sale of goods or the rendering of services are recognized upon the transfer of ownership and risk to the buyer. They are valued at the fair value of the consideration received. Sales are reported without sales tax. Expected rebates and other trade discounts are either accrued or deducted. Provisions are made to cover probable risks related to the return of products, estimated future warranty obligations and other claims.

Revenues from the sale of precious metals to industrial customers as well as some revenues from natural gas trading are recognized at the time of shipment and the corresponding purchase price is recorded at cost of sales. In the trading of precious metals and their derivatives with broker-traders, where as a rule there is no physical delivery, revenues are recorded on a net basis. Revenues from the natural gas trading activities of a project company consolidated by BASF are also recorded on a net basis.

In certain cases, customer acceptance is required on delivery. In these cases, revenue is recognized after customer acceptance occurs.

Payments relating to the sale or licensing of technologies or technological expertise are recognized in income according to the contractually agreed transfer of the rights and obligations associated with those technologies.

Foreign currency transactions: The cost of assets acquired in foreign currencies and revenue from sales in foreign currencies are recorded at the exchange rate on the date of the transaction. Foreign currency receivables and liabilities are valued at the exchange rates on the balance sheet date. Foreign exchange gains or losses resulting from the conversion of assets and liabilities are reported as other operating expenses or other operating income under other financial income or expenses; for available-for-sale financial assets, they are reported in other comprehensive income.

Oil and gas exploration and production: Exploration and development expenditures are accounted for using the successful efforts method. Under this method, costs of successful exploratory drilling as well as successful and dry development wells are capitalized as property, plant and equipment.

An exploration well is a well located outside of an area with proven oil and gas reserves. A development well is a well which is drilled to the depth of a reservoir of oil or gas within an area with proven reserves.

Production costs include all costs incurred to operate, repair and maintain the wells as well as the associated plant and ancillary production equipment, including the associated depreciation.

Exploration expenses relate exclusively to the Oil & Gas segment and include all costs related to areas with unproven oil or gas deposits. Included here are costs for the exploration of areas with possible oil or gas deposits, among others. Costs for geological and geophysical investigations are always reported under exploration expenses. In addition, this item includes the impairment charges of exploration wells which did not encounter proven reserves. Scheduled depreciation of successful exploratory drilling is reported under cost of sales.

Exploratory drilling is generally reported under construction in progress until its success can be determined. When the presence of hydrocarbons is proven such that the economic development of the field is probable, the costs remain capitalized as suspended well costs. At least once a year, all suspended wells are assessed from an economic, technical and strategic viewpoint to see if development is still intended. If this is not the case, the well in question is written off. When reserves are proven and the development of the field begins, the exploration wells are reclassified as machinery and technical equipment.

An Exploration and Production Sharing Agreement (EPSA) is a type of contract in crude oil and gas concessions whereby the expenses and profits from the exploration, development and production phases are divided between the state and one or more exploration and production companies using defined keys. The revenue BASF is entitled to under such contracts is reported as sales. Negotiations to convert the Libya concession agreements into EPSA-IV agreements are suspended due to the political situation.

Provisions for required restoration obligations associated with oil and gas operations concern the filling of wells and the removal of production facilities upon the termination of production. When the obligation arises, initial measurement is conducted at the present value of the future restoration costs. An asset of the same value is capitalized as part of the carrying amount of the plant concerned and together they are depreciated. Interest on the provision is accrued annually until the time of the planned restoration.

The unit of production method is used to depreciate assets from oil and gas exploration at the field or reservoir level. In principle, depreciation is calculated on the basis of proven, developed reserves in relation to the production of the period.

In the natural gas trading business, long-distance natural gas pipelines are depreciated using the straight-line method. The weighted-average depreciation period amounted to 25 years in 2011 (2010: 25 years). The intangible asset from the marketing contract for natural gas from the Yuzhno Russkoye natural gas field is amortized based on BASF’s share of the produced and distributed volumes.

Intangible assets in the Oil & Gas segment relate primarily to exploration and drilling rights. During the exploration phase, these are not subject to scheduled amortization but are tested for impairment annually. When economic success is determined, the rights are amortized in accordance with the unit of production method.

Assets and liabilities of disposal groups: These comprise those assets and directly associated liabilities shown on the balance sheet whose sale in the context of a single transaction is highly probable. The assets and liabilities of disposal groups are recognized at the lower of the sum of their carrying amounts or fair value less costs to sell. Scheduled depreciation of long-term assets is suspended.

Use of estimates in the preparation of the Consolidated Financial Statements

The carrying amount of assets, liabilities and provisions, contingent liabilities and other financial obligations in the Consolidated Financial Statements depends on the use of estimates and assumptions. Specific estimates or assumptions used in individual accounting or valuation methods are disclosed in their respective sections. They are based on the circumstances and estimates on the balance sheet date and affect the reported amounts of income and expenses during the reporting periods. These assumptions affect the determination of useful lives of property, plant and equipment and intangible assets, the measurement of provisions, the carrying amount of investments, and other similar valuations of assets and obligations. Although uncertainty is appropriately incorporated in the valuation factors, actual results can differ from these estimates.

In business combinations, the acquired assets and liabilities are recognized at fair value on the date the acquirer effectively obtains control. The determination of fair value of the acquired intangible assets, property, plant and equipment and liabilities assumed at the date of exchange as well as the useful lives of the acquired intangible assets and property, plant and equipment is based on assumptions. The measurement is largely based on projected cash flows. The actual cash flows can differ significantly from the cash flows used to determine the fair values. The purchase price allocation of material acquisitions is based on external appraisals. When businesses are acquired, measurements are based on the information available on the acquisition date.

Impairment tests on assets are required whenever certain triggering events indicate that an impairment may be necessary. External triggering events include, for example, changes in customer industries, technologies used and economic downturns. Internal triggering events for an impairment include lower product profitability, planned restructuring measures or physical damage to assets. Intangible assets with indefinite useful lives are subject to an annual impairment test.

Impairment tests are based on a comparison of the carrying amount and the recoverable amount. The recoverable amount is the higher of net realizable value and value-in-use. The determination of value-in-use requires the estimation and discounting of cash flows. The estimation of cash flows and the assumptions used consider all information available on the respective balance sheet date on the future development of the operating business. Actual future developments may vary.

IFRSs and IFRICs not yet to be considered in the preparation of the consolidated financial statements

The effects on the BASF Group of the IFRSs and IFRICs not yet in force or not yet endorsed by the European Union in the fiscal year 2011 were reviewed:

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Published by IASB

Implementation date stipulated by IASB

Endorsed by the European Union

Anticipated impact on BASF

IFRS 9 Financial Instruments

Nov. 12, 2009

Jan. 1, 2015


As the first phase of the project to replace IAS 39, Financial Instruments - Recognition and Measurement, this standard introduces new classes, classification criteria and assessment criteria for financial instruments. The potential impact on BASF is currently being analyzed. In addition, on October 28, 2010, new requirements from IFRS 9 were published on the accounting for financial liabilities and the derecognition of financial instruments. In particular these changes will affect those financial liabilities that were optionally measured at fair value. The potential impact on BASF is currently being analyzed.

IFRS 10 Consolidated Financial Statements

May 12, 2011

Jan. 1, 2013

Expected in Q3 2012

This new standard comprehensively regulates the mandatory full consolidation of subsidiaries and clarifies which conditions lead to a full consolidation. In contrast to IAS 27, this standard is geared more strongly towards the economic situation as opposed to the legal conditions. The impact on BASF is being analyzed.

Joint Arrangements

May 12, 2011

Jan. 1, 2013

Expected in Q3 2012

The regulations contained within IFRS 11 will bring about considerable changes. BASF currently consolidates jointly controlled entities proportionally. In the future jointly controlled entities will have to be accounted for using the equity method. The option to use proportional consolidation will be abolished. After the standard is endorsed by the E.U., BASF plans to classify the equity result as part of EBIT in its external reporting. The value of investments accounted for using the equity method will be shown as operating assets. Applying this regulation to the year 2011, for example, would result in a decrease in sales of €5,749 million.
For financial information on proportionally consolidated companies, see Note 2.

IFRS 12 Disclosure of Interests in Other Entities

May 12, 2011

Jan. 1, 2013

Expected in Q3 2012

This new standard requires more extensive disclosures with respect to fully consolidated companies and companies which are not included in the Consolidated Financial Statements, i.e. the reasons why they were fully consolidated or excluded. This change will impact the Notes to the Consolidated Financial Statements of the BASF Group.

Fair Value

May 12, 2011

Jan. 1, 2013

Expected in Q3 2012

IFRS 13 will replace the individual regulations governing the determination of fair value. This standard does not introduce any significant new valuation requirements but does require additional notes. The potential impact on BASF is currently being analyzed.

Amendments to IAS 28 Investments in Associates

May 12, 2011

Jan. 1, 2013

Expected in Q3 2012

The provision of IAS 28 governing the use of the equity method will be considerably expanded by the adoption of IFRS 11. In the future it will have to be used on shares in jointly controlled entities (see IFRS 11). The use of proportional consolidation for jointly controlled entities will consequently be omitted. The impact on BASF is explained above (IFRS 11). Additionally, remaining shares in associated companies that later become shares of a jointly controlled entity (or vice versa) do not have to be revalued.

Amendments to IAS 1 Presentation of Financial Statements

June 16, 2011

July 7, 2012

Expected in Q1 2012

Components of other comprehensive income (OCI) that are to be, under certain circumstances, reclassified in the profit and loss statement will have to be shown separately from those components which can never be reclassified. The impact on BASF is being analyzed.

IAS 19 Employee Benefits

June 16, 2011

Jan. 1, 2013

Expected in Q1 2012

The most significant change of IAS 19 requires that experience-based adjustments and effects from changes of actuarial assumptions, reported as actuarial gains and losses, will have to be recognized immediately in other comprehensive income. The previous choice between immediate reporting in profit and loss, reporting in other comprehensive income or delayed reporting according to the corridor method will be abolished. The amendment will not have an effect on BASF. Additionally, interest rates on plan assets will no longer be calculated according to expectations but will instead be equal to the discount rate of pension obligations.
For more information, see Note 20
The revised IAS 19 also requires more detailed notes.

Other new standards or amendments of the standards will have no material impact on BASF. Implementing the standards before endorsement by the European Union is not planned.

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