✓ audited

13 – Intangible assets

The goodwill of BASF is allocated to 31 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 using the value in use; this was done using five-year plans and their respective cash flows which 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 management’s best possible 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 6.82% and 7.01% (2011: 7.03% to 7.27%). For the cash-generating unit Exploration & Production in the Oil & Gas division, a cost of capital rate of 8.39% was applied (2011: 8.49%), 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. An exception is made for the goodwill of the Construction Chemicals division in the Functional Solutions segment, which arose from the acquisition of Degussa Bauchemie in the 2006 financial year. Earnings in the Construction Chemicals division are influenced by the growth of the construction industry, the focus on attractive market segments and the measures introduced to improve efficiency. The weighted average cost of capital rate used for the impairment testing of the cash-generating unit Construction Chemicals was 6.91% (2011: 7.18%). Construction Chemicals currently has a value in use that exceeds the carrying amount by around €518 million. The recoverable amount would equal the carrying amount of the unit if the weighted average cost of capital rate rose by 0.99 percentage points.

In 2012, the impairment tests resulted in no impairment losses on goodwill.

The impairment tests in the financial year 2011 resulted in impairment losses on goodwill totaling €11 million. These impairments occurred in relation to the sale of the European decorative paints business, which was part of the Coatings division in the Functional Solutions segment.

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Goodwill of cash-generating units (million €)

 

2012

 

2011

Cash-generating unit

Goodwill

Growth rates 1

 

Goodwill

Growth rates 1

1

Growth rates of impairment tests to determine terminal values in accordance with IAS 36

Crop Protection division

1,870

2.0%

 

1,410

2.0%

Catalysts division

1,366

2.0%

 

1,322

2.0%

Construction Chemicals division

691

1.5%

 

698

1.5%

Personal Care Ingredients in the Care Chemicals division

440

2.0%

 

461

2.0%

Pigments in the Dispersions & Pigments division

368

2.0%

 

371

2.0%

Exploration & Production in the Oil & Gas division

325

0.0%

 

389

0.0%

Other cash-generating units

1,325

0.0–2.0%

 

1,311

0.0–2.0%

Goodwill as of December 31

6,385

 

 

5,962

 

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Development of intangible assets 2012 (million €)

Distri-
bution,
supply
and
similar
rights

Product rights, licenses and
trade-
marks

Know-how, patents and pro-
duction techno-
logies

Inter-
nally gene-
rated intang-
ible assets

Other rights and values 2

Goodwill

Total

2

Including licenses to such rights and values

Cost

 

 

 

 

 

 

 

Balance as of January 1, 2012

4,829

1,628

2,002

81

611

5,962

15,113

Changes in scope of consolidation

7

2

8

3

1

14

35

Additions

5

19

22

20

43

109

Additions from acquisitions

45

37

176

229

586

1,073

Disposals

(382)

(273)

(261)

(12)

(149)

(6)

(1,083)

Transfers

(44)

6

12

(19)

(64)

(109)

Exchange differences

(7)

(2)

(16)

(10)

(107)

(142)

Balance as of December 31, 2012

4,453

1,417

1,943

92

706

6,385

14,996

Accumulated valuation adjustments

 

 

 

 

 

 

 

Balance as of January 1, 2012

1,446

604

773

49

322

3,194

Changes in scope of ­consolidation

2

1

4

1

8

Additions

402

64

141

17

66

690

Disposals

(382)

(271)

(259)

(11)

(140)

(1,063)

Transfers

(34)

3

(14)

(45)

Exchange differences

(18)

(1)

(6)

(4)

(29)

Balance as of December 31, 2012

1,416

400

653

55

231

2,755

Net carrying amount as of December 31, 2012

3,037

1,017

1,290

37

475

6,385

12,241

In connection with the acquisition of Becker Underwood in 2012, there were additions of €806 million to intangible assets, of which €499 million were to goodwill.

The acquisition of the energy storage business of Novolyte Technologies LP resulted in additions of €134 million to intangible assets, of which €55 million were to goodwill.

Concessions for oil and gas production under the category product rights, licenses and trademarks with a net carrying amount of €497 million in 2012 (2011: €498 million) authorize the exploration and production of oil and gas in certain areas. Some of these rights entail obligations to deliver a portion of the production output to local companies. At the end of the term of a concession, the rights are returned.

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

In Other rights and values, the line item transfers includes the market value adjustments of emission rights recognized directly in equity as of the balance sheet date.

Disposals primarily concerned the derecognition of fully amortized intangible assets.

In 2012, impairments of €75 million were recognized. Impairments are reported under other operating expenses.

A significant share of the impairments occurred in conjunction with the restructuring of the Construction Chemicals division (Functional Solutions segment) in Europe and were related to distribution, supply and similar rights and trademarks. There were no material reversals of impairments in 2012.

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Development of intangible assets 2011 (million €)

Distri-
bution,
supply
and
similar
rights

Product rights, licenses and
trade-
marks

Know-how, patents and pro-
duction techno-
logies

Inter-
nally gene-
rated intang-
ible assets

Other rights and values 1

Goodwill

Total

1

Including licenses to such rights and values

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

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

In Other rights and values, the line item transfers includes the market value adjustments of emission rights recognized directly in equity as of the balance sheet date.

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 share of the impairments occurred in conjunction with the sale of the European decorative paints business.

There were no material reversals of impairments in 2011.