✓ audited

19 – Retained earnings and other comprehensive income

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Million €

2012

2011

Legal reserves

431

383

Other retained earnings

19,675

19,063

 

20,106

19,446

Transfers between the line item legal reserves and the line item other retained earnings increased legal reserves by €48 million in 2012 and lowered them by €30 million in 2011.

The acquisition of shares in companies which BASF already controls or includes as a jointly controlled entity in the Consolidated Financial Statements is treated as a transaction between shareholders, as long as this does not lead to a change in the consolidation method. Additional interests in BASF Pakistan (Private) Ltd., Karachi, Pakistan, and in the jointly controlled entity Sabina Petrochemicals LLC, Houston, Texas, were acquired in 2011. The amount of €34 million resulting from the difference between the acquisition price and the proportional value of the net assets received was netted against retained earnings. There were no transactions of this type in 2012.

The offsetting of actuarial gains and losses resulted in a decrease in retained earnings of €1,939 million in 2012 and a decrease of €582 million in 2011.

Payment of dividends

In accordance with the resolution of the Annual Shareholders’ Meeting on April 27, 2012, BASF SE paid a dividend of €2.50 per share from the retained profit of the 2011 fiscal year. With 918,478,694 shares entitled to dividends, this amounts to a total dividend payout of €2,296,196,735.00.

Other comprehensive income

In accordance with IFRS, certain expenses and income have been recorded in other comprehensive income. These include translation adjustments, the valuation of securities at fair value, changes in the fair value of derivatives held to hedge future cash flows and net investments in a foreign operation and effects from the revaluation of assets and liabilities due to acquisition of a majority interest.

Translation adjustments

The translation adjustments due to the use of the closing rate method are shown under currency translation adjustments as a component of other comprehensive income in equity (translation adjustments) and are recognized in the income statement only upon the disposal of a company.

Valuation of securities at fair value

For fully and proportionally consolidated companies, as well as those companies which are accounted for using the equity method, changes in value of available-for-sale securities in excess of their acquisition costs are accounted for in other comprehensive income, without impacting the income statement, until the securities are disposed of. Upon disposal, the changes accumulated in other comprehensive income are recognized in the income statement.

The decrease of €1,014 million in 2011 is primarily due to the sale of shares in K+S Aktiengesellschaft.

Cash flow hedges

Derivatives are used to hedge future cash flows. The effective portion of the change in value of these derivatives is recognized in equity. This also comprises equity effects from the hedging of future cash flows at companies accounted for using the equity method.

Hedging future cash flows at Nord Stream AG, Zug, Switzerland, a company accounted for using the equity method, resulted in a change of minus €35 million in 2012 and of minus €44 million in 2011.

Hedges of net investments in foreign operations

Hedge accounting can be used to hedge the translation risk from the net investment in a foreign operation. Effects recorded in equity are recognized in the income statement upon sale of the operation or return of the investment.

Revaluation due to acquisition of majority of shares

Until 2008, effects from the revaluation of net assets were recorded in equity when they arose due to the acquisition of a majority of shares in a previously proportionally consolidated company. Additional depreciation of these revalued assets leads to a reversal of the corresponding item in equity; this does not affect income.