18 – Receivables and Miscellaneous Assets

The changes in loans and interest receivables were predominantly due to reimbursements of and valuation allowances on loans to nonconsolidated subsidiaries.

The decrease in noncurrent derivatives with positive fair values primarily affected the market valuation of combined interest rate and currency swaps. The change in current derivatives with positive fair market values was largely attributable to the increase in fair values of commodity derivatives for precious metals.

Bank acceptance drafts are used as an alternative form of payment in China. Bank acceptance drafts are issued at a discount from their par value. They can be held to maturity, traded or redeemed prematurely at a discount. If BASF discounts a bank acceptance draft with recourse, a liability toward the credit institution is recognized in the amount of the payment received. The increase relates to higher sales and broader use of this form of payment in China.

Prepaid expenses in 2020 mainly included prepayments of €28 million related to operating activities compared with €30 million in 2019, as well as €79 million in prepayments for insurance in both 2020 and 2019. Prepayments for license costs decreased from €74 million in 2019 to €70 million in 2020. Prepaid expenses in 2020 included lower advance payments for received precious metal catalysts to be refurbished.

The change in current tax refund claims was largely attributable to the rise in open income tax receivables at various Group companies.

The rise in current other receivables and assets, which represent financial instruments, was due to higher deposits on commodity derivatives and increased receivables for other refunds.

Precious metal trading items primarily comprise physical items, precious metal accounts as well as long positions in precious metals, which are largely hedged through forward sales or derivatives. The rise in 2020 was due to a significant increase in the price of palladium and rhodium.

Expected losses of trade accounts receivable at BASF are calculated primarily on the basis of internal or external customer ratings and the associated probability of default.

The following table presents the gross values and credit risks for trade accounts receivable measured at amortized cost as of December 31, 2020.

There are currently no significant credit risks (or a concentration thereof) associated with other financial instruments. BASF generally monitors the credit risk associated with counterparties with which receivables exist representing financial instruments. In accordance with IFRS 9, impairments for expected credit losses on receivables are recognized based on this.

At BASF, a comprehensive, global credit insurance program covers accounts receivable, trade. Under a global excess of loss policy, future bad debts are insured for essentially all BASF Group companies excluding joint ventures. The program has no impact on the calculation of valuation allowances in accordance with IFRS 9. No compensation claims were incurred in either 2020 or 2019.

Payment terms are generally agreed upon individually with customers and, as a rule, are within 90 days. In 2020, valuation allowances of €142 million were added for trade accounts receivable, and valuation allowances of €124 million were reversed. In the previous year, valuation allowances of €168 million were added for trade accounts receivable, and valuation allowances of €146 million were reversed.

In 2020, valuation allowances of €98 million were recognized for other receivables representing financial instruments, and valuation allowances of €13 million were reversed. In the previous year, valuation allowances of €15 million were recognized and valuation allowances of €3 million were reversed.

Additions included valuation allowances of €7 million due to a change in valuation parameters. Additions primarily included valuation allowances of loans to former and current Group companies.