15. Property, Plant and Equipment
Accounting policies
Property, plant and equipment are measured at cost less depreciation and impairment over their useful lives. The revaluation method is not applied. Low-value assets are fully expensed in the year of acquisition.
The cost of self-constructed plants includes direct costs, appropriate allocations of material and production overhead costs, and a share of the general administrative costs of the divisions involved in the construction of the plants.
Expenses related to the scheduled maintenance of large-scale plants are capitalized separately and depreciated using the straight-line method over the period until the next planned turnaround. Costs for the replacement of components are recognized as assets if an additional future benefit is expected. The carrying amount of the replaced components is derecognized. Costs for maintenance and repair as part of normal business operations are recognized as an expense.
As lessee, BASF generally recognizes all leases in the balance sheet. The right-of-use assets from leases and lease liabilities are measured at the present value of the financial commitments entered.
Investment properties held to realize capital gains or rental income are immaterial. They are valued at the lower of fair value or cost less depreciation.
Both movable and immovable fixed assets are principally depreciated using the straight-line method. The estimated useful lives and depreciation methods of property, plant and equipment are based on historical values, plans and estimates. The depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
The weighted average depreciation periods of continuing operations were as follows:
|
2021 |
2020 |
|---|---|---|
Buildings and structural installations |
18 |
16 |
Machinery and technical equipment |
11 |
10 |
Miscellaneous equipment and fixtures |
7 |
6 |
If there is indication of a possible cause for impairment, an impairment test is performed. Impairments to property, plant and equipment are recognized if the recoverable amount of the asset is lower than the carrying amount. The measurement is based on fair value less costs to sell or the value in use. An impairment is recognized for the difference between the carrying amount and the recoverable amount. If the reasons for an impairment no longer exist, the write-downs are reversed up to the value of the asset, had an impairment not been recognized. Impairments and reversals of impairments are reported in other operating income and expenses.
Borrowing costs: If borrowing costs are directly incurred as part of the acquisition, construction or production of a qualifying asset, they are capitalized as part of the acquisition or production cost of that asset. A qualifying asset is an asset for which the process necessary to make it ready for its intended use or sale is longer than one year. Borrowing costs are capitalized up to the date the asset is ready for its intended use. Borrowing costs were calculated based on a rate of 1.25% (previous year: 1.5%) and adjusted on a country-specific basis, if necessary. All other borrowing costs are recognized as an expense in the period in which they are incurred.
Government grants: 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 recognized immediately as other operating income or treated as deferred income and released over the underlying period.
|
Land |
Right-of-use land |
Buildings |
Right-of-use buildings |
Machinery and technical equipment |
Right-of-use machinery and technical equipment |
Miscellaneous equipment and fixtures |
Right-of-use miscellaneous equipment and fixtures |
Advance payments and construction in progress |
Advance payments for right-of-use assets |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
Cost |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2021 |
947 |
451 |
10,749 |
834 |
43,902 |
505 |
4,773 |
690 |
3,164 |
– |
66,015 |
Changes in the scope of consolidation |
0 |
–2 |
–2 |
0 |
–2 |
– |
–2 |
–1 |
0 |
– |
–10 |
Additions |
7 |
11 |
141 |
168 |
814 |
98 |
203 |
186 |
2,301 |
150 |
4,078 |
Additions from acquisitions |
– |
39 |
104 |
– |
149 |
– |
3 |
– |
38 |
– |
332 |
Disposals |
–8 |
–1 |
–97 |
–49 |
–556 |
–12 |
–171 |
–134 |
–140 |
– |
–1,168 |
Transfers |
–5 |
10 |
310 |
– |
1,392 |
– |
118 |
– |
–1,723 |
– |
102 |
Transfers to disposal groups |
–59 |
0 |
–60 |
–2 |
–360 |
0 |
–15 |
–5 |
–9 |
0 |
–510 |
Currency effects |
25 |
37 |
350 |
31 |
1,442 |
33 |
150 |
20 |
104 |
– |
2,193 |
As of December 31, 2021 |
905 |
544 |
11,495 |
982 |
46,781 |
624 |
5,058 |
756 |
3,735 |
150 |
71,030 |
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2021 |
66 |
100 |
6,689 |
292 |
34,882 |
229 |
3,576 |
357 |
177 |
– |
46,368 |
Changes in the scope of consolidation |
– |
–2 |
–2 |
0 |
–1 |
– |
–3 |
–1 |
0 |
–1 |
–9 |
Additions |
–3 |
17 |
380 |
129 |
1,921 |
80 |
331 |
173 |
35 |
– |
3,064 |
of which impairments |
–3 |
– |
27 |
8 |
72 |
– |
3 |
– |
35 |
– |
142 |
Disposals |
0 |
–1 |
–83 |
–27 |
–517 |
–8 |
–163 |
–103 |
–132 |
– |
–1,033 |
Transfers |
– |
2 |
3 |
–1 |
131 |
– |
–1 |
– |
–32 |
– |
102 |
Transfers to disposal groups |
–13 |
0 |
–45 |
–1 |
–336 |
– |
–11 |
–3 |
0 |
0 |
–409 |
Currency effects |
4 |
9 |
174 |
16 |
1,058 |
14 |
104 |
11 |
5 |
– |
1,395 |
As of December 31, 2021 |
54 |
125 |
7,115 |
408 |
37,138 |
316 |
3,833 |
435 |
53 |
– |
49,477 |
Net carrying amount as of December 31, 2021 |
852 |
419 |
4,380 |
574 |
9,642 |
308 |
1,225 |
321 |
3,681 |
150 |
21,553 |
Additions to property, plant and equipment arising from investment projects (excluding leases) amounted to €3,465 million in 2021. Investments were made at the following sites in particular: Ludwigshafen, Germany; Antwerp, Belgium; Zhanjiang, China; Geismar, Louisiana; and Freeport, Texas. Material investments included engineering services and the procurement of technical equipment in connection with development of the new Verbund site in Zhanjiang, China, as well as construction and expansion of ethylene oxide and polyethylene oxide production plants in Antwerp, Belgium, and Ludwigshafen, Germany. Investments also included modernization measures, particularly at the Ludwigshafen site. Government grants for funding investment measures reduced asset additions by €5 million. The additions to advance payments for right-of-use assets related only to the acquisition of land use rights at the new Verbund site in Zhanjiang, China.
Additions from acquisitions resulted from the acquisition of the 51% share in BASF Shanshan Battery Materials Co., Ltd.
In 2021, impairments of €155 million and reversals of impairments of €13 million were included in accumulated depreciation. Impairments of €49 million related to machinery and technical equipment as well as buildings at a production site in Asia in the Industrial Solutions segment. The value in use of €2 million was calculated applying a pre-tax cost of capital rate of 6.89%. This corresponds to a cost of capital rate of 9.05%. Furthermore, there was a complete write-down in the amount of €17 million due a plant closure at a production site in North America in the Materials segment, which related almost entirely to machinery and technical equipment. Impairments to construction in progress mainly related to discontinued investment projects. Reversals of impairments in the amount of €13 million resulted primarily from an increase in the fair value of plants impaired at a site in North America in 2020.
Disposals of property, plant and equipment mainly included the sale of the production site in Kankakee, Illinois, and the disposal of BASF’s share in the condensate splitter in Port Arthur, Texas.
Transfers related mainly to the reclassification of operation-ready assets from construction in progress to other asset categories.
Transfers to disposal groups related largely to reclassified amounts in connection with the divested kaolin minerals business.
Currency effects raised property, plant and equipment by €798 million and resulted mainly from appreciation of the U.S. dollar and the Chinese renminbi against the euro.
|
Land |
Right-of-use land |
Buildings |
Right-of-use buildings |
Machinery and technical equipment |
Right-of-use machinery and technical equipment |
Miscellaneous equipment and fixtures |
Right-of-use miscellaneous equipment and fixtures |
Advance payments and construction in progress |
Advance payments for right-of-use assets |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
Cost |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2020 |
950 |
440 |
10,757 |
808 |
43,783 |
399 |
4,808 |
551 |
3,006 |
6 |
65,508 |
Changes in the scope of consolidation |
1 |
– |
– |
– |
– |
– |
2 |
1 |
37 |
– |
41 |
Additions |
18 |
40 |
161 |
120 |
787 |
147 |
199 |
202 |
1,842 |
– |
3,516 |
Additions from acquisitions |
12 |
– |
82 |
3 |
400 |
10 |
3 |
1 |
48 |
– |
559 |
Disposals |
–3 |
–13 |
–129 |
–53 |
–590 |
–13 |
–145 |
–36 |
–216 |
– |
–1,198 |
Transfers |
5 |
– |
282 |
1 |
1,123 |
6 |
77 |
–1 |
–1,515 |
–6 |
–28 |
Transfers to disposal groups |
3 |
–2 |
– |
–3 |
–34 |
– |
–4 |
–2 |
60 |
– |
18 |
Currency effects |
–39 |
–14 |
–404 |
–42 |
–1,567 |
–44 |
–167 |
–26 |
–98 |
– |
–2,401 |
As of December 31, 2020 |
947 |
451 |
10,749 |
834 |
43,902 |
505 |
4,773 |
690 |
3,164 |
– |
66,015 |
Accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2020 |
53 |
65 |
6,374 |
144 |
33,110 |
144 |
3,472 |
196 |
158 |
– |
43,716 |
Changes in the scope of consolidation |
– |
– |
– |
– |
– |
– |
1 |
– |
– |
– |
1 |
Additions |
19 |
40 |
614 |
188 |
3,401 |
106 |
392 |
195 |
234 |
– |
5,189 |
of which impairments |
18 |
23 |
250 |
50 |
1,396 |
25 |
49 |
14 |
234 |
– |
2,059 |
Disposals |
–2 |
–1 |
–112 |
–27 |
–546 |
–8 |
–135 |
–25 |
–214 |
– |
–1,070 |
Transfers |
– |
– |
–2 |
– |
34 |
– |
–45 |
–1 |
–10 |
– |
–24 |
Transfers to disposal groups |
– |
– |
2 |
2 |
7 |
– |
–1 |
3 |
10 |
– |
23 |
Currency effects |
–4 |
–4 |
–187 |
–15 |
–1,124 |
–13 |
–108 |
–11 |
–1 |
– |
–1,467 |
As of December 31, 2020 |
66 |
100 |
6,689 |
292 |
34,882 |
229 |
3,576 |
357 |
177 |
– |
46,368 |
Net carrying amount as of December 31, 2020 |
881 |
351 |
4,060 |
542 |
9,020 |
276 |
1,197 |
333 |
2,987 |
− |
19,647 |