BASF Report 2023

15. Leases

Accounting policies

A lease is an agreement that conveys the right to control the use of identified asset for a defined period of time in return for a payment.

Leases can be embedded within other contracts. If separation is required under IFRS, the embedded lease is recorded separately from its host contract and each component of the contract is accounted and measured in accordance with the applicable regulations.

Leases in which BASF is a lessee mainly relate to real estate and transportation and technical equipment.

As lessee, BASF accounts for all leases, recognizing right-of-use assets for leased assets and liabilities for lease agreements subject to the following principles:

  • BASF exercises the exemption for lease agreements with a maximum term of 12 months from the date of provision and low-value assets. Low-value assets are generally defined as leased assets worth a maximum of €5,000.
  • Lease liabilities are measured at the present value of the remaining lease payments, taking into account the incremental borrowing rate.
  • As a general rule, BASF separates non-lease components, such as services, from lease payments.
  • A right-of-use asset is generally recognized at the same amount as the lease liability. Differences may arise from the lease payments made prior to the provision of the leased asset, less any lease incentives received.
  • After capitalization the right-of-use asset is generally depreciated over the lease term using the straight-line method.
  • A number of leases, particularly for real estate and barges, include extension and termination options. Extension and termination options are taken into account on recognition of the lease liability only if BASF is reasonably certain that these options will be exercised in the future. When contract terms are being determined, consideration is given to all facts and circumstances that offer an economic incentive for exercising extension options or not exercising termination options. Changes in lease terms arising from the exercise of an extension option or non-exercise of a termination option are only considered if sufficient certainty exists. Estimates and expectations which are asserted at the commencement date of the lease liability and the right-of-use asset and pertain to future payments not yet determined on the date of provision are assessed continuously during the lease term. If subsequently improved or changed knowledge influences the expected payment profile over time, the lease liability is remeasured.
  • If an existing lease contract is modified, the lease liability and right-of-use asset must be remeasured, provided the modification changes the payment profile (pursuant to the interest and principal plan) or the scope (either quantitatively or time-related) of use of the asset.

Explanation of leases

BASF as lessee

Lease liabilities (Million €)

 

December 31, 2023

December 31, 2022

 

Lease liabilities

Interest portion

Future lease payments

Lease liabilities

Interest portion

Future lease payments

Following year 1

350

51

401

330

43

373

Following year 2

234

39

273

222

36

258

Following year 3

171

32

203

150

30

180

Following year 4

134

29

163

111

26

137

Following year 5

106

26

132

85

23

108

Over 5 years

654

174

828

591

171

762

Total

1,649

351

2,000

1,489

329

1,818

Expenses and income in the statement of income from leases for BASF as lessee (Million €)

 

2023

2022

Interest expenses for lease liabilities

–53

–40

Expenses for variable lease payments not included in the measurement of lease liabilities

–13

–33

Income from sublease agreements

2

20

Expenses for short-term leases

–151

–156

Expenses for leases for low-value assets

–35

–22

Total

–250

–231

There were no significant sale and leaseback transactions in 2023. BASF entered a five-year rental agreement for a building with the sale of the site in Tarrytown, New York, in 2022. The lease liabilities for this sale-and-leaseback transaction amounted to €9 million as of December 31, 2023.

BASF as lessor

BASF acts as a lessor for finance leases to a minor extent only. Receivables on finance leases were €33 million in 2023 (2022: €35 million). The leased assets pertained primarily to buildings and production facilities.

Claims arising from operating leases amounted to €254 million in 2023 (2022: €268 million). As in the previous year, there were no material operating leases for property, plant and equipment.

Future lease payments to BASF from operating lease contracts (Million €)

 

Dec. 31, 2023

Dec. 31, 2022

Following year 1

49

46

Following year 2

40

39

Following year 3

38

39

Following year 4

37

38

Following year 5

36

37

Over 5 years

54

69

Total

254

268

Income from leases for BASF as lessor (Million €)

 

2023

2022

Income from finance leases

2

2

of which financial income from net investments

2

2

Income from operating leases

46

46

of which income from variable lease payments not dependent upon an index or interest rate

1

Total

48

48

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