1. Summary of Accounting Policies

1.1 General information

BASF SE (registered at the district trade register, or Amtsgericht, for Ludwigshafen am Rhein, number HRB 6000) is a publicly listed corporation headquartered in Ludwigshafen am Rhein, Germany. Its official address is Carl-Bosch-Str. 38, 67056 Ludwigshafen am Rhein, Germany.

The Consolidated Financial Statements of BASF SE as of December 31, 2024, have been prepared in accordance with the International Financial Reporting Standards (IFRS^®) of the International Accounting Standards Board (IASB^®) and section 315e (1) of the German Commercial Code (HGB). IFRSs are generally only applied after they have been endorsed by the European Union. For the 2024 fiscal year, all of the binding IFRSs and pronouncements of the International Financial Reporting Interpretations Committee (IFRIC^®) were applied. The Consolidated Financial Statements are for the period from January 1, 2024 to December 31, 2024, and are presented in euros. They are written in German and translated into English. All amounts, including the figures for previous years, are given in million euros unless otherwise indicated.

Due to rounding, individual figures in this report may not add up to the totals shown and percentages may not correspond exactly to the figures shown.

The individual financial statements of the consolidated companies are prepared as of the balance sheet date of the Consolidated Financial Statements. Business continuity is assumed. The accounting policies applied are largely the same as those used in 2023.

On March 17, 2025, the Board of Executive Directors prepared the Consolidated Financial Statements, submitted them to the Supervisory Board for review and approval, and released them for publication.

1.2 Changes in accounting principles

Accounting policies applied for the first time in 2024

The amendments presented in the following table had no material effect on the Consolidated Financial Statements of BASF SE.

IFRSs and IFRICs not yet to be considered but already endorsed by the EU

The effects on the BASF Group financial statements of the IFRSs and IFRICs not yet in force in 2024 but already endorsed by the European Union were reviewed. The amendments are unlikely to have a material impact on the reporting of BASF and were not adopted early.

IFRSs and IFRICs not yet to be considered and not yet endorsed by the EU

The IASB issued further amendments to standards and interpretations which are still subject to EU endorsement and whose application is not yet mandatory. The effect of application of IFRS 18 is being reviewed. The introduction of IFRS 19 does not affect the Consolidated Financial Statements of BASF SE as BASF SE does not fall within the scope of application of this standard. BASF falls within the scope of the amendments to IFRS 9 and IFRS 7 relating to nature-dependent electricity contracts. The resulting changes expected for physical and virtual power purchase agreements are currently being reviewed. No significant changes to current accounting practices are expected for physical PPAs. For virtual PPAs, an increase in hedge accounting is considered possible. The other amendments are not expected to have a material effect on BASF SE’s Consolidated Financial Statements. With the exception of the additions to IFRS 9 and IFRS 7, BASF does not plan on early adoption of the described amendments.

1.3 Group accounting principles

Scope of consolidation: The scope of consolidation is based on the application of the standards IFRS 10 and 11 and IAS 28.

According to IFRS 10, a group consists of a parent entity and the subsidiaries controlled by the parent. “Control” of an investee assumes the simultaneous fulfillment of the following three criteria:

• The parent company holds decision-making power over the relevant activities of the investee
• The parent company has rights to variable returns from the investee
• The parent company can use its decision-making power to affect the variable returns

Fulfillment of these three criteria is analyzed based on the corporate governance structure of the companies.

According to IFRS 11, which regulates the accounting of joint arrangements, a distinction must be made between joint ventures and joint operations. In the case of a joint venture, the parties that have joint control of a legally independent company have rights to the net assets of that arrangement. In joint operations, the parties that have joint control have direct rights to the assets and obligations for the liabilities relating to the arrangement. This requirement is particularly fulfilled if the production output of the joint arrangement is almost entirely transferred to the partners, through which the partners guarantee the joint arrangements’ ongoing financing.

Companies whose corporate governance structures classify them as joint arrangements are analyzed to determine if they meet the criteria for joint ventures or joint operations in accordance with IFRS 11. If the joint arrangement is structured as a separate vehicle, its legal form, the contractual arrangements and all other facts and circumstances are reviewed.

In addition to BASF SE, the Consolidated Financial Statements include all material subsidiaries on a fully consolidated and all material joint operations on a proportionally consolidated basis. Companies of minor importance for the presentation of a true and fair view of the net assets, financial position and results of operations, are not consolidated, but rather are reported under other shareholdings (for more information, see Note 25.4, footnote a). The aggregate assets and equity of these companies amount to less than 1% of the corresponding value at Group level.

Joint ventures and associated companies are accounted for using the equity method in the Consolidated Financial Statements in accordance with IAS 28. Associated companies are entities that are not subsidiaries, joint ventures or joint operations, and over whose operating and financial policies significant influence can be exercised. In general, this applies to companies in which BASF has an investment of between 20% and 50%. Associated companies and joint ventures that are fully or predominantly allocated to operating divisions are classified as integral because they are integrated into the value chain of the respective division; are controlled by the divisions; and they generate their income in close cooperation with the other assets of the BASF Group and/or of these divisions. Equity-accounted income from integral joint ventures or associated companies is reported as part of income from operations (EBIT). Equity-accounted income from non-integral associated companies is reported in net income from shareholdings (for more information, see Note 10 onward).

Consolidation methods: Assets and liabilities of consolidated companies are uniformly recognized and measured in accordance with the principles described herein. For companies accounted for using the equity method, material deviations in measurement resulting from the application of other accounting principles than those applied by BASF are adjusted.

Transactions between consolidated companies as well as intercompany profits resulting from trade between consolidated companies are eliminated in full. Sales and material other balances and transactions between joint operations and fully consolidated Group companies are also eliminated. Material intercompany profits and losses related to companies accounted for using the equity method are eliminated.

Capital consolidation is conducted on the acquisition date according to the purchase method. Initially, all assets, liabilities and additional intangible assets that are to be capitalized are measured at fair value regardless of the scope of any noncontrolling interests. Subsequently, the cost of acquiring the company is compared with the proportional share of the fair value of the net assets acquired. The resulting positive differences are capitalized as goodwill. Negative differences are reviewed once more, then recognized directly in the income statement.

Noncontrolling interests are measured at fair value on the date of acquisition proportional to the assets acquired and liabilities assumed (partial goodwill method).

The acquisition of shares in companies already controlled by BASF or included in the Consolidated Financial Statements as a joint arrangement is treated as a transaction between shareholders if it does not result in a change in the consolidation method.

The incidental acquisition costs of a business combination are recognized in the income statement under other operating expenses.

Foreign currency translation: The cost of assets acquired in foreign currencies and revenue from sales in foreign currencies are determined by the exchange rate on the date the transaction is recognized. Foreign currency receivables and liabilities are valued at the exchange rates on the balance sheet date. Changes in assets and liabilities arising from foreign currency translation are recognized in the income statement. They are then reported under other operating income or expenses, other financial result, and, in the case of financial assets measured at fair value through other comprehensive income, in other comprehensive income.

Translation of foreign currency financial statements: The translation of foreign currency financial statements depends on the functional currency of the consolidated companies. For companies whose functional currency is not the euro, translation into the reporting currency is based on the closing rate method: Balance sheet items are translated into euros using closing rates on the balance sheet date; expenses and income are translated into euros at monthly average rates and accumulated for the year. The difference between a company’s equity translated at historical rates at the time of acquisition or retention and its equity translated at closing rates on the balance sheet date is reported under other comprehensive income (translation adjustments) and is recognized in the income statement only upon the disposal of the company or a foreign business.

For certain companies outside the eurozone or U.S. dollar zone, the euro or U.S. dollar is the functional currency (among others, BASF Tuerk Kimya Sanayi ve Ticaret Ltd. Sti., Istanbul, Türkiye, and BASF Argentina S.A., Buenos Aires, Argentina). In such cases, financial statements prepared in the local currency are translated into the functional currency using the temporal method: All nonmonetary assets and related depreciation and amortization as well as equity are translated at the exchange rate applying to the respective transactions. All other balance sheet items are translated using closing rates on the balance sheet date; other expenses and income are translated at monthly average rates. The resulting translation differences are recognized in the income statement under other operating income or expenses. If necessary, financial statements in the functional currency are translated into the presentation currency according to the closing rate method.

1.4 Accounting policies

The accounting policies for the individual items in the balance sheet and the income statement are presented in the respective sections of the Notes.

Business combinations: In business combinations, the acquired assets and liabilities are recognized at fair value on the date the acquirer effectively obtains control. The fair value of acquired assets and assumed liabilities at the date of acquisition, as well as the useful lives of the acquired assets, are largely based on projected cash flows. Actual cash flows can deviate significantly from those. Independent external appraisals are typically used for the purchase price allocation of material business combinations. Valuations in the course of business combinations are based on existing information as of the acquisition date.

Use of estimates and assumptions in preparing the Consolidated Financial Statements

The carrying amount of assets, liabilities and provisions, contingent liabilities and other financial obligations reported in the Consolidated Financial Statements depends on the use of estimates, assumptions and discretionary scope. Specific estimates or assumptions used in individual accounting or valuation methods are disclosed in their respective sections of the Notes to the Consolidated Financial Statements. They are based on the circumstances and estimates on the balance sheet date and thus affect the amounts of income and expenses shown for the reporting periods presented. These assumptions primarily relate to the determination of discounted cash flows in the context of impairment tests and purchase price allocations; the useful lives of depreciable property, plant and equipment and intangible assets; the carrying amount of shareholdings; and the measurement of provisions for items such as employee benefits, warranties, trade discounts, environmental protection or the extent of recognition of assets, liabilities and provisions for taxes. Although uncertainty is appropriately incorporated in the valuation factors, actual results can differ from these estimates. Furthermore, extraordinary challenges resulting from current geopolitical and economic developments are also considered. Current inflation developments were taken into account both in the measurement of pension provisions and other provisions as well as in the fixed asset impairment tests.

Climate and sustainability-related developments: The chemical industry is resource-intensive. BASF is committed to the Paris Climate Agreement. Using resources as efficiently and responsibly as possible and the concept of a circular economy are firmly embedded in BASF’s strategy and its actions. BASF pursues clearly defined targets to reduce CO₂ as well as regarding the use of renewable and recycled raw materials. In this context, BASF always strives to employ raw materials more efficiently and improve production processes as well as to continually seek ways to use nonfossil, renewable or recycled feedstocks. Despite the current global political situation, the path to climate neutrality is resolutely being pursued (for more information on electricity supply contracts, see Note 25).

BASF is exposed to physical and transitional climate-related risks. Physical climate risks are the direct consequences of extreme weather scenarios in the form of floods, droughts, hurricanes, extreme rainfall or heat. These can cause damage to assets, interrupt deliveries to customers or have adverse effects on the supply of raw materials and precursors to plants. BASF responds to risks related to weather scenarios by adapting operational processes, for example in the area of logistics, by investing in assets and infrastructure or by maintaining broad insurance coverage.

Transitional risks are risks that arise from the transition to a low-emission economy. These can arise from developments aimed at preventing or reversing damage to the climate or to nature. As an energy-intensive company, BASF expects, among other things, rising energy and CO₂ prices as part of the structural transition. BASF plans to invest more in the green transformation. An initial pilot project includes the use of an electrically heated steam cracker furnace. In addition, a planned heat pump, the construction of which is being funded by the European Union’s “NextGenerationEU” and the German Ministry for Economic Affairs and Climate Protection based on a decision by the German Bundestag, should enable CO₂-free steam generation and, in turn, save up to 100,000 tons of greenhouse gas emissions annually. The transition also creates opportunities, for example through increasing demand for bio-based products, insulation foams for buildings, coolants and battery materials as well as better circular economy and climate protection solutions. The market-oriented approach anchored in the strategy is intended to enable BASF to leverage these opportunities and support the green transformation of various customer industries in a differentiated manner by prioritizing investments and projects with a sustainability focus according to customer demand and willingness to pay.

Taking into account transitional risks and other developments, an analysis was conducted on the profitability of the production site in Ludwigshafen, Germany, using different market development scenarios – regarding, for example, demand development, export opportunities and sustainability regulations – in order to develop a vision for the site. This vision provides a strategic direction for the structural and sustainable development of the Ludwigshafen production site and defines ambitious profitability targets. To this end, existing assets were first evaluated with regard to market developments. This showed that all important value chains can compete in their respective markets and that the majority of plants at the Ludwigshafen site are competitive in the short to long term.

Climate-related risks are taken into account in estimates and discretionary decisions when preparing the Consolidated Financial Statements. Transitional and physical risks are assessed on an ongoing basis and can, for example, have an impact on useful lives and residual carrying amounts of fixed assets, the valuation of provisions for environmental or restoration obligations, the valuation of inventories or growth rates in goodwill impairment tests.

The transition to electromobility will have a negative long-term impact on the emissions catalyst business. This development is reflected in a negative long-term growth rate in the goodwill impairment test of the Catalysts (excluding battery materials) cash-generating unit. Other BASF businesses will benefit from this transformation; for example, demand for innovative lightweight components and battery materials will grow. In the short and medium term, however, lower demand is expected, particularly in the battery materials market, which resulted in impairments on property, plant and equipment.