BASF Report 2009 - BASF Report 2012

BASF Report 2009
Consolidated Financial Statements
Notes
169
11 – Intangible assets
The goodwill of BASF is allocated to 37 cash-generating units
which are defined either on the basis of business units or on a
higher level. The goodwill arising from the acquisition of Ciba in
2009 of €571 million was allocated to cash-generating units in
the Performance Chemicals, Dispersion & Pigments, Care
Chemicals and Paper Chemicals divisions.
The annual impairment test took place in the fourth quarter
of the year on the basis of the cash-generating units. The
recoverable amount was determined using the value-in-use and
the plans approved by corporate management for the next five
years. The cash flows after the planning period are based on
the last year and extrapolated with the help of long-term growth
trends. The planning is based on the experience, current
performance and best possible management estimates on the
future development of the individual parameters such as raw
material prices and profit margins. Market assumptions regarding,
for example, economic development and market growth
are included based on external macroeconomic sources as well
as sources specific to the industry.
The weighted average cost of capital after tax required for
the impairment tests is determined using the Capital Asset
Pricing Model. It comprises the corresponding risk-free interest
rate, the market risk premium and the spread for the credit risk.
The calculation also takes into account the volatility of the BASF
share in comparison to the capital market (beta), the capital
structure of the BASF Group and the average tax rate of each
cash-generating unit.
The impairment test for the financial year 2009 resulted in
an overall impairment loss on goodwill of €220 million.
Changes in the market for electronic chemicals brought on
by the economic crisis and changing technology led to a reduction
in future growth forecasts and, as a result, to an impairment
loss on goodwill of €103 million in the Inorganic division in the
Chemicals segment.
In addition, an impairment loss on goodwill of €73 million
was recognized in the Care Chemicals division in the Performance
Products segment. Expectations regarding future cash
flows have worsened due to lower demand for high-priced
cosmetics. This decline was caused by changed consumer
behavior and intensified by the economic crisis.
The restructuring of the activities of BASF Fuel Cell, which
involves the transfer of fuel cell activities from Frankfurt,
Germany, to Somerset, New Jersey, led to an impairment loss
on goodwill of €22 million. These activities are allocated to the
Inorganics division in the Chemicals segment.
Further impairment losses on goodwill were recognized for
an overall amount of €22 million for cash-generating units in the
Polyurethanes division in the Plastics segment, the Performance
Chemicals division in the Performance Products segment and
the Coatings division in the Functional Solutions segment. All
impairment losses on goodwill are reported under other
operating expenses.
The major part of goodwill amounting to €5,069 million
in total (2008: €4,748 million) is allocated to the following
cash-generating units. The goodwill of the Crop Protection
division in the Agricultural Solutions segment amounts to
€1,366 million (2008: €1,383 million). Goodwill of €1,253 million
(2008: €1,246 million) and €627 million (2008: €620 million)
relate to the Catalysts and Construction Chemicals divisions in
the Functional Solutions segment. Goodwill of €389 million
(2008: €381 million) is allocated to the Oil & Gas segment.
The impairment tests were conducted using the following
assumptions: a weighted average cost of capital between 7.15%
and 7.64% (2008: 6.72% to 7.59%) and a long-term growth rate
between 0.0% and 2.0% (2008: 0.0% to 3.0%). In determining
the value-in-use of the cash-generating units, BASF assumes
that changes in material assumptions classified as possible will
not lead to the book values of the units materially exceeding the
recoverable amount.
This excludes the goodwill of the Catalysts division in the
Functional Solutions segment that arose from the acquisition of
Engelhard in 2006. The results of this division are connected to
market developments in the automotive and chemical
industries. The weighted average cost of capital used for the
impairment test of the Catalyst cash-generating unit was 7.50%
(2008: 7.48%). Catalysts currently has a value-in-use which
exceeds the book value by approximately €300 million. The
recoverable amount would equal the book value of the unit if the
cost of capital increased by 0.43 percentage points.
For more information on the Catalysts division, see the Management’s
Analysis on page 68