Impairment of fixed assets
A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that
occurred after the initial recognition of the asset, with negative impact on the estimated future cash flows of
that asset, which can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, indications
that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers,
indications that a debtor or issuer is approaching bankruptcy, or the disappearance of an active market for a
security.
The entity considers evidence of impairment for financial assets measured at amortized cost, loan and
receivables both individually and on a portfolio basis. All individually significant assets are assessed individually
for impairment. Those individually significant assets found not to be individually impaired and assets that are
not individually significant are then collectively assessed for impairment by grouping together assets with
similar risk characteristics.
In assessing collective impairment, the company uses historical trends of the probability of default, the timing
of collections and the amount of loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested
by historical trends.
A previously recognised impairment loss is reversed if the decrease of the impairment can be related
objectively to an event occurring after the impairment was recognised. The reversal is limited to at most the
amount required to measure the asset at its original amortised cost at the date of reversal had the impairment
not been recognised.
An impairment loss in respect of a financial asset stated at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s
original effective interest rate.
Losses are recognised in the profit and loss account and reflected in an allowance account against loans and
receivables. Interest on the impaired asset continues to be recognised by using the asset's original effective
interest rate.
Loans granted, other receivables and cash and cash equivalents
Loans and receivables are initially measured at fair value, including discount or premium and directly
attributable transaction costs.
Loans and receivables are measured after their initial valuation at amortized cost using the effective interest
rate method, less impairment losses. The loans and receivables with a remaining time to maturity exceeding
12 months are presented as financial fixed assets. Interest income, based on the effective interest rate
method, are accounted for in the interest and similar income within the income statement.
Provisions
A provision is recognised when the company has a present obligation as a result of a past event, when it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation. Provisions are valued at nominal value.
Long-term liabilities
Long-term and other financial commitments are initially measured at fair value, including discount or premium
and directly attributable transaction costs.
Long-term and current liabilities and other financial commitments are stated after their initial recognition at
amortized cost on the basis of the effective interest rate method.
Redemption payments regarding long-term liabilities that are due next year, are presented under current
liabilities.
BASF Finance Europe N.V.
Arnhem, The Netherlands
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Annual Report 2021
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