BASF Report 2021 Consoli dated Financial Statements – Notes 236 14 Intangible assets The expected useful lives and amortization methods of intangible BASF’s goodwill is allocated to 20 cash-generating units (2020: 20), assets are based on historical values, plans and estimates. The which are defined either on the basis of business units or at a higher Accounting policies weighted average amortization periods of intangible assets were as level. follows: Acquired intangible assets (excluding goodwill) with defined The respective recoverable amounts were determined using the useful lives are generally measured at cost less straight-line Weighted average amortization in years value in use. Plans approved by company management and their amortization. The useful life is determined using the period of the 2021 2020 respective cash flows for the next five years were used. For the underlying contract or the period of time over which the intangible period thereafter, a terminal value was calculated using a forward asset can be expected to be used. Distribution and similar rights 15 14 projection from the last detailed planning year as a perpetual annuity. Product rights, licenses and trademarks 25 30 Planning is based on experience, current performance and Impairments are recognized if the recoverable amount of the asset Know-how, patents and production technologies 16 16 management’s best possible estimates on the future development is lower than the carrying amount. The recoverable amount is the Internally generated intangible assets 5 4 of individual parameters, such as raw materials prices and profit higher of either the fair value less costs to sell or the value in use. The Other rights and values 8 5 margins. Market assumptions regarding, for example, economic value in use is determined on the basis of future cash inflows and development, inflation expectations and market growth are included outflows, and the weighted average cost of capital after taxes, based on external macroeconomic and industry-specific sources. depending on tax rates and country-related risks. If the reasons for Emission rights: Emission certificates, which are granted free of an impairment no longer exist, the write-downs are reversed up to charge by the German Emissions Trading Authority (Deutsche The fundamental transformation of the automotive industry will have the value of the asset, had an impairment not been recognized. Emissionshandelsstelle) or a similar authority in other countries, are a significant impact on the emissions catalyst business, which Depending on the type of intangible asset, amortization is reported recognized in the balance sheet with a value of zero. Emission rights belongs to the Catalysts (excluding battery materials) cash- under cost of sales, selling expenses, research and development purchased on the market are capitalized at cost as intangible assets. generating unit. In the planning period, the demand for catalysts is expenses or other operating expenses. Emissions generated create an obligation to surrender the emission initially expected to remain stable as a result of higher environmental certificates. Intangible assets purchased on the market are standards. In the medium term, the transition from combustion Intangible assets with indefinite useful lives are trade names and subsequently measured at fair value, up to a maximum of the engines to electromobility will lead to a steady decline in demand. trademarks that have been acquired as part of acquisitions. These amount of the acquisition costs. If the fair value is lower than the For this reason, the growth rate for perpetual annuity was adjusted are measured at cost and tested for impairment annually, or if there carrying amount on the balance sheet date, the emission rights are from 2.0% in 2020 to –0.7% in 2021. is an indication that their value has declined. impaired. For more information on the Surface Technologies segment, which the cash-generating Catalysts (excluding battery materials) unit is allocated to, see the Management’s Report from page 82 onward Internally generated intangible assets primarily comprise Goodwill is only written down in the case of an impairment. The required discounting of cash flows for impairment testing is internally developed software. Such software and other internally Impairment testing for goodwill is performed once a year and calculated using the weighted average cost of capital rate after tax, generated intangible assets are measured at cost and amortized whenever there is an indication of impairment. Goodwill impairments which is determined using the capital asset pricing model. over their estimated useful lives. Impairments are recognized if the are not reversed. For more information on the weighted cost of capital rate, see Note 1 from page 200 onward carrying amount of an asset exceeds the recoverable amount. In addition to those costs directly attributable to the asset, costs of internally generated intangible assets also include an appropriate portion of overhead costs.