BASF Report 2021 Consoli dated Financial Statements – Independent Auditor’s Report 189 Recoverability of goodwill Our audit approach Finally, we assessed whether the disclosures in the Notes on the key We consulted our valuation specialists in order to assess, among assumptions are appropriate and complete. For information on the accounting principles applied, please refer to other things, the appropriateness of the key assumptions as well as Note 1.4 to the Consolidated Financial Statements on page 204. the Group’s methods of calculation. Our observations The underlying assumptions used in the calculation and the disclo- The assumptions and data underlying the calculations of the Board sures on the impairment tests performed are included in Note 14 to We examined the forecast for the expected business and earnings of Executive Directors are acceptable. The disclosures in the Notes the Consolidated Financial Statements from page 236 onward. development and the resulting cash flows in the detailed planning on the key assumptions are appropriate and complete. period, in particular with respect to whether the expected develop- Financial statement risk ment of the relevant sales markets were given appropriate consider- Intangible assets in the Consolidated Financial Statements of ation and are consistent with the current budgets adopted by the Recoverability of the shareholding in Wintershall Dea BASF SE include goodwill in the amount of €7,520 million. Good- Board of Executive Directors and the Supervisory Board. We will accounts for 8.6% of total assets and thus has a material impact compared internal growth forecasts with industry expectations and For information on the accounting principles applied and the under- on the company’s net assets. Goodwill must be tested for impairment those of significant competitors and we assessed whether assump- lying assumptions used in the calculation, please refer to Note 10.2 annually and whenever there is an indication that goodwill may be tions contained in the planning regarding the future development of to the Consolidated Financial Statements on page 227. impaired. margins and the amount of investments are appropriate. Our review of the appropriateness of the budgets adopted by the Board of Financial statement risk Goodwill impairment testing is complex and is based on a range of Execu tive Directors and the Supervisory Board also included a In the Consolidated Financial Statements of BASF SE, shares in discretionary assumptions. These include the forecasts for future comparison of planning in past business years with the results Wintershall Dea in the amount of €9,583 million are reported under cash inflows in the detailed planning period, the assumed growth actually achieved. For selected units, we examined whether non-integral shareholdings accounted for using the equity method. rate for subsequent periods and the cost of capital. These assump- reasons for not reaching planned values in the past were given The shareholding in Wintershall Dea accounts for 11% of total tions have a material impact on the recoverability of goodwill. The appropriate consideration in current planning, to the extent that this assets and thus has a material influence on the company’s net growth forecasts of the Board of Executive Directors are associated was relevant. assets. with risks and can be revised in light of volatile raw materials prices e are indicators for an impairment of an equity-accounted and an instable macroeconomic environment. We assessed the appropriateness of the assumed growth rate for If ther the period following the detailed planning period on the basis of shareholding the company determines the recoverable amount as of There is the risk for the financial statements that an impairment as of industry-specific and macroeconomic studies. We evaluated the the reporting date and compares this with the carrying amount. The the balance sheet date is not identified or that an impairment as of methodological appropriateness of the calculation and the appro- recoverable amount is the higher of fair value less costs to sell and the balance sheet date is not recognized with an appropriate priateness of the weighted cost of capital rates. To this end, we the value in use of the shareholding. The higher value in use deter- amount. In addition, there is also a risk that the disclosures in the calculated our own expected values for the assumptions and data mined for the shareholding as the recoverable amount is determined Notes on the key assumptions are not appropriate and complete. underlying the weighted cost of capital rates and compared these using the discounted cash flow method. If the carrying amount is with the assumptions and data used. higher than the recoverable amount, this results in an impairment.