BASF Report 2021 Consoli dated Financial Statements – Notes 275 BASF’s planned soybean procurement is also exposed to commod- Furthermore, BASF SE’s fixed-rate U.S. private placement of BASF used currency options in 2021 to hedge the foreign currency ity price risks. These commodity price risks are hedged with soybean $1.25 billion, issued in 2013, was converted to euros using risk resulting from the U.S. dollar-denominated sales price for the futures. The contractual conditions for these hedging transactions cross-currency swaps, as the private placement exposes BASF to a sale of the shares in Solenis. These were designated in a cash flow correspond to the respective hedged item, and some are desig- combined interest/currency risk. The hedged interest rate was hedge accounting relationship. As this was a transaction-related nated in cash flow hedge accounting relationships. The average 4.13% in the fiscal years 2021 and 2020. The hedged foreign hedge, the change in the time value component was recognized as price hedged using these instruments was $13.35 per bushel as of exchange rate in both years was $1.3589 per euro. This hedge was hedging costs at a point in time. Accordingly, €10 million was initially December 31, 2021 (December 31, 2020: $12.52 per bushel). Cash designated as a cash flow hedge. recognized as a reduction in equity. Upon disposal of the shares in flows from these futures and the hedged expected future transac- Solenis in November 2021, the amount recognized in equity was tions are generally recognized in profit or loss for the following year. Furthermore, BASF was exposed to foreign currency risks in 2021 reclassified to profit or loss and reported under net income from through U.S. dollar-denominated commercial paper. These risks are shareholdings. There was no ineffectiveness at any time during the The physical power purchase agreements that were reported as hedged with foreign currency forward contracts and designated in a year. derivatives in the balance sheet were designated as hedging cash flow hedge accounting relationship. The changes in the value instruments to a cash flow hedge accounting relationship. The aver- of the hedging instruments in the amount of €11 million resulting Furthermore, BASF used foreign currency options in 2021 to hedge age price hedged using these instruments was €45.44 per MWh of from the change in the forward rate were recognized as time- period- the Chinese renminbi denominated purchase price for 51% of the electricity and €1.83 per GoO as of December 31, 2021. The real- related hedging costs. Because all underlying transactions and shares in BASF Shanshan Battery Materials Co., Ltd. The options ized hedging results are recognized in profit or loss upon occurrence hedging instruments had expired by December 31, 2021, the used for hedging were designated in a cash flow hedge accounting of the hedged underlying transactions in the years 2022 to 2048. amount of €11 million, which was initially recognized in equity, was relationship. This was a transaction-related hedge; accordingly, the reclassified in full as an increase in earnings. There was no change in the time value component was recognized as hedging Due to planned sales in U.S. dollars, BASF is exposed to foreign ineffectiveness at any time during the year. costs at a point in time. For this purpose, €2 million was recognized currency risks, which are partially hedged with currency options and as a reduction in equity. Upon closing of the transaction in designated in a cash flow hedge accounting relationship. The The expected sales price associated with the disposal of the August 2021, the amount recognized in equity as hedging costs hedged transaction – the designated share of expected sales in pigments business was partially hedged against exchange rate was derecognized thereby increasing the purchase price. There was U.S. dollars – is calculated based on internal thresholds. The hedged fluctuations in 2021 and 2020. The occurrence of the hedged no ineffectiveness at any time during the year. volume is always below the total amount of expected sales in transactions was, due to contractual agreements, considered highly U.S. dollars for the following fiscal year. The average hedged rate probable; and the transaction and derivatives used for hedging were The effects of the hedging relationships on the balance sheet, the was $1.1630 per euro as of December 31, 2021, and $1.1583 per designated in a cash flow hedge accounting relationship. The hedge cash flow hedge reserve, hedged nominal value and ineffectiveness euro in the previous year. The impact on earnings from designated was initially achieved through foreign currency forward contracts to be determined are presented in the following tables by fiscal year. transactions in 2021 will be recognized in the following year. The and, following the discontinuation of this hedging relationship, with decrease in the options’ time value component arising in the amount foreign currency options. This was a transaction-related hedge. The of €14 million in 2021 was recognized separately in equity as the change in the forward rate and the change in the time value cost of hedging and resulted in a reduction in equity. Due to the component were recognized as hedging costs at a point in time. maturity of hedged items, accumulated changes in the options’ time This reduced equity by €3 million in 2021, and by €8 million in 2020. values were reclassified as a reduction in earnings in the amount of Upon disposal of the pigments business as of June 30, 2021, €19 million. In 2020, €30 million was recognized as a change in the €11 million was reclassified as a reduction in earnings and included options’ time value component, thereby reducing equity; and in disposal losses from the global pigments business. There was no €34 million was reclassified as a reduction in earnings. ineffectiveness at any time during the year.