Accounting Principles


The financial statements of Wacker Chemie AG and the German and international subsidiaries are prepared in accordance with uniform accounting principles. The preparation of the consolidated financial statements in compliance with IFRS necessitates assumptions and estimates affecting the amounts and the reporting of the recognized assets and debts, income and expenses, and contingencies. The assumptions on which the estimates are based relate primarily to the uniform determination of useful lives throughout the Group, the recognition and measurement of provisions, the scope for realizing future tax relief, and the assumptions in connection with impairment tests. The actual values may in individual cases differ from the assumptions and estimates that were made. Changes in value are recognized as soon as they become apparent and affect the results for the period when the change occurred and, if applicable, in future reporting periods.

Significant risks inherent in the environmental protection provisions that may affect the levels of assets and liabilities reported in the balance sheet are possible changes in the cost estimates, changes in the likelihood of their utilization, and enhanced statutory provisions on the elimination and prevention of environmental damage. See Note 14

In principle, there is also the risk of future cash inflows from property, plant, and equipment not being high enough to justify the carrying amounts stated. In this case, there would be impairments.

In principle, the values from the reporting period and those of the comparative period are comparable, as no shortened fiscal year was applied; instead, each period encompasses a calendar year. Limits to comparability may occur in the case of large-scale acquisitions of fully consolidated companies. This topic was dealt with in the explanation of the scope of consolidation. Insofar as amounts from the previous year are adjusted, these are explained in the relevant Notes.

Sales are recognized when goods and services have been duly delivered or rendered, respectively, and the ownership and risks have devolved upon the purchaser. Sales also include income from services. Information on the development of sales by segment and region is provided in the section on segment reporting.

Production costs show the costs of the products, merchandise, and services sold. In addition to directly attributable costs, such as material costs, personnel expenses, and energy costs, they encompass overheads including depreciation and inventory write-downs. This item also includes the cost of outward freight.

Selling expenses include costs incurred by the sales organization, advertising, market research, and application support on customers’ premises. This item also includes commission expenses.

Research and development expenses include costs incurred in the development of products and processes. Research costs in the narrower sense are recognized as expenses when they are incurred. They are not capitalized. Development costs are capitalized only when all the prescribed recognition criteria have been met cumulatively, the research phase can be separated clearly from the development phase, and the costs incurred can be allocated to the individual projects without any overlaps. At the moment, not all the capitalization criteria in IAS 38 have been met due to numerous interdependencies within development projects and the uncertainty about which products will ultimately become commercially viable.

General administrative expenses include the pro rata personnel expenses and cost of materials of central Group control functions, human resources, accounting, and information technology, unless they have been charged as an internal service to other cost centers and therefore perhaps to other functional areas.

Intangible assets separately acquired are measured at cost and, if their useful lives can be determined, are amortized regularly on a straight-line basis. The useful life is taken to be between four and eight years unless otherwise indicated, e.g. by the life of a patent. Amortization of intangible assets (apart from goodwill) is allocated to the functional areas that use them. Intangible assets with indefinite useful lives undergo an annual impairment test. At the moment, these, without exception, are goodwill.

Self-generated intangible assets are capitalized if it is probable that a future economic benefit can be associated with the use of the asset and the costs of the asset can be determined reliably. They are recognized at cost and amortized regularly using the straight-line method. Their stated useful lives correspond to those of the intangible assets separately acquired. If development costs are capitalized, they are comprised of the costs directly and indirectly attributable to the development process. Capitalized development costs are amortized regularly over the useful life of the corresponding production facilities as from the start of production.

Goodwill is not amortized regularly. Existing goodwill undergoes an annual impairment test. If the impairment test indicates a recoverable amount that is lower than the carrying amount, the goodwill is reduced to its recoverable amount and an impairment loss is recognized. The intrinsic value, furthermore, is examined when events or circumstances indicate possible impairment. The impairments of goodwill are presented under other operating expenses.

We capitalize property, plant, and equipment at cost and depreciate them regularly using the straight-line method in accordance with their expected useful lives. In addition to the purchase price, acquisition costs include incidental acquisition costs as well as any costs incurred in the demolition, dismantling, and/or removal of the asset in question from its location and in the restoration of that location. Any reductions in the price of acquisition reduce the acquisition costs. There was no revaluation of property, plant, and equipment on the basis of the provisions in IAS 16.

Grants from third parties reduce acquisition and production costs. Unless otherwise indicated, these grants (investment subsidies) are provided by government bodies.

Borrowing costs are not recognized as a part of acquisition or production cost, but are expensed as incurred.

Income grants that are not offset by future expenses are recognized as income.

The production cost of self-generated assets includes all the costs directly attributable to the production process, as well as appropriate parts of the production-related overheads.

If property, plant, and equipment are shut down, sold, or abandoned, the gain or loss from the difference between the sale proceeds and the residual carrying amount is recognized under other operating income or expenses. Assets relating to leases are also reported under property, plant, and equipment. Property, plant, and equipment hired by means of finance leases are recognized at fair value at their time of addition, unless the present values of the minimum lease payments are lower. The assets are depreciated regularly using the straight-line method over the expected useful life or the shorter contractual term.

The obligations resulting from future lease payments are recognized under financial liabilities.

The scheduled depreciation of property, plant, and equipment is generally carried out in accordance with the following useful lives:

  download table








in years

Useful life



Production buildings

20 to 40

Other buildings

10 to 30

Plant and machinery

6 to 12

Motor vehicles

4 to 6

Factory and office equipment

6 to 10

If the carrying amounts of intangible assets or items of property, plant, and equipment determined in accordance with the above principles are higher than their recoverable amounts as of the reporting date, corresponding impairment losses are recognized as an expense. The fair values are determined on the basis of the net selling price or, if higher, the present value of the estimated future cash flows from the use of the asset. We use division-specific risk-adjusted interest rates in discounting those cash flows. For the group an average interest rate of 9.5% (previous year 8.8%) has been applied. The need for write-downs is assessed annually for such assets or groups of assets where there are indications of possible impairment. If the impairment loss no longer exists or has decreased, impairment losses are fully or partially reversed. Impairments are reported under other operating expenses, reversal of impairment losses under other operating income.

Investment property is measured according to the acquisition cost model.

Shares in non-consolidated subsidiaries and investments are measured at cost, unless divergent fair values are available.

Changes in market values are posted to the income statement upon realization by means of disposal or if the market value falls below the acquisition cost. Loans advanced are measured at amortized cost, except for non-interest-bearing and low-interest loans, which are measured at their present value.

Investments in associated companies and joint ventures are accounted for using the equity method. Generally the carrying amount reflects the Group’s pro rata share of equity. In the process, pro rata net income is posted to the consolidated income statement and increases or decreases the carrying amount. Any changes in the investee’s equity that have been recognized directly in the investee’s equity are also recognized directly in equity in the consolidated financial statements. Dividends paid by joint ventures and associated companies reduce their equity and, therefore, decrease the carrying amount without affecting profit. If an associated company or a joint venture faces losses that have exhausted its equity, these losses are written off in full in the consolidated balance sheet. Any additional losses above and beyond additional assets of a type similar to the investments are not included in the consolidated financial statements. The carrying amount is not increased until the loss carryforward has been set off and the equity is positive again.

Inventories are measured at cost using the average cost method. Lower net disposal values or net realizable prices as of the balance sheet date are taken into account by means of write-downs to their fair value less selling costs. Production costs include directly attributable costs, appropriate parts of the indirect materials and indirect labor costs, and straight-line depreciation. Borrowing costs are not stated as part of acquisition and production costs. The overhead cost markups are determined on the basis of average capacity utilization.

Write-downs are recognized for inventory risks resulting from extended periods of storage and reduced usability and to reflect other reductions in the recoverable amount. In the income statement, the cost of unused production capacity is also included in the production costs.

For production-related reasons, work in process and finished goods are reported combined under products.

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. WACKER’s financial assets include, in particular, cash and cash equivalents, trade receivables, and other receivables and derivative financial assets. Financial liabilities regularly substantiate claims for repayment in cash or another financial asset. This includes, in particular, bonds and other securitized liabilities, trade payables, amounts owed to banks, finance lease payables, promissory notes, and derivative financial liabilities. Financial instruments are generally recognized as soon as WACKER becomes party to the contractual regulations of the financial instrument. In the case of purchase or sale on usual market terms (purchase or sale within the framework of a contract of which the terms require delivery within the timeframe generally established by regulations or conventions prevailing on the market in question), however, the settlement date is relevant to the initial recognition or derecognition. This is the date on which the asset is delivered to or by WACKER. In general, financial assets and financial liabilities are not netted out. A net amount is presented in the balance sheet when, and only when, the entity currently has a right to set off the recognized amounts and intends to settle on a net basis.

Financial assets are measured at fair value when first recognized. In the process, the transaction costs directly attributable to the acquisition are taken into account for all financial assets not subsequently measured at fair value through profit and loss. The fair values recognized in the balance sheet generally correspond to the market prices of the financial assets. If these are not immediately available, they must be calculated using standard valuation models on the basis of current market parameters. Financial assets and liabilities are subsequently valued in accordance with the category – cash and cash equivalents, available-for-sale financial assets, loans and receivables, or financial liabilities recognized at amortized cost – to which they are allocated.

Trade receivables and other assets, including tax receivables, are basically recognized at amortized cost, except for derivative financial instruments. Risks are taken into account through appropriate depreciation posted as valuation allowances. Allowances for uninsured receivables – or for the deductible in the case of insured receivables – are made whenever recourse is had to the law. If an incoming receivable is no longer expected, even though an appeal has been lodged, the gross receivable is written off and the allowances made are reversed. Long-term receivables which are non-interest-bearing or low-interest are discounted. WACKER is not a contractor for long-term production orders.

Receivables from finance lease agreements where WACKER acts as the lessor are reported under other assets. In the process, the gross value of the outstanding lease payments, less the still unrealized borrowed amounts, is capitalized as a receivable. The lease installments received are apportioned into the respective interest amount and the repayment of the outstanding receivable in such a way that the interest amount reflects the constant interest-bearing of the still unsettled receivable. The interest amount is reported in the income statement under other financial results.

Available-for-sale financial assets – investments in current securities, equity instruments, debt instruments, and investment fund shares are classified as available-for-sale financial assets. They are recognized at fair value, provided that this value can be calculated reliably. In the process, observable market prices are used for orientation. Unrealized gains and losses are recorded taking account of deferred taxes and are recognized in other equity with no effect on income. If equity instruments have no price quoted on an active market and if their fair value cannot be determined reliably, they are measured at cost. If the fair values of available-for-sale financial assets fall below the acquisition costs and there are objective signs that an asset’s value has been impaired, the cumulative loss recorded directly in equity is reversed and shown in the income statement. The company bases its assessment of possible impairments on all available information, such as market conditions and prices, investment-specific factors, and the duration and extent of the drop in value below acquisition costs. Impairments affecting a debt instrument are reversed in subsequent periods, provided that the reasons for the impairment no longer apply.

Derivative financial instruments are used for hedging purposes with the sole aim of reducing the Group’s exposure to exchange rate, interest rate, and raw materials price risks arising from operating activities and the resultant financing requirements. Derivative financial instruments are always measured at fair value, irrespective of the purpose or intention for which they were concluded. Positive fair values are recognized as a receivable and negative current values as a liability. Changes in market values of financial instruments used to limit the risk of lower future inflows or higher outflows (cash flow hedges) are recognized in other comprehensive income in consideration of any related tax effects.

Measures to hedge the risk of changes in the market values of recognized assets or liabilities lead to “fair value hedges.” Changes in fair values are recorded for both the hedged underlying transaction and the derivative financial instruments used for hedging, and these changes are presented in the income statement under “Other financial result.” Derivative financial instruments are recorded as of the trading date.

Cash and cash equivalents, including cash accounts and current investments with banks, generally have a residual period of up to three months upon their addition and are measured at cost, which is equivalent to their nominal value.

Financial liabilities are measured at fair value on initial recognition. For all financial liabilities not subsequently measured at fair value through profit or loss, the transaction costs directly attributable to the acquisition are likewise taken into account. Liabilities from finance lease agreements are shown as financial liabilities at the present value of the future lease installments.

Trade payables and other liabilities (including tax liabilities) are basically recognized at amortized cost using the effective interest method.

There are no contingencies recorded in the balance sheet.

Deferred tax assets and liabilities are formed for temporary differences between tax bases and carrying amounts, as well as for consolidation measures recognized in the income statement. The deferred tax assets include tax relief entitlements resulting from the anticipated use of existing loss carryforwards in future years, the realization of which is assured with sufficient probability. The deferred taxes are determined on the basis of the tax rates which, under current law, are applicable or anticipated at the time of realization in the individual countries. The deferred tax assets and liabilities are netted out only to the extent that is possible under the same tax authority.

Minority shares in the limited partnership capital of consolidated companies are reported as a financial liability. Pro rata results and dividend payments increase or diminish this liability.

Pension provisions are measured according to the projected unit credit method. This method takes account not only of pensions and entitlements to future pensions known as of the balance sheet date, but also of estimated increases in salaries and pensions. The calculation is based on actuarial valuations, taking account of biometric calculation principles.

Actuarial gains and losses are recognized as income or expenses only once they move outside a margin of ten percent of the present value of the defined benefit obligation. In the event of this happening, the excess amounts are distributed over the average future residual working lives of the employees. The expense incurred in funding the pension provisions (service costs) is allocated to the costs of the functional areas concerned. The interest costs are reported under “Other financial result.” If assets are funded externally (plan assets) to finance pension obligations, the fair values of these assets are set off against the present value of the obligations. The expected return on plan assets is likewise reported under “Other financial result.”

Provisions are formed in the balance sheet for current legal or constructive obligations if an outflow of resources to cover these obligations is probable and the amount of these obligations can be estimated reliably. The assigned value of the provisions is based on the amounts that will be required to cover future payment obligations, identifiable risks, and Group contingencies. All cost components which are also capitalized under inventories are basically included in the measurement of other provisions. Noncurrent provisions are measured at discounted present value as of the balance sheet date. Any expected refunds, provided that they are sufficiently secure or legally enforceable, are not balanced against provisions.

Emission certificates allotted free of charge are measured at a nominal value of zero. Provisions are formed if the available portfolio of emission certificates does not cover the anticipated obligations. Proceeds from the sale of emission certificates allotted free of charge are included under other operating income.

Changes in the Accounting Methods/Standards Used for the First Time

IAS 1: “Presentation of Financial Statements”

In September 2007, the IASB adopted changes to IAS 1. The revisions to the standard must be applied for the first time in the fiscal year which begins on or after January 1, 2009. Their earlier application is permissible. The revised standard was endorsed by the European Union in December 2008. Its first-time application will lead to the following significant changes in the way the financial statements are presented:

  • Statement of comprehensive income: the presentation of all the changes in equity recorded in the reporting period (excluding transactions with shareholders) is made in two separate parts of the financial statements: additional to the income statement, those changes in assets and liabilities posted to equity which do not influence the result for the period are reported in the statement of comprehensive income. These include, in particular, the reporting of particular changes in the market values of derivative financial instruments in connection with the hedging of future payments in foreign currencies, and the change in the balancing item from the translation of consolidated companies’ financial statements in foreign currencies. The statement of comprehensive income takes the result for the year and, via the aforementioned item, ascertains the total income and expenses reported, or “comprehensive income”. Both the result for the year and the comprehensive income are apportioned to the shares attributable to minority interests and those accounted for by the shareholders in Wacker Chemie AG.
  • Statement of changes in equity: the income and expenses posted directly to equity are reported as a single amount and no longer separately. The development of the other equity items is presented in detail in an additional table, where the individual items (foreign currency translation, cash flow hedging) are reported separately. This table is an integral part of the statement of changes in equity. In connection with this, the items “translation adjustment” and “Gains and losses recognized in equity”, which were previously reported separately in the balance sheet, are now combined in the single item “Sundry equity items”.

IAS 39: “Financial Instruments: Recognition and Measurement” and IFRS 7: “Financial Instruments: Disclosures”

In October 2008, the IASB adopted changes to the two standards specified above which must be applied retroactively as from July 1. They have been endorsed by the European Union, also in October 2008. Due to a lack of relevant data, the application of the revised standards did not have any impact on Wacker Chemie AG’s consolidated financial statements.

FRIC 11: “IFRS 2-Group and Treasury Share Transactions”

This interpretation must be used for the first time in the fiscal year that begins on or after March 1, 2007. The interpretation was endorsed by the European Union on June 1, 2007. As there are no relevant transactions in the WACKER Group, the application of the interpretation has no impact on Wacker Chemie AG’s consolidated financial statements.

IFRIC 14: “IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Require ments and Their Interaction”

The first mandatory application of this interpretation is in the fiscal year beginning on or after January 1, 2008. The changes were endorsed by the European Union on December 16, 2008. In view of the application of the IAS 19 rules so far, its application has no impact on Wacker Chemie AG’s consolidated financial statements.