Using the reconciliations of this chapter and the information in Chapter 2, comment on the adjustments necessary when moving from German or UK accounting to US or IFRS accounting.

Chapter 2

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Table 5.8 Reconciliations by BASF from German to US rules for 2004 (m) Income Equity As reported income under German GAAP 1,883.0 15,765.0 Adjustments required to conform with US GAAP Capitalization of interest (4.5) 472.7 Capitalization of software developed for internal use (53.5) 128.3 Accounting for pensions 41.0 924.3 Accounting for provisions (8.1) 244.4 Accounting for derivatives and long-term foreign currency items 194.5 3.2 Valuation of securities at market values 6.8 191.5 Valuation adjustments relating to companies accounted for under the equity method (161.6) 39.0 Inventory valuation (3.4) 18.9 Reversal of goodwill amortization 148.7 469.5 Other adjustments 29.8 58.6 Deferred taxes and recognition of tax effects of dividend payments (210.4) (810.8) Minority interests 0.5 (345.5) In accordance with US GAAP 1,862.8 17,159.1 Source: Adapted from the BASF Annual Report, 2004, p. 92. BASF SA, Ludwigshafen, Germany. Reproduced with permission.