18 – Receivables and Miscellaneous Assets

The decline in noncurrent loans and interest receivables was predominantly due to changes in loans to nonconsolidated subsidiaries.

The increase in noncurrent derivatives with positive fair values primarily affected the market valuation of combined interest rate and currency swaps. The change in current derivatives with positive fair market values was largely attributable to the increase in fair values of commodity derivatives for precious metals.

Bank acceptance drafts are used as an alternative form of payment in China. Bank acceptance drafts are issued at a discount from their par value. They can be held to maturity, traded or redeemed prematurely at a discount. If BASF discounts a bank acceptance draft with recourse, a liability toward the credit institution is recognized in the amount of the payment received.

Current prepaid expenses in 2019 mainly included prepayments of €30 million related to operating activities compared with €22 million in 2018, as well as €79 million in prepayments for insurance in 2019 compared with €83 million in 2018. Prepayments for license costs increased from €38 million in 2018 to €74 million in 2019. Noncurrent prepaid expenses in 2019 included higher advance payments for received precious metal catalysts to be refurbished.

The change in current tax refund claims is largely attributable to the rise in open income tax receivables.

The rise in current other receivables and assets, which represent financial instruments, was due to deposits on commodity derivatives, which were traded through clearing houses.

Precious metal trading items primarily comprise physical items, precious metal accounts as well as long positions in precious metals, which are largely hedged through sales or derivatives.

Expected losses on trade accounts receivable at BASF are calculated primarily on the basis of internal or external customer ratings and the associated probability of default.

The following table presents the gross values and credit risks for trade accounts receivable measured at amortized cost as of December 31, 2019.

BASF generally monitors the credit risk associated with counterparties with which receivables exist in the form of financial instruments. In accordance with IFRS 9, impairments for expected credit losses on receivables are recognized based on this.

At BASF, a comprehensive, global credit insurance program covers accounts receivable, trade. Under a global excess of loss policy, future bad debts are insured for essentially all BASF Group companies excluding joint ventures. The program has no impact on the calculation of valuation allowances in accordance with IFRS 9. No compensation claims were incurred in either 2019 or 2018.

Payment terms are generally agreed upon individually with customers and, as a rule, are within 90 days. In 2019, valuation allowances of €168 million were added for trade accounts receivable, and valuation allowances of €146 million were reversed. In the previous year, valuation allowances of €128 million were added for trade accounts receivable, and valuation allowances of €117 million were reversed.

In 2019, valuation allowances of €15 million were recognized for other receivables representing financial instruments, and valuation allowances of €3 million were reversed. In the previous year, valuation allowances of €11 million were recognized for all other receivables, and valuation allowances of €9 million were reversed.

Additions included valuation allowances of €9 million due to a change in valuation parameters.