Edgar Filing: BRASKEM SA

bakfs2011_6k.htm - Generated by SEC Publisher for SEC Filing

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16
OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2012

(Commission File No. 1-14862 )

BRASKEM S.A.

(Exact Name as Specified in its Charter)

N/A

(Translation of registrant's name into English)

Rua Eteno, 1561, Polo Petroquimico de Camacari
Camacari, Bahia - CEP 42810-000 Brazil

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X___ Form 40-F ______

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1). _____

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7). _____

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.

PRESENTATION OF FINANCIAL STATEMENTS

	Page

Management’s Report on Internal Controls Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2011 and 2010	1
Consolidated Statement of Operations for the years ended December 31, 2011, 2010 and 2009	3
Consolidated Statement of Comprehensive Income for the years ended December 31, 2011, 2010 and 2009	4
Consolidated Statement of Changes in Equity for the years ended December 31, 2011 and 2010	5
Consolidated Statement of Cash Flows for the years ended December 31, 2011, 2010 and 2009	6
Notes to the Consolidated Financial Statements	7

Braskem S.A. and Its Subsidiaries

Management’s Report on Internal Controls Over Financial Reporting

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

(a) Management´s report on internal controls over financial reporting

The management of Braskem S.A.("Braskem" or the "Company"), including the CEO and CFO, is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined on article 13a-15 (f) according “Exchange Act” of United States of America.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Rules of Financial Reporting - “IFRS” issued by International Accounting Standards Board - “IASB”. The Company´s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company´s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.

As disclosed in Note 5.5 of its consolidated financial statements, during 2011, Braskem acquired the control of the polypropylene businesses from The Dow Chemical Company in the United States and Germany. As provided under Sarbanes – Oxley Act of 2002 and the applicable rules and regulations of the Securities Exchange Commission, management has elected to excluded the polypropylene businesses from The Dow Chemical Company in the United States and Germany from this evaluation and the total assets and net sales of which represent 3.6% and 2.0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2011.

Braskem’s management has assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2011 based on the criteria established in Internal Control – “Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on such criteria, Braskem´s management has concluded that, as of December 31, 2011, the Company´s internal control over financial reporting is effective.

(b) Management´s report under deficiencies and recommendations on internal controls over audit report

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report which appears herein.

March 13, 2012

By: /s/ Carlos Jose Fadigas de Souza Filho		/s/ Marcela Aparecida Drehmer Andrade
Name: Carlos José Fadigas de Souza Filho		Name: Marcela Aparecida Drehmer Andrade
Title: Chief Executive Officer		Title: Chief Financial Officer

Braskem S.A. and Its Subsidiaries

Independent Auditor’s Report as of December 31, 2011

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Braskem S.A.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of Braskem S.A. and its subsidiaries at December 31,2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31,2011, 2010 and 2009 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Braskem S.A. and Its Subsidiaries

Independent Auditor’s Report as of December 31, 2011

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in “Management’s Report on Internal Control over Financial Reporting”, management has excluded the polypropylene businesses acquired from The Dow Chemical Company in the United States and Germany (see note 5.5 to the financial statements) from its assessment of internal control over financial reporting as of December 31, 2011, because they were acquired by the Company in a purchase business combinations during 2011. We have also excluded the polypropylene businesses acquired from The Dow Chemical Company in the United States and Germany from our audit of internal control over financial reporting. The total assets and net sales of the polypropylene businesses acquired from The Dow Chemical Company in the United States and Germany represent 3.6% and 2.0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2011.

Salvador, March 13, 2012

/s/ PricewaterhouseCoopers

Auditores Independentes

Braskem S.A. and Its Subsidiaries

Consolidated Balance Sheet

All amounts in thousands of Brazilian reais




Assets		Note	2011	2010

Current assets
	Cash and cash equivalents	6	2,986,819	2,624,270
	Financial investments	7	170,297	236,319
	Trade accounts receivable	8	1,843,756	1,894,648
	Inventories	9	3,623,522	3,015,657
	Taxes recoverable	11	1,036,253	698,879
	Prepaid expenses		104,496	41,620
	Other receivables	14	406,634	228,569

			10,171,777	8,739,962

Non-current assets
	Financial investments	7	34,752	28,706
	Trade accounts receivable	8	51,056	62,303
	Taxes recoverable	11	1,506,247	1,444,401
	Deferred income tax and social contribution	23.2	1,237,144	1,136,685
	Judicial deposits	12	174,220	250,195
	Related parties	10	58,169	53,742
	Insurance claims	13	252,670	40,336
	Other receivables	14	182,533	107,432
	Investment in associates	15	29,870	160,790
	Other investments		10,844	7,485
	Property, plant and equipment	16	20,628,187	19,366,272
	Intangible assets	17	3,016,692	3,079,182

			27,182,384	25,737,529

Total assets			37,354,161	34,477,491

The accompanying notes are an integral part of these financial statements.

Braskem S.A. and Its Subsidiaries

Consolidated Balance Sheet

All amounts in thousands Brazilian of reais Continued




Liabilities and equity		Note	2011	2010

Current liabilities
	Trade payables		6,847,340	5,201,162
	Borrowings	19	1,391,779	1,206,444
	Debentures	20		517,741
	Hedge operations	21.2.1	83,392	50,124
	Payroll and related charges		242,102	360,368
	Taxes payable	22	329,987	390,062
	Dividends and interest on capital	29 (h.1)	4,838	419,981
	Advances from customers		19,119	50,344
	Sundry provisions	24	23,629	32,602
	Other payables	18	119,402	233,322

			9,061,588	8,462,150

Non-current liabilities		-
	Borrowings	19	13,753,033	11,004,301
	Debentures	20	19,102
	Hedge operations	21.2.1	10,278	34,433
	Taxes payable	22	1,613,179	1,583,569
	Related parties	10	44,833	31,386
	Long-term incentives	25	15,213	14,442
	Deferred income tax and social contribution	23.2	1,938,971	2,200,538
	Pension plans	26	149,575	123,517
	Advances from customers	27	218,531
	Sundry provisions	24	298,094	362,265
	Other payables	18	280,546	252,604

			18,341,355	15,607,055

Equity		29
	Capital		8,043,222	8,043,222
	Capital reserve		845,998	845,998
	Revenue reserves		591,307	1,338,908
	Other comprehensive income		315,586	221,350
	Treasury shares		(60,217)	(59,271)

	Total attributable to the shareholders of the Company		9,735,896	10,390,207

	Non-controlling interest	2.2	215,322	18,079

			9,951,218	10,408,286

Total liabilities and equity			37,354,161	34,477,491

The accompanying notes are an integral part of these financial statements.

Braskem S.A. and Its Subsidiaries

Consolidated Statement of Operations

Years ended December 31

All amounts in thousands of Brazilian reais, except for earnings (loss) per share





		Note	2011	2010	2009

Net sales revenue		31	33,176,160	25,494,817	16,136,070
	Cost of products sold		(29,317,951)	(21,411,775)	(13,529,696)

Gross profit			3,858,209	4,083,042	2,606,374

Income (expenses)
	Selling		(343,655)	(383,454)	(298,847)
	Distribution		(480,532)	(335,510)	(300,735)
	General and administrative		(1,025,668)	(969,929)	(648,310)
	Research and development		(99,083)	(78,778)	(63,119)
	Results from equity investments	15 (c)	(1,419)	20,302	3,188
	Results from business combinations	5		975,283	102,051
	Other operating income (expenses), net	33	22,053	(95,995)	3,705

Operating profit			1,929,905	3,214,961	1,404,307

Financial results		34
	Financial expenses		(3,574,240)	(1,696,949)	685,439
	Financial income		769,341	369,426	(331,330)

			(2,804,899)	(1,327,523)	354,109

Profit (loss) before income tax and
social contribution			(874,994)	1,887,438	1,758,416

	Current income tax and social contribution	23.1	(18,981)	(61,536)	(353,551)
	Deferred income tax and social contribution	23.1	377,136	63,583	(1,006,374)
			358,155	2,047	(1,359,925)

Profit (loss) for the year			(516,839)	1,889,485	398,491

Attributable to:
	Company's shareholders		(525,142)	1,895,309	398,491
	Non-controlling interest	2.2	8,303	(5,824)	-

			(516,839)	1,889,485	398,491


Earnings (loss) per share attributable to the shareholders of the Company
at the end of the year (R$)		30
	Basic earnings (loss) per share - common		(0.6580)	2.7037	0.7551
	Basic earnings (loss) per share - preferred		(0.6580)	2.5904	0.7842
	Diluted earnings (loss) per share - common		(0.6577)	2.7031	0.7554
	Diluted earnings (loss) per share - preferred		(0.6577)	2.5898	0.7845

The accompanying notes are an integral part of these financial statements.

3

Braskem S.A. and Its Subsidiaries

Consolidated Statement of Comprehensive Income

Years ended December 31

All amounts in thousands of Brazilian reais





		Note	2011	2010	2009

Profit (loss) for the year			(516,839)	1,889,485	398,491

Other comprehensive income or loss:
	Available for sale financial assets			58	(10,722)
	Cash flow hedge	21.2.2	45,034	6,032	42,794
	Foreign currency translation adjustment		56,809	(79,346)
	Income tax and social contribution related to
	components of comprehensive income	21.2.2	(2,458)	6,793	3,851

Total other comprehensive income or loss			99,385	(66,463)	35,923

Total comprehensive income or loss for the year			(417,454)	1,823,022	434,414

Attributable to:
	Company's shareholders		(427,935)	1,829,057	434,414
	Non-controlling interest		10,481	(6,035)

			(417,454)	1,823,022	434,414

The accompanying notes are an integral part of these financial statements.

Braskem S.A. and Its Subsidiaries

Consolidated Statement of Changes in Equity

All amounts in thousands of Brazilian reais


		Attributed to shareholders' interest
				Revenue reserves
	Note	Capital	Capital reserve	Legal reserve	Tax incentives	Unrealized profit reserve	Additional dividends proposed	Other comprehensive Income	Treasury shares	Retained earnings (accumulated deficit)	Total Braskem shareholders' interest	Non-controlling Interest	Total shareholders' equity

At December 31, 2009		5,473,181	416,675	-	-	-	-	314,838	(10,376)	(1,215,674)	4,978,644	-	4,978,644

Comprehensive income for the year:
Profit for the year										1,895,309	1,895,309	(5,824)	1,889,485
Fair value of financial assets, net of taxes								38			38		38
Fair value of cash flow hedge, net of taxes								12,845			12,845		12,845
Foreign currency translation adjustment		-	-	-	-	-	-	(79,135)	-	-	(79,135)	(211)	(79,346)
								(66,252)		1,895,309	1,829,057	(6,035)	1,823,022

Equity valuation adjustments:
Realization of additional property, plant and equipment price-level restatement, net of taxes		-	-	-	-	-	-	(27,236)	-	27,236	-	-	-
								(27,236)		27,236

Contributions and distributions to shareholders:
Capital increase		2,570,041	1,479,294								4,049,335		4,049,335
Treasury shares									(48,892)		(48,892)		(48,892)
Purchase of treasury shares									(3)		(3)		(3)
Expired dividends / other										(2,650)	(2,650)		(2,650)
Absorption of losses			(1,061,871)							1,061,871
Tax incentives			11,900							(11,900)
Legal reserve				87,710						(87,710)
Minimum mandatory dividends										(415,284)	(415,284)		(415,284)
Additional dividends proposed							250,346			(250,346)
Unrealized profit reserves						995,505				(995,505)
Tax incentives reserve					5,347					(5,347)
Acquisition of non-controlling interest		-	-	-	-	-	-	-	-	-	-	24,114	24,114
		2,570,041	429,323	87,710	5,347	995,505	250,346	-	(48,895)	(706,871)	3,582,506	24,114	3,606,620

At December 31, 2010		8,043,222	845,998	87,710	5,347	995,505	250,346	221,350	(59,271)	-	10,390,207	18,079	10,408,286

Comprehensive income for the year:
Loss for the year										(525,142)	(525,142)	8,303	(516,839)
Fair value of cash flow hedge, net of taxes	21.2.2							42,576			42,576		42,576
Foreign currency translation adjustment		-	-	-	-	-	-	54,631	-	-	54,631	2,178	56,809
								97,207		(525,142)	(427,935)	10,481	(417,454)

Equity valuation adjustments:
Deemed cost of jointly-controlled subsidiary, net								22,079			22,079		22,079
Realization of deemed cost of jointly-controlled subsidiary, net of taxes								(920)		920
Realization of additional property, plant and equipment price-level restatement, net of taxes		-	-	-	-	-	-	(27,236)	-	27,236	-	-	-
								(6,077)		28,156	22,079		22,079

Contributions and distributions to shareholders:
Capital increase of non-controlling interest												86,634	86,634
Payment of additional dividends proposed	29 (h.1)						(250,346)				(250,346)		(250,346)
Tax incentives					(800)						(800)		(800)
Gain (loss) on interest in subsidiary								3,106			3,106	(3,106)
Acquisition of non-controlling interest - Cetrel	2.2											103,503	103,503
Expired dividends / other										531	531	(269)	262
Absorption of losses	29 (e)					(496,455)				496,455
Additional dividends proposed	29 (e)					(482,593)	482,593
Repurchase of treasury shares	29 (g)	-	-	-	-	-	-	-	(946)		(946)	-	(946)
		-	-	-	(800)	(979,048)	232,247	3,106	(946)	496,986	(248,455)	186,762	(61,693)

At December 31, 2011		8,043,222	845,998	87,710	4,547	16,457	482,593	315,586	(60,217)	-	9,735,896	215,322	9,951,218

The accompanying notes are an integral part of these financial statements.

Braskem S.A. and Its Subsidiaries

Statement of Cash Flows

Years ended December 31

All amounts in thousands of reais




		2011	2010	2009

Profit (loss) before income tax and social contribution		(874,994)	1,887,438	1,758,416
Adjustments for reconciliation of profit (loss)
	Depreciation, amortization and depletion	1,721,428	1,606,354	1,038,061
	Results from equity investments	1,419	(20,302)	(3,188)
	Results from business combinations		(975,283)	(102,051)
	Interest and monetary and exchange variations, net	2,292,498	413,194	(1,108,058)
	Other	2,302	47,209	99,447

		3,142,653	2,958,610	1,682,627

Changes in operating working capital
	Held-for-trading financial investments	90,953	79,764	8,351
	Trade accounts receivable	365,901	184,442	(1,044,263)
	Inventories	(382,465)	(382,285)	1,035,140
	Taxes recoverable	(311,021)	622,167	94,372
	Prepaid expenses	(62,531)	(5,062)	44,295
	Other receivables	(356,253)	1,730	(41,577)
	Trade payables	1,325,977	683,639	(1,073,838)
	Taxes payable	(52,134)	(601,878)	501,718
	Long-term incentives	771	6,733	(2,744)
	Advances from customers	187,306	(38,424)	(19,218)
	Sundry provisions	(74,402)	21,128	(17,669)
	Other payables	(212,133)	177,901	50,116

Cash from operations		3,662,622	3,708,465	1,217,310

	Interest paid	(802,427)	(929,481)	(594,676)
	Income tax and social contribution paid	(82,695)	(58,617)	(23,970)

Net cash generated by operating activities		2,777,500	2,720,367	598,664

Proceeds from the sale of fixed assets and investments		23,958	1,781	2,949
Proceeds from the capital reduction of associates		6,600
Acquisitions of investments in subsidiaries and associates		(619,207)	(939,427)	1,464
Acquisitions to property, plant and equipment		(2,252,491)	(1,689,006)	(811,740)
Acquisitions of intangible assets		(11,474)	(17,042)
Held-for-trading and available for sale financial investments		(13,856)	256,113	(17,346)

Net cash used in investing activities		(2,866,470)	(2,387,581)	(824,673)

Short-term and long-term debt
	Obtained borrowings	7,122,632	5,860,561	3,506,989
	Payment of borrowings	(6,042,644)	(10,013,753)	(3,010,705)
Related parties
	Obtained loans
	Payment of loans
Dividends paid		(664,851)	(107)	(956)
Non-controlling interests in subsidiaries		76,406
Repurchase of shares		(946)	(3)
Capital increase			3,764,971
Other		4,147

Net cash provided by (used in) financing activities		494,744	(388,331)	495,328

Exchange variation on cash of foreign subsidiaries		(117,030)	(3,253)	-

Increase (decrease) in cash and cash equivalents		288,744	(58,798)	269,319

Represented by
	Cash and cash equivalents at the beginning of the year	2,698,075	2,683,068	2,413,749
	Cash and cash equivalents at the end of the year	2,986,819	2,624,270	2,683,068

Increase (decrease) in cash and cash equivalents		288,744	(58,798)	269,319

The accompanying notes are an integral part of these financial statements.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

1 Operations

Braskem S.A. together with its subsidiaries and jointly-controlled subsidiaries (“Braskem” or “Company”) is a publicly-held corporation headquartered in Camaçari, State of Bahia, which operates 35 industrial units, 28 of which are located in the Brazilian states of Alagoas, Bahia, Rio de Janeiro, Rio Grande do Sul and São Paulo, five are located in the United States, in the states of Pennsylvania, Texas and West Virginia and two are located in Germany. These units produce basic petrochemicals - such as ethylene, propylene butadiene, toluene, xylene and benzene, as well as gasoline and LPG (Liquefied Petroleum Gas) – and thermoplastic resins – polyethylene, polypropylene and polyvinyl chloride (“PVC”). Additionally, Braskem is also engaged in the import and export of chemicals, petrochemicals and fuels, the production, supply and sale of utilities such as steam, water, compressed air, industrial gases, as well as the provision of industrial services and the production, supply and sale of electric energy for its own use and use by other companies. Braskem also invests in other companies, either as a partner or shareholder.

Braskem is controlled by Odebrecht S.A. (“Odebrecht”), which directly and indirectly holds a 50.1% and a 38.1% interest in its voting and total capital, respectively.

(a) Significant operational events

In May 2009, the Company’s management announced the suspension of production of caprolactam and the temporary closure of the industrial plant in Camaçari. This decision was based on an evaluation of the business, taking into account the market difficulties for caprolactam in Brazil experienced in the last few years, as well as the impact of the recent global economic financial crisis. At that time the Company recorded an impairment provision for this plant in the amount of R$ 29,600, representing the total net book value of machinery, equipment and installations for the production of caprolactam, which cannot be used in the event of resumption in production. There were no changes in 2011 and 2010 related to this matter. Company management is monitoring developments in the market for caprolactam before making any final decision on this matter.

In September 2010, the management of the subsidiary Braskem PP Americas, Inc ("Braskem America") decided to suspend a polypropylene production line at the plant located in the State of Texas. The key factors driving this decision were the line's outdated technology, high production cost, and low production capacity. Braskem America will keep the production of polypropylene in other lines of that plant without affecting its total production of other resins. The residual carrying amount of this production line on December 31, 2011 and 2010 equals zero.

On September 24, 2010, the Company inaugurated an ethanol-derived ethylene unit at the Triunfo Petrochemical Complex, which will produce 200,000 metric tons of green polyethylene per year. With this new unit, the Company now supplies resin from renewable sources, diversifying its competitive raw material sources. The cost of the investment was R$ 482,053.

In December 2011, Sunoco Chemicals, Inc. (“Sunoco Chemicals”) announced that as from the second half of 2012 it will shut down, permanently, the activities of its refinery, which is one of the suppliers of raw materials to the polypropylene plant of the subsidiary Braskem America located in the State of Pennsylvania. The annual production capacity of this plant is 350,000 metric tons and the residual book value on December 31, 2011 is US$ 94,303 (R$ 176,894).

The agreement for the purchase of this polypropylene plant entered into with Sunoco Chemicals itself in 2010 provides for an indemnity to Braskem in the event of an interruption in the supply of raw materials that exceeds the residual book value mentioned above.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Despite this guarantee, Braskem’s management is analyzing economically viable ways for the supply of inputs to its industrial unit. The plant is still operating at normal levels with the supply coming from other sources and from Sunoco Chemicals itself, which has been supplementing the supply through its refinery in Philadelphia.

(b) Corporate events

Since its creation on August 16, 2002, Braskem has been undergoing an extensive corporate restructuring process, which has been disclosed to the market in the form of “Material Fact” notices. The main events in 2010 and 2011 are summarized below:

(b.1) Quattor

On January 22, 2010, Braskem announced the completion of the negotiations for the acquisition of Quattor Participações S.A. (“Quattor”), currently named Braskem Qpar S.A. (“Braskem Qpar”), by means of an Investment Agreement entered into on that date between Odebrecht, Petróleo Brasileiro S.A. – PETROBRAS (“Petrobras”), Braskem and Unipar – União de Indústrias Petroquímicas S.A. (“Unipar”). The agreement allowed Petrobras to consolidate its main petrochemical assets in the Company.

Also, as a result of the Investment Agreement, the Company has the preemptive right to participate as a partner in the projects of the Petrochemical Complex in the State of Rio de Janeiro - COMPERJ - and the Petrochemical Complex of Suape, in the State of Pernambuco.

The Investment Agreement was approved without restrictions on February 23, 2011 by the Brazilian antitrust agency (“CADE”).

All stages of the Investment Agreement had already been implemented by September 30, 2010, as follows:

(i) In December 2009, the holding company BRK Investimentos Petroquímicos S.A. (“BRK”) was created, in which all the common shares issued by Braskem and held by Odebrecht and Petrobras were subsequently concentrated.

(ii) In April 2010, Odebrecht and Petrobras completed a capital increase in BRK in the amount of R$ 3,500,000 through the payment of new shares in cash.

(iii) On April 14, 2010, the Board of Directors approved an increase of the Company’s capital in the form of a private subscription, which resulted in the payment of 243,206,530 common shares and 16,697,781 class A preferred shares, at the price of R$ 14.40 each, totaling R$ 3,742,622. Of this amount, R$ 2,378,742 was allocated to capital and R$ 1,363,880 to the capital reserve account (Note 29(a)).

(iv) On April 27, 2010, the Company announced by means of a Material Fact, the acquisition from Unipar of shares representing 60% of Quattor’s voting and total capital by means of the payment of R$ 659,454 in cash. On April 30, 2010, Quattor held the following investments:

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(v) On May 10, 2010, the Company announced to the market the acquisition, from Unipar, of 100% of the shares of Unipar Comercial e Distribuidora (“Unipar Comercial”) and the shares representing 33.33% of the total capital of Polibutenos S.A. Indústrias Químicas (“Polibutenos”) by means of the payment in cash of R$ 27,104 and R$ 22,362, respectively.

On May 31, 2010, the Company acquired from Chevron Oronite do Brasil ("Chevron"), shares representing 33.33% of the total capital of Polibutenos for R$ 22,482. With the acquisitions from Unipar and Chevron, the Company became the direct and indirect holder of 100% of Polibutenos' capital.

In accordance with the accounting practices adopted in the preparation of these financial statements (Note 2), the acquisitions of Quattor and Unipar Comercial represented business combinations under International Financial Reporting Standards (“IFRS”) 3, and the effects of which are stated in Note 5.

(vi) On June 18, 2010, the Company’s Extraordinary General Shareholders’ Meeting approved the merger of Quattor (current Braskem Qpar) shares held by Petrobras, which represented 40% of the total and voting capital of that subsidiary. The carrying amount of the merged net assets on March 31, 2010 amounted to R$ 199,356. Of this amount, R$ 164,744 was allocated to capital and R$ 34,612, to the capital reserve account. In this operation, 18,000,087 common shares were issued based on the exchange ratio of 0.18855863182 share of the Company for each share of Quattor, as determined in economic appraisal reports of the companies prepared by an independent appraiser. With this merger, the Company became the holder of 100% of the total and voting capital of Quattor.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(vii) On June 24, 2010, Quattor’s Extraordinary General Shareholders’ Meeting approved a capital increase of R$ 4,014,128, without the issue of new shares. The capital increase was paid up using advances for future capital increase previously made by the Company. Additionally, on June 29, 2010, the Extraordinary General Shareholders’ Meeting of Quattor approved a R$ 2,578,372 reduction in its capital stock, without the cancellation of shares and with return to the Company, its sole shareholder, of all the investments in Rio Polímeros S.A. (“Riopol”) and Quattor Petroquímica S.A. (“Quattor Petroquímica”), which is currently named Braskem Petroquímica S.A. (“Braskem Petroquímica”).

(viii) On August 9, 2010, BNDES Participações S.A. (“BNDESPAR”) exercised its put option for the shares of Riopol, equivalent to 25% of the total capital of this subsidiary. Braskem acquired 190,784,674 common shares and 30 preferred shares of Riopol for R$ 209,951 (60% of the shares held by BNDESPAR). The acquisition corresponds to 15% of the capital stock of Riopol and Braskem became the direct and indirect holder of 90% of the capital of this subsidiary.

The amount of this acquisition will be paid in three installments adjusted based on the Long-Term Interest Rate (“TJLP”) (Note 18), as follows:

a. On June 11, 2015, corresponding to 15% of the total amount;

b. On June 11, 2016, corresponding to 35% of the total amount;

c. On June 11, 2017, corresponding to 50% of the total amount.

(ix) On August 30, 2010, the Company’s Extraordinary General Shareholders’ Meeting approved the merger of Riopol shares, converting Riopol into a wholly-owned subsidiary. The carrying amount of the merged net assets on March 31, 2010, the base date of the operation, amounted to R$ 103,087. Of this amount, R$ 22,285 was allocated to capital and R$ 80,802, to the capital reserve account. In this transaction, 2,434,890 class A preferred shares were issued, based on an exchange ratio of 0.010064743789 share of the Company for each Riopol share, as determined in economic appraisal reports of the companies, prepared by an independent appraiser.

Due to this merger of shares, Braskem’s subsidiary Quattor Petroquímica (current Braskem Petroquímica), which held 9.02% of Riopol's capital, received shares of the Company. In the consolidated financial statements, these shares, which result in mutual interest, are accounted for as "treasury shares" (Note 29(a)).

(x) On September 1, 2010, the Extraordinary General Shareholders’ Meeting of Quattor approved the merger of the companies listed below. The net assets of the merged companies were appraised at carrying amount at June 30, 2010 (the base date of the operation).

a. Quattor Química S.A (“Quattor Química”)

On the date of the merger, Quattor Química's capital was held by Quattor (94.11%) and Quattor Petroquímica (5.89%). The exchange ratio of Quattor Química shares for Quattor shares was determined based on the equity of both companies at June 30, 2010, the base date of the operation, resulting in a capital increase of R$ 58,231 with the issue of 7,538,949 common shares that were delivered to Quattor Petroquímica.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

b. Polibutenos

On the date of the merger, Polibutenos's capital was held by Quattor (33.33%) and the Company (66.67%). The exchange ratio of Polibutenos shares for Quattor shares was determined based on the equity of both companies at June 30, 2010, the base date of the operation, resulting in a capital increase of R$ 13,032 with the issue of 1,687,179 common shares that were delivered to the Company.

c. Mauá Resinas S.A. (“Mauá Resinas”) and Norfolk Distribuidora Ltda. (“Norfolk”)

On the date of the merger, Mauá Resinas and Norfolk were wholly-owned subsidiaries of Quattor and this is why there was no capital increase or issue of shares by the merging company.

(xi) On May 26, 2010, the Company filed with CVM the request for the registration of a public offering for the acquisition of 7,688 common shares and 1,542,006 preferred shares of Quattor Petroquímica held by its non-controlling shareholders as a result of the change in the control of this subsidiary. The shares subject to the offering correspond to 0.68% of the total capital of Quattor Petroquímica. On October 28, 2010, CVM’s board approved the public offering.

The offering was completed and settled on December 16, 2010. The total number of shares acquired through the public offering was 224,968, and 1,324,726 preferred shares remained outstanding. The outstanding shares stated at carrying amount on March 31, 2010 were merged into the Company, resulting in an increase in its capital of R$ 4,270, which was subscribed and paid-up by Quattor Petroquímica’s shareholders. In this transaction, 398,175 class A preferred shares were issued based on an exchange ratio of 0.300571316385725 share of the Company for each share of Quattor Petroquímica, as determined in economic appraisal reports of the companies, prepared by an independent appraiser.

This operation was approved by the Extraordinary General Shareholders’ Meetings of the Company and of the subsidiary Quattor Petroquímica on December 27, 2010 in accordance with the disclosure in a Material Fact notice on December 7, 2010.

CVM, by means of an official letter dated February 3, 2011, approved the cancelation of the registration of Quattor Petroquímica to trade shares on stock exchanges that was requested by the Company on January 28, 2011.

On January 3, 2011, the shareholders of IQ Soluções & Química S.A. (“Quantiq”) approved the merger of Unipar Comercial. The merger resulted in an increase in the capital of Quantiq by R$ 38,710, from R$ 61,141 to R$ 99,851 without the issue of new shares. Such increase was based on the equity of Unipar Comercial on November 30, 2010 (base date of the operation), under the terms and conditions established in the “Protocol and Justification” dated December 27, 2010.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

On December 31, 2011, the Company’s interest in the acquired companies is stated in the flowchart below:

(b.2) Sunoco Chemicals

On February 1, 2010, Braskem announced that its subsidiary Braskem America, Inc. (“Braskem America Inc.”) entered into, on that date, an agreement for the purchase and sale of shares with Sunoco Inc., an U.S. oil company, by means of which Braskem America Inc. acquired 100% of the shares representing the voting and total capital of Sunoco Chemicals, Inc. (“Sunoco Chemicals”) for US$ 350.7 million, equivalent to R$ 620,838. Sunoco Chemicals has an annual installed capacity of 950,000 metric tons of polypropylene distributed over three plants located in the states of Pennsylvania, West Virginia and Texas.

The transaction was completed on April 1, 2010 after full payment was made. On the same date, the name of Sunoco Chemicals was changed to Braskem PP Americas, Inc. (“PP Americas”).

In accordance with the accounting practices adopted in the preparation of these financial statements (Note 2), this acquisition represented a business combination under IFRS 3, and the effects of which are stated in Note 5.

On January 1, 2011, the parent company Braskem America Inc. was merged into its subsidiary Braskem PP Americas Inc. On the same date, the corporate name of Braskem PP Americas, Inc. was changed to Braskem America Inc. (“Braskem America”).

(b.3) Braskem Idesa

In November 2009, Braskem and the IDESA Sociedad Anónima de Capital Variable Group (“IDESA”), a traditional Mexican petrochemical company, announced that they won a bidding process in Mexico for the implementation of a petrochemical project using ethane in the region of Veracruz by means of an agreement for the supply, by Pemex-Gas y Petrouímica Básica (subsidiary of Petróleos Mexicanos), of 66,000 barrels/day of this input for a period of 20 years. As a result of this bidding process, Braskem and IDESA signed a Memorandum of Understanding and formalized, on February 23, 2010, a final agreement that comprises an investment commitment by Braskem and IDESA for (i) the construction of an ethane cracker to produce 1 million metric tons of ethane a year; and (ii) the construction of three polyethylene plants for the production of 1 million metric tons of resins a year. The project is called Ethylene XXI and the expected investment is US$ 3 billion (Capital expenditure – Capex). The works are expected to be completed and the units are expected to be operational in the first half of 2015.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The corporate name of this new company is Braskem Idesa, Sociedad Anónima Promotora de Inversión (“Braskem Idesa”) and its total and voting capital is held by the Company, 65% and Etileno XXI, Sociedad Anónima de Capital Variable, 35%.

In December 2011, Braskem Idesa’s capital amounts to Mex$ 2,220,174 thousand (R$ 293,320).

(b.4) Other events

(i) On April 30, and May 5, 2009, the Extraordinary General Shareholders’ Meetings held by Braskem and Petroquímica Triunfo S.A. (“Triunfo”), respectively, approved the merger of Triunfo into the Company. The net assets merged, at book value, totaled R$ 117,990. A total of 13,387,157 preferred shares class “A” were issued by Braskem and delivered to shareholders of Triunfo at an exchange ratio of 0.210428051882238 share of Braskem for each share of Triunfo. This acquisition represents a business combination, as per IFRS 3 and its effects are presented in Note 5.

(ii) On June 1, 2010, Braskem approved the spin-off of its subsidiary Varient Distribuidora de Resinas Ltda. (“Varient”) and the merger of the spun-off portion by the new subsidiary called Alcacer Distribuidora de Resinas Ltda. (“Alcacer”). On the same date, the Company completed the negotiations for the sale of these two subsidiaries for the total amount of R$ 12,700.

(iii) On December 17, 2010, the Extraordinary General Shareholders’ Meeting held by Braskem approved the merger of Companhia Alagoas Industrial - Cinal (“Cinal”) into the Company based on its equity as of September 30, 2010, amounting to R$ 27,834, in accordance with the terms and conditions set forth in the protocol and justification dated November 29, 2010. There were no changes in the value of the Company’s capital since the Company is the only shareholder of Cinal.

(iv) On May 25, 2011, the Company entered into a private instrument for the purchase and sale of quotas by means of which all the quotas of the subsidiary ISATEC – Pesquisa, Desenvolvimento e Análises Ltda. (“ISATEC”) were sold for R$ 1,100.

(v) On July 7, 2011 the company Braskem America Finance, a wholly-owned subsidiary of Braskem America, was incorporated for the purposes of raising funds in the international financial market. Braskem America Finance was the issuer of the US$ 500 million bond issued on July 19, 2011 (Note 19).

(vi) On August 25, 2011, the company Braskem Europe GmbH (“Braskem Alemanha”), a wholly-owned subsidiary of Braskem Netherlands B.V. (“Braskem Holanda”), current name of Braskem Europe B.V., was incorporated for the purpose of producing, trading, distributing, importing and exporting chemical and petrochemical products and conducting research and development in the area of such products, among other things. The assets acquired in the business combination of The Dow Chemical (“Dow Chemical”) in Germany were recorded in this subsidiary as from October 2011 (Note 5).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(c) Effect of foreign exchange variation

Braskem has assets and liabilities denominated in foreign currency, particularly in U.S. dollars, such as financial investments, trade accounts receivable, inventories, trade payables and borrowings, which were translated into Brazilian reais at the commercial sell rate disclosed by the Central Bank of Brazil on December 30, 2011, of US$ 1.00 to R$ 1.8758 (US$ 1.00 to R$ 1.6662 on December 31, 2010). The appreciation of the Brazilian real in relation to the U.S. dollar in 2011 was 12.58% (2010 – the Brazilian real appreciated 4.31% in relation to the U.S. dollar).

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented.

2.1 Basis of preparation and presentation of the financial statements

The financial statements have been prepared under the historical cost convention and were adjusted, when necessary, to reflect the fair value of assets and liabilities.

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3.

The consolidated financial statements have been prepared and are being presented in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

2.2 Basis of consolidation

The consolidation process provided for in pronouncement IAS 27 corresponds to the sum of balance sheet accounts and profit and loss, in addition to the following eliminations:

a) the investments of the Company in the equity of subsidiaries, jointly-controlled subsidiaries and specific purpose entities;

b) balance sheet accounts between companies;

c) income and expenses arising from commercial and financial operations carried out between companies; and

d) the portions of profit (loss) for the year and assets that correspond to unrealized gains and losses on transactions between companies.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The consolidated financial statements comprise the financial statements of the Braskem S.A. and the following subsidiaries:

			Total interest - %
			Headquarters
			(Country)	2011	2010
Direct and Indirect subsidiaries
Braskem America, Inc. (“Braskem America Inc”)		(i)	USA	-	100.00
Braskem America, Inc. (“Braskem America”)		(ii)	USA	100.00	100.00
Braskem America Finance Company ("Braskem America Finance")		(iii)	USA	100.00	-
Braskem Argentina S.A. (“Braskem Argentina”)		(iv)	Argentina	100.00	100.00
Braskem Chile Ltda. (“Braskem Chile”)		0	Chile	100.00	100.00
Braskem Distribuidora Ltda.(“Braskem Distribuidora”)		0	Brazil	100.00	100.00
Braskem Netherlands B.V (“Braskem Holanda”)		(v)	Netherlands	100.00	100.00
Braskem Europe GmbH ("Braskem Alemanha")		(vi)	Germany	100.00	-
Braskem Finance Limited (“Braskem Finance”)		0	Cayman Islands	100.00	100.00
Braskem Idesa S.A.P.I (“Braskem Idesa")		0	Mexico	65.00	65.00
Braskem Idesa Servicios S.A. de CV ("Braskem Idesa Serviços")		(vii)	Mexico	65.00	-
Braskem Importação e Exportação Ltda. (“Braskem Importação”)		0	Brazil	100.00	100.00
Braskem Incorporated Limited (“Braskem Inc”)		0	Cayman Islands	100.00	100.00
Braskem México, S de RL de CV (“Braskem México”)		0	Mexico	100.00	100.00
Braskem Participações S.A. (“Braskem Participações”)		0	Brazil	100.00	100.00
Braskem Petroquímica S.A. (“Braskem Petroquímica”)		(viii)	Brazil	100.00	100.00
Braskem Petroquímica Chile Ltda. (“Petroquímica Chile”)		0	Chile	100.00	100.00
Braskem Qpar S.A. (“Braskem Qpar”)		(xi)	Brazil	100.00	100.00
Cetrel S.A. ("Cetrel")		(ix)	Brazil	54.09	53.72
Commom Industries Ltd. (“Commom”)		0	British Virgin Islands	100.00	100.00
Ideom Tecnologia Ltda. (“Ideom”)		0	Brazil	100.00	100.00
IQ Soluções & Química S.A.(“Quantiq”)		0	Brazil	100.00	100.00
IQAG Armazéns Gerais Ltda. (“IQAG”)			Brazil	100.00	100.00
ISATEC–Pesquisa, Desenv. e Análises Quím.Ltda. (“ISATEC”)		(x)	Brazil	-	100.00
Lantana Trading Co. Inc. (“Lantana”)		0	Bahamas	100.00	100.00
Norfolk Trading S.A. (“Norfolk”)		0	Uruguay	100.00	100.00
Politeno Empreendimentos Ltda. (“Politeno Empreendimentos”)		0	Brazil	100.00	100.00
Rio Polímeros S.A. (“Riopol”)		0	Brazil	100.00	100.00
Unipar Comercial e Distribuidora S.A. (“Unipar Comercial”)		(xii)	Brazil	-	100.00

Jointly-controlled subsidiaries
Refinaria de Petróleo Riograndense S.A. (“RPR”)		0	Brazil	33.20	33.20
Polietilenos de America S.A.(“Polimerica”)		0	Venezuela	49.00	49.00
Polipropileno Del Sur S.A.(“Propilsur”)		0	Venezuela	49.00	49.00

Specific Purpose Entity ("SPE")
Fundo de Investimento Multimercado Crédito Privado Sol (“FIM Sol”)		0	Brazil	100.00	100.00

(i)	Merged into Braskem PP Americas Inc. in January 2011 (Note 1 (b.2)).
(ii)	This company's name was changed from Braskem PP Americas Inc. to Braskem America Inc. after the merger of its parent (Note 1 (b.2)).
(iii)	Company created in February 2011.
(iv)	This company's name was changed from Braskem Petroquímica S.A. to Braskem Argentina S.A.
(v)	This company's name was changed from Braskem Europe B.V to Braskem Netherlands B.V.
(vi)	Company created in August 2011.
(vii)	Company created in February 2011.
(viii)	This company's name was changed from Quattor Petroquímica S.A. to Braskem Petroquímica S.A.
(ix)	Cetrel started to be fully consolidated by Braskem as from the quarterly information for the period ended June 30, 2011 based on a new interpretation of that subsidiary's bylaws, which, according to the opinion of the Company's external legal advisors, establishes control by the Company. The consolidated quarterly in information for the prior periods was not restated due to the immateriality of Cetrel to the Company's financial information as a whole.
(x)	Company sold in May 2011 (Note 1 (b.4) (iv))
(xi)	This company's name was changed from Quattor Participações S.A. to Braskem Qpar S.A.
(xii)	Merged into Quantiq in January 2011 (Note 1 (b.1)).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The operations of subsidiaries and jointly-controlled subsidiaries are as follows:

· Braskem America – is headquartered in Philadelphia and is composed of five industrial units that produce polypropylene, three of which are in the State of Texas, two acquired in 2011 (Note 5.5), one in the State of Pennsylvania and one in the State of West Virginia.

· Braskem Argentina; Petroquímica Chile; Braskem Holanda – subsidiaries responsible for the sale of products manufactured by Braskem in the international market. Braskem Holanda is also the parent company of Braskem Alemanha.

· Braskem Distribuidora – is responsible for the distribution and sale of oil byproducts and correlated products, including chemical and petrochemical products, fuels and solvents.

· Braskem Alemanha – is headquartered in Frankfurt, Germany, it has two industrial units with a joint polypropylene production capacity of 545,000 metric tons a year. These units were acquired in 2011 (Note 5.5).

· Braskem Finance and Braskem America Finance – were incorporated for the purpose of centralizing the raising of funds abroad.

· Braskem Idesa – is responsible for the construction of an industrial complex for the production of one million metric tons of ethane a year. The project was called Ethylene XXI and the the units are expected to be operational in the first half of 2015.

· Braskem México; Braskem Idesa Serviços – companies that provide services to Braskem Idesa.

· Braskem Importação e Exportação – is responsible for the import, export and sale of petrochemical naphtha, oil and its byproducts.

· Braskem Inc. – operates in the sales of naphtha and other products, in addition to carrying out Braskem’s usual financial funding operations.

· Braskem Participações – its main purpose is the investment in the equity of other companies;

· Braskem Petroquímica and Braskem Qpar – they produce basic petrochemicals such as ethane and propane. In the thermoplastic resins segment, they produce polyethylene and polypropylene. These subsidiaries were acquired by the Company in 2010 (Note 5.2).

· Cetrel – its main purpose is the provision of environmental protection services, such as research in the area of environmental control and waste recycling and other recoverable waste from industrial and urban emissions, among other things.

· Ideom – its purpose is the provision of research services applied in the chemical and petrochemical, plastic materials and textile industries. This company was merged by the Company on February 28, 2012 (Note 39).

· IQAG – operates in the provision of storage services to third parties.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

· Politeno Empreendimentos – its purpose is the participation in industrial projects and ventures, asset management, sales of petrochemical products and the investment in the equity of other companies;

· Quantiq – operates in the distribution, sale and industrialization of solvents from oil and petrochemical products, distribution and sale of process oils, other inputs that are oil byproducts, chemical intermediaries, specialty chemicals and pharmaceutical products.

· Propilsur and Polimérica – Braskem, in partnership with Petroquímica de Venezuela (“Pequiven”), has two investment projects in Venezuela, one for the production of polypropylene (Propilsur) and another for the integrated production of ethane and polyethylene (Polimérica).

· Riopol – its purpose is the production and sale of thermoplastic resins and other petrochemical products.

· RPR – its main activities are the refine, processing and sale and import of oil, its byproducts and correlated products.

2.2.1 Non-controlling interest in the equity

and results of operations of subsidiaries


	Equity		Profit (loss) for the year
	2011	2010	2011	2010

Braskem Idesa	93,578	18,079	(4,695)	(5,824)
Cetrel	121,744		12,998	-
Total	215,322	18,079	8,303	(5,824)

2.3 Segment reporting

Operating segment information is prepared and presented consistently with the internal report provided to the Chief Executive Officer, who is the main operating decision-maker and responsible for allocating resources and assessing performance of the operating segments.

The determination of results per segment takes into consideration the transactions carried out with third parties and transfers of goods and provision of services between segments that are considered arm’s length sales and stated based on market prices.

2.4 Foreign currency translation

(a) Functional and presentation currency

The functional and presentation currency of the Company is the real, determined in accordance with IAS 21.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(b) Transactions and balances

Foreign currency transactions and balances are translated into the functional currency using the foreign exchange rates prevailing at the dates of the transactions or at year end, as applicable. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end foreign exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations, except those designated for hedge accounting, which are deferred in equity as cash flow hedges.

Foreign exchange variations on financial assets and liabilities are classified as “financial income” and “financial expenses”, respectively.

(c) Foreign subsidiaries and jointly-controlled subsidiaries

Some subsidiaries and jointly-controlled subsidiaries have a different functional currency from that of Braskem S.A., namely:

(i) Propilsur and Polimerica - headquartered in Venezuela, for which the functional currency is the U.S. dollar, since they are under the construction stage and the capital contributions and the main supplies of equipment and services are based on this currency;

(ii) Braskem Idesa and Braskem Idesa Serviços - headquartered in Mexico, for which the functional currency is the Mexican peso, since they are under the construction stage and the main supplies of equipment and services are based on this currency;

(iii) Braskem America, headquartered in the United States – it maintains a management structure that is independent from the operations of Braskem S.A. and that comprises own labor, outsourcing services, acquisition of raw materials and production and sale of resins. Prices, personnel expenses and production costs are mostly determined in U.S. dollar, which is, therefore, its functional currency; and

(iv) Braskem Alemanha – it maintains a management structure that is independent from the operations of Braskem S.A. and that comprises own labor, outsourcing services, acquisition of raw materials and production and sale of resins. Prices, personnel expenses and production costs are mostly determined in euro, which is, therefore, its functional currency.

The financial statements of these subsidiaries and jointly-controlled subsidiaries are translated into reais based on the following rules:

· assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

· equity is converted at the historical rate, that is, the foreign exchange rate prevailing on the date of each transaction; and

· income and expenses for each income statement are translated at the rate prevailing on the dates of the transactions.

All resulting exchange differences are recognized as a separate component of equity in the account “other comprehensive income”. When a foreign investment is partially or fully disposed of, exchange differences recorded in equity are recognized in the income statement as part of the gain or loss on the transaction.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

2.5 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and highly liquid investments with maturities of three months or less. They are convertible into a known amount and subject to an immaterial risk of change in value.

2.6 Financial assets

2.6.1 Classification

The Company classifies its financial assets upon initial recognition in the categories listed below. The classification depends on the purpose for which the financial assets were acquired/established.

(a) Held-for-trading financial assets – these are measured at fair value and they are held to be actively and frequently traded in the short term. The assets in this category are classified as current assets.

Derivatives are also categorized as held for trading unless they are designated for hedge accounting (Note 2.7).

(b) Loans and receivables - these are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as current assets, except for those falling due more than 12 months after the balance sheet date (these are classified as non-current assets). The Company’s loans and receivables comprise loans to related parties and accounts with associates, trade accounts receivable (Note 8), other accounts receivable (Note 14), cash and cash equivalents (Note 6) and financial investments (Note 7).

(c) Held-to-maturity financial assets - these are financial assets acquired with the intention and financial capacity for their maintenance in the portfolio up to maturity. The Company’s held-to-maturity financial assets comprise mainly quotas of investment funds in credit rights, classified as non-current assets.

(d) Available-for-sale financial assets - these are non-derivatives that are either designated in this category or not classified in any of the previous categories. They are included in current assets unless management intends to dispose of them within 12 months after the balance sheet date. These are classified as non-current assets.

2.6.2 Recognition and measurement

Purchases and sales of financial assets are recognized on the trade date (the date on which the Company commits to purchase or sell the asset).

Available-for-sale and held-for-trading financial assets are carried at fair value on an ongoing basis.

Gains or losses arising from changes in the fair value of held-for trading financial assets are presented in “financial results” in the period in which they arise.

Interest on available-for-sale securities calculated using the effective interest method is recognized in the income statement as financial income.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Changes in the fair value of monetary securities classified as available-for-sale are recognized in equity, net of taxes, as “other comprehensive income”. When securities are sold or impaired, the accumulated fair value adjustments are included in the income statement as “financial results”.

Loans and receivables are carried at amortized cost using the effective interest method. These assets are stated at cost of acquisition, plus earnings accrued, against profit or loss for the year.

Financial assets are derecognized when the rights to receive cash flows from the investments have been received or transferred and the Company has transferred substantially all risks and rewards of ownership of the related assets.

The transaction costs related to the held-for-trading financial assets are expensed in the income statement. For the other financial assets, the transaction costs, when they are significant, are added to their respective fair value.

Dividends declared by associates are recognized in the income statement as part of the account “results from equity investments”.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset and for unlisted securities is not active, the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models that make maximum use of market inputs and rely as little as possible on entity-specific inputs.

2.6.3 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legal right to offset the recognized amounts and an intention to settle them on a net basis, or realize the asset and settle the liability simultaneously.

2.6.4 Impairment of financial assets

The Company assesses at each balance sheet date, based on the history of losses, whether there is objective evidence that a financial asset, classified as loans and receivables, held-to-maturity or available-for-sale, is impaired. The criteria the Company uses to determine that there is objective evidence of an impairment loss include:

a) significant financial difficulty of the issuer or debtor;

b) a breach of contract, such as a default or delinquency in interest or principal payments;

c) it becomes probable that the borrower will enter bankruptcy or other financial reorganization; or

d) the disappearance of an active market for that financial asset because of financial difficulties.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(a) Assets classified as held-to-maturity and loans and receivables

Losses are recorded when there is objective evidence of impairment as a result of one more events that occurred after the initial recognition of the asset and that loss event has an impact on the future cash flows that can be reliably estimated.

The amount of any impairment loss is measured as the difference between the asset’s carrying amount and the present value of future cash flows discounted at the financial asset’s original effective interest rate. This methodology does not apply to the calculation of the provision for impairment.

The methodology adopted by the Company for recognizing the provision for impairment is based on the history of losses and considers the sum of (i) 100% of the amount of receivables past due for over 180 days; (ii) 50% of the amount of receivables past due for over 90 days; (iii) 100% of the amount of receivables under judicial collection (iv) 100%.of the receivables arising from a second renegotiation with customers; (v) and all the receivables from the first renegotiation maturing within more than 24 months. Receivables from related parties are not considered in this calculation.

(b) Assets classified as available-for-sale

When there is any evidence of an impairment loss for the financial assets classified as available for sale , the accumulated fair value that is recognized in equity is transferred from “other comprehensive income” to profit (loss) for the year.

If, in a subsequent period, the amount of the loss decreases and this decrease can be objectively related to an event occurring after the impairment loss was recognized, the impairment loss is reversed.

2.7 Derivative financial instruments and hedging activities

Derivatives are recognized at fair value on an ongoing basis.

(a) Hedging activities (designated for hedge accounting)

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months.

The recognition of the gain or loss in profit or loss depends on whether the derivative is designated as a hedging instrument, and if so, on the nature of the item being hedged.

Management may designate certain derivatives as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).

The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. It also documents its assessment, on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The effective portion of the changes in the fair value of hedge derivatives is recognized in “other comprehensive income”. These amounts are transferred to profit or loss for the periods in which the hedged item affects profit or loss. Gains or losses on interest rate or foreign exchange rate swaps that hedge borrowings are recognized in profit (loss) for the year as “financial result”.

The ineffective portion is recognized immediately in the income statement as “financial income and expenses” within “financial result”.

When the hedge instrument matures or is sold or when it no longer meets the criteria for hedge accounting, it is prospectively discontinued and any cumulative gain or loss existing in equity remains in equity and is recognized in profit or loss when the hedged item or transaction affects profit or loss. If the hedged item or transaction is settled in advance or discontinued, the cumulative gain or loss that was previously recognized in equity is immediately transferred to profit or loss for the year.

The cash flow hedge transactions carried out by the Company are described in Note 21.

(b) Derivatives at fair value through profit or loss

Derivatives not designated as hedge instruments are classified as current assets or liabilities. Changes in the fair value of these derivative instruments are recognized immediately in the income statement within “financial results”.

(c) Derivatives embedded in commercial agreements

The Company has procedures aimed at the timely recognition, control and proper accounting treatment of embedded derivatives in purchase, sale and service agreements.

The contracts that may have embedded derivative instruments are assessed to determine whether the economic characteristics of the embedded derivatives are closely related to those of the host contract or not and, if they are not, the embedded derivatives are separated from the host contract and stated at fair value through profit or loss

Currently, Braskem has no contracts that require the separation of embedded derivatives.

2.8 Trade accounts receivable

Trade accounts receivable are recognized at the amount billed net of the provision for impairment. The Company’s average billing period is 30 days, therefore, the amount of the trade accounts receivable corresponds to their fair value on the date of the sale.

2.9 Inventories

Inventories are stated at the lower of average acquisition or production cost or at the net realizable value. The Company determines the cost of its inventories using the absorption method based on the weighted moving average. Net realizable value is the estimated selling price in the ordinary course of the Company’s business, less taxes. The provisions for impairment of slow-moving or obsolete inventories are recognized when the realization amount is lower than cost. Imports in transit are stated at the cost accumulated in each import.

2.10 Investments in associated companies and other investments

Associates are all entities over which the Company has the power to participate in the financial and operating decisions without having control (significant influence). Investments in associates are initially accounted for at cost and subsequently using the equity method and they may include possible goodwill identified on acquisition, net of any accumulated impairment loss.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest.

Gains and losses arising from the dilution of or increase in investments in associates are recognized in the income statement.

Other investments are stated at acquisition cost, less provision for adjustments to market value, when applicable.

2.11 Investments in jointly-controlled subsidiaries

Jointly-controlled subsidiaries are all entities over which the Company shares control with one or more parties under a shareholders’ or partners’ agreement. Investments in jointly-controlled subsidiaries are initially accounted for at cost and subsequently using the equity method. These investments are consolidated using the proportional consolidation method.

2.12 Property, plant and equipment

Property, plant and equipment is stated at cost net of accumulated depreciation and provision for impairment, when applicable. The cost includes:

(a) the acquisition price and the financial charges incurred in borrowings during the phase of construction (Note 19(g)), and all other costs directly related with making the asset usable; and

(b) the fair value of assets acquired through business combinations.

The assets intended for maintaining the Company’s activities arising from financial lease operations are recorded initially at the lower of fair value or the present value of the minimum payment of the contract, and are depreciated on a straight-line basis over the lower of the remaining useful life of the asset or the term of the contract.

The financial charges are capitalized on the balance of the projects in progress using (i) an average funding rate of all borrowings; and (ii) the portion of the foreign exchange variation that corresponds to a possible difference between the average rate of financing in the internal market and the rate mentioned in item (i) above.

The machinery, equipment and installations of the Company require inspections, replacement of components and maintenance in regular intervals. The Company makes stoppages in regular intervals that vary from two to six years to perform these activities. These stoppages can involve the plant as a whole, a part of it, or even specific relevant pieces of equipment, such as industrial boilers, turbines and tanks. Stoppages that take place every six years, for example, are usually made for the maintenance of industrial plants as a whole.

Costs that are directly attributable to these stoppages are capitalized when (i) it is probable that future economic benefits associated with these costs will flow to the Company; and (ii) these costs can be measured reliably. For each scheduled stoppage, the costs of materials and services from third-parties are included in property, plant and equipment items that were the subject matter of the stoppage and are fully depreciated until the beginning of the following related stoppage.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The expenditures with the consumption of small materials, maintenance and the related services from third parties are recorded, when incurred, as production costs.

Property, plant and equipment items are depreciated on a straight-line basis. The average depreciation and depletion rates used, determined based on the useful lives of the assets, are presented in Note 3.4.

Land has an indefinite useful life, therefore, it is not depreciated.

Projects in progress are not depreciated. Depreciation begins when the assets are available for use.

The useful life is annually reviewed by the Company. The review made on December 31, 2011 did not indicate the need for a change in relation to 2010.

The Company does not attribute a residual value to assets due to its insignificance.

2.13 Intangible assets

The group of accounts that comprise the intangible assets is the following:

(a) Goodwill based on future profitability

The existing goodwill was determined in accordance with the criteria established by the accounting practices adopted in Brazil before the adoption of IFRS and represent the excess of the amount paid over the amount of equity of the entity acquired. The Company applied the exemption related to business combinations prior to January 1, 2009 and did not remeasure these amounts. This goodwill has not been amortized since January 1, 2009 and it is tested annually for impairment.

Goodwill is accounted for at cost, net of accumulated impairment losses. Impairment losses are not reversed.

(b) Trademarks and patents

The technologies acquired from third parties and in a business combination are recorded at the cost of acquisition and/or fair value and other directly attributed costs, net of accumulated amortization and provision for impairment, when applicable. Technologies that have defined useful lives and are amortized using the straight-line method based on the estimated useful lives of the assets (15 to 20 years) or the term of the purchase agreement.

Expenditures with research and development are accounted for in profit or loss as they are incurred.

(c) Contractual customer and supplier relationships

Contractual customer and supplier relationships arising from a business combination are recognized at fair value at the acquisition date. These contractual customer and supplier relationships have a finite useful life and are amortized using the straight-line method over the term of the respective purchase or sale agreement.

(d) Software

This is recorded at cost net of accumulated amortization and provision for impairment, when applicable. Cost includes the acquisition price and/or internal development costs and all other costs directly related with making the software usable. Software that has defined useful lives is amortized using the straight-line method based on its estimated useful lives (3 to 10 years) or on the term of the respective purchase contracts. Costs associated with maintaining computer software programs are recognized in profit or loss as incurred.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

2.14 Impairment of non-financial assets

Assets that have indefinite useful lives, for example goodwill based on future profitability, are not subject to amortization and are tested annually for impairment. This goodwill is allocated to the Cash Generating Units (“CGU”) or operating segments for the purposes of impairment testing.

Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized when the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of (i) an asset’s fair value less costs to sell; (ii) and its value in use. Taking into consideration the peculiarities of the Company’s assets, the value used for assessing impairment is the value in use, except when specifically indicated otherwise. The value in use is estimated based on the present value of future cash flows (Note 3.6).

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are identifiable cash flows that can be CGUs or operating segments.

Non-financial assets other than goodwill that were adjusted due to impairment are subsequently reviewed for possible reversal of the impairment at the balance sheet date.

2.15 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business and they are recorded at the amount billed. When applicable, they are recorded at present value based on interest rates that reflect the term, currency and risk of each transaction.

The Company calculates the adjustment to present value for the purchases that fall due after 180 days and accounts for it as financial expenses.

2.16 Borrowings

Borrowings are recognized initially at fair value and, in some cases, net of the transaction costs incurred in structuring the transaction. Subsequently, borrowings are presented with the charges and interest in proportion to the period incurred.

2.17 Provisions

Provisions are recognized in the balance sheet when (i) the Company has a present legal, contractual or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources will be required to settle the obligation and (iii) the amount can be reliably estimated.

The provisions for tax, labor and other contingencies are recognized based on Management’s expectation of probable loss in the respective proceedings in progress and supported by the opinion of the Company’s external legal advisors (Note 24).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The contingencies assumed in a business combination for which an unfavorable outcome is considered possible are recognized at their fair value on the acquisition date. Subsequently, and until the liability is settled, these contingent liabilities are measured at the higher of the amount recorded in the business combination and the amount that would be recognized under IAS 37.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a rate before tax effects that reflects current market assessments. The increase in the provision due to passage of time is recognized in “financial results”.

2.18 Current and deferred income tax and social contribution

The income tax (“IR”) and social contribution (“CSL”) recorded in the year are determined on the current and deferred tax basis. These taxes are calculated on the basis of the tax laws enacted at the balance sheet date in the countries where the Company operates and are recognized in the income statement, except to the extent they relate to items recorded in equity.

Deferred income tax and social contribution are recognized on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. On the other hand, the deferred income tax and social contribution are not accounted for if they arise from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or loss.

Deferred income tax and social contribution assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized based on projections of future results prepared and based on internal assumptions and future economic scenarios that will allow for their utilization. The amounts accounted for and projections are regularly reviewed.

Deferred income tax and social contribution assets and liabilities are presented net in the balance sheet when there is a legally enforceable right to offset them upon the calculation of current taxes, generally when related to the same legal entity and the same tax authority. Accordingly, deferred tax assets and liabilities in different entities or in different countries are generally presented separately, and not on a net basis.

Management periodically evaluates positions taken by the Company in income tax returns with respect to situations in which applicable tax regulation is subject to interpretation.

2.19 Employee benefits – pension plan

The Company sponsors a defined contribution plan and defined benefit plans.

(i) Defined contribution plan

For the defined contribution plans, the Company pays contributions to private pension plans on compulsory, contractual or voluntary bases. As soon as the contributions are paid, the Company does not have any further obligations related to additional payments.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(ii) Defined benefit plan

The defined benefit plan is financed by the payment of contributions to pension funds and the use of actuarial assumptions is necessary to measure the liability and the expenses of the plan, as well as the existence of actuarial gains and losses.

The liability recognized in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date, less the market value of plan assets, adjusted by actuarial gains or losses and past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the expected interest rate of return on assets disclosed by the plan’s manager, which have terms to maturity approximating the terms of the related pension obligation.

The Company adopts the corridor approach to recognize actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions. Actuarial gains and losses that exceed the higher of 10% of plan assets or 10% of plan liabilities, are charged or credited to profit or loss according to the average remaining service period of the fund participants.

Past-service costs are recognized immediately in profit or loss on a straight-line basis over a period equivalent to the vesting period.

2.20 Contingent assets and liabilities and judicial deposits

The recognition, measurement and disclosure of contingent assets and liabilities and judicial deposits are performed in accordance with IAS 37 as follows:

(i) Contingent assets – are not recognized in the books, except when management considers, supported by the opinion of its external legal advisors, the gain to be virtually certain or when there are secured guarantees or for which a favorable final and unappealable decision has been rendered.

(ii) Contingent liabilities – are not recognized, except when management considers, supported by the opinion of its external legal advisors, that the chances of an unfavorable outcome is probable. In the case of non-recognition, the Company discloses the main proceedings for which an unfavorable outcome is possible in Note 28.

(iii) Judicial deposits – are maintained in non-current assets without the deduction of the related provisions for contingencies or legal liabilities, unless such deposit can be legally offset against liabilities and the Company intends to offset such amounts.

2.21 Recognition of sales revenue

Sales revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company’s activities. Revenue is shown net of taxes, returns and rebates.

Revenue from the sale of goods is recognized when (i) the amount of revenue can be reliably measured and the Company no longer has control over the goods sold; (ii) it is probable that future economic benefits will be received by the Company; and (iii) all legal rights and risks and rewards of ownership have been transferred to the customer. The Company does not make sales with continued management involvement.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Most of Braskem’s sales are made to industrial customers and, in a lower volume, to retailers and resellers.

The moment at which the legal right, as well as the risks and rewards, are substantially transferred to the customer depends on the delivery terms:

(i) for contracts in which the Company is responsible for freight and insurance, the legal right, as well as the risks and rewards, are transferred to the customer after the good is delivered at the contractually agreed destination;

(ii) for contracts in which the freight and insurance are the responsibility of the customer, the risks and rewards are transferred at the moment the goods are delivered at the client’s shipping company; and

(iii) for contracts in which the delivery of the goods involves the use of pipelines, particularly basic petrochemicals, the risks and rewards are transferred at the point immediately after the Company’s official measures, which is the point of delivery of the goods and transfer of their ownership.

2.22 Distribution of dividends

Distributions of dividends and interest on capital to the Company’s shareholders are recognized as a liability in the financial statements at year-end in accordance with Brazilian tax legislation and the Company’s bylaws.

The amount that is lower than the portion equivalent to the minimum compulsory dividend (25%) is recorded as a liability in the “dividends payable” account because it is considered a legal liability as provided for in the Company’s bylaws. The amount of dividends that exceeds the minimum compulsory dividend is not recorded as a liability and it is presented in the “proposed additional dividend” account in equity.

2.23 Operating leases

Leases in which a significant portion of the risks and rewards of ownership of the assets is retained by the lessor are classified as operating leases. Payments made under these leases are charged to the income statement on a straight-line basis over the period of the lease.

The contracts in which the Company holds substantially all risks and rewards of ownership of the assets, are classified as operating leases and recognized in liabilities as “other payables”.

2.24 New standards, amendments and interpretations

to existing standards that are not yet effective

New standards, amendments and interpretations to existing standards that are not yet effective and that have not been early adopted by the Company and its subsidiaries:

IAS 19, "Employee benefits" was amended in June 2011. The impact on the Company will be as follows: (i) to eliminate the corridor approach; (ii) to recognize all actuarial gains and losses in “other comprehensive income” as they occur; (iii) to immediately recognize all past service costs; and (iv) to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit asset (liability). The standard is applicable as from January 1, 2013.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

IFRS 9, "Financial instruments" addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortized cost. The determination is made at initial recognition. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial instruments. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than in the income statement, unless this creates an accounting mismatch. The standard is applicable as from January 1, 2015.

IFRS 10, "Consolidated financial statements" builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the Parent Company. The standard provides additional guidance to assist in the determination of control. The standard is applicable as from January 1, 2013.

IFRS 11,"Joint arrangements" was issued in May 2011. The standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than on its legal form. There are two types of joint arrangements: (i) joint operations - arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses; and (ii) joint ventures - arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. The proportional consolidation method will no longer be permitted in joint ventures. The standard is applicable as from January 1, 2015.

IFRS 12, "Disclosures of interests in other entities" includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The standard is applicable as from January 1, 2013.

IFRS 13, “Fair value measurement” was issued in May 2011. IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The standard is applicable as from January 1, 2013.

The Company is yet to access the full impact of these standards.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

3 Application of critical accounting practices and judgments

Critical estimates and judgments

Critical estimates and judgments are those that require the most difficult, subjective or complex judgments by management, usually as a result of the need to make estimates that affect issues that are inherently uncertain. Estimates and judgments are continually reassessed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results can differ from those estimated under different variables, assumptions or conditions.

In order to provide an understanding of the way the Company forms its judgments on future events, the variables and assumptions used in estimates are presented below:

3.1 Deferred income tax and social contribution

The Company keeps a permanent record of deferred income tax and social contribution on the following bases: (i) tax losses and social contribution tax loss carryforwards; (ii) temporarily non-taxable and undeductible income and expenses, respectively; (iii) tax credits and expenses that will be reflected in the books in subsequent periods; and (iv) asset and liability amounts arising from business combinations that will be treated as income or expenses in the future and that will not affect the calculation of income tax and social contribution.

The recognition and the amount of deferred taxes assets depend on the generation of future taxable income, which requires the use of an estimate related to the Company’s future performance. This information is in the Business Plan, which is approved by the Board of Directors at the end of the second half of every year. This plan is prepared by the Executive Board and its main variables, such as the price of the products manufactured by the Company, price of naphtha, exchange variation, interest rate, inflation rate, and the start-up of operations of new plants are obtained from specialized external consultants. The Company annually reviews the projection of taxable income. If this projection shows that the taxable income will not be sufficient to absorb the deferred tax, then the corresponding portion of the asset that cannot be recovered is written-off.

3.2 Pension plans

The Company recognizes the obligation of the employee defined benefit plans and related costs, net of the plan assets, by adopting the following practices:

(i) the plan cost is determined by actuaries using the projected unit credit method and the best estimates of the plan’s manager and the Company of the expected performance of the plan’s investments, salary growth, retirement age of employees and discount rates;

(ii) the plan assets are stated at fair value;

(iii) plan curtailments result in significant changes in the length of service expected from active employees. A net curtailment gain or loss is recognized when the event is probable and can be estimated.

The discount rate used to determine the future benefit obligation is an estimate of the interest rate of return on the plan assets disclosed by the plan’s management.

Additionally, actuaries, supported by the plan’s manager, also use subjective factors such as rescission, turnover and mortality rates to estimate these factors. The actuarial assumptions used in the Company’s plans can be materially different from the actual results due to changes in economic and market conditions, regulatory events, court decisions, higher or lower rescission rates or longer or shorter longevity of participants (Note 26).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

3.3 Derivative financial instruments

The Company evaluates the derivative financial instruments at their fair value on the date of the financial statements and the main sources of information are the stock exchanges, commodities and futures markets, disclosures of the Central Bank of Brazil and quotation services like Bloomberg. Nevertheless the high volatility of the foreign exchange and interest rate markets in Brazil caused, in certain periods, significant changes in future rates and interest rates over short periods of time, leading to significant changes in the market value of swaps and other financial instruments. The market value recognized in its financial statements may not necessarily represent the amount of cash that the Company would receive or pay upon the settlement of the transaction.

3.4 Useful live of assets

The Company recognizes the depreciation and depletion of its long-lived assets based on their useful life estimated by independent appraisers and approved by the Company’s technicians taking into consideration the experience of these professionals in the management of Braskem’s plants. The useful lives initially established by independent appraisers are reviewed at the end of every year by the Company’s technicians in order to check whether they need to be changed. In December 2011, this analysis concluded that the useful lives applied in 2010 and 2011 should be maintained in 2012.

The main factors that are taken into consideration in the definition of the useful life of the assets that compose the Company’s industrial plants are the information of manufacturers of machinery and equipment, volume of the plants’ operations, quality of preventive and corrective maintenance and the prospects of technological obsolescence of assets.

The Company’s management also decided that (i) depreciation should cover all assets because when the equipment and installations are no longer operational, they are sold by amounts that are absolutely immaterial; and (ii) land is not depreciated because it has an indefinite useful life.

The useful lives applied to the assets determined the following average depreciation and depletion rates:

	Percentage (%)
	2011	2010
Buildings and improvements	3.46	4.12
Machinery, equipment and installations	6.91	6.72
Mines and wells	9.01	9.01
Furniture and fixtures	10.86	10.36
IT equipment	20.80	20.50
Lab equipment	10.18	10.18
Security equipment	9.96	9.96
Vehicles	20.00	20.00
Other	6.38	6.38

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

3.5 Valuation of assets and liabilities in business combinations

In accordance with IFRS 3, the Company must allocate the cost of the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date.

The Company exercises significant judgment in the process of identifying and evaluating tangible and intangible assets and liabilities and in the determination of their remaining useful lives. The use of assumptions in the evaluation of the assets acquired and liabilities assumed includes an estimate of discounted cash flows or discount rates that may result in estimated amounts that are different from those of the assets acquired and liabilities assumed. The Company contracts a specialized company to evaluate the fair value of the assets acquired and liabilities assumed.

If the future results are not consistent with the estimates and assumptions used, the Company may be exposed to losses that may be material.

3.6 Impairment test for tangible and intangible assets

(a) Tangible and intangible assets with defined useful lives

On the balance sheet date, the Company makes an analysis to determine if there is evidence that the amount of long-lived tangible assets and intangible assets with defined useful lives will not be recoverable. This analysis takes into consideration the following variables that are relevant to the Business Plan mentioned in Note 3.1: (i) evolution of Industrial Gross Domestic Product; (ii) price of naphtha; (iii) evolution of Brazil’s Gross Domestic Product; (iv) inflation; and (v) foreign exchange rates. The Company uses scenarios projected by specialized consultants to estimate these variables.

When some evidence that the amount of tangible and intangible assets with defined useful lives will not be recovered is identified, the Company compares the amount of these assets with the respective value in use. For this test, the Company uses the cash flow that is prepared based on the Business Plan. The assets are allocated to the CGUs as follows:

Basic petrochemicals operating segment:

· CGU UNIB Bahia: represented by assets of the basic petrochemicals plants located in the state of Bahia;

· CGU UNIB South: represented by assets of the basic petrochemicals plants located in the state of Rio Grande do Sul;

· CGU UNIB Southeast: represented by assets of the basic petrochemicals plants located in the states of Rio de Janeiro and São Paulo;

Polyolefins operating segment:

· CGU Polyethylene: represented by assets of the polyethylene plants located in Brazil;

· CGU Polypropylene: represented by assets of the polypropylene plants located in Brazil;

Vinyls operating segment:

· CGU Vinyls: represented by assets of PVC plants and chloride soda (CS) located in Brazil;

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Foreign businesses operating segment:

· CGU PP USA: represented by assets of polypropylene plants located in the United States;

· CGU PP Germany: represented by assets of polypropylene plants located in Germany;

· CGU Green Polyethylene: represented by the Green Polyethylene plant located in Brazil;

Chemical Distribution operating segment:

· CGU Quantiq – represented by assets of the subsidiaries Quantiq and IQAG.

(b) Goodwill based on future profitability and intangible assets with indefinite useful lives

Whether there are indications that the amount of an asset may not be recovered or not, the balances of goodwill from future profitability arising from business combinations and intangible assets with indefinite useful lives are tested for impairment at least once a year at the balance sheet date.

For the purposes of testing impairment, the Company allocated the goodwill existing at the CGU UNIB-South and in the Polyolefins and Vinyls operating segments. The Company’s management allocated the goodwill to the Polyolefins segment based on the way this goodwill is internally managed. The existing goodwill was generated in a business combination that resulted in the simultaneous acquisition of polypropylene and polyethylene plants. The main raw materials of these plants were supplied by Braskem S.A., which allowed for the obtainment of significant synergies in the operation. These synergies were one of the main drivers of that acquisition. Accordingly, the Company’s management tested this goodwill and assets for impairment in the ambit of their operating segment since the benefits of the synergies are associated with all units acquired.

3.7 Provisions and contingent liabilities

Braskem’s management, based on the opinion of its external legal advisors, classifies the legal and administrative proceedings against the Company in terms of probability of loss as follows:

Probable loss – these are proceedings for which there is a higher probability of loss than of a favorable outcome, that is the probability of loss exceeds 50%. For these proceedings, the Company recognizes a provision that is determined as follows:

(i) labor claims – the amount of the provision corresponds to the amount claimed multiplied by the Company’s historical percentage of settlement of claims of this nature;

(ii) tax claims - the amount of the provision corresponds to 100% of the value of the matter plus charges corresponding to the variation in the Selic rate, which is the rate disclosed by the Central Bank of Brazil;

(iii) other claims – the amount of the provision corresponds to the value of the matter.

Possible loss – these are proceedings for which the possibility of loss is not remote. The loss may occur, however, the elements available are not sufficient or clear to allow for a conclusion on whether the trend is for a loss or a gain. In percentage terms, the probability of loss is between 25% and 50%. For these claims, except for the cases of business combinations, the Company does not recognize a provision and mentions the most significant ones in a note to the financial statements (Note 28). In business combination transactions, in accordance with the provision in IFRS 3, the Company records the fair value of the claims based on the assessment of loss. The amount of the provision corresponds to the value of the matter, plus charges corresponding to the variation in the Selic rate, multiplied by the probability of loss (Note 24(c)).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Remote loss – these are proceedings for which the risk of loss is small. In percentage terms, this probability is lower than 25%. For these proceedings, the Company does not recognize a provision nor does it disclose them in a note to the financial statements regardless of the amount involved.

The Company’s management believes that the estimates related to the outcome of the proceedings and the possibility of future disbursement may change in view of the following: (i) higher courts may decide in a similar case involving another company, adopting a final interpretation of the matter and, consequently, advancing the termination of the of a proceeding involving the Company, without any disbursement or without implying the need of any disbursement; and (ii) programs encouraging the payment of the debts, such as refinancing programs (REFIS) implemented in Brazil at the Federal level, in favorable conditions that may lead to a disbursement that is lower than the one that is currently recognized in the provision or lower than the value of the matter.

4 Risk management

Braskem is exposed to (i) market risks arising from variations in commodity prices, foreign exchange and interest rates; (ii) credit risks of its counterparties in cash equivalents, financial investments and trade accounts receivable; and (iii) liquidity risks to meet its obligations related to financial liabilities.

Braskem adopts procedures for managing market and credit risks that are in conformity with the new financial policy approved by the Board of Directors on August 09, 2010. The purpose of risk management is to protect the cash flows of Braskem and reduce the threats to the financing of its operating working capital and investment programs.

4.1 Market risk

Braskem prepares a sensitivity analysis for each type of market risk to which it is exposed, which is presented in Note 21.4.

(a) Commodities risk

Braskem is exposed to fluctuations in the prices of many petrochemical commodities, in particular, of its main raw material, the naphtha. As Braskem seeks to pass on the fluctuations in the prices of this raw material caused by the fluctuations in international prices, the Company does not enter into derivatives contracts to protect against commodity risks. Additionally, an immaterial part of sales are performed based on fixed-price contracts or contracts with a maximum and/or minimum fluctuation range. These contracts can be commercial agreements or derivative contracts relating to future sales.

(b) Foreign exchange risk

Braskem has commercial operations denominated or indexed in foreign currencies. Braskem’s inputs and products have prices denominated in or strongly influenced by international prices of commodities, which are usually denominated in U.S. dollars. Additionally, Braskem has long-term loans in foreign currencies, which expose the company to variations in the foreign exchange rate between the real and the foreign currency, in particular, the U.S. dollar. Braskem manages its exposure to foreign exchange risk by means of a combination of debts in foreign currencies, investments in foreign currencies and derivatives. Braskem’s financial policy to manage foreign exchange risks provides for the maximum and minimum coverage limits that should be followed and which are continuously monitored by its management.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(c) Interest rate risk

Braskem is exposed to the risk that a variation in floating interest rates causes an increase in its financial expenses from payments of future interest. Foreign currency denominated debt subject to floating rates is mainly subject to fluctuations in the Libor. Local currency denominated debt is mainly subject to the variation in the TJLP, fixed rates in Brazilian reais and the variation in the Interbank Deposit Certificate (“daily CDI”) rate. Braskem has swap contracts designated for hedge accounting with asset positions in floating Libor and liability positions at fixed rates.

4.2 Credit risk

The transactions that subject Braskem to the concentration of credit risks are mainly in current accounts with banks, financial investments and trade accounts receivable in which Braskem is exposed to the risk of the financial institution or customer involved. In order to manage this risk, Braskem maintains bank current accounts and financial investments with large financial institutions, weighting concentrations in accordance with the ratings and the daily prices seen in the Credit Default Swap market for the institutions, as well as netting contracts that minimize the total credit risk arising from the many financial transactions entered into by the parties.

On December 31, 2011, Braskem has netting contracts with Banco Citibank S.A., HSBC Bank Brasil S.A. – Banco Múltiplo, Banco Itaú BBA S.A., Banco Safra S.A., Banco Santander (Brasil) S.A., Banco Votorantim S.A., Banco West LB do Brasil S.A., Banco Caixa Geral – Brasil S.A., Banco Bradesco S.A. Approximately 50% of the amounts maintained in cash and cash equivalents (Note 6) and financial investments (Note 7) are contemplated in these contracts and the obligations in which are included in the account “borrowings” (Note 19).

With respect to the credit risk of customers, Braskem protects itself by performing a rigorous analysis before granting credit and obtaining secured and unsecured guarantees when considered necessary.

The maximum exposure to credit risks of non-derivative financial instruments on the reporting date is their carrying amounts less any impairment losses. On December 31, 2011, the balance of trade accounts receivable is net of the provision for impairment and amounts to R$ 253,607 (2010 – R$ 269,159).

4.3 Liquidity risk and capital management

Braskem has a calculation methodology to determine an operating cash and a minimum cash for the purpose of, respectively: (i) ensure the liquidity of short-term obligations, calculated based on the expectation of operating disbursements for the following month; and (ii) ensure that the Company maintains liquidity in possible moments of crisis, calculated based on the expectation of operating cash generation, less short-term debts, working capital needs, among others.

In some financing agreements, Braskem has covenants that tie the net debt and the payment of interest to its consolidated EBITDA (Earnings before interests, taxes, depreciation and amortization) (Note 19(i)). The Company’s Management monitors these indicators on quarterly basis in U.S. dollar, as established in the financing agreements.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Additionally, Braskem has two revolving credit lines amounting to: (i) US$ 350 million, which may be used without restriction for a period of three years as from September 2010; and (ii) US$ 250 million, which may be used without restriction for a period of five years as from August 2011. These credit lines allow for the reduction of cash maintained by Braskem. On December 31, 2011, Braskem had not used any credit from these lines.

The table below shows Braskem’s financial liabilities by maturity, corresponding to the period remaining in the balance sheet until the contractual maturity date. These amounts are calculated from undiscounted cash flows and may not be reconciled with the balance sheet.


	Note	Until one year (i)	Between one and two years (i)	Between two and five years (i)	More than five years (i)	Fair value total
Current
Trade payables		6,847,340				6,847,340
Borrowings		2,237,316				2,237,316
Hedge accounting	21.2.1	9,031				9,031
Derivatives	21.2.1	74,361				74,361

Non-current
Borrowings			2,068,506	5,965,642	19,688,279	27,722,427
Debentures	20				19,102
Hedge accounting	21.2.1		7,748	2,530		10,278
At December 31, 2011		9,168,048	2,076,254	5,968,172	19,707,381	36,900,753

(i) The maturity terms presented are based on the contracts signed.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

5 Business combinations

5.1 Petroquímica Triunfo S.A.

On April 30 and May 5, 2009, the General Extraordinary Shareholders Meetings held by Braskem and Triunfo, respectively, approved the acquisition and merger of Triunfo by the Company. This represents the final phase of the merger of the petrochemical assets held by Petroquisa and it was conducted under the terms of the Investment Agreement dated November 30, 2007, between Petrobras, Petroquisa, Odebrecht and Norquisa.

Braskem acquired control of Triunfo on May 5, 2009 when it acquired 100% of its voting capital. On this same date, the Company merged Triunfo into Braskem.

The table below summarizes the consideration paid through the issuance of shares, and the value of the assets acquired and liabilities assumed which were accounted for on the acquisition date:

Consideration
Shares issued (13,387,157 Braskem shares issued in exchange for 100% of Triunfo’s voting capital)	92,505
Total consideration (A)	92,505
Fair value of the identifiable assets acquired and liabilities assumed
Current assets
Inventory	46,268
Other current assets	95,566
Non-current assets
Property, plant & equipment	179,957
Other non-current assets	20,657
Current liabilities	23,283
Non-current liabilities	124,609
Total identifiable assets acquired and liabilities assumed (B)	194,556
Business combination result (A) – (B)	102,051

For purposes of determining the exchange ratio of shares issued by Triunfo for shares issued by Braskem, Banco Brasdesco BBI S.A. was contracted to perform an independent financial and economic analysis of Triunfo and Braskem, based on their financial statements. In consideration for net assets of Triunfo, Braskem issued 13,387,157 new preferred shares class “A”, valued at R$ 92,505. This fair value was adjusted to reflect the price of Braskem shares at the closing stock price on the BM&FBovespa on the date of the operation.

The amount of R$ 102,051 refers to gain from the bargain purchase and was accounted under “results from business combination” in the statement of operations of 2009.

The fair values of the assets acquired and liabilities assumed were determined by independent appraisers contracted by the Company, as summarized below:

(i) The fair value of inventory was determined based on its sale value net of taxes at the appraisal report date by applying the market approach method. The difference between the book value and the fair value was R$ 4,086;

(ii) The method used to determine the fair value of property, plant and equipment was the replacement cost approach. The Company’s management, together with the independent external appraisers, concluded that it was not practicable to apply the market approach, as the individual value of each asset does not reflect the economic value of a petrochemical plant, which includes the value of the technology, cost of the supporting facilities and the integration with the production and finished products transportation system. When valuing these assets the Company and its independent appraisers took into account: (i) the cost of new similar plants; (ii) recent quotes for the expansion and replacement of similar assets; and (iii) market price for the purchase of a new similar asset, in the same usage conditions as when last inspected, among other assumptions. Property, plant and equipment at fair value totaled R$152,895 on April 30, 2010; and

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(iii) Braskem shares were valued at R$1,556 based on the market value on May 5, 2010.

Triunfo was merged into the Company immediately after the acquisition.

The acquisition of Triunfo was approved by CADE on July 9, 2009.

5.2 Quattor Participações S.A. (current Braskem Qpar)

On January 22, 2010 the shareholders of the Braskem S.A; (Odebrecht S.A. – “ODB”, Odebrecht Serviços e Participações S.A. – “OSP”, Petróleo Brasileiro S.A. – Petrobras e Petrobras Química S.A. – Petroquisa), together with União das Indústrias Petroquímicas S.A. – “Unipar”, entered into an Investment Agreement to establish the terms for the acquisition by the Company and of the investments held by Unipar in the petrochemical industry, allowing for the consolidation of Petrobras’ petrochemical investments in Braskem.

On April 27, 2010, the Company purchased 143,192,231 of Quattor shares representing 60% of its total capital and paid the amount of R$ 659,454 to Unipar. On April 30, 2010, the Company acquired the control of Quattor and, at the Ordinary General Shareholders’ Meeting, it appointed the members of Quattor’s Board of Directors and this date is the date of acquisition for the purposes of accounting for this business combination.

Under the Investment Agreement of January 22, 2010, when the Company acquired 60% of Quattor’s voting capital, it undertook to acquire the following interests:

(i) 40% of the voting capital of Quattor held by Petrobras through the exchange of 18,000,087 shares issued by the Company;

(ii) 33.3% of the voting capital of Polibutenos S.A. held by Unipar for a cash consideration of R$ 22,326;

(iii) 0.68% of non-controlling interests in Quattor Química; these non-controlling shareholders have a tag along right to sell their shares for up to 80% of the price paid to the controlling shareholder);

(iv) 25% of the voting capital of Riopol held by BNDESPAR. ¹

¹ As part of the acquisition of Quattor, the Company assumed the obligation under a put option entered into by Unipar and BNDESPAR (Note 1(b.1(viii))). Under this put option and a similar put option entered into by Petrobras, Unipar and Petrobras, former owners of a 75% interest in Riopol, agreed to repurchase a 25% (being 15% by Unipar and 10% by Petrobras) non-controlling interest of Riopol from BNDESPAR at the end of a five-year period (that commenced on January 15, 2008), or at an earlier time during that period in the event that BNDESPAR decided to exercise the option earlier. Under the terms of the option, the purchase price of these shares would be equal to the total amount originally invested by BNDESPAR, corrected by a contractually agreed interest rate.

At the acquisition date, the fair value of the option entered by Unipar was R$ 205,121, based on the amount originally invested corrected by the contractual interest rate. On August 9, 2010, BNDESPAR exercised the put option and Braskem acquired 190,784,674 common shares and 30 preferred shares of Riopol for R$ 209,951. The change in the fair value of this put option totaled of R$ 4,830 and was recorded as an expense.

Although the Company did not obtain the legal right over the aforementioned shares of the companies on the acquisition date, all the events described above were accounted for on April 30, 2010, since the Investment Agreement set forth the Company’s obligation to acquire all of the remaining shares. Subsequently, all interests were acquired under the Investment Agreement.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The table below summarizes the consideration paid to the shareholders’ of the Quattor Group and the amounts of the assets acquired and liabilities assumed recognized on the date of acquisition, as well as the fair value on the date of the acquisition of the non-controlling interests in Quattor.


Consideration paid
Cash	704,298
Shares issued (the amount of R$250,049 also includes Braskem shares issued for the	250,049
purrchase of other interests in this business combination)
BNDESPAR put option assumed by the Company and other obligations	218,739
Total consideration transferred (A)	1,173,086

Fair value of identifiable assets and assumed liabilities
Current assets
Inventory	823,012
Other current assets	1,383,104
Non-current assets
Property, plant & equipment	7,531,158
Intangible	560,430
Other non-current assets	990,850

Current liabilities	2,903,113
Non-current liabilities
Other provisions	220,619
Deffered income tax and social contribution	623,173
Other non-current liabilities	5,527,104
Total identifiable assets and assumed liabilities (B)	2,014,545

Business combination result (A) – (B)	841,459

The gain (bargain purchase) of R$ 841,459 is recorded in a specific account in the income statement for 2010 called “gain (loss) from business combinations”. This bargain purchase was attributable to the terms of negotiation with the shareholders of Quattor.

The fair value of the Company’s shares issued in these transactions was determined based on the BM&FBovespa closing price on April, 30, 2010 and totaled R$ 197,101.

The fair value of the assets acquired and liabilities assumed was estimated by an independent appraiser and the main results are described below:

(i) The fair value of inventories was determined taking into consideration the sales price, net of taxes, on the date of the evaluation of the assets using the market approach method. The difference between the market value and the carrying amount of inventories was R$ 68,009.

(ii) The method used to evaluate property, plant and equipment was the cost replacement approach method. Management, together with its external appraisers, understands that the use of the market approach method using the unit values of each asset that composes the plant would not reflect the economic value of the plant, since they would not consider the costs of the installed technology, costs of supporting installations and the active connection with production and distribution (going concern). In the evaluation process, the following information was used: (i) cost of installation of similar plants; (ii) most recent quotes for the expansion and replacement of similar assets; and (iii) cash price for the replacement of the asset, taking into consideration the working conditions on the date of inspection, among other. The adjustment booked over the historical Quattor property, plant and equipment book value of R$ 6,039,067 was in the amount of R$ 1,492,091. Therefore, after the adjustments, the fair value of property, plant and equipment registered in the acquisition was in the amount of R$ 7,531,158.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(iii) As a result of the evaluation, net gains on future cash flows were identified for the commercial contracts with customers and suppliers that were brought to present value at a discount rate of 14.1% a year. Additionally, the costs of registration and product placement were considered and, in technology, the expenses incurred with personnel and the administrative expenses for the research conducted together with the Federal University of Rio de Janeiro were also considered. The identifiable intangible assets related to brands, technology, contracts with customers and suppliers totaled R$ 393,878.

(iv) Many tax contingencies were recognized and the chances of an unfavorable outcome for these contingencies are possible based on the evaluation of the value of the matter in dispute and probability of loss estimated by external legal advisors. The provisions recognized refer to lawsuits related to the State Value-Added Tax (ICMS), Social Integration Program (PIS), Social Contribution on Revenues (COFINS), Income Tax (IR) and Social Contribution on Income (CSL) totaling R$ 210,695.

(v) The fair value of loans and financing was determined using the income approach method however, the fair value effects were not recognized since these loans included clauses that provided for the advanced settlement were settled in 2010 and the effects were annulled in profit or loss for that year.

The 2010 net sales revenue included in the consolidated income statement since April 30, 2010 includes R$ 4,412,244 in net revenues from Quattor. Quattor also contributed with profit of R$ 58.461 in the same period.

The acquisition of Quattor was subject to the final approval of CADE. Brazilian Corporate Law allows for the completion of this transaction before the final approval by the Brazilian antitrust authorities, unless CADE issues a writ of prevention against the transaction. This transaction was submitted for CADE’s analysis on February 5, 2010. On February 23, 2011, the transaction was approved with no significant restrictions.

5.3 Sunoco Chemicals

On April 1, 2010, Braskem acquired 100% of Sunoco Chemicals’ shares for R$ 620,838 (US$ 351 million). The name of this subsidiary was changed to Braskem PP Americas Inc. (currently named Braskem America). Headquartered in Philadelphia, Braskem America has three polypropylene plants located in the states of Texas, Pennsylvania and West Virginia that had an aggregate annual installed capacity of 950,000 metric tons, representing approximately 13% of the total installed polypropylene production capacity in the United States. Additionally, Braskem America also has a technology center in Pittsburgh, Pennsylvania.

The date of acquisition of control over the operating and financial policies of PP Americas is April 1, 2010, date from which the Company started to appoint all the members of this subsidiary’s Board.

The following table summarizes the consideration paid to the former shareholders of Sunoco Chemicals and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

Consideration transferred
Cash	620,838
Total consideration transferred (A)	620,838

Fair value of the identifiable assets and liabilities assumed
Current assets
Inventory	177,070
Non-current assets
Property, plant & equipment	628,698
Intangible	285,464
Othe non-current assets	11,262

Current liabilities	6,597
Non-current liabilities
Deferred income tax and social contribution	330,421
Other non-currente liabilities	18,549
Total identifiable assets and liabilities assumed (B)	746,927

Business combination result (A) – (B)	126,089

The gain (bargain purchase) of R$ 126,089 is recorded in a specific account in the income statement for 2010 called “results from business combinations”.

The fair value of the assets acquired and liabilities assumed was estimated by an independent appraiser and the main results are described below:

(i) The fair value of inventories was determined taking into consideration the sales price, net of taxes, on the date of the evaluation of the assets by the experts using the market approach method.

(ii) The method used to evaluate property, plant and equipment was the cost approach method. Management, together with its external appraisers, understands that the use of the market approach method using the unit values of each asset that composes the plant would not reflect the economic value of the plant, since they would not consider the costs of the installed technology, costs of supporting installations and the active connection with production and distribution (going concern). In the evaluation process, the following information was used: (i) cost of installation of similar plants; (ii) most recent quotes for the expansion and replacement of similar assets; and (iii) cash price for the replacement of the asset, taking into consideration the working conditions on the date of inspection, among other.

(iii) As a result of the evaluation, net gains on future cash flow were identified for the commercial contracts that were brought to present value at a discount rate of 15% a year. The identifiable intangible assets relate to technology and contracts with suppliers.

The net revenue included in the consolidated income statement since April 1, 2010 includes R$ 1,891,487 in net revenues from PP Americas’ operations. PP Americas also contributed with a profit of R$ 172,735 in the same period.

This transaction was approved by CADE on November 3, 2010 and by the U.S. antitrust agency on March 22, 2010.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

5.4 Unipar Comercial

On May 10, 2010, the Company acquired 100% of the voting capital of Unipar Comercial. On the same date, the Company acquired the control over its management and, therefore, this date was considered for accounting for the business combination. The total cash consideration paid for the acquisition was R$ 27,104 and the fair value of the assets acquired and liabilities assumed was R$ 35,138. The adjustment that was booked over the historical book value, in the amount of R$ 8,342, arose from the evaluation of property, plant and equipment, and on this amount, deferred income tax and social contribution liabilities, amounting to R$ 4,139, was also recognized. A bargain purchase gain of R$ 7,735 was recognized in the income statement for 2010 within “results from business combinations”. CADE approved this transaction on February 23, 2011.

5.5 Polypropylene plants abroad – Dow Chemical

On September 30, 2011, Braskem, through its subsidiaries Braskem America and Braskem Alemanha acquired the polypropylene business from Dow Chemical for R$ 607,595 (US$ 323 million). On the same date, the amount of R$ 312,263 (US$ 166 million) was paid, corresponding to the portion of the trade payables that were assumed in the transaction.

Based on the changes in trade accounts receivable and inventories between the date of the announcement of the transaction and the closing date, an additional amount of R$ 9,412 (US$ 5 million) was paid. The final amount can still be changed based on new changes in trade accounts receivable and inventories.

The negotiations included four industrial units, two in the United States and two in Germany, with an annual production capacity of 1,050 thousand metric tons of polypropylene.

In the United States and Germany, mainly industrial plants, trade accounts receivable, inventories were acquired and liabilities assumed related to the business operation. In the United States, the plants acquired are located in the State of Texas and have an annual polypropylene production capacity of 505,000 metric tons. In Germany, the plants have an annual polypropylene production capacity of 545,000 metric tons.

Trade accounts receivable and inventories located in Mexico were also acquired through the subsidiary Braskem Mexico amounting to R$ 13,214 (US$ 7 million), net of trade payables assumed. Since this was a separated purchase of assets that will be terminated in the short term with the sale of inventories and the financial settlement of trade accounts receivable and payable, this transaction is not a business combination.

The closing of this transaction between the parties took place on September 30 and the financial settlement occurred on October 3, 2011.

Until the effective payment to Dow Chemical, the acquirers have not made any significant decision with respect to the operations of the plants. The rights and obligations generated from October 1, 2011 are of the acquirers, including inventories produced and new liabilities assumed.

The reasons mentioned above lead us to conclude that the date of acquisition of control is October 3, 2011, which is the date the business combination was recorded.

The following table summarizes the consideration paid to Dow Chemical and the amounts of the assets acquired and liabilities assumed recognized on the acquisition date:

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

	U.S.	Germany	Total business combination	Mexico	Total paid
Consideration transferred
Cash	315,120	288,674	603,793	13,214	617,007
Total consideration transferred	315,120	288,674	603,793	13,214	617,007

Fair value of the identifiable assets and liabilities assumed
Current assets
Trade accounts receivable	142,051	135,320	277,371	18,948	296,318
Inventory	161,381	124,066	285,447	15,169	300,616
Other receivables	24,867		24,867	(2,507)	22,360
Non-current assets	-	-	-	-	-
Property, plant & equipment	129,040	194,103	323,143		323,143
	-	-	-	-	-
Current liabilities	-	-	-	-	-
Trade payables	(140,621)	(153,246)	(293,868)	(18,395)	(312,263)
Other payables	(1,599)		(1,599)		(1,599)
Non-current liabilities	-	-	-	-	-
Pension plan	-	(11,569)	(11,569)		(11,569)

Total fair value of identifiable assets and liabilities assumed	315,120	288,674	603,793	13,214	617,007

In the financial statements for the year ended December 31, 2011, the amounts were allocated, on a preliminary basis, to the assets acquired and liabilities assumed by the acquirers.

Independent appraisers were contracted to determine the assets acquired and liabilities assumed at fair value. This work is expected to be completed by the end of the first quarter of 2012 when possible adjustments will be recognized.

The Company did not determine any goodwill or gain from a bargain purchase as a result of this preliminary allocation.

This acquisition was submitted for the approval of CADE on August 17, 2011 and approved on February 8, 2012. This transaction was also submitted to the U.S. antitrust agency on August 16, 2011 and was approved on September 9, 2011, and to European antitrust agencies on August 26, 2011 and it approved on September 28, 2011.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

6 Cash and cash equivalents

		2011	2010

Cash and banks		349,916	252,925
Cash equivalents:
	Domestic market	1,899,825	2,208,475
	Foreign market	737,078	162,870
Total		2,986,819	2,624,270

Investments in Brazil are mainly represented by fixed-income instruments and time deposits held by the exclusive FIM Sol fund. Investments abroad mainly comprise fixed–income instruments issued by first-class financial institutions (time deposit) with high market liquidity.

7 Financial investments

		2011	2010
Held-for-trading
	Investments in FIM Sol	36,410	204,123
	Investments in foreign currency	10,716	32,112
	Shares	3,023	84
Loans and receivables
	Investments in FIM Sol	116,007
Held-to-maturity
	Quotas of investment funds in credit rights	34,720	28,706
	Restricted deposits	4,173
Total		205,049	265,025

In current assets		170,297	236,319
In non-current assets		34,752	28,706
Total		205,049	265,025

On December 31, 2011, the balances of investments of FIM Sol classified as “held-for-trading” and “loans and receivables” refer to floating-rate fixed income investments with determinable earnings. The held-to-maturity financial investments related to quotas of investments funds in credit rights have maturity in June 2013 and December 2014 and are presented as non-current assets.

This account was presented in the 2010 annual financial statements in specific accounts called “available-for-sale financial assets” and “held-for-trading financial assets”.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

8 Trade accounts receivable

		2011	2010
Consumers
	Domestic market	866,168	1,638,449
	Foreign market	1,282,251	587,661
Allowance for doubtful accounts		(253,607)	(269,159)
Total		1,894,812	1,956,951

In current assets		1,843,756	1,894,648
In non-current assets		51,056	62,303
Total		1,894,812	1,956,951

The breakdown of trade accounts receivable by maturity is as follows:

	2011	2010

Past due securities:
Up to 90 days	223,649	132,850
91 to 180 days	6,754	1,936
As of 180 days	209,139	230,477
Allowance for doubtful accounts	(253,607)	(269,159)
Total past due receivables	185,935	96,104
Falling due receivables	1,708,877	1,860,847
Total costumers portfolio	1,894,812	1,956,951
% of past-due securities on total costumers portfolio	20.46%	16.41%

The changes in the balance of the provision for impairment are presented below:

	2011	2010	2009

Balance of provision at the beginning of the year	(269,159)	(220,264)	(198,741)
(Provision) reverse in the year	4,612	(66,896)	(60,865)
Write-offs	18,671	18,131	61,569
Addition by acquisition of companies	(7,731)	(130)	(22,227)
Balance of provision at the end of the year	(253,607)	(269,159)	(220,264)

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

9 Inventories

	2011	2010

Finished goods	2,444,547	1,876,290
Raw materials, production inputs and packaging	866,206	781,594
Maintenance materials	183,779	240,442
Advances to suppliers	58,200	56,825
Imports in transit and other	70,790	60,506
Total	3,623,522	3,015,657

Advances to suppliers and expenditures with imports in transit are mainly related to operations for the acquisition of the main raw material of the Company, the petrochemical naphtha.

The account “maintenance materials” includes materials of general and specific use and the useful lives of which, after their application on machinery and equipment, is less than a year. The other maintenance materials are spare assets and replacement parts with useful lives that exceed one year and are classified in property, plant and equipment in accordance with IAS 16 (Note 16).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

10 Related parties

The Company carries out transactions with related parties in the ordinary course of its operations and activities. The Company believes that all the conditions set forth in the contracts with related parties meet the Company’s interests. To ensure that these contracts present terms and conditions that are as favorable to the Company as those it would enter into with any other third parties is a permanent objective of Braskem’s management.

	Assets				Liabilities
	Current		Non-current		Current		Non-current

Jointly-controlled subsidiaries
Propilsur	2,598	(i)					24,855	(v)
Polimerica	1,748	(i)					19,978	(v)
	4,346						44,833
Associated company
Borealis	3,123	(i)
	3,123
Related companies
Construtora Norberto Odebrecht ("CNO")					4,128	(iv)
Petrobras	88,842	(ii)	58,169	(iii)	1,777,503	(iv)
Refinaria Alberto Pasqualini ("Refap")	19,492	(i)			10,003	(iv)
Other	565	(i)
	108,899		58,169		1,791,634


At December 31, 2011	116,368		58,169		1,791,634		44,833

Groups of accounts in which the transactions are recorded:

(i) Amounts in “trade accounts receivable”: R$ 22,890 and in “other receivables”: R$ 4,636.

(ii) Amount in “trade accounts receivable”: R$ 6,887 and in “other receivables”: R$ 81,955.

(iii) Amount in “related parties” related to loan agreements, subject to TJLP + interest of 2% per year.

(iv) Amounts in “trade payables”.

(v) Amounts in “related parties” related to “advances for future capital increase” made by other shareholders.

	Income statement transactions from January to December 31, 2011
	Sales of products	Purchases of raw materials, services and utilities	Financial income (expenses)	Cost of production/general and administrative expenses



Jointly-controlled subsidiary
RPR	15,624	5,362	(56)
	15,624	5,362	(56)
Associated companies
Borealis	167,408		1,500
Sansuy	23,663	658
	191,071	658	1,500
Related companies
CNO		190,484
Odebrecht Ingeniería y Construcción de México, S. de R.L. de C.V ("CNO México")		16,461
OCS - Corretora de Seguros ("OCS")		2,348
Odebrecht Serviços e Participações ("OSP")		205,824
Petrobras	1,457,484	14,321,986	4,427
Petrobras International Finance ("PifCo")	7,446
Refap	11,699
	1,476,629	14,737,103	4,427
Post-employment benefit plan
Odeprev				13,873
				13,873


Total	1,683,324	14,743,123	5,871	13,873

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

	Assets				Liabilities
	Current		Non-current		Current		Non-current
Jointly-controlled subsidiaries
RPR	7,596	(i)	-		-		-
Propilsur	3,497	(ii)	-		-		15,001	(vii)
Polimerica	4,257	(ii)	-		-		14,538	(vii)
	15,350		-		-		29,539
Associated companies	-		-		-		-
Borealis	7,337	(iii)	-		-		-
Cetrel	-		-		1,907	(vi)	-
Sansuy	-		-		219	(vi)	-
	7,337		-		2,126		-
Related companies	-		-		-		-
OCS	-		-		29	(vi)	-
Petrobras	131,228	(iv)	53,742	(v)	562,327	(vi)	-
Refap	-		-		110,008	(vi)	-
Other	-		-		-	-	1,847	(viii)
	131,228		53,742		672,364		1,847
					-

At December 31, 2010	153,915		53,742		674,490		31,386

Groups of accounts in which the transactions are recorded:

(i) Amounts in “trade accounts receivable”.

(ii) Amounts in “other receivables”.

(iii) Amounts in “trade accounts receivable”: R$ 7,150 and in “other receivables”: R$ 187.

(iv) Amounts in “trade accounts receivable”: R$ 85,245 and in “other receivables”: R$ 45,983.

(v) Amounts in “related parties” related to loan agreements, subject to TJLP + interest of 2% per year.

(vi) Amounts in “trade payables”.

(vii) Amounts in “related parties” related to “advance for future capital increase” made by other shareholders.

(viii) Amounts in “related parties” related to loan agreements, subject to 100% of CDI.

	Income statement transactions from January to December 31, 2010
	Sales of products	Purchases of raw materials, services and utilities	Financial income (expenses)	Cost of production/general and administrative expenses



Jointly-controlled subsidiary
RPR	228,616	37,743	(2,003)
	228,616	37,743	(2,003)
Associated companies
Borealis	118,967	5
Cetrel	181	12,881
	119,148	12,886
Related companies
CNO		82,580
OCS		1,966
Odebrecht Plantas Industriais ("OPIP")		135,731
Petrobras	416,081	8,227,866	656
PIFCo	70,087	81,091
Refap	235,684	1,235,782
Other			(33)
	721,852	9,765,016	623

Post-employment benefit plan
Brasilprev				4,102
Fundação Petrobras de Seguridade Social ("Petros")				3,640
Odeprev				11,413
Triunfo Vida				126
				19,281


Total	1,069,616	9,815,645	(1,380)	19,281

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

	Income statement transactions from January to December 31, 2009
	Sales of products	Purchases of raw materials, services and utilities	Financial income (expenses)



Jointly-controlled subsidiary
Cetrel	415	23,816
RPR	140,419	83,003
	140,834	106,819
Associated company
Borealis	155,440		2,000
	155,440		2,000
Related companies
CNO		94,238
Petrobras	521,500	4,766,666	(4,600)
PifCo			(12,050)
Refap		1,243,470
	521,500	6,104,374	(16,650)


Total	817,774	6,211,193	(14,650)

As provided for in the Company’s bylaws, the Board of Directors has the exclusive power to decide on any contract but those related to the supply of raw materials that exceeds R$ 5,000 per operation or R$ 15,000 altogether per year between the Company and its subsidiaries and any of its common shareholders, directors of the Company, its parent company or subsidiary or its respective related parties. Additionally, the Company has a Finance and Investment Committee that, among other things, monitors the contracts with related parties that are approved by the Board of Directors.

It is worth noting that Brazilian Corporate Law (“Corporate Law”) forbids officers and directors to: (i) perform any acts of freedom with the use of the Company’s assets and in its detriment; (ii) intervene in any operations in which these officers and directors have a conflict of interest with the Company or in resolutions in which they participate; and (iii) receive, based on their position, any type of personal advantage from third parties, directly or indirectly, without an authorization granted by the proper body.

The related parties have the following relationship with the Company:

· CNO: indirect controlling of Braskem S.A.

· CNO México: wholly-owned indirect subsidiary of Odebrecht

· OCS: wholly-owned direct subsidiary of Odebrecht

· OPIP: wholly-owned direct subsidiary of Odebrecht

· OSP: indirect controlling of Braskem S.A.

· Petrobras: direct shareholder of Brakem S.A.

· Pfico: wholly-owned direct subsidiary of Petrobras

· Refap: wholly-owned indirect subsidiary of Petrobras

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

The transactions with related parties are summarized below:

· CNO: The Company and CNO signed an alliance agreement for performing services in the stoppages for maintenance and inspection in the industrial units. This agreement provides for a different price for each type of activity carried out by CNO.

· CNO Mexico: The subsidiary Braskem Idesa and CNO Mexico signed, together with Ica Fluor Daniel, S de R. L. de C. V. (Mexican engineering company), agreements for the performance of services of (i) basic engineering and preliminary procurement of equipment amounting to US$ 16 million and effective until April 2012; and (ii) land leveling, amounting to US$ 150 million and effective until March 2013. These contracts were signed for the construction of the Ethylene XXI project (Note 1(b.3)).

· CNO and Alagoas Consortium (composed of CNO and OSP): The Company signed: (i) an alliance agreement with the Alagoas Consortium (composed of CNO and OSP) for the construction of a PVC plant in Alagoas in the estimated amount of R$ 362 million, dated December 14, 2010, and effective for 24 months; and (ii) an alliance agreement with CNO for the construction of a butadiene plant in the state of Rio Grande do Sul in the amount of R$ 129 million, dated April 4, 2011 and effective until October 3, 2012.

· Petrobras:

(i) Naphtha

Braskem and Braskem Qpar have agreements for the supply of naphtha with Petrobras. The agreements provide for the supply of naphtha to the basic petrochemicals units located in the Triunfo, Camaçari and São Paulo Petrochemical Complexes. The agreed-upon price of the naphtha is based on several factors, such as the market price of the naphtha and a number of oil byproducts, the volatility of the prices of these products in the international markets, the Brazilian real - U.S. dollar exchange rate and the concentration of paraffinic content and contaminants present in the naphtha delivered. The agreement provides for a minimum consumption of 3,800,000 metric tons a year and a maximum consumption of 7,019,600 metric tons a year. The subsidiary of Petrobras, PifCo, also supplies naphtha to the Company.

(ii) Propane

Braskem has propane supply agreements with Petrobras and its subsidiary Refap through its refineries for the Company’s plants located in the petrochemical complexes. These agreements provide for the full supply of approximately 680,000 metric tons of propane a year.

(iii) Ethane, propane and electric energy

The subsidiary Riopol has an agreement with Petrobras for the supply of 392,500 metric tons of ethylene a year, 392,500 metric tons of propane a year and 306.6 GWh of electric energy a year.

(iv) Sale of sundry products

The Company supplies to Petrobras many products it manufactures, such as solvents, butadiene, benzene, toluene, etc. These supplies are not covered by an agreement and take place on a regular basis at market prices.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

· OCS: The Company entered into a risk and insurance management agreement with OCS, amounting to R$ 6 million for a period of three years as from 2008.

Key management personnel

The Company considers “Key management personnel” to be the members of the Board of Directors and the Executive Board, composed of the CEO and vice-presidents. Not all the members of the Executive Board are members of the statutory board.

Income statement transactions	2011	2010	2009

Remuneration
Short-term benefits to employees and managers	32,445	30,886	26,164
Post-employment benefit	223	383	225
Benefits on contract termination		892	36
Long-term incentives	1,519	2,320	2,879
Total	34,187	34,481	29,304



Balance sheet accounts	2011	2010

Long-term incentives	4,121	5,372
Total	4,121	5,372

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

11 Taxes recoverable

	Note	2011	2010

Excise tax (IPI)		31,016	29,128
Value-added tax on sales and services (ICMS)	(a)	1,094,838	1,211,256
Social integration program (PIS) and social contribution on revenue (COFINS)	(b)	469,872	326,005
PIS and COFINS - Law No. 9,718/98	(c)	157,733	115,362
PIS - Decree-Law 2,445 and 2,449/88	(d)	199,972	55,317
Income tax and social contribution (IR and CSL)	(e)	389,769	220,525
Tax on net income (ILL)	(e)	14,912	61,126
Other		184,388	124,561
Total		2,542,500	2,143,280

In current assets		1,036,253	698,879
In non-current assets		1,506,247	1,444,401
Total		2,542,500	2,143,280

(a) ICMS

The Company has accumulated ICMS credits over the past few years arising mainly from acquisitions of fixed assets, domestic sales subject to deferred taxation and export sales. This accumulation of tax credits was more evident in the states of Bahia, Rio Grande do Sul and São Paulo where most production units are concentrated.

The Company’s management has been prioritizing a series of actions so as to maximize the use of these credits and, currently, it does not expect losses on their realization. Among the actions carried out by management are:

· Agreement with the Government of the state of Rio Grande do Sul, maintaining the full deferral of ICMS on the import of naphtha and limiting the use of accumulated ICMS credits to an average of R$ 8,250 per month for offsetting monthly ICMS payable by the units in that state;

· Maintenance of the Agreement with the Government of the State of Bahia, which ensures the effective enforcement of State Decree No. 11,807 of October 27, 2009, which (i) gradually reduced the effective ICMS rate on domestic and imported naphtha acquired in that state and; (ii) established that the amount of R$ 9,100 per month can be deducted from the debt balance between April 2011 and March 2014, and the amount of R$ 5,907 per month between April 2014 and March 2018; and

· In São Paulo, Braskem started to take measures towards the monetization of the credit balance, including the centralization of the ICMS of the São Paulo units in a single establishment and management of the purchase of inputs, whenever possible, from interstate bases.

Taking into consideration the tax rule that limits the short-term realization of ICMS credits from the acquisition of fixed assets and the projections of the Company’s management for the realization of the other credits, as of December 31, 2011, the amount recorded in non-current assets was R$ 685,487 (2010 – R$ 883,163), including the amount of R$ 53,017 (2010 – R$ 59,133), related to the ICMS deferred on the acquisitions of machinery, equipment and parts for the construction of the subsidiary Riopol (Note 22(a)).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(b) PIS and COFINS

This account includes PIS and COFINS credits on the acquisition of property, plant and equipment items, and the amount of which on December 31, 2011 totals R$ 249,191 (2010 – R$ 168,673). The changes in the year are mainly due to the project for the expansion of the PVC plant in the State of Alagoas and the scheduled stoppages for maintenance. These credits will be realized in the ordinary course of the Company’s operations, following the rules provided for in the Regulatory Instruction of the Federal Revenue Service (SRF) No. 457 of October 18, 2004.

(c) PIS and COFINS – Law No. 9,718/98

This account contains credits arising from legal discussions on the constitutionality of some aspects of Law No. 9,718/98. These credits will be used to offset federal taxes due. In 2011, the Company recognized new credits arising from favorable outcomes in lawsuits filed by companies merged into.

(d) PIS – Decree-Laws No. 2,445 and No. 2,449/88

In 2011, Braskem recognized credits in the amount of R$ 155,505 arising from favorable decisions in lawsuits that challenged the constitutionality of Decree Laws No. 2,445 and No. 2,449/88.

(e) IR and CSL

This account contains IR and CSL credits arising from prepayments in years that did not present taxable income at year end in addition to the taxes withheld on financial investments. In 2011, the Company used credits from the ILL process for IR prepayments amounting to R$ 48,299. All these credits are adjusted based on the variation of the Selic rate.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

12 Judicial deposits – Non-current assets


		2011	2010
Judicial deposits
	Tax contingencies	105,611	117,137
	Labor and social security contingencies	60,187	117,470
	Other	8,422	15,588
Total		174,220	250,195

On December 31, 2011, a portion of the deposits is associated with legal proceedings for which the probability of loss is possible (Note 28) and a portion is associated with proceedings for which the probability of loss is remote.

13 Insurance claims

On December 31, 2011, this account includes:

(i) indemnities for claims occurred in December 2010 and February 2011 in furnaces and in the electric system in the olefin plants of the Camaçari Basic Petrochemicals unit located in the State of Bahia in the amounts of R$ 141,247 and R$ 61,300, respectively; and

(ii) indemnity for the claim in the plant of chloride soda in the State of Alagoas in the amount of R$ 12,911.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

14 Other receivables

(a) Current

The main balances that compose this account in current assets are:

· R$ 96,213 related to advances to service suppliers (2010 – R$ 59,608);

· R$ 81,955 related to amounts receivable from related companies (2010 – R$ 45,965), Note 10.

(b) Non-current – Eletrobrás compulsory loans

In 2000, the merged company Trikem S.A. and Braskem Petroquímica filed lawsuits related to credits arising from interest and monetary adjustment on the Eletrobrás compulsory loan for the period between 1987 and 1994 and, in 2001, they filed lawsuits related to credits for the period between 1977 and 1986.

The Superior Court of Justice – STJ appeased the matter in favor of the taxpayers upon the judgment of RESP No. 1003955 and RESP No. 1028592 made after repetitive appeals under Article 543-C of the Civil Procedure Code, establishing this decision to all cases that address this matter. Meanwhile, through the judgment of the Interlocutory Appeal No. 735933 lodged by Eletrobrás, the Federal Supreme Court - STF consolidated the understanding of the STJ in the sense that the discussion over the matter relates to ordinary law.

The lawsuits of said companies have already been awarded final and unappealable decisions by the STJ and, therefore, appeals against these decisions are no longer applicable. Accordingly, the Company recognized the related credits, which, as it understands are unconstested based on the opinion of its external legal advisors, amounting to R$ 51 million and R$ 29 million for the lawsuits of Trikem and Braskem Petroquímica, respectively, and a revenue was recorded in the statement of operations of 2011.

The composition of this amount results from a principal amount and interest. Although the legal advisors consider that there is a probability that this amount will be received in full, Management applied a negative goodwill of 40%.

On December 31, 2011, the balance of this account is R$ 82,526 (2010 - R$ 8,766).

On December 31, 2010, this account included, in current assets, balances of insurance claims that were reclassified to a specific account in non-current assets on December 31, 2011 (Note 13).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

15 Investments

(a) Information on investments

			Adjusted net profit (loss)			Adjusted
		Interest in	for the year			equity
		total capital (%)	2011	2010	2009	2011	2010
		2011	2011	2010	2009	2011	2010

Associates
	Borealis	20.00	22,307	15,028	9,704	149,349	130,940
	Cetrel (i)			23,916	17,292		254,785
	Codeverde	35.97	1,561	(1,004)	(770)	66,606	83,546
	Sansuy	20.00	(16)	(13)	(40)	1,954	1,972

(i) Redesignated from an associate to a subsidiary (Note 2.2(ix)).

(b) Changes in investments in associates

		Capital		Provision
	Balance at	increase	Equity	for losses /	Balance at
	2010	(decrease)	in results	other	2011

Associates
Borealis	26,188		3,682		29,870
Cetrel (i)	134,602			(134,602)
Codeverde		(6,600)		6,600
Total associates	160,790	(6,600)	3,682	(128,002)	29,870

(ii) Redesignated from an associate to a subsidiary (Note 2.2(ix)).

(c) Breakdown of equity results

	2011		2010	2009

Equity in results of subsidiaries and jointly-controlled subsidiaries	210		3,432	(289)
Equity in results of associates	3,306		21,191	10,235
Amortization of fair value adjustment	(5,430)	(i)	(4,225)	(6,758)
Provision for losses on investments	(18)		(96)
Dividends received from other investments / other	513
	(1,419)		20,302	3,188

(i) Comprises amortization of fair value adjustments on property, plant and equipment of the subsidiaries Braskem Petroquímica and Cetrel.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

16 Property, plant and equipment

	Note	Land	Buildings and improvements	Machinery, equipment and facilities	Projects and stoppage in progress	Other	Total

Cost		417,475	1,804,708	22,045,283	1,972,781	632,260	26,872,507
Accumulated depreciation/depletion			(613,585)	(6,458,072)		(270,549)	(7,342,206)
Provision for impairment	(i)			(164,029)			(164,029)
Balance as of December 31, 2010		417,475	1,191,123	15,423,182	1,972,781	361,711	19,366,272

Acquisitions		4,385	9,666	198,096	1,848,820	109,304	2,170,271
Acquisition of companies			1,798	321,345			323,143
Capitalized financial charges	19(g)				101,721		101,721
Full consolidation of subsidiary (Cetrel)		1,130	42,230	22,704	21,354	80,820	168,238
Disposals, net of depreciation/depletion				(4,433)	(6,153)	(5,299)	(15,885)
Transfers	(ii)		7,309	104,903	(257,809)	131,955	(13,642)
Transfers from current assets	(iii)				81,686		81,686
Depreciation / depletion			(64,939)	(1,465,281)		(78,602)	(1,608,822)
Reversal of provision				3,993			3,993
Foreign currency translation adjustment		(4,564)	(5,720)	68,032	855	(7,391)	51,212

Net book value		418,426	1,181,467	14,672,541	3,763,255	592,498	20,628,187
Cost		418,426	1,859,991	22,755,930	3,763,255	941,649	29,739,251
Accumulated depreciation/depletion			(678,524)	(7,923,353)		(349,151)	(8,951,028)
Provision for impairment	(i)			(160,036)			(160,036)
Balance as of December 31, 2011		418,426	1,181,467	14,672,541	3,763,255	592,498	20,628,187

(i) Impairment of plants hibernated in 2008 and 2009.
(ii) Includes transfers to intangible
(iii) Transfers of spare parts to property, plant and equipment

The projects in progress relate mainly to operating improvements to increase the economic useful life of machinery and equipment and expansion projects, particularly the expansion of the PVC plant in Alagoas, and the construction of a new butadiene plant in Rio Grande do Sul.

Braskem offered in guarantee plants, land, real estate properties and machinery and equipment in the amount of R$ 3,428,276 (2010 – R$ 2,978,033) to comply with the obligations assumed in financing agreements (Note 19).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(a) Impairment test for fixed assets

In the preparation of the Business Plan for the 2012/2016 period, the Company’s management analyzed the prospects for the main variables that affect its activities (Note 3.6) in both domestic and international markets.

In general, the Business Plan was prepared taking into consideration that no situation that may prevent the operational continuity of Braskem’s assets, both in terms of obsolescence of the industrial park and technologies employed and of legal restrictions is foreseen. Braskem’s management believes that the plants will operate at their full capacity, or close to it, within the projected period. Also, no significant changes in the Braskem’s business are expected, such as a significant excess in the offer by other manufacturers that may negatively affect future sales, with the exception of the seasonal price and profitability increases and decreases, which are historically associated with the petrochemical business worldwide. Also, no new technologies or raw materials, which could negatively impact Braskem’s future performance, are expected. Braskem expects to continue to operate in a regulatory environment aimed at environmental preservation, which is absolutely in line with its practices.

In view of all the analysis made, Braskem’s management understood that there was no need to conduct an impairment test for the assets of the Foreign Business and Chemical Distribution operating segments, as well as of the CGUs UNIB-Bahia and UNIB-Southeast.

Despite this conclusion, Braskem conducted an impairment test for the assets of the Polyolefins and Vinyls operating segments and CGU UNIB-South since they are associated with goodwill from future profitability (Note 17).

17 Intangible assets

	Goodwill based on expected future profitability	Brands and patents	Software licenses	Costumers and suppliers agreements	Total




Cost	3,194,545	188,612	381,964	644,447	4,409,568
Accumulated amortization	(1,130,794)	(51,402)	(109,325)	(38,865)	(1,330,386)
Balance as of December 31, 2010	2,063,751	137,210	272,639	605,582	3,079,182

Acquisitions			11,402		11,402
Full consolidation of subsidiary (Cetrel)		58	2,030		2,088
Transfers from PP&E			13,642		13,642
Amortization		(10,815)	(53,119)	(54,699)	(118,633)
Foreign currency translation adjustment		1,075	1,193	26,743	29,011

Net book value	2,063,751	127,528	247,787	577,626	3,016,692
Cost	3,194,545	189,745	410,231	671,190	4,465,711
Accumulated amortization	(1,130,794)	(62,217)	(162,444)	(93,564)	(1,449,019)
Balance as of December 31, 2011	2,063,751	127,528	247,787	577,626	3,016,692

Average annual rates of amortization		9.34%	13.10%	8.43%

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(a) Impairment test of goodwill based on future profitability

The Company’s goodwill was systematically amortized until December 2008. As from 2009, it has been subject to annual impairment tests in accordance with the provisions in IAS 36. On December 31, 2011, the goodwill of the Company is allocated at the CGU of UNIB-South and at the Polyolefins and Vinyls operating segments.

The CGU UNIB-South belongs to the Basic Petrochemicals operating segment, which is divided into three CGUs. The other CGU, called UNIB-Bahia and UNIB-Southeast do not have goodwill.

The Polyolefins operating segment is divided into two CGUs: Polyethylene and Polypropylene. Part of the industrial plants that compose these CGUs were acquired in a business combination that resulted in a goodwill based on the future profitability of these plants. The Company’s management established that the benefits from the synergy of this transaction should be associated with all units acquired and, therefore, the goodwill recognized is allocated and monitored at the lowest level of the corresponding group of assets, which is the Polyolefins operating segment.

In December 2011, Braskem conducted an impairment test of the goodwill of the Polyolefins and Vinyls operating segments and CGU UNIB-South using the value in use method (discounted cash flow) and did not identify any loss, as shown in the table below:


	Allocated goodwill	Cash flow (CF)	Book value (with goodwill)	CF/Book value
	Allocated goodwill	Cash flow (CF)	Book value (with goodwill)	CF/Book value
CGU and operating segments
CGU - UNIB - South	926,854	20,179,263	1,380,117	14.6
Operating segment - Polyolefins (i)	944,500	34,350,341	8,765,178	3.9
Operating segment - Vinyls	192,353	3,880,780	2,343,232	1.7
Total	2,063,707	58,410,384	12,488,527

(i) These amounts include the industrial units of polyethylene and polypropylene acquired in the business combination of Quattor, arising from the change in the organization structure that took place in 2011 (Note 36).

The assumptions used to determine the discounted cash flow include: cash flows for five years based on the Business Plan, discount rates based on the Weighted Average Cost of Capital (WACC) of 9.3% a year and growth rates to determine the perpetuity based on annual inflation rate according to the Broad Consumer Price Index (“IPCA”) of 5%.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(b) Sensitivity analysis

Considering the impact of the “discount rate” and “growth rate for perpetuity” on the potential cash flows, Braskem performed a sensitivity analysis with changes in these variables and the cash flows are presented in the table below:


	+0,5% on discount rate	-0,5% on growth rate to perpetuity
	+0,5% on discount rate	-0,5% on growth rate to perpetuity
CGU and operating segments
CGU - UNIB - South	18,597,888	18,900,839
Operating segment - Polyolefins	30,751,814	31,295,193
Operating segment - Vinyls	3,469,531	3,533,534
Total	52,819,233	53,729,566

18 Other payables


	2011	2010

Credit notes	410	6,365
Commissions	17,291	4,823
Lease agreements	21,793	27,693
Trade notes (i)	253,427	230,085
Labor agreements (ii)	3,203	83,875
Other payables	103,824	133,085
Total	399,948	485,926

In current liabilities	119,402	233,322
In non-current liabilities	280,546	252,604
Total	399,948	485,926

(i) At December 31, 2011, the balance includes the amount of R$ 235,968, which corresponds to the amounts payable to BNDESPAR arising from the acquisition of Riopol shares (Note 1(b.1)).

(ii) In March and September 2011, Braskem made the payment of the second and third installments of the labor agreement entered into between Braskem, Braskem Petroquímica and the Labor Union in the Petrochemical, Chemical, Plastic and Related Industries and Companies of the State of Bahia to end the litigation related to the collective bargaining agreement (“Clause 4”).

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

19 Borrowings

		Annual financial charges
		Monetary restatement	Average interest (unless otherwise stated)	2011	2010
		Monetary restatement	Average interest (unless otherwise stated)	2011	2010
Foreign currency
	Bonds	Note 19 (a)	Note 19 (a)	5,981,035	3,927,712
	Advances on exchange contracts	US dollar exchange variation	2.03%	131,668
	Export prepayments	Note 19 (b)	Note 19 (b)	1,781,346	2,287,738
	Medium-Term Notes (i)	US dollar exchange variation	11.75%	166,392	438,031
	Raw material	US dollar exchange variation	3.02%	6,322	15,142
	Acquisition of investment (ii)	US dollar exchange variation	4.45%		352,480
	Acquisition of investment	US dollar exchange variation	1.75% above Libor	188,070
	BNDES	Note 19 (c)	Note 19 (c)	413,722	307,701
	Export credit notes	Note 19 (d)	Note 19 (d)	723,153	642,280
	Working capital	US dollar exchange variation	2.22% above Libor	281,694	16,662
	Working capital	US dollar exchange variation	101.25% to 105.5 of CDI		1,301
	Project financing (NEXI)	Yen exchange variation	0.95% above Libor	26,318	66,602
	Transactions costs, net			(84,525)	(29,195)

Local currency
	Export credit notes	Note 19 (d)	Note 19 (d)	2,281,814	941,781
	Working capital		105% to 106% of CDI	148,158	191,934
	Acquisition of machinery and equipment (FINAME)	TJLP	1.38%	5,607	9,842
	Acquisition of machinery and equipment (FINAME)	TJLP	4.67%	1,674	1,024
	BNDES	Note 19 (c)	Note 19 (c)	2,556,521	2,419,712
	Support to the production of goods for export (BNDESEXIM)		7.00%		150,452
	Banco do Nordeste do Brasil (BNB)		8.50%	214,530	213,686
	Project financing (FINEP) (iii)	TJLP	0.01%	34,765	61,975
	Project financing (FINEP) (iii)	TJLP	4.37%	84,090	10,004
	Project financing (FUNDES) (iv)		6.00%	204,182	187,419
	Transactions costs, net			(1,724)	(3,538)
Total				15,144,812	12,210,745

Current liabilities				1,391,779	1,206,444
Non-current liabilities				13,753,033	11,004,301
Total				15,144,812	12,210,745

(i) In April 2011, the Company paid for part of this financing in advance.
(ii) In July 2011, the subsidiary Braskem America settled this financing in advance.
(iii) FINEP - Financier of Studies and Projects
(iv) FUNDES - Fund for Economic and Social Development

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(a) Bonds

		Issue amount		Interest
Issue date		(US$ in thousands)	Maturity	(% per year)	2011	2010

August 2005	(i)	250,000	June 2015	9.38	123,379	251,861
April 2006	(i)	500,000	no maturity date	9.00		339,143
September 2006	(i)	275,000	January 2017	8.00	253,563	473,886
June 2008		500,000	June 2018	7.25	942,622	837,294
May 2010		400,000	May 2020	7.00	752,951	673,348
May 2010		350,000	May 2020	7.00	663,296	589,180
October 2010		450,000	no maturity date	7.38	858,981	763,000
April 2011	(i)	750,000	April 2021	5.75	1,419,013
July 2011	(ii)	500,000	July 2041	7.13	967,230
Total		3,975,000			5,981,035	3,927,712

(b) Export prepayments (“EPP”)

		Initial amount
		of the transaction
Issue date		(US$ thousand)	Maturity	Charges (% per year)	2011	2010

December 2005		55,000	December 2012	US dollar exchange variation + semiannual Libor + 1.60	25,803	45,837
July 2006	(iv)	95,000	June 2013	US dollar exchange variation + 3.17	33,416	51,166
July 2006	(iv)	75,000	July 2014	US dollar exchange variation + 2.73	72,696	89,561
March 2007	(iv)	35,000	March 2014	US dollar exchange variation + 4.10	47,147	58,630
April 2007	(iv)	150,000	April 2014	US dollar exchange variation + 3.40	282,206	250,662
November 2007	(iii)	150,000	November 2013	US dollar exchange variation + 3.53		250,410
October 2008	(i)	725,000	October 2013	US dollar exchange variation + 5.64		670,378
August 2009		20,000	July 2011	US dollar exchange variation + semiannual Libor + 5.00		34,482
March 2010	(iv)	100,000	March 2015	US dollar exchange variation + 4.67	190,808	168,752
May 2010		150,000	May 2015	US dollar exchange variation + semiannual Libor + 2.40	282,093	250,631
June 2010		150,000	June 2016	US dollar exchange variation + semiannual Libor + 2.60	281,869	250,419
December 2010		100,000	December 2017	US dollar exchange variation + semiannual Libor + 2.47	187,783	166,810
March 2011		200,000	February 2021	US dollar exchange variation + semiannual Libor + 1.20	377,525
Total		2,005,000			1,781,346	2,287,738

(i) In April 2011, Braskem Finance concluded the funding of US$ 750 million, which was part of the financial resources used to: (1) partially settle in advance the bonds issued in August 2005 and September 2006; (2) fully settle the perpetual bonds issued in April 2006; (3) partially settle in advance the financing obtained through the Medium-Term Notes program; and (4) fully settle in advance the financing obtained in October 2008 through export prepayments.

(ii) On July 19, 2011, the subsidiary Braskem America Finance completed the funding of US$ 500 million with semiannual payments of interest on January 22 and July 22 of each year for the purpose of (1) making the payment for the loan obtained in the acquisition of Sunoco Chemicals; (2) making the payment of short and long-term borrowings; and (3) general corporate matters.

(iii) On September 28, 2011, an export prepayment amounting to R$ 271,798 (US$ 150,932 thousand) was fully settled in advance.

(iv) Braskem contracted hedge transactions for some export prepayment contracts in order to offset the variation in the Libor (Note 21.2.1(b.i)). On December 31, 2011, the breakdown of the charges on these contracts already shows the nominal rate applied taking into consideration these transactions.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(c) BNDES financing

Braskem has financing contracted with the National Bank for Economic and Social Development – BNDES and the breakdown of which, per project, is represented below:

Projects	Issue date	Maturity	Charges (% per year)	2011	2010

Green PE	2008/2009	July 2017	TJLP + 0,00 to 4,78	508,083	468,684
Green PE	2009	July 2017	US dollar exchange variation + 6.17	49,463	40,335
Braskem Qpar expansion	2006/2007/2008	February 2016	TJLP + 1,00 to 3,50	460,270	569,217
Braskem Qpar expansion	2006/2007/2008	April 2016	US dollar exchange variation + 6.09 to 6.59	44,047	47,293
Braskem Qpar expansion	2006/2007/2008	January 2015	Monetary variation (UMBNDES) + 6,24	2,862	3,359
Limit of credit II	2009	January 2017	TJLP + 2,58 to 3,58	327,902	259,788
Limit of credit II	2009	January 2017	US dollar exchange variation + 6.17	87,694	63,144
Limit of credit II	2009	January 2017	4.5	17,582	-
PVC Alagoas	2010	December 2019	TJLP + 0,00 to 3,58	261,403	48,046
PVC Alagoas	2010	January 2020	US dollar exchange variation + 6.17	68,630	11,713
PVC Alagoas	2010	January 2020	5.5	30,129	-
Limit of credit I	2007	April 2015	TJLP + 1,81 to 2,32	260,851	348,119
Limit of credit I	2007	April 2015	US dollar exchange variation + 4.91 to 5.80	57,813	68,044
Paulinia	2006	December 2014	TJLP + 2,40 to 3,40	245,014	323,732
Paulinia	2006	January 2015	US dollar exchange variation + 6.49	25,546	30,058
Limit of credit III	2011	January 2018	TJLP + 2,05 to 3,45	122,234
Limit of credit III	2011	January 2018	US dollar exchange variation + 6.04	28,169
Limit of credit UNIB-South	2006	May 2014	TJLP + 2,02 to 3,00	92,131	140,820
Limit of credit UNIB-South	2006	July 2014	US dollar exchange variation + 5.41 to 6.09	17,866	22,979
Butadiene	2011	December 2020	TJLP + 2,45 to 3,45	64,060
Butadiene	2011	January 2021	US dollar exchange variation + 6.04	16,185
Other	2005/2006	September 2016	TJLP + 0,52 to 4,00	166,862	261,416
Other	2005/2006	October 2016	US dollar exchange variation +6.39 to 6.59	11,764	12,751
Other	2005/2006	October 2016	Monetary variation (UMBNDES) + 5,49 to 6,29	3,683	7,915
Total				2,970,243	2,727,413

The I, II, III and UNIB-South credit limits refer to revolving credit lines, with limits stipulated by BNDES, and the funds of which are aimed at the current investments of the Company and investments in research, development and innovation.

Additionally, in December 2011, BNDES approved a new revolving credit line limit for the Company in the total amount of R$ 2.5 billion, which may be used for five years as from the date it is contracted. The funds will be used in the Company’s investment plan for 2011 to 2013. The first release of these funds (III credit limit) took place in December 2011 in the amount of R$ 150 million.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(d) Export credit notes (“NCE”)

		Initial amount
Issue date		of the transaction	Maturity	Charges (% per year)	2011	2010

December 2005		100,000	March 2014	106% of CDI	105,345	104,921
January 2006		11,500	January 2014	108% of CDI	7,731	10,137
November 2006		167,014	May 2018	Us dollar exchange variation + 8.10	147,991	131,455
April 2007		101,605	March 2018	Us dollar exchange variation + 7.87	95,533	84,840
May 2007		146,010	May 2019	Us dollar exchange variation + 7.85	141,636	125,810
January 2008		266,430	February 2020	Us dollar exchange variation + 7.30	290,043	257,583
March 2008		41,750	March 2016	Us dollar exchange variation + 7.50	47,950	42,592
March 2008	(i)	450,000	March 2017	110% of CDI		487,468
April 2010		50,000	March 2014	12.16	60,861	54,260
June 2010		200,000	June 2014	12.13	237,590	211,885
September 2010	(ii)	71,000	September 2012	100.7% of CDI	81,818	73,110
February 2011		250,000	February 2014	99% of CDI	274,613
April 2011	(ii)	450,000	April 2019	112.5% of CDI	461,209
June 2011		80,000	June 2014	98.5% of CDI	84,572
August 2011	(ii)	400,000	August 2019	112.5% of CDI	404,267
October 2011		250,000	April 2012	108.3% of CDI	158,568
November 2011		400,000	November 2019	112.5% of CDI	405,240
Total		3,435,309			3,004,967	1,584,061

(i) In March 2011, the Company settled this financing in advance.

(ii) Braskem contracted hedge transactions for some NCE contracts in order to offset the variation in the CDI (Note 21.2.1(a.ii)), and the transaction of R$ 71,000, contracted in September 2010, was designated for hedge accounting (Note 21.2.1(b.ii)).

(e) Project financing - NEXI

(i) In March and September 2005, the Company obtained loans in Japanese currency from Nippon Export and Investment Insurance ("NEXI"), in the amount of YEN 5,256,500 thousand (R$ 136,496) and YEN 6,628,200 thousand (R$ 141,529), respectively. The principal is repayable in 11 installments as from March 2007, with final maturity in June 2012.

As described in Note 21.2.1 (a.i), the Company entered into swap contracts for all of these debts, changing the effective annual interest cost of the tranche drawn down in March 2005 to 101.59% of the CDI and that of the tranches drawn down in September 2005 to 104.29% and 103.98% of the CDI. The swap contracts were signed with first-class foreign banks and maturities, currency, rates and amounts are perfectly appropriate to the financing contracts.

(ii) In March 2011, the Company obtained loans in U.S. dollar from NEXI in the amount of US$ 200 million and the charges on which are paid semiannually and include foreign exchange variation, semiannual Libor and interest of 1.20% a year. The principal amount will be paid in semiannual installments as from February 2013 and matures in February 2021. On December 31, 2011, the balance of this loan is presented in the “EPP” account in the amount of R$ 377,525 in item (b) of this note.

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(f) Payment schedule

The long-term amounts mature as follows:

	2011	2010

2012		1,238,243
2013	1,252,464	1,814,902
2014	1,781,917	1,691,089
2015	1,123,509	1,069,774
2016	1,204,472	671,495
2017	565,456	683,258
2018	1,331,131	1,082,112
2019	1,536,264	159,965
2020	1,754,200	1,510,429
2021 and thereafter	3,203,620	1,083,034
Total	13,753,033	11,004,301

(g) Capitalized financial charges

The Company capitalized financial charges in the year ended December 31, 2011 in the amount of R$ 101,721 (2010 - R$ 43,491), including monetary and exchange variation. The average rate of these charges in the year was 7.68% a year (2010 – 6.00% a year).

(h) Guarantees

Braskem has provided guarantees for its borrowings as shown below:

		Total	Total
Loans	Maturity	guaranteed	debt 2011	Guarantees

BNB	December 2022	214,530	214,530	Mortgage of plants, pledge of machinery and equipment
BNDES	January 2020	2,955,573	2,955,573	Mortgage of plants, land and property, pledge of machinery and equipment
FUNDES	May 2020	204,182	204,182	Mortgage of plants, land and property, pledge of machinery and equipment
NEXI	June 2012	26,318	26,318	Insurance policy
EPP	March 2014	47,147	47,147	Mortgage guarantees of 2° grade and land
FINEP	January 2019	63,596	63,596	Bank surety
FINAME	July 2015	6,844	6,844	Pledge of equipment
Total		3,518,190	3,518,190

Braskem S.A. and Its Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2011, 2010 and 2009

All amounts in thousands of Brazilian reais, unless otherwise indicated

(i) Covenants

The financing agreements entered into by Braskem and NEXI establish limits for certain indicators related to the capacity for indebtedness and payment of interest.

The first indicator establishes a limit for the indebtedness of Braskem based on its EBITDA generating capacity. This is calculated by dividing the Company’s consolidated net debt by its consolidated EBITDA for the past twelve months. This indicator is calculated in U.S. dollars, using the closing PTAX to determine the net debt and the average U.S. dollar rate for the last four quarters for the calculation of EBITDA.

The second indicator found in the agreements of Braskem is the division of consolidated EBITDA by net interest, which corresponds to the difference between the interest paid and interest received. This indicator is checked on a quarterly basis and calculated in U.S. dollars.

A summary of these operations and their limiting factors is provided below:


Indicator/Limit	Currency
Net debt/EBITDA < 4.5	U.S. dollar
EBITDA /Net interest > 1.5	U.S. dollar

The calculation of EBITDA for these operations is determined as follows:


EBITDA = LB (-) DOP (+) DAC (+/-) ORD (+) DJCP
LB = Gross profit	ORD = Other operating income and expenses
DOP = Selling, general and administrative expenses	DJCP = Dividends and interest on capital received from
DAC = Depreciation allocated to the cost of products sold	non-consolidated companies

The penalty for the non-compliance with these covenants is the possibility of having the debt maturing earlier. On December 31, 2011, all commitments assumed were complied with.

20 Debentures (public issues of non-convertible debentures)

On September 1, 2011, the Company paid the amount of R$ 530,424 for non-convertible debentures related to the 14^th issue started in August 2006.

On December 31, 2011, the balance of R$ 19,102 refers to the first issue of non-convertible debentures of the jointly-controlled subsidiary RPR, which took place in 2011, presented in the non-current liabilities.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

21 Financial instruments

21.1 Non-derivative financial instruments

Braskem held on December 31, 2011 and 2010 the following non-derivative financial instruments according to the definition of IAS 39.

				Book value		Fair value
	Classification by category	Fair value hierarchy	Note	2011	2010	2011	2010
Cash and cash equivalents			6
Cash and banks	Loans and receivables			349,916	252,925	349,916	252,925
Financial investments in Brazil	Held-for-Trading	Level 2		435,580	2,208,475	435,580	2,208,475
Financial investments in Brazil	Loans and receivables			1,464,245		1,464,245
Financial investments abroad	Held-for-Trading	Level 2		737,078	162,870	737,078	162,870
				2,986,819	2,624,270	2,986,819	2,624,270

Financial investments			7
FIM Sol investments	Held-for-Trading	Level 2		36,410	204,123	36,410	204,123
Investiments in foreign currency	Held-for-Trading	Level 2		10,716	32,112	10,716	32,112
Shares	Held-for-Trading	Level 1		3,023	84	3,023	84
FIM Sol investments	Loans and receivables			116,007		116,007
Quotas of receivables investment fund	Held-to-maturity			34,720	28,706	34,720	28,706
Restricted deposits	Held-to-maturity			4,173		4,173
				205,049	265,025	205,049	265,025

Trade accounts receivable	Loans and receivables		8	1,894,812	1,956,951	1,894,812	1,956,951

Related parties			10
Assets	Loans and receivables			58,169	53,742	58,169	53,742

Trade Payables	Other financial liabilities			6,847,340	5,201,162	6,847,340	5,201,162

Borrowings			19
Foreign currency	Other financial liabilities			9,699,720	8,055,649	9,956,792	8,127,648
Local currency	Other financial liabilities			5,531,341	4,187,829	5,531,765	4,187,829
				15,231,061	12,243,478	15,488,557	12,315,477

Debentures	Other financial liabilities		20	19,102	517,741	19,102	516,562

(a) Fair value

The fair value of financial assets and liabilities is estimated as the amount for which a financial instrument could be exchanged in an arm’s length transaction and not in a forced sale or settlement. The following methods and assumptions were used to estimate the fair value:

(i) held-for-trading and available-for-sale financial assets are measured in accordance with the fair value hierarchy (Level 1 and Level 2), with inputs used in the measurement processes obtained from sources that reflect the most recent observable market prices.

(ii) trade accounts receivable, trade payables and other short-term liabilities approximate their respective carrying amount due to the short-term maturity of these instruments.

(iii) the fair value of related parties is the same as the carrying amount.

(iv) the fair value of borrowings is estimated by discounting future contractual cash flows at the market interest rate, which is available to Braskem in similar financial instruments.

(v) the fair value of debentures is obtained through secondary market prices disclosed by ANDIMA (National Association of Financial Market Institutions).

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b) Fair value hierarchy

The Company adopts and IFRS 7 for financial instruments that are measured in the balance sheet; this requires disclosure of measurements by level of the following fair value measurement hierarchy:

Level 1 – Fair value obtained through prices quoted (without adjustments) in active markets for identical assets or liabilities, such as the stock exchange; and

Level 2 – Fair value obtained from discounted cash flow models, when the instrument is a forward purchase or sale or a swap contract, or valuation models of option contracts, such as the Black-Scholes model, when the derivative has the characteristics of an option.

The valuation assumptions (inputs to models) are obtained from sources that reflect the most recent observable market prices, particularly the curves of interest and future currency quotes disclosed by the Commodities & Futures Exchange, the spot exchange rate disclosed by the Central Bank of Brazil and the foreign interest curves disclosed by well-known quoting services such as Bloomberg or Reuters.

21.2 Derivative financial instruments

Derivative financial instruments are presented in the balance sheet at their fair value in an asset or liability account depending on whether the fair value represents a positive or a negative balance to Braskem, respectively. Derivative financial instruments are necessarily classified as "held-for-trading". The regular changes in the fair value of derivatives are recognized as financial income or expense in the period in which they occur, except when the derivative is designated and qualified for hedge accounting.

All derivative financial instruments held at December 31, 2011 were contracted on Over the Counter - OTC markets with large financial counterparties under global derivative contracts in Brazil or abroad and its fair value is classified as Level 2.

Braskem’s Financial Policy provides for a continuous short-term hedging program for foreign exchange rate risk arising from its operations and financial items. The other market risks are addressed on a case-by-case basis for each transaction. In general, Braskem assesses the need for hedging in the analysis of prospective transactions and seeks to customize the hedge for each operation and keeps it in place for the whole period of the hedged transaction.

Braskem may elect derivatives as hedges for the application of hedge accounting in accordance with IAS 32, IAS 39 and IFRS 7. The hedge designation is not mandatory. In general, Braskem will elect to designate derivatives as hedges when the application is expected to provide a significant improvement in the presentation of the offsetting effect of derivatives on the changes in the hedged items.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

21.2.1 Changes in derivative financial instruments

At December 31, 2011, Braskem had financial derivative contracts with a nominal value of R$ 1,802,799 (2010 - R$ 2,257,789), R$ 279,495 (2010 – R$ 279,495) of which related to hedge transactions connected with project financing, R$ 1,444,320 (2010 – R$ 1,978,294) connected with export prepayments and export credit notes, and R$ 78,984 connected with commodities and a share repurchase program.

Characteristics of the operation

Change infair value

Financial

Identification

Asset part

Liability part

2010

(Note 21.2.2)

settlement

2011

Non-hedge accouting transactions

Foreign exchange swap

Note 21.2.1 (a.i)

Iene

CDI

13,700

(1,962)

(11,089)

649

Foreign exchange swap

Note 21.2.1 (a.ii)

CDI

Dolar

66,576

4,393

70,969

Repurchase of shares swap

(i)

Note 21.2.1 (a.iii)

Share value

CDI

2,263

Naphtha purchase swap

Note 21.2.1 (a.iv)

Fixed price

Variable price

219

261

480

Term commodity - ethanol

Note 21.2.1 (a.v)

Variable price

Fixed price

(202)

13,700

66,894

(6,435)

74,159

Hedge accounting transactions

Braskem Inc.

Interest rate swaps

(ii)

Note 21.2.1 (b)

Libor

Fixed rate

42,890

(7,940)

(34,950)

Braskem

Interest rate swaps

Note 21.2.1 (b.i)

Libor

Fixed rate

25,988

6,986

(13,665)

19,309

Interest rate swaps

Note 21.2.1 (b.ii)

Pre-contractual rate

CDI

456

(1,289)

(833)

Braskem America

Interest rate swaps

(iii)

Note 21.2.1 (b)

Libor

Fixed rate

1,523

2,882

(4,405)

Sale swaps

Note 21.2.1 (b)

(1,300)

1,300

69,557

1,939

(53,020)

18,476

Current assets (other receivables)

(1,300)

(1,035)

Current liability (hedge operations)

50,124

83,392

Non-current liabilities (hedge operations)

34,433

10,278

83,257

92,635

(i) Braskem shares were repurchased by a financial institution and are the subject matter of a swap operation (Note 29(g)).

(ii) As a consequence of the advanced payment of the (1) export prepayment contracts mentioned in Note 19(b); and (2) financing for the acquisition of the investment mentioned in Note 19(ii), Braskem settled in advance the interest rate swap transactions that would mature in October 2013 and April 2015.

(iii) In December 2011, the swap operations held by the subsidiary Braskem America for the purpose of establishing the margins in sales contracts were settled. A financial expense amounting to R$ 1,300 related to the settlement of these operations was recognized.

The counterparties in these contracts are daily monitored based on the analysis of their respective ratings and Credit Default Swaps – CDS. Braskem has many bilateral risk mitigators in its derivative contracts, such as the possibility of depositing or requesting deposits of a guarantee margin from the counterparties it deems convenient. At December 31, 2011 there was no guarantee deposit placed by Braskem in relation to these derivatives.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(a) Non-hedge accounting transactions

The regular changes in the fair value of swaps are recorded as financial income or expenses in the same period in which they occur. Braskem recognized a financial expense of R$ 66,894 related to the change in the fair value of these swaps for the period ended December 31, 2011.

(a.i) Project financing (NEXI) related swaps

At December 31, 2011, the Company had four currency swap contracts with a total nominal value of R$ 279,495 to hedge loans obtained in yen with floating interest rates and maturing in March and June, 2012. The objective of these swaps is to mitigate the risk of fluctuations in the foreign exchange rate between the Brazilian real and the yen arising from the loan mentioned in Note 19(e) and the risk of the change in future expenses with the payment of interest. The term, amount, settlement dates, and interest rate in yen of the swaps match the financing terms. The Company intends to maintain these swaps until the settlement of the loans.

The characteristics of each swap transaction are listed below:

Identification	Nominal value	Interest rate		Fair value
Identification	(R$ thousand)	Interest rate	Maturity	2011	2010
Swap NEXI I	28,987	104.29% CDI	June 2012	(129)	1,051
Swap NEXI II	136,495	101.85% CDI	March 2012	1,468	9,283
Swap NEXI III	86,110	103.98% CDI	June 2012	(503)	3,089
Swap NEXI IV	27,903	103.98% CDI	June 2012	(187)	277
Total	279,495			649	13,700

In current liabilities (hedge operations)				649	13,700
Total				649	13,700

The Company has elected not to designate these swaps as hedges for the application of hedge accounting since the main risk protected - the variation in the foreign exchange rate - is satisfactorily mitigated by the offsetting results of the foreign exchange variation in the loans and the variation in the derivative's fair value. Consequently, the regular changes in the fair value of the swaps are recorded as finance income or expense in the same period in which they occur. The Company recognized financial income of R$ 1,962 related to the changes in the fair value of these swaps in 2011.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(a.ii) Export credit note (NCE) related swaps

At December 31, 2011, the Company had five foreign exchange swap contracts with a total nominal value of R$ 600,000 contracted on a credit line in reais with a rate of 112.5% of the CDI in August 2011 and maturing in April and August 2019 (Note 19(d)). In these swaps the Company receives 112.5% of the CDI and regularly pays exchange variation and a fixed rate of the foreign exchange coupon concurrently with the debt's cash flow.

Identification	Nominal value			Fair value
Identification	(R$ thousand)	Interest rate	Maturity	2011	2010
Swap NCE I	200,000	5.44%	August 2019	32,023
Swap NCE II	100,000	5.40%	August 2019	13,952
Swap NCE III	100,000	5.37%	August 2019	12,512
Swap NCE IV	100,000	5.50%	April 2019	6,267
Swap NCE V	100,000	5.50%	April 2019	6,215
Total	600,000			70,969

In current liabilities (hedge operations)				70,969
Total				70,969

The Company has elected not to designate these swaps as hedges for the application of hedge accounting since the main risk protected - the variation in the CDI - is satisfactorily mitigated by the offsetting results of the CDI variation in the loans and the changes in the derivative's fair value. Consequently, the regular changes in the fair value of the swaps are recorded as financial income or expenses in the same period in which they occur. The Company recognized a financial expense of R$ 66,576 related to the changes in the fair value of these swaps in 2011.

(a.iii) Repurchase of shares related swaps (Note 29(g))

On December 31, 2011, 1,405,400 class A preferred shares of the Company had been repurchased by financial institutions for a nominal value of R$ 19,830 (Note 29(g)). The Company recognized a financial expense of R$2,263 related to the variation in the CDI as from the date each repurchase.

Identification	Nominal value	Interest rate		Fair value
Identification	(R$ thousand)	Interest rate	Maturity	2011	2010
Repurchase TRS	19,830	108% CDI	August 2012	2,263
Total	19,830			2,263

In current liabilities (hedge operations)				2,263
Total				2,263

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(a.iv) Naphtha purchase related swaps

On December 31, 2011, the subsidiary Braskem Inc. held two naphtha swap contracts with a nominal value of US$ 30,428 thousand. In these swaps, Braskem Inc. swaps floating flows for fixed flows for the purposes of preserving its margins.

Identification	Nominal value	US$ Fixed price / ton	Maturity	Fair value
Identification	(US$ thousand)	US$ Fixed price / ton	Maturity	2011	2010
Naphtha swap	15,208	869.0000	February 2012	228
Naphtha swap	15,221	869.7500	February 2012	252
Total	30,428			480

In current liabilities (hedge operations)				480
Total				480

The Company decided not to designate these swaps as hedges for hedge accounting purposes. Consequently, the regular changes in the fair value of the swaps are recorded as financial income or expenses in the same period in which they occur. Braskem recognized a financial expense of R$ 219 related to the changes in the fair value of these swaps in 2011.

(a.v) Ethanol purchase related swaps

On December 31, 2011, the Company held ethanol derivative contracts indexed to the Commodities & Futures Exchange – BM&F in the nominal amount of R$ 2,077. In this operation, the Company seeks to protect the margin of its operations.

Identification	Nominal value	R$ fixed price / m3	Maturity	Fair value
Identification	(R$ thousand)	R$ fixed price / m3	Maturity	2011	2010
Term commodity	2,077	1,384.500	February 2012	(202)
Total	2,077			(202)

In current assets (other receivables)				(202)
Total				(202)

The Company decided not to designate these swaps as hedges for hedge accounting purposes.

Consequently, the regular changes in the fair value of the swaps are recorded as financial income or expenses in the same period in which they occur. The Company recognized a financial income of R$ 202 related to the changes in the fair value of these swaps in 2011.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b) Hedge accounting transactions

The Company designated the following operations for hedge accounting:

(b.i) Export prepayment (EPP) related interest rate swaps

Braskem, at December 31, 2011, 7 interest rate swap contracts with a total nominal value of US$ 407,500 thousand relating to export prepayment debts contracted in U.S. dollars and at floating interest rates (Libor basis) in October 2008, April 2009 and June 2010 and maturing between 2013 and 2015 (Note 19 (b)). In these swaps, Braskem receives floating rates (Libor) and pays fixed rates regularly, concurrently with the cash flow of the export prepayment debt. The purpose of these swaps is to mitigate the changes in future financial expenses of the debt caused by fluctuations in the LIBOR rate. The term, amount, settlement dates and floating interest rate match the financing terms. Braskem intends to maintain these swaps until the settlement of the loans.

For hedge accounting purposes, these swaps were designated as cash flow hedges of the risk of fluctuations in LIBOR on the specified debts. The regular effective changes in the fair value of the derivatives designated as cash flow hedges that are highly effective in mitigating the cash flow changes in the hedged item are recognized in equity as "other comprehensive income" until the period in which the respective changes in the hedged item impact profit or loss. The impacts of Libor on the hedged item affect the results of Braskem in every period of allocation of the interest on the debt, from the date of the disbursement until its maturity.

The characteristics of each swap transaction are listed below:

Identification	Nominal value	Interest rate		Fair value
Identification	(US$ thousand)	Interest rate	Maturity	2011	2010
Swap EPP X	35,000	2.5040%	March 2014	1,216	1,786
Swap EPP XI	75,000	1.9450%	July 2014	1,079	1,455
Swap EPP XII	100,000	2.1200%	November 2013		4,061
Swap EPP XIII	50,000	2.1500%	November 2013		2,082
Swap EPP XIV	50,000	2.6350%	April 2014	3,452	3,734
Swap EPP XV	100,000	2.6200%	April 2014	6,848	7,392
Swap EPP XVI	47,500	1.6650%	June 2013	184	606
Swap EPP XVII	75,000	2.1975%	March 2015	4,923	3,684
Swap EPP XIX	25,000	2.1700%	March 2015	1,608	1,188
Total	557,500			19,309	25,988

In current liabilities (hedge operations)				9,031	13,918
In non-current liabilities (hedge operations)				10,278	12,070
Total				19,309	25,988

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b.ii) Export credit note (NCE) related swap

At December 31, 2011, the Company had an interest rate swap designated for hedge accounting with a total nominal value of US$ 42,612 thousand, contracted on a fixed-rate credit line in Brazilian reais in September 2010 and maturing in September 2012 (Note 19 (d)). In this swap the Company regularly receives fixed rates and pays a percentage of the CDI concurrently with the debt's cash flow.

Identification	Nominal value	Interest rate		Fair value
Identification	(US$ thousand)	Interest rate	Maturity	2011	2010
Swap NCA I	42,612	100.70% CDI	September 2012	(833)	456
Total	42,612			(833)	456

In current assets (other receivables)				(833)
In non-current liabilities (hedge operations)					456
Total				(833)	456

(c) Effectiveness test of transactions designated for hedge accounting

Braskem tests the effectiveness of these hedges at the end of the reporting period using the cumulative monetary compensation method. According to this method, the hedge is considered effective if the variation in the cash flow of derivatives is between 80% and 125% of the variation in the hedged item caused by the risk that is being covered.

The effectiveness test at December 31, 2011, showed that the derivatives were effective in offsetting the changes in the hedged item from the time the derivatives were contracted until the end of the reporting period, and that all other conditions for qualifying these instruments for hedge accounting were met. Consequently, the effective portion of the changes in the fair value of the derivatives, amounting to R$ 1,939 (Note 21.2.1), was recorded as "other comprehensive income".

(d) Estimated maximum loss

The amount at risk of the derivatives held by Braskem at December 31, 2011, defined as the highest loss that could result in one month and in 95% of the cases, under normal market conditions, was estimated by the Company at US$ 1,530 thousand for the EPP swaps, US$ 8,219 thousand for the NCE swap and R$ 275,521 for the NEXI swaps.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

21.2.2 Hedge operations presented in “other

comprehensive income” in equity

The derivatives indicated in items 21.2.1 (b) were designated as cash flow hedge, resulting in closing balances in “other comprehensive income”. The appropriations of interest are allocated to interest expenses in the financial expenses group. The summary of changes in the account is as follows:

		Appropriation of	Change in
	2010	interest	fair value	2011
Swaps EPP Braskem Inc.	(39,315)	31,375	7,940
Swaps EPP Braskem	(23,013)	12,928	(6,986)	(17,071)
Swaps loans Braskem	(456)		1,289	833
Swaps loans Braskem America	212	2,670	(2,882)
Sale price swaps Braskem America	1,300		(1,300)
	(61,272)	46,973	(1,939)	(16,238)

On December 31, 2011, the appropriation of accrued interest and changes in the fair value of derivatives designated as cash flow hedge was R$ 45,034, which, with the effect of income tax and social contribution of R$ 2,458, amounts to R$ 42,576, and is presented within “other comprehensive income” in equity.

21.3 Credit quality of financial assets

(a) Trade accounts receivable

Practically all Braskem's customers do not have risk ratings assigned by credit rating agencies. For this reason, Braskem developed its own credit rating system for all accounts receivable from domestic customers and part of the accounts receivable from foreign customers. Braskem does not apply this rating to all of its foreign customers because most accounts receivable from them are covered by an insurance policy or letters of credit issued by banks. As of December 31, 2011, the credit ratings are as follows:

			Percentage (%)
1	Minimum risk		24.09
2	Low risk		33.04
3	Moderate risk		30.25
4	High risk		4.24
5	Very high risk	(*)	8.38

(*) Most customers in this group are inactive and the respective accounts are in the process of judicial collection. Customers in this group that are still active purchase from Braskem and pay in advance.

Default indicators (*):

· December 2009: 0.25%

· December 2010: 0.13%

· December 2011: 0.18%

(*) Default indicator = total trade accounts receivable in default issued in the past 12 months/total billings in the past 12 months.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b) Other financial assets

In order to determine the credit ratings of counterparties in financial assets classified as cash and cash equivalents, held for trading, held to maturity and loans and receivables, Braskem uses the following ratings agencies: Standard & Poor’s, Moody’s and Fitch Ratings.

	2011	2010
Cash and cash equivalents and financial investments
AAA	2,868,992	2,136,193
AA+		445,867
AA	206	43,154
AA-	72,029	37,397
A+	96,464	78,920
A	28
A-	71,367	37,176
BBB+		18,684
BB+	19,028	18,878
B+	3,590	3,378
Other financial assets with no risk assessment	10,548	8,830
	3,142,252	2,828,477
Held-to-maturiy
Quotas of investment funds in credit rights (i)	34,720	28,706
Restricted deposits (ii)	4,173
	38,893	28,706
Other investments (offshore funds)
Sundry funds (i)	10,723	32,112
	10,723	32,112

Total	3,191,868	2,889,295

(i) Financial assets with no internal or external ratings.

(ii) Risk-free financial assets.

Braskem’s financial policy determines “A-” as the minimum rating for financial investments. On December 31, 2011, Braskem has balances classified as “B+” and “BB+” related to balances of the jointly-controlled subsidiaries Propilsur and Polimerica amounting to R$ 3,590, and Term Deposits with Special Guarantee – DPGEs amounting to R$ 19,028, respectively. The DPGEs are guaranteed by the Credit Guarantee Fund – FGC, which makes these investments appropriate to Braskem’s policy.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

21.4 Sensitivity analysis

The financial instruments, including derivatives, may be subject to changes in their fair value as a result of the variation in commodity prices, foreign exchange rates, interest rates, shares and share indexes, price indexes and other variables. The sensitivity of the derivative and non-derivative financial instruments to these variables are presented below:

(a) Selection of risks

The three main risks that may most affect the value of Braskem’s financial instruments are:

(i) Brazilian real-U.S. dollar exchange rate

(ii) Brazilian real-yen exchange rate

(iii) Libor floating interest rate

For the purposes of the risk sensitivity analysis, Braskem presents the exposures to currencies as if they were independent, that is, without reflecting in the exposure to a foreign exchange rate the risks of the variation in other foreign exchange rates that could be directly influenced by it.

(b) Selection of scenarios

In accordance with CVM Instruction No. 475/08, Braskem included three scenarios in the sensitivity analysis, one of which is probable and the other two represent adverse effects to Braskem. In the preparation of the adverse scenarios, only the impact of the variables on the financial instruments, including derivatives, and on the items covered by hedge transactions, was considered. The overall impacts on Braskem’s operations, such as the one arising from the revaluation of inventories and revenues and future costs, were not considered. Since Braskem manages its exposure to foreign exchange rate risk on a net basis, adverse effects from a depreciation of the Brazilian real in relation to the U.S. dollar can be offset by opposing effects on Braskem’s operating results.

The FOCUS survey published by the Central Bank of Brazil on December 30, 2011 was considered for the probable scenario. For the interest rate variables not considered in the FOCUS survey, the probable scenario considered was the Interbank Deposit Certificate (CDI) percentage variation. For the exchange rate variables not included in the FOCUS survey, the probable scenario considered was the U.S. dollar-real percentage variation.

For the Brazilian real-U.S. dollar exchange rate, an increase of 25% was considered for the possible adverse scenario and of 50% for the extreme scenario based on the exchange rate on December 31, 2011.

For the Brazilian real-yen exchange rate, an increase of 25% was considered for the possible adverse scenario and of 50% for the extreme scenario based on the exchange rate on December 31, 2011.

For the Libor interest rate, a decrease of 25% was considered for the possible adverse scenario and of 50% for the extreme scenario based on the Libor rate on December 31, 2011.

The sensitivity amounts in the table below are the changes in the value of the financial instruments in each scenario, except for table (e), which shows the changes in future cash flows.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(c) Sensitivity to the Brazilian real-U.S. dollar exchange rate

The sensitivity of each financial instrument, including derivatives and items covered by them, to the variation in the Brazilian real-US dollar exchange rate is presented in the table below:

		Possible adverse	Extreme adverse
Instrument	Probable	(25%)	(50%)
Advances on exchange contracts	8,830	(32,917)	(65,834)
BNDES	27,746	(103,431)	(206,861)
Bonds	401,116	(1,495,259)	(2,990,517)
Working capital / structured operations	80,009	(298,255)	(596,509)
Raw material financing	424	(1,581)	(3,161)
Medium-Term Notes	11,159	(41,598)	(83,196)
EPP	31,512	(117,469)	(234,938)
Financial investments abroad	(49,290)	183,742	367,483
EPP debt, plus hedge, of which:
EPP debt	87,953	(327,868)	(655,735)
Swap EPP	1,295	(4,828)	(9,655)
Other swaps	44,583	(166,194)	(332,388)

(d) Sensitivity to the Brazilian real-yen exchange rate

The sensitivity of each financial instrument, including derivatives and items covered by them, to the variation in the Brazilian real-yen exchange rate is presented in the table below:

		Possible adverse	Extreme adverse
Instrument	Probable	(25%)	(50%)
Project financing (NEXI), plus swaps, of which:
Debt (NEXI)	2,578	(9,610)	(19,219)
Swaps (NEXI)	(1,754)	6,538	13,076

(e) Sensitivity of future cash flows to the Libor floating interest rate

The sensitivity of future interest income and expenses of each financial instrument, including derivatives and items covered by them, is presented in the table below: The figures represent the impact on financial income (expenses), taking into consideration the average term of the respective instrument.

		Possible adverse	Extreme adverse
Instrument	Probable	(25%)	(50%)
Working capital / structured operation
Raw material financing	14	(50)	(100)
EPP	1,012	(3,736)	(7,413)
EPP debt, plus hedge, of which:
EPP debt	2,826	(10,427)	(20,690)
Swap EPP	(2,826)	10,427	20,690

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

22 Taxes payable

	Note	2011	2010

IPI		38,654	49,721
PIS and COFINS		7,172	27,785
Income tax and social contribution		27,712	31,055
ICMS	(a)	135,131	171,308
Education, SAT and INSS			40,085
Tax debt refinancing program - Law No.11,941/09	(b)	1,669,976	1,535,458
Other		64,521	118,219
Total		1,943,166	1,973,631

Current liabilities		329,987	390,062
Non-current liabilities		1,613,179	1,583,569
Total		1,943,166	1,973,631

(a) ICMS

The ICMS balance payable includes the amount of R$ 53,017 (2010 – R$ 59,133) related to the ICMS due on the import of equipment and parts aimed at the construction of the industrial complex of the subsidiary Riopol. This tax has been paid in six annual installments since the date of the acquisition of the assets and it is not subject to any financial charges. This benefit was granted by specific legislation of the State of Rio de Janeiro.

(b) Tax debt refinancing program – Law No. 11,941/09

On May 27, 2009, Law No. 11.941, which establishes the conditions for the program that allows for the installment payments of federal tax debts, was enacted. These conditions include: (i) a payment term that can be as long as 180 months; (ii) reductions in fines, interest and charges that vary in accordance with the payment term; and (iii) the possibility of using the balance of income tax and social contribution tax loss carryforwards in the settlement of fines and interest. In compliance with the provision in said Law, Braskem and its subsidiaries Braskem Qpar and Braskem Petroquímica adhered to this program and paid the minimum amounts established by law until the consolidation of the tax debts.

In June 2011, the Federal Revenue Service made the program available for consolidating the debts in said refinancing program. The amount consolidated totaled R$ 1,664,907 to be paid in monthly and consecutive installments of R$ 10,678, adjusted based on the Selic rate as from that month. At December 31, 2011, the balance of R$ 1,669,976 will be paid in 154 months.

As established in said Law, Braskem will lose all the reductions of arrears charges if it fails to pay three installments, whether consecutive or not.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

23 Income tax (“IR”) and social contribution (“CSL”)

23.1 Reconciliation of the effects of IR and CSL on the Company’s profit (loss)

	2011	2010	2009
Profit (loss) before IR and CSL and
participation of non-controlling interest	(874,994)	1,887,438	1,758,416

IR and CSL credit (expenses) at the rate of 34%	297,498	(641,729)	(597,862)

Permanent adjustments to the IR and social
contribution calculation basis
IR and CSL on equity in
results of investees	(651)	8,372	(18,241)
Temporary differences on CSL not previously recognized			87,282
Effects of taxes paid in installments	13,896	38,718	351,300
Deferred IR and CSL losses		282,997
Adjustments related to Law Nos. 11,638/07 and 11,941/09		(10,705)
Tax incentives (Sudene and PAT) (i)		5,479
Recognition of prior period CSL		(18,186)	(342,203)
Recognition of prior period IR and CSL			(404,400)
IR loss carryforward used to offset other taxes			(502,292)
IR and CSL recorded from previous years (ii)	73,773
Business combination effects		331,596	34,697
Other permanent differences	(26,361)	5,505	31,794
Effect of IR and CSL on results of operations	358,155	2,047	(1,359,925)

Breakdown of IR and CSL:

Current IR and CSL	(18,981)	(48,829)	(11,348)
Tax incentives (Sudene and PAT)		5,479
Prior period CSL		(18,186)	(342,203)
Current IR and CSL	(18,981)	(61,536)	(353,551)

Deferred IR and CSL	377,136	63,583	(1,006,374)
Deferred IR and CSL	377,136	63,583	(1,006,374)

Total IR and CSL	358,155	2,047	(1,359,925)

(i) PAT – Workers’ Meal Program.

(ii) Recognition of deferred income tax and social contribution on undeductible expenses from prior periods, in particular impairment losses on industrial plants that have been shut down, for which the realization of the corresponding tax assets have become probable in 2011.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

23.2 Deferred IR and CSL

(a) Breakdown of and changes in deferred IR and CSL

Deferred tax - assets	As of December 31, 2010	Impact on the result / (expense) income	Impact on the result / (decrease) increase	Installment Program MP 470	Companies acquired and consolidated	As of December 31, 2011

Tax losses and negative base	505,550	61,836		(22,239)		545,147
Goodwill amortized	117,706	(53,887)				63,821
Temporary adjustments	116,459	125,448			13,878	255,785
Adequacy Law Nos. 11,638/07 and 11,941/09	9,406	(1,427)	(2,458)			5,521
Business combination - Quattor	252,099	(13,785)				238,314
Pension plan	29,473	16,131				45,604
Deferred charges - write-off	105,992	(23,040)				82,952
Total assets	1,136,685	111,276	(2,458)	(22,239)	13,878	1,237,144



Deferred tax - liabilities	As of December 31, 2010	Impact on the result / (income) expense	Impact on the result / (increase) decrease	Installment Program MP 470	Companies acquired and consolidated	As of December 31, 2011

Adequacy Law Nos. 11,638/07 and 11,941/09	351,430	374,598				726,028
Exchange variations	645,775	(591,500)				54,275
Other temporary differences	310,604	6,136			4,293	321,033
Business combination	707,509	(40,469)				667,040
Write-off negative goodwill of Cinal	2,969	(594)				2,375
Additional indexation PP&E	182,251	(14,031)				168,220
Total liabilities	2,200,538	(265,860)			4,293	1,938,971
	0

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b) Realization of deferred IR and CSL


		December 31,		2013 and	2015 and	2017 and
Deferred tax - assets	Note	2011	2012	2014	2016	thereafter

Tax losses and negative base	2.19	545,147	70,726	261,364	213,057
Goodwill amortized	(i)	63,821	32,387	21,578	3,650	6,206
Temporary adjustments	(ii)	255,785	87,200	14,292	11,844	142,449
Adequacy Law Nos. 11,638/07 and 11,941/09		5,521				5,521
Business combination - Quattor	(iii)	238,314				238,314
Pension plan	(iv)	45,604				45,604
Deferred charges - write-off	(v)	82,952	22,893	38,977	21,082
Total assets		1,237,144	213,206	336,211	249,633	438,094



		December 31,		2013 and	2015 and	2017 and
Deferred tax - liabilities	Note	2011	2012	2014	2016	thereafter

Tax losses and negative base	(vi)	726,028				726,028
Exchange variations	(vii)	54,275				54,275
Other temporary differences	(viii)	321,033	32,097	64,193	63,808	160,935
Business combination	(ix)	667,040	40,469	80,938	80,938	464,695
Write-off negative of goodwill		2,375	594	1,188	593
Additional indexation PP&E	(x)	168,220	16,232	32,463	32,463	87,062
Total liabilities		1,938,971	89,392	178,782	177,802	1,492,995

Basis for recognition and realization:

(i) Book goodwill from merged investments, amortized before Law No. 11,638/07, which is controlled in the Taxable Income Assessment Book (LALUR). Realization based on the specific fiscal rule.

(ii) Book expenses that are still undeductible for determining IR and CSL and the use of which will take place in subsequent periods.

(iii) Refers to (1) tax goodwill generated in the acquisition of Quattor, and (2) amounts of contingencies recognized in the business combination of Quattor. The goodwill will be realized upon the merger of the acquired companies and of contingencies after write-offs due to settlements or reversal of the proceedings involved.

(iv) Refers to the provision of the defined benefit plan of Petros Copesul. Realization is based on the expectation of settlement or withdrawal of sponsorship of the plan.

(v) Amounts recognized on the deferred assets written-off due to the application of Law No. 11,638/07. Realization according to the application of the amortization rate used before the application of this law.

(vi) Refers to goodwill based on future profitability of merged companies that have not been amortized in the books since the application of Law No. 11,638/07 (Note 17 (a)). Realization is associated with the impairment or disposal of assets related to the goodwill.

(vii) Foreign exchange variation of assets and liabilities denominated in foreign currency accounted for under the accrual basis, which will be realized on cash basis.

(viii) Book revenues that are not yet taxable for determining income tax and social contribution and the taxation of which will take place in subsequent periods.

(ix) Refers to goodwill on property, plant and equipment and identifiable intangible assets arising from the business combinations of Quattor, Unipar and Petroquímica Triunfo, which is realized through the depreciation and amortization of these assets.

(x) Refers to the adjustment of the additional indexation of property, plant and equipment, which will be realized through the depreciation of assets.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

24 Sundry provisions

	Note	2011	2010

Provision for costumers bonus	(a)	13,577	21,538
Provision for recovery of environmental damages	(b)	36,777	36,282
Judicial and administrative provisions	(c)	266,302	330,807
Other		5,067	6,240
Total		321,723	394,867

In current liabilities		23,629	32,602
In non-current liabilities		298,094	362,265
Total		321,723	394,867

(a) Provision for costumer bonus

Some sales agreements of Braskem provide for a rebate, in products, should some sales volumes be achieved within the year, six-month period or three-month period, depending on the agreement. The rebate is monthly recognized in a provision, assuming that the minimum contractual amount will be achieved. As they are recognized based on contracts, the provisions are not subject to significant uncertainties with respect to their amount or settlement.

(b) Provision for recovery of environmental damages

Braskem has a provision for future expenses for the recovery of environmental damages in some of its industrial plants. The term estimated, which are measured at present value, is five years.

(c) Judicial and administrative provisions

As presented below, Braskem maintains a provision for legal and administrative proceedings against the Company, for which the chances of loss are considered probable, and tax claims against Quattor, for which the chances of loss are considered possible on April 30, 2010, date on which the control of Quattor was acquired.

	Note	2011	2010

Labor claims	(c.1)	36,718	33,302

Tax claims	(c.2)
Income tax and social contribution	(i)	27,753	25,021
PIS and COFINS	(ii)	30,354	27,195
ICMS - interstate purchases	(iii)	73,457	125,357
ICMS - other	(iv)	52,518	47,052
Other		38,197	58,104

Societary claims and other		7,305	14,776
		266,302	330,807

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(c.1) Labor claims

On December 31, 2011, the Company is involved in 531 labor claims, including occupational health and security cases, in the total amount of R$ 117,722. The Company’s legal advisors estimate that the term for the termination of these types of claims in Brazil exceeds five years.

The estimates related to the outcome of proceedings and the possibility of future disbursement may change in view of new decisions in higher courts. The Company’s management believes that the chances of increasing the amount of the existing provision is remote.

The Company has a judicial deposit that will be used to settle possible unfavorable decisions (Note 12).

(c.2) Tax claims

On December 31, 2011, Braskem has recognized a provision in the amount of R$ 38,197 for claims from the Brazilian tax authorities and the chances of loss for which are considered probable. On the same date, the Company has recognized a provision in the amount of R$ 184,082 for these claims arising from the business combination of Quattor (Note 5.2) and the chances of loss for which are considered possible.

The Company’s external legal advisors believe that the estimates related to the outcome of the claims and the possibility of future disbursement may change in view of the following: (i) the Federal Supreme Court or the Superior Court of Justice deciding in a similar case involving another company, adopting a final interpretation of the matter and, consequently, advancing the termination of the claims involving the Company, without any disbursement or implying a disbursement lower than that assessed; and (ii) programs encouraging the payment of the debts, such as the REFIS (refinancing program) implemented at the Federal level, in favorable conditions that may lead to a disbursement that is lower than the one that is currently recognized in the provision.

On December 31, 2011, the main tax claims for which the Company maintains a provision are the following:

(i) IR and CSL

The subsidiary Braskem Petroquímica is assessed for the payment of IR and CSL on the foreign exchange variation in the account of investments in foreign subsidiaries in 2002. On December 31, 2011, the amount involved is R$ 110 million. The amount of the provision recognized is based on the estimate of disbursement made by an external legal advisor taking into consideration the case law on the matter at the administrative and judicial levels.

There is no judicial deposit or other type of guarantee for this claim and the Company’s management expects this case to be terminated by 2015.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(ii) PIS and COFINS

The subsidiary Braskem Petroquímica is assessed for the payment of these taxes in many claims, such as:

· non-payment of COFINS for the period from March 1999 to December 2000, from February 2001 to March 2002, from May 2002 to July 2002 and September 2002;

· undue offset of credit arising from the additional 1% to the rate of COFINS;

· offset with credits from PIS – Decree-Laws No. 2,445 and No. 2,449;

· omission in the calculation basis of income arising from foreign exchange variations on assets, determined as a result of successive reductions in the capital of Suzanopar Petroquímica Ltda.

On December 31, 2011, the total amount involved in these claims is R$ 89 million. The amount of the provision recognized is based on the estimate of disbursement made by an external legal advisor taking into consideration the case law on the matters at the administrative and judicial levels. Guarantees were offered for these claims in the form of bank guarantee and finished products manufactured by Braskem Petroquímic, which, together, cover the amount of the claims. The Company’s management estimates that these cases should be terminated by 2020.

(iii) ICMS – interstate purchases

In 2009, the subsidiary Braskem Qpar was assessed by the Finance Department of the State of São Paulo for the payment of ICMS in view of:

· undue use of tax credits in the periods from February 2004 to August 2005, November 2005 to February 2006, and September 2006 to January 2008, arising from the bookkeeping of credits that were unduly presented in the sales invoices of products acquired from another company, since the operations were aimed at the export of the products and, as such, they would not be subject to ICMS;

· issue of invoices without registering the shipment of the goods from its facilities for storage;

· non-presentation of the tax documents requested by inspection authorities.

On December 31, 2011, the adjusted amount involved is R$ 350 million. The amount of the provision recognized is based on the estimate of disbursement made by an external legal advisor taking into consideration the case law on the matters at the administrative and judicial levels. Management estimates that this case should be terminated by 2019.

There are no assets deposited or recorded by the Company with respect to this case.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(iv) ICMS – sundry violations

The subsidiary Braskem Qpar was assessed by the Finance Department of the State of São Paulo for the payment of ICMS in view of the following alleged violations:

· undue tax credit and issue of invoices in the periods between 2004 and 2005, without the effective shipment of the goods; and

· non-payment of tax in the period from 2002 and 2004 when carrying out interstate sale operations to taxpayers located in another state but the goods never left the State of São Paulo.

On December 31, 2011, the total amount involved in these claims is R$ 131 million. The amount of the provision recognized is based on the estimate of disbursement made by an external legal advisor taking into consideration the case law on the matters at the administrative and judicial levels. The Company’s management estimates that these cases should be terminated by 2020. There is no judicial asset or any other type of guarantee for these cases.

(d) Changes in provisions

The changes in provisions are as follows:

		Recovery of
		environmental	Legal
	Bonus	damage	provisions	Other	Total

January 1,2009	18,753	51,168	75,296		145,217
Additions	18,126	35,784	15,604		69,514
Write-offs through usage and payments	(26,034)	(29,155)	(327)		(55,516)
Monetary adjustment			3,829		3,829
December 31, 2009	10,845	57,797	94,402		163,044

Additions	44,680	727	3,153	6,240	54,800
Additions trough mergers			233,029		233,029
Write-offs through usage and payments	(33,987)	(22,242)	(3,368)		(59,597)
Monetary adjustment			3,591		3,591
December 31, 2010	21,538	36,282	330,807	6,240	394,867

Additions	33,452	16,542	3,539	3,136	56,669
Write-offs through usage and payments	(41,413)	(16,047)	(27,015)	(4,867)	(89,342)
Monetary adjustment, net			(31,874)	558	(31,316)
Compensation			(9,155)		(9,155)
December 31, 2011	13,577	36,777	266,302	5,067	321,723

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

25 Long-term incentive

A long-term non-share-based incentive plan was approved at the Shareholders’ Meeting held in September 2005, under which the participants designated annually by management can acquire securities issued by the Company that are called “Investment Units”. The objective of the plan is, among others, to align the interests of participants in the creation of long-term value with those of shareholders, help participants develop a sense of ownership and motivate the vision and commitment of participants to long-term results.

The investment unit does not give its holder rights as a shareholder of Braskem, or any other rights or privileges that are inherent to shareholders, in particular voting rights and other political rights.

On an annual basis, the Board of Directors approves the eligible participants, the quantity of Investment Units to be issued, the percentage of the Company’s consideration for the participants’ acquisition and the number of units offered per participant. The acceptance by the participant implies cash payment of the amount attributed to the participant and the execution of the unit purchase agreement, with Braskem being responsible for issuing the respective Certificate of Investment Units.

The Investment Unit is issued in the first half of each year and its value is annually adjusted based on the average price of the Company’s class A preferred share at the closing of the trading sessions of the São Paulo Stock Exchange (BM&FBovespa) from October to March. In addition to the change in its par value, the Investment Unit yields the same as the dividend and/or interest on capital distributed by Braskem.

There are three types of Investment Units:

· unit acquired by the participant, called “Alpha”;

· unit received by the participant from Braskem as a consideration, called “Beta”;

· unit received by the participant as earnings, called “Gama”.

The Investment Unit (and its related certificate) is issued in its holder’s name and can be sold only to Braskem by means of redemption, according to the following conditions:

· as from the 5^th year, after the first acquisition, the acquirer can redeem up to 20% of the accumulated balance of investment units; and

· as from the 6^thyear, redemption is limited to 10% of the accumulated balance.

The changes in the number and amount of Investment Units at December 31, 2011 and 2010 are as follows:

	Investment unit Alpha		Investment unit Beta
	Quantity	Amount	Quantity	Amount

December 31, 2010	672,753	8,699	665,268	5,743
Conversion from IU's Gama to Alpha	19,475	349
Update of nominal amount		4,346		2,002
Redemption	(153,250)	(2,965)	(153,073)	(2,962)
December 31, 2011	538,978	10,429	512,195	4,783

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

26 Private pension plans

The actuarial obligations relating to the pension and retirement plans are recorded in conformity with and IAS 19.

26.1 Defined contribution plans

(a) ODEPREV

The Company maintains a defined contribution plan for its employees managed by ODEPREV, a private pension plan entity created by Odebrecht. ODEPREV offers its participants, which are employees of the sponsoring companies, an optional defined contribution plan in which monthly and additional participant contributions and monthly and annual sponsor contributions are made to individual pension savings accounts.

At December 31, 2011, the number of active participants in ODEPREV totals 5,259 (2010 – 3,468). The contributions made by the Company in the year amounted to R$ 13,873 (2010 - R$ 11,315) and the contributions made by the participants amounted to R$ 39,927 (2010 - R$ 25,515). As from January 2011, the process for the integration of the employees of the subsidiaries Braskem Qpar, Braskem Petroquímica, Ripol and Quantiq in the ODEPREV plan began.

(b) Triunfo Vida

Braskem, due to the merger of Triunfo, became a sponsor of Triunfo Vida. On May 31, 2010, the Company requested to withdraw its sponsorship of this plan and the contributions were suspended in June 2010. The contributions of the Company and participants until June 2010 totaled R$ 126 and R$ 197, respectively.

In 2011, the withdrawal process followed its course with the submittal of the withdrawal documents and calculations to the regulatory agency, PREVIC – National Superintendency of Supplementary Pension Plan (“PREVIC”). As established by regulation, PREVIC is conducting a technical analysis that precedes the approval of the sponsorship withdrawal process.

The Company does not expect any additional disbursement in the withdrawal process.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

26.2 Defined benefit plans

(a) PETROS - Fundação Petrobras de Seguridade Social ("PETROS")

· PETROS Copesul Plan

Braskem and part of the employees of the merged company Copesul make contributions as sponsors of PETROS in a defined benefit retirement and pension plan.

At December 31, 2011, the number of active participants in this plan totals 244 (2010 – 293). The contributions of the Company and participants were made only until 2010 and amounted to R$ 1,160 and R$ 944, respectively.

As mentioned above, the PETROS charter and applicable legislation determine that, in the event of insufficient technical reserves, both the sponsor and participants are required to contribute with additional amounts, otherwise the plan benefits will be adjusted to the available funds.

· PETROS PQU Plan

With the acquisition of Quattor in April 2010, the Company became responsible for the supplementary defined benefit pension plan called Petros PQU. Quattor had already been in the process for withdrawing its sponsorship since September 2009 when it determined the base date for the withdrawal and suspended its contributions to the plan.

In 2011, the withdrawal process followed its course with the submittal of the withdrawal documents and calculations to PREVIC and the beginning of the technical analysis that should finish with the approval of the withdrawal process. The calculation of the mathematical reserves of the participants was completed in February 2010. Due to the plan’s surplus, no provision is necessary in the Company’s financial statements.

(b) Fundação Francisco Martins Bastos – (“Francisco Martins Bastos Foundation”)

The Company, due to the merger of Ipiranga Petroquímica S.A., became a sponsor of the Francisco Martins Bastos Foundation - FFMB, a supplementary private pension entity, whose purpose is the management and execution of a defined benefit pension plan for the former employees of the Ipiranga Group.

In June 2009, the Company formally requested its withdrawal from the sponsorship of the benefit plan and related amendments as from the 30^th of that month to FFMB in accordance with the provisions in the Foundation's bylaws. The calculation of the mathematical reserves of participants was completed in November 2009. In the same month, the withdrawal request was filed with PREVIC, which approved it on December 16, 2010 and, due to the plan surplus, no additional contribution was required in the settlement process.

(c) Novamont – Braskem America

On April 1, 2010, with the acquisition of Sunoco Chemicals, Braskem America became the sponsor of Novamont, which is a defined benefit plan of the employees of the plant located in the State of West Virginia.

At December 31, 2011, the number of active participants in Novamont totals 73 (2010 – 70). In 2011 and 2010, no contributions were made by the Company and participants.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(d) Braskem Germany defined benefit plan

On October 3, 2011, with the acquisition of the polypropylene business from Dow Chemical, Braskem Germany became the sponsor of the defined benefit plan of the employees of the plant located in that country.

At December 31, 2011, the number of active participants totals 96. In 2011, no contributions were made by Braskem Germany and participants.

26.2.1 Breakdown and changes in the balances of defined benefit private pension plans

The amounts recognized for defined benefit pension plans are as follows:

	2011	2010
Actuarial asset recorded with
Novamont Braskem America (i)		270
		270

Actuarial liabilities recorded with
Novamont Braskem America	821
Petros	134,506	110,744
Braskem Alemanha	14,248
RPR		12,773
	149,575	123,517

(i) This amount is part of the balance of “other receivables” in non-current assets.

The amounts recognized in the balance sheet are as follows:

	2011	2010

Benefit obligations	(780,561)	(680,010)
Fair value of plan assets	589,116	541,761
Funded status of the plan	(191,445)	(138,249)
Past service cost not recognized	4,182	5,939
Actuarial gains	37,688	22,686
Net balance parent company and subsidiaries	(149,575)	(109,624)
Net balance of jointly-controlled subsidiaries		(13,623)
Consolidated net balance	(149,575)	(123,247)

In current asset		270
In non-current liability	(149,575)	(123,517)
	(149,575)	(123,247)

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

The changes in the obligations of the defined benefit plans in the year are presented below:

	2011	2010	2009
Change in defined benefit obligations
Balance at beginning of year	680,010	563,058	1,155,141
Acquisition of company 26.2 (c) (d)	13,661	695,302
Current service cost	7,309	77,812	5,423
Interest cost	70,480	64,444	52,471
Special retirement	278
Benefits paid	(41,379)	(107,509)	(30,438)
Change of plan	1,026
Actuarial losses	46,951	215,000	(27,320)
Other revenue		(41)
Plan settlement			(494,299)
Plan curtailment 26.2 (a)		(828,056)	(97,920)
Exchange variation	2,225
Balance at the end of the year	780,561	680,010	563,058

The changes in the fair value of the benefit plan’s assets in the periods presented are as follows:

	2011	2010	2009
Change in fair value of plan assets
Balance at beginning of the year	541,761	512,143	1,046,500
Acquisition of company	632	878,198
Actual return on plan assets	83,781	275,440	110,132
Employer contributions		2,526	6,202
Employee contributions	2,955	9,180	6,903
Current expenses	(35)	(42)
Benefits paid	(42,140)	(107,509)	(30,438)
Plan settlement			(524,300)
Plan curtailment		(1,028,175)	(102,856)
Exchange variation	2,162
Balance at the end of the year	589,116	541,761	512,143

The amounts recognized in the income statement are:

	2011	2010	2009
Amounts recognized in the income statement
Current service cost	(7,309)	(8,358)	(14,753)
Interest cost	(70,480)	10,037	(63,405)
Expected return on plan assets	54,720	(35,600)	59,384
Amortization of actuarial gains	(32)	(153,293)	(547)
Amortization of unrecognized service cost	(2,783)	(2,783)	(2,783)
Employee contributions		2,526	1,619
Charges on special retirement	(278)
Plan curtailment		173,117	21,071
	(26,162)	(14,354)	586

The amounts recognized in the income statement related to the changes in the defined benefit pension plans are presented in Braskem’s operating profit (loss).

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

The main actuarial assumptions used were the following:

	Percentage (%)
	2011			2010
		United			United
	Brazil	States	Germany	Brazil	States

Discount rate	6.00	5.70	5.75	6.00	6.00
Inflation rate	4.50	3.00	n/a	4.50	3.00
Expected return on plan assets	10.50	1.00	n/a	10.50	1.00
Rate of increase in future salary levels	4.50	n/a	3.00	4.50	n/a
Rate of increase in future pension plan	4.50	n/a	2.25	4.50	n/a

The breakdown of the plan’s net assets classified based on the fair value hierarchy is as follows:

	Percentual (%)
	2011				2010
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total

Investment fund - equity	39.41			39.41	26.73			26.73
Receivables	18.68			18.68
Government debt securities	12.78			12.78	13.11			13.11
Shares	14.17			14.17	19.34			19.34
Real estate			5.57	5.57			5.41	5.41
Investment fund - fixed income	4.93			4.93	30.70			30.70
Debt securities		1.01	0.47	1.47		1.07	0.01	1.08
Other assets	1.98			1.98	2.27			2.27
Loans			1.02	1.02			1.36	1.36
Fair value of plan assets	91.9	1.0	7.0	100.0	92.2	1.1	6.8	100.0

The defined benefit plan’s assets of Petros consist mainly of National Treasury Notes (NTN), fixed-income and variable-income investment funds, variable-income funds managed by large financial institutions and investments in shares of large domestic companies.

The assets of the defined benefit plan of Novamont are composed of quotas of funds in fixed income.

The defined benefit plan of Braskem Germany is a non-contribution plan, that is, the contributions of the sponsor are managed and recorded directly by the Company and this type of plan is allowed by legislation of that country. On December 31, 2011, the balance of the fair value of the plan’s assets is only composed of contributions made by participants.

27 Advances from customers – non-current

On December 31, 2011, the balance of this account includes the advance of R$ 140,685 (US$ 75 million) made by a foreign customer for the acquisition of butadiene between February 2013 and December 2016.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

28 Contingencies

The Company is a party to labor and social security, tax, civil and corporate claims for which the chances of loss was considered possible and for which no provision has been recognized, in accordance with the breakdown and estimate below:

	Note	2011

Labor claims	(a)	768,022
Tax claims	(b)	3,455,777
Other lawsuits	(c)	416,321
Total		4,640,120

(a) Labor

On December 31, 2011, the Company is involved in 1,403 indemnity and labor claims for which the chances of loss are considered possible. Among these claims are:

(a.1) In the second quarter of 2005, the Union of Workers in the Petrochemical and Chemical Industries in Triunfo (State of Rio Grande do Sul) lodged a number of class actions claiming overtime payment. For part of these actions, for which the claims amount to R$ 86,479, the chances of a loss are considered possible. For the remaining actions in progress, for which the claims amount of R$ 641,854, the chances of a loss are considered remote.

All actions in progress are with the Superior Labor Court and Management expects them to be judged by 2013.

One of these actions was awarded a final and unappealable decision in favor of the Company.

There are judicial deposits related to these claims.

(a.2) In the third quarter of 2010, the Union of Workers in the Petrochemical and Chemical Industries in Triunfo (State of Rio Grande do Sul) filed class actions claiming the payment of overtime referring to work breaks and integration into base salary of the remunerated weekly day-off amounting to R$ 255,048.

The proper defenses were presented for these actions and the Company, based on the opinion of the external legal advisors, does not expect losses arising from the outcome of these proceedings. The chances of loss are considered possible.

The claims are in the fact finding and appeals phase and they are expected to be granted a final and unappealable decision in the last quarter of 2013.

There are judicial deposits related to these claims.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b) Tax

On December 31, 2011, the Company is involved in many proceedings with the Brazilian tax authorities and the chances of loss are considered possible based on the estimate and opinion of its external advisors.

Braskem’s external legal advisors believe that the estimates related to the outcome of the claims and the possibility of future disbursement may change in view of the following: (i) the Federal Supreme Court or the Superior Court of Justice deciding in a similar case involving another company, adopting a final interpretation of the matter and, consequently, advancing the termination of the claims involving the Company, without any disbursement or implying a disbursement lower than that assessed; and (ii) programs encouraging the payment of the debts, such as the REFIS (refinancing program) implemented at the Federal level, in favorable conditions that may lead to the adherence of the Company to these programs.

On December 31, the main tax contingencies are the following:

(b.1) ICMS - reduction in calculation basis

In 2010, the Company was assessed by the Finance Department of the State of Bahia for the payment of ICMS in view of the perpetration of many violations. Most of the demands are based on the fact that the Company shipped goods and reduced the tax calculation basis without having made the proportional reversal of the tax credit from the acquisitions of the goods used in the manufacturing process. On December 31, 2011, the adjusted amount involved is R$ 500 million.

The Company’s legal advisors estimate that: (i) the judicial proceeding is expected to be terminated in 2020; and (ii) in the event of an unfavorable decision to the Company, which is not expected, this contingency could be settled for up to 50% of the amount in dispute. This estimate is based on the probability of success of the Company’s defense theory taking into consideration the case law at the administrative and judicial levels.

There are no assets deposited or recorded by the Company with respect to this case.

(b.2) ICMS - sundry

The Company is involved in many ICMS collection claims that became relevant because they are the subject matter of repeated assessment notices drawn up mainly by the Finance Department of the State of Bahia and Alagoas. On December 31, 2011, the adjusted amounts involved of these claims total R$ 700 million and the objects of the claims include the following matters:

· ICMS credit on the acquisition of assets that are considered by the Revenue Services as being of use and consumption. The Revenue Service understands that the asset has to be a physically integral part of the final product to give rise to a credit. Most of the products do not so, but the Judiciary branch has a precedent that says that the asset must be an integral part of the product or be consumed in the production process.

· ICMS credit arising from the acquisition of assets to be used in property, plant and equipment, which is considered by the Revenue Services as not being related to the production activity, such as laboratory materials, construction of warehouses, security equipment, etc.

· transfer of goods for an amount lower than the production cost;

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

· omission of the entry or shipment of goods based on physical count of inventories;

· lack of evidence that the company exported goods so that the shipment of the goods is presumably taxed for the domestic market;

· fines for the failure to register invoices;

· ICMS credit on transportation services with CIF clause without having evidence that it used the transportation service.

The Company’s legal advisors estimate that: (i) the judicial proceedings are expected to be terminated in 2020, and (ii) in the event of an unfavorable decision to the Company, which is not expected, this contingency could be settled for up to 40% of the amount in dispute. This estimate is based on the probability of success of the Company’s defense theory taking into consideration the case law at the administrative and judicial levels.

There are no assets deposited or recorded by the Company with respect to these cases.

(b.3) COFINS - sundry

The Company is involved in collection actions related to COFINS in which the use, by the Company, of certain tax credits to determine and pay this tax is under discussion. These credits arise from (i) legal actions; and (ii) income tax prepayments.

On December 31, 2011, the adjusted amounts involved of these assessments total R$ 182 million.

The Company’s external legal advisors estimate that: (i) the judicial proceedings are expected to be terminated in 2018; and (ii) in the event of an unfavorable decision to the Company, which is not expected, this contingency could be settled for up to 50% of the amount in dispute. This estimate is based on the probability of success of the Company’s defense theory taking into consideration the case law at the administrative and judicial levels.

The Company offered assets in guarantee that cover the amount involved in these claims.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(b.4) Income tax - BEFIEX

The Company was assessed by the Federal Revenue Service for the payment of income tax for the calendar year 2001 since the existence of the negative balance declared by Braskem was questioned. The plaintiff notes that the Company determined a lower taxable income in view of the undue offset, in full, of tax losses based on the Export Special Program – BEFIEX after the period of effectiveness of the program. The use of an income tax reduction benefit of 37.5% is also being questioned but the right to such benefit has not been proved. On December 31, 2011, the adjusted amount involved is R$ 63 million.

The Company’s legal advisors estimate that: (i) the judicial proceeding is expected to be terminated in 2019, and (ii) in the event of an unfavorable decision to the Company, which is not expected, this contingency could be settled for up to 70% of the amount in dispute. This estimate is based on the probability of success of the Company’s defense theory taking into consideration the case law at the administrative and judicial levels.

There are no assets deposited or recorded by the Company with respect to these cases.

(b.5) IPI – presumed credit

The Company is involved in tax assessments that question the undue use of presumed IPI credit as a way to offset the payment of PIS and COFINS levied on the acquisitions of raw materials, intermediate products and packaging material used in the industrialization of exported products. The Revenue Service understands that only the products that have been in contact with or have a direct influence on the final product provide for the right to the presumed credit. The Judicial branch understands that the products that give rise to the right to the credits are those that (i) are incorporated into the final product; or (ii) are immediately and completely consumed in the production process. On December 31, 2011, the adjusted amount involved of these assessments is R$ 90 million.

The Company’s legal advisors estimate that: (i) the judicial proceeding is expected to be terminated in 2020; and (ii) in the event of an unfavorable decision to the Company, which is not expected, this contingency could be settled for up to 60% of the amount in dispute. This estimate is based on the probability of success of the Company’s defense theory taking into consideration the case law at the administrative and judicial levels.

There are no assets deposited or recorded by the Company with respect to these cases.

(c) Other court disputes involving the Company and its subsidiaries

(c.1) Civil

The Company is the defendant in civil lawsuits filed by the owner of a former distributor of caustic soda and by the shipping company that provided services to this former distributor, which, at December 31, 2011, totaled R$ 30,540. The claimants seek indemnity for damages related to the alleged non-performance of the distribution agreement by the Company. Management's evaluation, supported by the opinion of its external legal advisors who are responsible for the cases, is that the lawsuits will possibly be dismissed within a period of 8 years.

There are judicial deposits related to these claims.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(c.2) Corporate

Some shareholders of preferred shares acquired with incentives filed lawsuits, originally against Copene, the former name of the Company, and against the merged companies Nitrocarbono, OPP Química, Salgema, Trikem, Polialden and Politeno. They claim a share in the profit remaining after the payment of priority dividends on the same basis as the common shareholders, in addition to the right to vote in shareholders' meetings until the distribution of dividends in the desired conditions is reestablished. The amount involved in the lawsuits for which there is a possibility of loss is R$ 14,093. Since the lawsuits are in different phases, the Company’s external legal advisors are not able to estimate when these proceedings are expected to be terminated.

There are judicial deposits related to these claims.

(c.3) Social security

The Company is a party to 85 administrative and judicial proceedings concerning social security matters, which total approximately R$ 205,684 at December 31, 2011, as adjusted by the Selic rate.

The Company's management, based on the opinion of its external legal advisors, who consider that the chances of success in all these proceedings are possible, understands that no amount is due with respect to these assessments and, for this reason, no provision was recognized to this end. The Company’s external legal advisors were not able to estimate when these proceedings are expected to be terminated. Additionally, management believes that is not possible to estimate the amount of disbursement to cover a possible unfavorable decision to the Company.

29 Equity

(a) Capital

At December 31, 2011, the Company's subscribed and paid up capital amounts to R$ 8,043,222 and comprises 801,665,617 shares with no par value divided into 451,669,063 common shares, 349,402,736 class A preferred shares, and 593,818 class B preferred shares.

The Company's Extraordinary Shareholders’ General Meeting held on February 25, 2010 approved a capital increase, regardless of changes in the bylaws, up to the limit of 1,152,937,970 shares, divided into: 535,661,731 common shares, 616,682,421 class A preferred shares and 593,818 class B preferred shares. The amount of preferred shares without voting rights or with restricted voting rights may not exceed the limit of two thirds of the Company's total capital.

On April 14, 2010, the Company's Board of Directors approved a capital increase in the form of private subscription through the issue of 259,904,311 shares, of which: 243,206,530 of which are common shares and 16,697,781 are class A preferred shares with an issue price of R$ 14.40 per share, totaling R$ 3,742,622. The amount of R$ 1,363,880 was credited to the capital reserve account and R$ 2,378,742 to the capital account, which increased from R$ 5,473,181 to R$ 7,851,923, comprising 780,832,465 shares divided into 433,668,976 common shares, 346,569,671 class A preferred shares and 593,818 class B preferred shares.

The Extraordinary General Shareholders’ Meeting held on June 18, 2010 approved the merger of Quattor shares by Braskem. This merger resulted in the issue of 18,000,087 common shares, amounting to R$ 199,356, R$ 164,744 of which was allocated to the capital account and R$ 34,612 to the capital reserve account. As a result, the Company's capital increased from R$ 7,851,923 to R$ 8,016,667.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

The Extraordinary General Shareholders’ Meeting held on August 30, 2010 approved the merger of Riopol shares by Braskem. This merger resulted in the issue of 2,434,890 class A preferred shares amounting to R$ 103,087, R$ 22,285 of which was allocated to the capital account and R$ 80,802 to the capital reserve account. As a result, the Company's capital increased from R$ 8,016,667 to R$ 8,038,952.

The Extraordinary General Shareholders’ Meeting held on December 27, 2010 approved the merger of Quattor Petroquímica shares by Braskem. This merger resulted in the issue of 398,175 class A preferred shares amounting to R$ 4,270 which was allocated to the capital account. As a result, the Company's capital increased from R$ 8,038,952 to R$ 8,043,222.

(b) Share rights

Preferred shares carry no voting rights but they ensure priority, non-cumulative annual dividend of 6% of their unit value, according to profits available for distribution. The unit value of the shares is obtained through the division of capital by the total number of outstanding shares. Only class A preferred shares will have the same claim on the remaining profit as common shares and will be entitled to dividends only after the priority dividend is paid to preferred shareholders. Only class A preferred shares also have the same claim as common shares on the distribution of shares resulting from capitalization of other reserves. Only class A preferred shares can be converted into common shares upon resolution of majority voting shareholders present at a General Meeting. Class B preferred shares can be converted into class A preferred shares at any time, at the ratio of two class B preferred shares for one class A preferred share, upon a simple written request to the Company, provided that the non-transferability period provided for in specific legislation that allowed for the issue and payment of such shares with tax incentive funds has elapsed.

In the event of liquidation of the Company, class A and B preferred shares will have priority in the reimbursement of capital.

Shareholders are entitled to receive a mandatory minimum dividend of 25% on profit for the year, adjusted under Brazilian Corporate Law.

(c) Capital reserve – tax incentives

The balance of this reserve mainly comprises the income tax deduction benefit determined before the base period of 2006 (Note 32(a)). After the adoption of Laws No. 11,638/07 and 11,941/09, as from January 1, 2007, the income tax benefit started to be recorded in the income statement in the revenue reserves account as proposed by management and approved at the General Shareholders’ Meeting. Regardless of the change introduced by Laws No. 11,638/07 and 11,941/09, this tax incentive can be used only for capital increase or absorption of losses.

(d) Legal reserve

Under Brazilian Corporate Law, the Company must transfer 5% of net profit for the year, determined in accordance with the accounting practices adopted in Brazil, to a legal reserve until this reserve is equivalent to 20% of the paid-up capital. The legal reserve can be used for capital increase or absorption of losses.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(e) Unrealized profit reserves

This reserve was established based on unrealized profits in accordance with items I and II, paragraph 1 of Article 197 of Law No. 6,404/76, which states that in the fiscal year that the distributable dividends exceed the amount of profits, which generated cash inflows to the Company, the General Stockholders’ Meeting may, upon proposal of the board, attribute such excess to “unrealized profit reserves”. Under the terms of the Law No 6,404/76, this reserve should only be used to (i) absorb losses; and (ii) to pay dividends.

At the end of 2011, the Company used R$ 979,048 of the balance of this reserve to (i) absorb part of the accumulated deficit of 2011, amounting to R$ 496,455; and (ii) propose the payment of dividends, amounting to R$ 482,593 (Note 29(h.2)). On December 31, 2011, the balance of this reserve is R$ 16,457.

(f) Treasury shares

The breakdown of treasury shares is as follows:

	2011	2010
Quantity
Common shares	411	411
Preferred shares class "A" (i)	2,697,016	2,660,818
	2,697,427	2,661,229

Amount (R$ thousand)	60,217	59,271

(i) In the consolidated financial statements as of December 31, 2011 and 2010, the Company recorded the amount of R$ 48,892 within "treasury shares," corresponding to 1,154,758 class A preferred shares issued by Braskem and held by the subsidiary Braskem Petroquímica. These shares were received by Braskem Petroquimica as a result of the merger of Riopol shares by Braskem (Note 1 (b.1 (ix)).

On December 31, 2011, the total amount of treasury shares, calculated based on the closing trading price of BM&FBovespa, is R$34,522 (2010 – R$54,201).

In 2010 and 2011, the events that resulted in the increase of the number of treasury shares were the following:

· The Extraordinary General Shareholders’ Meeting held on August 30, 2010 approved the merger of Riopol shares by Braskem. As a result, some holders of 411 common shares of Braskem exercised their right to withdraw. The reimbursement of these shares corresponded to the carrying amount of the share in accordance with the balance sheet as of December 31, 2009 of R$ 9.15237722 per share, totaling R$ 3.

· In January 2011, the Company repurchased 36,198 class A preferred shares for the amount of R$ 946 arising from the right of non-controlling shareholders to withdraw from Braskem Petroquímica due to the merger of its shares into Braskem, which was approved by the shareholders on December 27, 2010.

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(g) Program for the repurchase of shares in progress

On August 26, 2011, Braskem’s Board of Directors approved a new program for the repurchase of shares to be effective between August 29, 2011 and August 28, 2012 through which the Company may acquire up to 12,162,504 class A preferred shares at market price. The shares may be acquired by the Company or financial institutions contracted for this purpose.

The program, which was approved by the Brazilian Securities Commission (“CVM”), provides that even if they are in the possession of financial institutions, the shares repurchased in the ambit of the program will not be entitled to the dividends proposed by the Company.

Until the end of the program, Braskem will acquire from the financial institutions, at market price, the shares acquired by them, which is when they will be recorded by the Company as “treasury shares”.

By December 31, 2011, 1,405,400 shares had been repurchased by financial institutions for the amount of R$ 19,830 at a weighted average cost of R$ 14.11 (minimum cost of R$ 13.26 and maximum of R$ 15.15). The average market value of these shares at December 31, 2011 is R$ 17,989.

Additionally, during the term of the program, the shares repurchased by financial institutions will be excluded from the calculation basis of earnings (loss) per share since, in essence, they are treasury shares and, for this reason, they are not subject to this calculation.

(h) Dividends proposed and appropriation of profit

Under the Company’s bylaws, profit for the year, adjusted according to Law No. 6,404/76, is appropriated as follows:

(i) 5% to a legal reserve, which must not exceed 20% of capital;

(ii) 25% to pay for mandatory, non-cumulative dividends, provided that the legal and statutory advantages of the Class A and B preferred shares are observed. When the amount of the priority dividend paid to class A and B preferred shares is equal to or higher than 25% of profit for the year calculated under Article 202 of Corporate Law, it is the full payment of the mandatory dividend. Any surplus remaining after the payment of the priority dividend will be used to:

· pay dividends to common shareholders up to the limit of the priority dividends of preferred shares;

· if there still is any surplus, distribute additional dividends to common shareholders and class A preferred shareholders so that the same amount of dividends is paid for each common share or class A preferred share.

100

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(h.1) Appropriation of profit for 2010

On April 29, 2011, the Ordinary General Shareholders’ Meeting approved the payment of dividends in the amount of R$ 665,630 (corresponding to 40% of profit adjusted for the calculation of the dividends) as from May 10, 2011, R$ 376,352 of which was made available to common shareholders and R$ 288,891 and R$ 357 to class A and B preferred shareholders, respectively. The remaining proposed and undistributed amount, of R$ 30, was reversed to retained earnings and refers to the 36,198 class A preferred shares acquired by Braskem in January 2011 as a result from the exercise of the right to withdraw by the shareholders of Braskem Petroquímica (Note 29 (f)).

Total dividends paid represent R$ 0.83324710 for common and class A preferred shares and R$ 0.601988304 for class B preferred shares, in conformity with the provisions in the Company’s bylaws.

	2010

Net income for the year	1,895,309
Realization of additional property, plant and equipment	27,236
Prescribed dividends / others	(2,650)
Absorption of losses	(165,703)
Net income adjusted	1,754,192
Legal reserves distribution	(87,710)
Destinantion of tax incentive reserves	(5,347)
Net income adjusted by dividends calculation	1,661,135
Proposed dividends (*)	(665,630)
Portion allocated to unrealized profit reserves	(995,505)
Balance of retained earnings

(*) Minimum dividends - 25% adjusted net income	415,284	(i)
Additional proposed dividends	250,346	(ii)
Total dividends	665,630

Total proposed dividends, per share:
Common shares and preferred class "A"	0.833247140
Preferred class "B"	0.601988304

(i) Presented in current liabilities
(ii) Presented in equity, in caption "additional proposed dividends"

(h.2) Result for 2011 and proposal of dividends

As provided for in the sole paragraph of Article 189 of Brazilian Corporate Law, the remaining balance of the Company’s loss for the year was absorbed by the unrealized profits reserve.

The Company’s management will propose to the Ordinary General Shareholders’ Meeting dividends in the amount of R$ 482,593, R$ 0.605085049 of which for each common and class A and B preferred share.

101

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(i) Other comprehensive income

Additional

Deemed

Fair value

Foreign

indexation of

cost of

Fair value

variation of

currency

Gain

PP&E

jointly-controlled

of cash flow

financial

translation

on interest

Note

price-level

subsidiary

hedges

assets

adjustment

in subsidiary

Total

As of December 31, 2009

381,015

(67,304)

1,127

314,838

Additional indexation

Realization by depreciation or writte-off assets

(41,270)

Income tax and social contribution on realization

14,032

Cash flow hedges

Change in fair value

74,561

Transfer to result

(68,529)

Tax on fair value gains

7,980

Available for sales investments

(1,127)

Foreign currency translation adjustment

(79,135)

As of December 31, 2010

353,777

(53,292)

(79,135)

221,350

Additional indexation

Realization by depreciation or writte-off assets

(41,267)

Income tax and social contribution on realization

14,031

Deemed cost of jointly-controlled subsidiary

22,079

Realization by depreciation or writte-off assets

(1,394)

Income tax and social contribution on realization

474

Cash flow hedges

21.2.2

Change in fair value

(1,939)

Transfer to result

46,973

Tax on fair value gains

(2,458)

Gain on interest in subsidiary

3,106

Foreign currency translation adjustment

54,631

As of December 31, 2011

326,541

21,159

(10,716)

(24,504)

3,106

315,586

102

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

30 Earnings (loss) per share

Basic earnings (loss) per share is calculated by means of the division of adjusted profit for the year attributable to the Company’s common and class A preferred shareholders by the weighted average number of these shares held by shareholders, excluding those held in treasury and following the rules for the distribution of dividends provided for in the Company’s bylaws, as described in Note 29 (h).

Diluted earnings (loss) per share is calculated by means of the division of adjusted profit for the year attributable to the Company’s common and class A preferred shareholders by the weighted average number of these shares held by shareholders, excluding those held in treasury. Also, the weighted average number of shares is adjusted by the potential convertibility of class B preferred shares into class A preferred shares in the proportion of two to one, and following the rules for the distribution of dividends provided for in the Company’s bylaws, as described in Note 29 (h).

The weighted average numbers per share is calculated based on the number of outstanding common and Class A preferred shares at the beginning of the period, adjusted by the number of shares repurchased or issued in the period, multiplied by a weighting time factor. The calculation of the weighted average in 2011 is shown below:

Total of outstanding shares

Weighted average

Note

Common shares

Preferred shares class "A"

Total of weighted average

Common shares

Preferred shares class "A"

Total of weighted average

As of December 31, 2010

451,668,652

346,741,918

798,410,570

374,037,573

341,130,775

715,168,348

Withdrawal of shareholders of Braskem Petroquímica

29 (f)

(36,198)

(31,636)

Repurchase of shares

(i)

(1,405,400)

(258,793)

As of December 31, 2011

451,668,652

345,300,320

796,968,972

451,668,652

346,451,489

798,120,141

(i) The shares repurchased in the program for the repurchase of shares by financial institutions were not considered in the calculation of earnings (loss) per share since they are not entitled to dividends (Note 29 (g)).

Class A preferred shares participate in dividends with common shares after the mandatory dividends has been attributed in accordance with the formula provided for in the Company’s bylaws, as described in Note 29(h). There is no highest limit for their participation.

103

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

As required by IAS 33, the table below show the reconciliation of profit (loss) for the period adjusted to the amounts used to calculate basic and diluted earnings (loss) per share.

	2011			2010		2009
	Basic	Diluted	Basic	Diluted	Basic	Diluted

Profit (loss) for the year attributed to Company's shareholders	(525,142)	(525,142)	1,895,309	1,895,309	398,491	398,491

Dividends attributable to priority
Preferred share class "A"			209,824	209,902	205,013	205,013
Preferred share class "A" potentially convertible				179		188
(the ratio of 2 shares class "B" for each share class "A")
Preferred share class "B"			358		375
			210,182	210,081	205,389	205,201

Distribution of 6% of the unit value of common shares			272,411	272,512	114,872	114,872

Distribution of plus income, by class:
Common shares			738,859	738,553	28,947	28,999
Preferred shares class "A"			673,857	673,577	49,284	49,373
Preferred share class "A" potentially convertible				586		45
(the ratio of 2 shares class "B" for each share class "A")
	(525,142)	(525,142)	1,412,716	1,412,716	78,230	78,418

Reconciliation of income available for distribution, by class (numerator):
Common shares	(297,186)	(297,076)	1,011,270	1,011,065	143,819	143,871
Preferred shares class "A"	(227,956)	(227,871)	883,681	883,479	254,297	254,387
Preferred share class "A" potentially convertible		(195)		765		233
(the ratio of 2 shares class "B" for each share class "A")
	(525,142)	(525,142)	1,894,951	1,895,309	398,116	398,491

Weighted average number of shares, by class (denominator):
Common shares	451,668,652	451,668,652	374,037,573	374,037,573	190,462,446	190,462,446
Preferred shares class "A"	346,451,489	346,451,489	341,130,775	341,130,775	324,273,452	324,273,452
Preferred share class "A" potentially convertible
(the ratio of 2 shares class "B" for each share class "A")		296,909		296,909		296,909
	798,120,141	798,417,050	715,168,348	715,465,257	514,735,898	515,032,807

Earnings (loss) per share (in R$)
Common shares	(0.6580)	(0.6577)	2.7037	2.7031	0.7551	0.7554
Preferred shares class "A"	(0.6580)	(0.6577)	2.5904	2.5898	0.7842	0.7845

104

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

31 Net sales revenue

		2011	2010	2009
Sales revenue
	Domestic market	25,672,589	22,700,555	15,277,311
	Foreign market	14,143,107	8,846,057	4,427,658
		39,815,696	31,546,612	19,704,969
Sales deductions
	Taxes	(6,403,057)	(5,897,653)	(3,452,762)
	Sales returns and other	(236,479)	(154,142)	(116,137)
		(6,639,536)	(6,051,795)	(3,568,899)

Net sales revenue		33,176,160	25,494,817	16,136,070

32 Tax incentives

(a) SUDENE – Income Tax

Until calendar year 2011, the Company has the right to reduce by 75% the income tax on the profit arising from the sale of basic petrochemical products and utilities produced in the Camaçari plant. The same rights apply to the three Camaçari polyethylene plants and polypropylene plant until calendar years 2011, 2012, 2013 and 2016 and to the Camaçari and Marechal Deodoro (state of Alagoas) PVC plants until 2013 and 2019, respectively.

Productions of caustic soda, chloride, ethylene dichloride and caprolactam enjoy the benefit of a 75% decrease in the income tax rate until 2012.

(b) PRODESIN - ICMS

The Company has ICMS tax incentives granted by the state of Alagoas, through the state of Alagoas Integrated Development Program - PRODESIN. These incentives are aimed at the implementation and expansion of a plant in that state and are recorded in the account “net sales revenue” in the income statement and in the account “taxes” of Note 31. In 2011, the amount of this incentive was R$ 22,683 (2010 – R$ 19,010).

(c) REINTEGRA – federal taxes

On December 14, 2011, Federal Law No. 12,546 was approved, converted from the Provisional Measure No. 540, which, among other provisions, created the program called “REINTEGRA”, aimed at the refund to exporting companies the federal taxes levied on their production chain of goods sold abroad. The refund is equivalent to 3% of the amount of export revenues and will be performed through the reimbursement in cash or of credit for offset against the federal taxes due. This program will be valid for export sales until December 31, 2012.

In December 2011, first month of effectiveness of REINTEGRA, the Company determined a credit of R$ 17,924, which is presented in the account “net sales revenue”, in the income statement and in the account “taxes” of Note 31.

105

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

33 Other operating income (expenses), net

On December 31, 2011, this account includes:

(i) loss of property, plant and equipment items and investment amounting to R$ 89,702, R$ 52,605 of which refers to the disposal of assets in the period of tests of the green PE plant;

(ii) depreciation of dormant plants, amounting to R$ 20,702.

34 Financial results

		2011	2010	2009
Financial income
	Interest income	268,005	267,357	182,363
	Monetary variations	59,100	85,853	58,966
	Exchange rate variations	423,299	(12,140)	(687,069)
	Other	18,937	28,356	114,410
		769,341	369,426	(331,330)

Financial expenses
	Interest expenses	(990,142)	(894,313)	(640,343)
	Monetary variations	(301,179)	(327,263)	(205,272)
	Exchange rate variations	(1,659,839)	464,608	2,922,947
	Update of tax and labor debts	(235,769)	(333,238)	(963,425)
	Tax expenses on finacial operations	(15,640)	(30,987)	(33,363)
	Discounts granted	(46,756)	(37,672)	(142,871)
	Loans transaction costs - amortization	(21,159)	(50,514)	(13,102)
	Adjustment to present value - appropriation	(60,353)	(162,104)	(141,789)
	Other	(243,403)	(325,466)	(97,343)
		(3,574,240)	(1,696,949)	685,439

	Total	(2,804,899)	(1,327,523)	354,109

	2011	2010	2009
Interest income
Available for sale		4,437	7,106
Held-for-trading	106,775	193,094	127,924
Loans and receivables	96,737	49,025	33,181
Held-to-maturity	16,636	8,185	6,041
	220,148	254,741	174,252
Other assets not classifiable	47,857	12,616	8,111
Total	268,005	267,357	182,363

106

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

35 Expenses by nature

The Company chose to present its expenses by function in the income statement. As required by IAS 1, the breakdown of expenses by nature is presented below:

		2011	2010	2009
Classification by nature:
	Raw materials other inputs	(25,198,575)	(18,059,704)	(10,900,495)
	Personnel expenses	(1,576,192)	(1,273,617)	(1,007,702)
	Outsourced services	(838,652)	(694,487)	(534,351)
	Tax expenses	(54,775)	(60,222)	(23,005)
	Depreciation, amortization and depletion	(1,683,175)	(1,606,354)	(1,038,061)
	Variable selling expenses	(508,065)	(449,459)	(377,800)
	Freights	(993,428)	(786,353)	(710,604)
	Other expenses	(414,027)	(249,250)	(248,689)
	Total	(31,266,889)	(23,179,446)	(14,840,707)

Classification by function:
	Cost of products sold	(29,317,951)	(21,411,775)	(13,529,696)
	Selling	(343,655)	(383,454)	(298,847)
	Distribution	(480,532)	(335,510)	(300,735)
	General and administrative	(1,025,668)	(969,929)	(648,310)
	Research and development	(99,083)	(78,778)	(63,119)
	Total	(31,266,889)	(23,179,446)	(14,840,707)

107

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

36 Segment information

The Company’s management determined Braskem’s operating structure based on the type of business and on the main products, markets, and production processes and identified five operating and reportable segments, four of which are production segments and one is a distribution segment. The information on the operating segments presented is that sent to the Chief Executive Officer, who is the main responsible for the Company’s decision making and allocation of funds.

On December 31, 2011, Braskem’s organizational structure comprises the following segments:

· Basic petrochemicals

This segment comprises the activities related to the production of basic petrochemicals and the supply of electric energy, steam and compressed air to second-generation producers located in the Camaçari, Triunfo, Capuava and Duque de Caxias petrochemical complexes.

· Polyolefins

This segment comprises the activities related to the production of polyethylene and polypropylene.

· Vinyls

This segment comprises the activities related to the production of PVC, caustic soda and chloride.

· Foreign businesses

This segment comprises the activities related to the production of polyethylene in the United States and Germany and Green polyethylene in Brazil. This segment was created on April 1, 2010 as a result of the acquisition of the petrochemical assets from Sunoco Chemicals, as disclosed in Note 5.3. Since October 2011, the results of the plants acquired from Dow Chemical have been added to the results of this segment, as disclosed in Note 5.5.

· Chemical distribution

This segment mainly comprises the activities related to distribution of solvents from oil, chemical intermediaries, specialty chemicals and pharmaceutical products of the subsidiary Quantiq.

· Segment restructuring

In February 2011, CADE approved the operation for the acquisition and integration of Quattor’s assets, which made possible the change in the Company’s organizational structure as from 2011. The change in relation to the previous structure, presented in the Company’s 2010 annual financial statements, in Note 28, is in the distribution of Quattor’s activities among the Basic petrochemicals and Polyolefins units. The 2010 information below was reclassified to allow comparability with the results for 2011.

Additionally, the Foreign business segment was presented as PP Americas in the financial statements for 2010.

108

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

The Company retrospectively reviews the segment information for the periods presented and evaluates and manages their performance based on the information generated from the accounting records kept in accordance with IFRS, and which are reflected in the consolidated financial statements.

The eliminations stated in the operating segment information, when compared with the consolidated balances disclosed in accordance with IFRS, are represented by sales between segments that are carried out as arm’s length sales. The reclassifications are represented mainly by results arising from the provision of services that are presented as “other operating income (expenses), net” by operating segment, and as “net sales revenue” in the consolidated financial statements.

The complete results of the subsidiaries Cetrel and Braskem Idesa and the proportional results of the jointly-controlled subsidiaries Propilsur, Polimérica and RPR are presented in Other segments.

The results of equity investments recognized in the Company’s income statement are presented in Corporate unit.

The operating segments are stated based on the results of operations, which does not include financial results, and current and deferred income tax and social contribution expenses.

In 2011 and 2010, the Company does not have any revenue arising from transactions with only one customer that is equal or superior to 10% of its total net revenues. In 2011, the most representative revenue arising from only one customer amounts to approximately 5% of total net revenue of the Company and refers to the Basic petrochemical segment.

The Company does not disclose assets per segment since this information is not presented to its chief operating decision maker.

109

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(a) Results of operations by segment

	2011
	Reporting segments					Total			Braskem
	Basic			International	Chemical	reportable	Other	Corporate	consolidated	Reclassifications/	Braskem
	petrochemicals	Polyolefins	Vinyls	business	distribution	segments	segments	unit	before adjustments	Eliminations	consolidated

Net sales revenue	23,080,909	12,710,687	1,730,894	3,427,487	774,923	41,724,900	270,522		41,995,422	(8,819,262)	33,176,160
Cost of products sold	(20,874,367)	(11,589,552)	(1,608,055)	(3,276,353)	(631,552)	(37,979,879)	(216,116)		(38,195,995)	8,878,044	(29,317,951)
Gross profit	2,206,542	1,121,135	122,839	151,134	143,371	3,745,021	54,406		3,799,427	58,782	3,858,209

Operating expenses
Selling, general and distribution expenses	(564,536)	(818,528)	(146,357)	(145,396)	(93,601)	(1,768,418)	(74,304)	(7,133)	(1,849,855)		(1,849,855)
Results from equity investments								(1,419)	(1,419)		(1,419)
Other operating income (expenses), net	(10,692)	15,070	(32,126)	(21,035)	7,007	(41,776)	40,349	(75,603)	(77,030)		(77,030)
	(575,228)	(803,458)	(178,483)	(166,431)	(86,594)	(1,810,194)	(33,955)	(84,155)	(1,928,304)		(1,928,304)

Operating profit (loss)	1,631,314	317,677	(55,644)	(15,297)	56,777	1,934,827	20,451	(84,155)	1,871,123	58,782	1,929,905

											2010
	Reporting segments					Total			Braskem
	Basic			International	Chemical	reportable	Other	Corporate	consolidated	Reclassifications/	Braskem
	petrochemicals	Polyolefins	Vinyls	business	distribution	segments	segments	unit	before adjustments	Eliminations	consolidated

Net sales revenue	17,794,560	11,386,539	1,799,335	1,697,843	777,923	33,456,200	548,246		34,004,446	(8,509,629)	25,494,817
Cost of products sold	(15,516,979)	(9,880,799)	(1,605,930)	(1,558,042)	(658,464)	(29,220,214)	(450,333)		(29,670,547)	8,258,772	(21,411,775)
Gross profit	2,277,581	1,505,740	193,405	139,801	119,459	4,235,986	97,913		4,333,899	(250,857)	4,083,042

Operating expenses
Selling, general and distribution expenses	(580,008)	(645,263)	(140,981)	(66,966)	(87,106)	(1,520,324)	(77,036)	(91,533)	(1,688,893)		(1,688,893)
Results from equity investments								20,302	20,302		20,302
Results from business combinations								975,283	975,283		975,283
Other operating income (expenses)	(49,511)	(20,129)	33	(20,430)	2,737	(87,300)	(258)	(87,215)	(174,773)		(174,773)
	(629,519)	(665,392)	(140,948)	(87,396)	(84,369)	(1,607,624)	(77,294)	816,837	(868,081)		(868,081)

Operating profit (loss)	1,648,062	840,348	52,457	52,405	35,090	2,628,362	20,619	816,837	3,465,818	(250,857)	3,214,961

110

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

	2009
	Reporting segments				Total			Braskem
	Basic			Chemical	reportable	Other	Corporate	consolidated	Reclassifications/	Braskem
	petrochemicals	Polyolefins	Vinyls	distribution	segments	segments	unit	before adjustments	Eliminations	consolidated

Net sales revenue	11,325,387	7,412,389	1,613,377	567,163	20,918,316	551,839		21,470,155	(5,334,085)	16,136,070
Cost of products sold	(9,861,077)	(6,674,781)	(1,580,557)	(488,479)	(18,604,894)	(491,208)		(19,096,102)	5,566,406	(13,529,696)
Gross profit	1,464,310	737,608	32,820	78,684	2,313,422	60,631		2,374,053	232,321	2,606,374

Operating expenses
Selling, general and distribution expenses	(379,221)	(583,718)	(153,813)	(60,498)	(1,177,250)	(60,459)	(10,183)	(1,247,892)		(1,247,892)
Results from equity investments							3,188	3,188		3,188
Gain on business combination							102,051	102,051		102,051
Other operating income (expenses), net	61,256	6,343	13,564	1,298	82,461	2,228	(144,103)	(59,414)		(59,414)
	(317,965)	(577,375)	(140,249)	(59,200)	(1,094,789)	(58,231)	(49,047)	(1,202,067)		(1,202,067)

Operating profit (loss)	1,146,345	160,233	(107,429)	19,484	1,218,633	2,400	(49,047)	1,171,986	232,321	1,404,307

(b) Net sales revenue per country

	Net sales revenue
	2011	2010	2009

Headquarter - Brazil	19,033,053	16,648,760	12,711,161
United States	5,032,359	3,251,863	848,346
Switzerland	2,574,025	999,932	347,811
Argentina	1,058,825	1,243,790	544,621
Netherlands	862,310	413,148	200,891
Mexico	765,834	284,985	196,660
Barbados	742,183	531,833	60,942
United Kingdom	434,930	376,652	165,925
Spain	309,616	50,435	50,897
Colombia	302,180	304,466	108,149
Uruguay	225,832	108,656	71,650
Chile	183,715	116,084	86,183
Italy	159,084	42,425	38,652
Germany	134,363	655	4,885
Portugal	106,463	45,923	46,828
Singapore	90,206	141,558	186,102
Paraguay	88,011	62,592	49,221
China	85,482	40,598	65,435
Bolivia	75,482	44,625	38,482
Belgium	34,272		11,920
Turkey		7,410
Other	877,935	778,427	301,309
	33,176,160	25,494,817	16,136,070

111

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

(c) Net sales revenue per product

	Net sales revenue per product
	2011	2010	2009

PE/PP	15,994,515	13,084,382	7,136,641
Naphtha, condensate and crude oil	4,356,086	1,966,242	839,923
Ethylene, Propylene	2,237,711	1,956,721	1,481,487
Benzene, toluene and xylene	2,014,110	1,872,807	1,492,994
PVC/Caustic Soda/EDC	1,730,894	1,799,335	1,560,894
ETBE/Gasoline	1,557,080	1,285,521	944,127
Butadiene	1,547,222	1,016,795	437,181
Chemical distribution	774,923	777,923	567,163
Cumene	690,170	391,966
Solvents	274,991	284,761	209,850
Other	1,998,458	1,058,364	1,465,810
	33,176,160	25,494,817	16,136,070

112

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

37 Insurance coverage

Braskem, according to the policy approved by the Board of Directors, maintains a broad risk and insurance management program. Specifically in the risk management area, the risk and procedure assessment practices are applied in all companies, in Brazil and abroad, including the acquisition for the period, following the principles adopted by Braskem.

On March 30, 2011, Riopol’s assets were included in Braskem’s insurance program.

In October 2011, the entire All Risks program of Braskem was renewed and the polypropylene operations acquired from Dow Chemical were included in the insurance program of the “Foreign Businesses” segment.

The all-risk insurance policies of Braskem, which include all assets in Brazil and abroad, have maximum indemnity limits established based on the amounts of maximum possible loss that are deemed sufficient to cover possible claims in view of the nature of the Company’s activities and based on the guidance of its insurance consultants.

The information on the all-risk policies in effect is presented below:

		Effectiveness	Maximum indemnity limit	Amount insured
	Maturity	(in days)	US$ million	US$ million

Braskem	April 8, 2013	548	2,000	27,340
Braskem America and Braskem Alemanha	September 30, 2012	366	500	2,438
Quantiq	May 30, 2012	366	55	79
Total				29,857

Additionally, the Company contracted civil liability, transportation, sundry risk and vehicle insurance. The risk assumptions adopted are not part of the audit scope and, therefore, were not subject to review by our independent accountants.

113

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

38 Changes in investments in subsidiaries and associates – cash flow - 2010

(a) 2011

Due to the consolidation of Cetrel as from 2011, the balance of cash and cash equivalents presented in the consolidated statement of cash flows for the beginning of the period (January 1, 2011) was increased by the amount of R$ 73,805, which corresponds to the amount of cash and cash equivalents of Cetrel on that date.

(b) 2010

		Amount	Cash	Net
Acquired companies	Note	paid	acquired	Amount
Quattor (consolidated)	1 (b.1 (iv))	(659,454)	413,847	(245,607)
PP America	1 (b.2)	(620,837)		(620,837)
Unipar Comercial	1 (b.1 (v))	(27,104)	1,857	(25,247)
Polibutenos	1 (b.1 (v))	(44,844)	2,479	(42,365)
Cetrel		(5,371)		(5,371)
		(1,357,610)	418,183	(939,427)

Operations related to investments that did not affect cash in 2010

(i) Acquisition of 15% of Riopol’s capital from BNDESPAR with payment in installments (Note 18).

(ii) Merger of shares corresponding to 9.02% of Riopol’s capital by means of the delivery of Braskem shares.

(iii) Acquisition of shares of Quattor Petroquímica by means of the delivery of Braskem shares.

(iv) Merger of shares corresponding to 40% of Quattor’s capital by means of the delivery of Braskem shares to Petrobras.

114

Braskem S.A.

Notes to the financial statements

at December 31, 2011

All amounts in thousands of reais unless otherwise stated

39 Subsequent events

(a) Partial spin-off of BRK and merger of Petroquisa

On January 27, 2012, the controlling shareholder of Braskem was proportionally spun-off. In this spin-off, part of the shares issued by Braskem and which were held by BRK were delivered to Petrobras. BRK became a wholly-owned subsidiary of OSP and kept the shares that are equivalent to 50.11% and 28.23% of the voting and total capital of Braskem, respectively. On the same date, the merger of Petroquisa into Petrobras was approved and Petrobras became the holder of 47.03% and 35.95% of the voting and total capital of Braskem.

(b) On February 8, 2012, CADE approved the acquisition by Braskem of the units acquired from Dow Chemical located in the United States and Germany (Note 5.5).

(c) On February 28, 2012, the Extraordinary General Shareholders’ Meeting approved the merger of Ideom into the Company.

(b) Braskem completed the following issues of bonds: (i) US$ 250 million, on February 2, 2012, related to the additional issue to the issue Braskem Finance performed in April 2011 in the amount of US$ 750 million (Note 19(a)); and (ii) US$ 250 million on February 14, 2012, related to the additional issue to the issue of perpetual bonds Braskem Finance performed in October 2010, in the amount of US$ 700 million (Note 19(a)).

115

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 15, 2012

BRASKEM S.A.


By:	/s/ Marcela Aparecida Drehmer Andrade

	Name:	Marcela Aparecida Drehmer Andrade
	Title:	Chief Financial Officer

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.