Dow Chemical 2013 Annual Report Download - page 131

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The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations for the
years ended December 31, 2013 and 2012:
Asset Retirement Obligations
In millions 2013 2012
Balance at January 1 $ 92 $ 88
Additional accruals 5 2
Liabilities settled (2) (6)
Accretion expense 1 1
Revisions in estimated cash flows (8) 7
Other 1 —
Balance at December 31 $ 89 $ 92
The discount rate used to calculate the Company’s asset retirement obligations at December 31, 2013 was 0.88 percent (0.87
percent at December 31, 2012). These obligations are included in the consolidated balance sheets as "Accrued and other current
liabilities" and "Other noncurrent obligations."
The Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated
in its consolidated financial statements. Assets that have not been submitted/reviewed for potential demolition activities are
considered to have continued usefulness and are generally still operating normally. Therefore, without a plan to demolish the
assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes in accordance with the
accounting guidance related to property, plant and equipment, the Company is unable to reasonably forecast a time frame to use
for present value calculations. As such, the Company has not recognized obligations for individual plants/buildings at its
manufacturing sites where estimates of potential settlement dates cannot be reasonably made. In addition, the Company has not
recognized conditional asset retirement obligations for the capping of its approximately 44 underground storage wells and
140 underground brine mining and other wells at Dow-owned sites when there are no plans or expectations of plans to exit the
sites. It is the opinion of the Company’s management that the possibility is remote that such conditional asset retirement
obligations, when estimable, will have a material impact on the Company’s consolidated financial statements based on current
costs.
K-Dow Arbitration
In February 2009, the Company initiated arbitration proceedings against Petrochemical Industries Company (K.S.C.) ("PIC")
alleging that PIC breached the Joint Venture Formation Agreement related to the establishment of K-Dow, a proposed 50:50
global petrochemical joint venture with PIC, by failing to close the transaction. In May 2012, the International Court of
Arbitration of the International Chamber of Commerce ("ICC") awarded the Company $2.161 billion in damages ("Partial
Award"), not including pre- and post-award interest and arbitration costs. On March 4, 2013 the ICC released the Final Award
in the arbitration case covering the Company's claim for pre- and post-award interest and arbitration costs and awarded the
Company $318 million, as of February 28, 2013. On May 6, 2013, the Company and PIC entered into a Deed providing for
payment of the Company's claims against PIC under the K-Dow arbitration. On May 7, 2013, the Company confirmed the
receipt of a $2.195 billion cash payment from PIC, which included the Partial Award of $2.161 billion as well as recovery of
Dow's costs incurred in the arbitration, including legal fees. In addition, Kuwait Petroleum Corporation provided assurances
that no retaliatory or punitive actions would be taken against the Company and its affiliates as a result of the Deed and payment.
In the second quarter of 2013, the Company recorded a pretax gain of $2.195 billion, of which $2.161 billion is included in
"Sundry income (expense) - net" and $34 million is included in "Cost of sales" in the consolidated statements of income and
reflected in Corporate. The K-Dow arbitration is considered final and settled in full.
NOTE 15 – TRANSFERS OF FINANCIAL ASSETS
Sale of Trade Accounts Receivable in North America and Europe
The Company sells trade accounts receivable of select North America entities and qualifying trade accounts receivable of select
European entities on a revolving basis to certain multi-seller commercial paper conduit entities ("conduits"). The Company
maintains servicing responsibilities and the related costs are insignificant. The proceeds received are comprised of cash and
interests in specified assets of the conduits (the receivables sold by the Company) that entitle the Company to the residual cash
flows of such specified assets in the conduits after the commercial paper has been repaid. Neither the conduits nor the investors
in those entities have recourse to other assets of the Company in the event of nonpayment by the debtors.