Dow Chemical 2013 Annual Report Download - page 79

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OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance.
Critical Accounting Policies
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that
affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated
Financial Statements describes the significant accounting policies and methods used in the preparation of the consolidated
financial statements. Following are the Company’s critical accounting policies impacted by judgments, assumptions and
estimates:
Litigation
The Company is subject to legal proceedings and claims arising out of the normal course of business. The Company
routinely assesses the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A
determination of the amount of the reserves required, if any, for these contingencies is made after thoughtful analysis
of each known claim. Dow has an active risk management program consisting of numerous insurance policies secured
from many carriers. These policies often provide coverage that is utilized to minimize the financial impact, if any, of
the legal proceedings. The required reserves may change in the future due to new developments in each matter. For
further discussion, see Note 14 to the Consolidated Financial Statements.
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved
in a large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits
principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both
actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past,
alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s
responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. Each year,
Analysis, Research and Planning Corporation ("ARPC") performs a review for Union Carbide based upon historical
asbestos claims and resolution activity. Union Carbide compares current asbestos claim and resolution activity to the
results of the most recent ARPC study at each balance sheet date to determine whether the asbestos-related liability
continues to be appropriate.
It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its
asbestos-related claims, including future defense costs, could have a material impact on the Company’s results of
operations and cash flows for a particular period and on the consolidated financial position of the Company.
For additional information, see Part I, Item 3. Legal Proceedings; Asbestos-Related Matters of Union Carbide
Corporation in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and Note 14
to the Consolidated Financial Statements.
Environmental Matters
The Company determines the costs of environmental remediation of its facilities and formerly owned facilities based
on evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due
to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and
emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress,
or as additional technical or legal information becomes available. In the case of landfills and other active waste
management facilities, Dow recognizes the costs over the useful life of the facility. At December 31, 2013, the
Company had accrued obligations of $722 million for probable environmental remediation and restoration costs,
including $73 million for the remediation of Superfund sites. This is management’s best estimate of the costs for
remediation and restoration with respect to environmental matters for which the Company has accrued liabilities,
although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to
approximately two and a half times that amount. For further discussion, see Environmental Matters in Management’s
Discussion and Analysis of Financial Condition and Results of Operations and Notes 1 and 14 to the Consolidated
Financial Statements.