Dow Chemical 2013 Annual Report Download - page 83

61
remain to be recognized in the calculation of the market-related value of plan assets. These net gains will result in
decreases in future pension expense as they are recognized in the market-related value of assets. The increase in the
market-related value of assets due to the recognition of prior gains is presented in the following table:
Increase in Market-Related Asset Value Due to
Recognition of Prior Gains
In millions
2014 $ 202
2015 107
2016 191
2017 55
Total $ 555
Based on the 2014 pension assumptions, the Company expects net periodic benefit costs to decrease by approximately
$360 million for all pension and other postretirement benefits in 2014 compared with 2013. The decrease in net
periodic benefit costs is primarily due to higher discount rates.
A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s total
pension expense for 2014 by $45 million. A 25 basis point increase in the discount rate assumption would lower the
Company's total pension expense for 2014 by $62 million. A 25 basis point decrease in the discount rate assumption
would increase the Company's total pension expense for 2014 by $54 million. A 25 basis point change in the long-term
return and discount rate assumptions would have an immaterial impact on the other postretirement benefit expense for
2014.
Income Taxes
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and
tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the
differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, the
Company recognizes future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the
extent that realizing these benefits is considered to be more likely than not.
At December 31, 2013, the Company had a net deferred tax asset balance of $1,856 million, after valuation allowances
of $1,112 million.
In evaluating the ability to realize the deferred tax assets, the Company relies on, in order of increasing subjectivity,
taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning
strategies and forecasted taxable income using historical and projected future operating results.
At December 31, 2013, the Company had deferred tax assets for tax loss and tax credit carryforwards of
$2,012 million, $182 million of which is subject to expiration in the years 2014-2018. In order to realize these deferred
tax assets for tax loss and tax credit carryforwards, the Company needs taxable income of approximately $19,408
million across multiple jurisdictions. The taxable income needed to realize the deferred tax assets for tax loss and tax
credit carryforwards that are subject to expiration between 2014-2018 is approximately $3,358 million.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely
than not, based on technical merits, that the position will be sustained upon examination. At December 31, 2013, the
Company had uncertain tax positions for both domestic and foreign issues of $266 million.
The Company accrues for non-income tax contingencies when it is probable that a liability to a taxing authority has
been incurred and the amount of the contingency can be reasonably estimated. At December 31, 2013, the Company
had a non-income tax contingency reserve for both domestic and foreign issues of $105 million.
For additional information, see Notes 1 and 22 to the Consolidated Financial Statements.