Dow Chemical 2009 Annual Report Download - page 119

Table of Contents
Legal Costs
The Company expenses legal costs, including those legal costs expected to be incurred in connection with a loss contingency, as incurred.
Severance Costs
The Company routinely reviews its operations around the world in an effort to ensure competitiveness across its businesses and geographic areas. When the
reviews result in a workforce reduction related to the shutdown of facilities or other optimization activities, severance benefits are provided to employees
primarily under Dow’s ongoing benefit arrangements. These severance costs are accrued under the guidance of ASC Topic 712, “Compensation –
Nonretirement Postemployment Benefits,” once management commits to a plan of termination including the number of employees to be terminated, their job
classifications or functions, their locations and the expected completion date.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates. The effect of a
change in tax rates on deferred tax assets is recognized in income in the period that includes the enactment date.
Annual tax provisions include amounts considered sufficient to pay assessments that may result from examinations of prior year tax returns; however,
the amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits,
that the position will be sustained upon examination. The Company accrues for other 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. The current portion of uncertain income tax positions is included in
“Income taxes payable” and the long-term portion is included in “Other noncurrent obligations” in the consolidated balance sheets.
Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be
permanently invested.
Earnings per Common Share
The calculation of earnings per common share is based on the weighted-average number of the Company’s common shares outstanding for the applicable
period. The calculation of diluted earnings per common share reflects the effect of all potential dilutive common shares that were outstanding during the
respective periods, unless the effect of doing so is antidilutive.
NOTE B – RECENT ACCOUNTING GUIDANCE
Accounting Standards Codification
On July 1, 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™ (“Codification” or “ASC”) became the single
source of authoritative U.S. GAAP (other than rules and interpretive releases of the U.S. Securities and Exchange Commission). The Codification is topically
based with topics organized by ASC number and updated with Accounting Standards Updates (“ASUs”). ASUs replace accounting guidance that was
historically issued as Statements of Financial Accounting Standards (“SFAS”), FASB Interpretations (“FIN”), FASB Staff Positions (“FSP”), Emerging Issue
Task Force (“EITF”) Abstracts and other types of accounting standards. The Codification became effective September 30, 2009 for the Company, and
disclosures within this Annual Report on Form 10-K have been updated to reflect the change.
Accounting for Noncontrolling Interests
SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (codified in ASC Topic 810,
“Consolidation”), was effective January 1, 2009 for the Company, and established accounting and reporting standards for
noncontrolling interests in a subsidiary and for deconsolidation of a subsidiary. The retrospective presentation and
disclosure requirements outlined by the consolidation guidance have been incorporated into this Annual Report on
Form 10-K.
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