Dow Chemical 2009 Annual Report Download - page 121

Table of Contents
On January 1, 2009, the Company adopted E ITF Issue No. 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (codified in ASC Topic 260, “Earnings Per Share”),
related to whether instruments granted in share-based payment transactions are participating securities prior to
vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-
class method. The guidance affects entities that accrue dividends on share-based payment awards during the
awards’ service period when the dividends are not required to be returned if employees forfeit the award. The
adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
On January 1, 2009, the Company adopted FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies” (codified in ASC Topic 805, “Business
Combinations” and ASC Topic 820). This guidance states that assets acquired and liabilities assumed in a business
combination that arise from contingencies should be recognized at fair value if the acquisition date fair value can be
reasonably determined. If the acquisition date fair value cannot be reasonably determined, then the asset or liability
should be recognized in accordance with ASC Topic 450, “Contingencies” (formerly SFAS No. 5, “Accounting for
Contingencies,” and FIN No. 14, “Reasonable Estimation of the Amount of a Loss - an interpretation of FASB
Statement No. 5”). The FSP also requires new disclosures for the assets and liabilities within the scope of this Topic.
See Note D for disclosures related to a recent business combination.
On June 30, 2009, the Company adopted FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”
(codified in ASC Topic 320, “Investments - Debt and Equity Securities”). This guidance amends the other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity
securities. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
On June 30, 2009, the Company adopted SFAS No. 165, “Subsequent Events” (codified in ASC Topic 855, “Subsequent Events”). This guidance
established the principles and requirements for evaluating and reporting subsequent events, including the period subject to evaluation for subsequent events,
the circumstances requiring recognition of subsequent events in the financial statements, and the required disclosures. The Company has evaluated
subsequent events in accordance with this guidance through the filing of this Annual Report on Form 10-K on February 19, 2010.
On December 31, 2009, the Company adopted FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (codified in
ASC Topic 715, “Compensation - Retirement Benefits”). The FSP requires new disclosures on investment policies and strategies, categories of plan assets,
fair value measurements of plan assets, and significant concentrations of risk. The required disclosures are included in Note P.
Accounting Guidance Issued But Not Adopted as of December 31, 2009
In December 2009, the FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” This
ASU is intended to improve the information provided in financial statements concerning transfers of financial assets, including the effects of transfers on
financial position, financial performance and cash flows, and any continuing involvement of the transferor with the transferred financial assets. This ASU is
effective for the first annual reporting period after November 15, 2009, which is January 1, 2010 for the Company. The Company is evaluating the impact of
adopting the guidance and anticipates that certain sales of accounts receivables, under the terms and conditions in place at December 31, 2009, would be
classified as secured borrowings in the consolidated balance sheets upon adoption. Under these arrangements, $915 million was outstanding at January 1,
2010. The maximum amount of receivables available for participation in these programs was $1,939 million at January 1, 2010; the average monthly
participation in 2009 was approximately $936 million. In January 2010, the Company terminated one of these arrangements and replaced it with a new
arrangement that is expected to qualify for treatment as a sale under ASU 2009-16. Such arrangement related to $294 million of the $915 million outstanding
at January 1, 2010 and $1,100 million of the $1,939 million maximum participation.
In December 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with
Variable Interest Entities,” which amended the consolidation guidance applicable to variable interest entities and required additional disclosures concerning an
enterprise’s continuing involvement with variable interest entities. This ASU is effective for the first annual reporting period after November 15, 2009, which
is January 1, 2010 for the Company. The Company is currently evaluating the impact of adopting the guidance and anticipates that upon adoption the ethylene
facility disclosed as a variable interest entity in Note R will be consolidated by the Company as primary beneficiary. At January 1, 2010, the estimated
obligation on this arrangement was $394 million and the estimated net book value of the asset was approximately $80 million; the difference would be
recognized as a cumulative effect adjustment to retained earnings. The outstanding obligation related to the facility will mature in 2014.
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