Dow Chemical 2009 Annual Report Download - page 133

Table of Contents
Purchased In-Process Research and Development
Purchased in-process research and development (“IPR&D”) represents the value assigned in a business combination to acquired research and development
projects that, as of the date of the acquisition, had not established technological feasibility and had no alternative future use. Prior to January 1, 2009,
amounts assigned to IPR&D meeting these criteria were charged to expense as part of the allocation of the purchase price of the business combination. With the
adoption of ASC Topic 805, “Business Combinations,” on January 1, 2009, IPR&D acquired in a business combination is capitalized and tested for
impairment annually.
The Company recorded pretax charges totaling $7 million in 2009 for IPR&D projects associated with the purchase of technology that was not part of a
business combination. The Company recorded pretax charges totaling $44 million in 2008 and $57 million in 2007 for IPR&D projects associated with
several acquisitions. The estimated values assigned to the IPR&D projects were determined primarily based on a discounted cash flow model and are shown
below:
In-Process Research and Development Projects Acquired
In millions Date of Acquisition
Estimated Value
Assigned to
IPR&D
2009
Lithium ion battery technology purchase October 30, 2009 $ 7
2008
Germplasm from Triumph Seed Co., Inc. February 29, 2008 $ 4
Germplasm from Dairyland Seed Co., Inc. and Bio-Plant Research Ltd. August 29, 2008 23
Germplasm from Südwestsaat GbR December 16, 2008 17
Total 2008 IPR&D $ 44
2007
Germplasm from Maize Technologies International May 1, 2007 $ 2
Manufacturing process R&D from Wolff Walsrode June 30, 2007 7
Germplasm from Agromen Tecnologia Ltda. August 1, 2007 26
Germplasm from Duo Maize August 30, 2007 3
Intellectual property for crop trait discovery from Exelixis Plant Sciences September 4, 2007 19
Total 2007 IPR&D $ 57
The IPR&D charges outlined above are shown as “Purchased in-process research and development charges” in the consolidated statements of income. The
2009 IPR&D charges related to a technology purchase for projects within the Ventures business, impacting Corporate. The 2008 IPR&D charges were related
to projects within the Health and Agricultural Sciences segment. In 2007, IPR&D charges of $50 million related to projects within the Health and Agricultural
Sciences segment; $7 million related to IPR&D acquired from Wolff Walsrode and impacted the results for the Electronic and Specialty Materials segment.
NOTE E – DIVESTITURES
Divestiture of the Rohm and Haas Salt Business
On April 1, 2009, the Company announced the entry into a definitive agreement to sell the stock of Morton International, Inc. (“Morton”), the Salt business of
Rohm and Haas, to K+S Aktiengesellschaft (“K+S”). On October 1, 2009, the Company completed the divestiture of its interest in Morton to K+S and
received net proceeds of $1,576 million, with proceeds subject to customary post-closing adjustments. As a result, the Company recognized a pretax
$37 million gain on the sale in the fourth quarter of 2009, included in “Sundry income –net.” One billion dollars in proceeds from this transaction were used
to pay off the Term Loan Agreement used to fund the acquisition of Rohm and Haas (see Note O). The results of operations for the Salt business were reported
in Corporate and were not material to the consolidated financial statements.
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