Dow Chemical 2009 Annual Report Download - page 157

Table of Contents
Residual Value Guarantees
The Company provides guarantees related to leased assets specifying the residual value that will be available to the lessor at lease termination through sale of
the assets to the lessee or third parties.
The following tables provide a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance
sheets for each type of guarantee:
Guarantees at December 31, 2009
In millions Final Expiration
Maximum Future
Payments Recorded Liability
Guarantees 2020 $ 358 $ 52
Residual value guarantees 2014 695 5
Total guarantees $ 1,053 $ 57
Guarantees at December 31, 2008
In millions Final Expiration
Maximum Future
Payments Recorded Liability
Guarantees 2014 $ 330 $ 23
Residual value guarantees 2015 985 4
Total guarantees $ 1,315 $ 27
Asset Retirement Obligations
Dow has 214 manufacturing sites in 37 countries. Most of these sites contain numerous individual manufacturing operations, particularly at the Company’s
larger sites. Asset retirement obligations are recorded as incurred and reasonably estimable, including obligations for which the timing and/or method of
settlement are conditional on a future event that may or may not be within the control of the Company. The retirement of assets may involve such efforts as
remediation and treatment of asbestos, contractually required demolition, and other related activities, depending on the nature and location of the assets, and
retirement obligations are typically realized only upon demolition of those facilities. In identifying asset retirement obligations, the Company considers
identification of legally enforceable obligations, changes in existing law, estimates of potential settlement dates and the calculation of an appropriate discount
rate to be used in calculating the fair value of the obligations. Dow has a well-established global process to identify, approve and track the demolition of retired
or to-be-retired facilities; and no assets are retired from service until this process has been followed. Dow typically forecasts demolition projects based on the
usefulness of the assets; environmental, health and safety concerns; and other similar considerations. Under this process, as demolition projects are identified
and approved, reasonable estimates are determined for the time frames during which any related asset retirement obligations are expected to be settled. For those
assets where a range of potential settlement dates may be reasonably estimated, obligations are recorded. Dow routinely reviews all changes to items under
consideration for demolition to determine if an adjustment to the value of the asset retirement obligation is required.
The Company has recognized asset retirement obligations for the following activities: demolition and remediation activities at manufacturing sites in the
United States, Canada, Brazil and Europe; and capping activities at landfill sites in the United States, Canada, Brazil and Europe. The Company has also
recognized conditional asset retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at
manufacturing and administrative sites in the United States, Canada, Brazil and Europe. The aggregate carrying amount of conditional asset retirement
obligations recognized by the Company (included in the asset retirement obligations balance) was $41 million at December 31, 2009 and 2008.
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