Dow Chemical 2009 Annual Report Download - page 167

Table of Contents
For pension or other post retirement benefit plan assets classified as Level 1 (measured using quoted prices in active markets), the total fair value is either
the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded
on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
For pension or other post retirement benefit plan assets classified as Level 2, the fair value is based on the price a dealer would pay for the security or
similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well established and recognized vendors of market
data and subjected to tolerance/quality checks. For derivative assets and liabilities, the fair value is calculated using standard industry models used to
calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices,
swap rates, interest rates and implied volatilities obtained from various market sources.
For all other pension or other post retirement benefit plan assets for which observable inputs are used, fair value is derived through the use of fair value
models, such as a discounted cash flow model or other standard pricing models.
For pension or other post retirement benefit plan assets classified as Level 3, the total fair value is based on significant unobservable inputs including
assumptions where there is little, if any, market activity for the investment. Investment managers or fund managers provide valuations of the investment on a
monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments
to valuations are made where appropriate. Where available, audited financial statements are obtained and reviewed for the investments as support for the
manager’s investment valuation.
The following table summarizes the changes in fair value of Level 3 pension plan assets for the year ended December 31, 2009:
Fair Value Measurement of Level 3
Pension Plan Assets
In millions Equity Securities
Fixed Income
Securities
Alternative
Investments Other Securities Total
Balance at January 1, 2009 $ 3 $ 28 $ 1,242 $ 20 $ 1,293
Acquisitions and divestitures - 44 257 20 321
Actual return on plan assets:
Relating to assets sold during 2009 (16) (6) (23) - (45)
Relating to assets held at Dec. 31,
2009 16 13 (121) 2 (90)
Purchases, sales and settlements (3) (29) 99 1 68
Foreign currency impact - - 4 - 4
Balance at December 31, 2009 - $ 50 $ 1,458 $ 43 $ 1,551
The following table summarizes the bases used to measure the Company’s other postretirement benefit plan assets at fair value:
Basis of Fair Value Measurements of Other
Postretirement Benefit Plan Assets at
December 31, 2009
In millions
Quoted Prices in
Active Markets
for Identical
Items
(Level 1)
Significant Other
Observable Inputs
(Level 2) Total
Cash and cash equivalents - $ 74 $ 74
Equity securities (1) $ 82 - 82
Fixed income securities 3 208 211
Total assets at fair value $ 85 $ 282 $ 367
(1) Includes no common stock of the Company.
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