Dow Chemical 2011 Annual Report Download - page 156

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Union Carbide’s receivable for insurance recoveries related to its asbestos liability was $40 million at December 31,
2011. At December 31, 2011, all of the receivable for insurance recoveries was related to insurers that are not signatories to
the Wellington Agreement and/or do not otherwise have agreements in place regarding their asbestos-related insurance
coverage.
The amounts recorded by Union Carbide for the asbestos-related liability and related insurance receivable were based
upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year,
the average cost of disposing of each such claim, coverage issues among insurers, and the continuing solvency of various
insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could
cause the actual costs and insurance recoveries for Union Carbide to be higher or lower than those projected or those
recorded.
For additional information, see Part I, Item 3. Legal Proceedings; Asbestos-Related Matters of Union Carbide
Corporation in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and Note N to
the Consolidated Financial Statements.
Environmental Matters
The Company determines the costs of environmental remediation of its facilities and formerly owned facilities based on
evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due to
unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and
emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress, or as
additional technical or legal information becomes available. In the case of landfills and other active waste management
facilities, Dow recognizes the costs over the useful life of the facility. At December 31, 2011, the Company had accrued
obligations of $733 million for probable environmental remediation and restoration costs, including $69 million for the
remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with
respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the
ultimate cost with respect to these particular matters could range up to approximately twice that amount. The Company had
accrued obligations of $607 million at December 31, 2010 for probable environmental remediation and restoration costs,
including $59 million for the remediation of Superfund sites. For further discussion, see Environmental Matters in
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes A and N to the
Consolidated Financial Statements.
Goodwill
The Company assesses goodwill recoverability through business financial performance reviews, enterprise valuation
analysis, and impairment tests.
Annual goodwill impairment tests are completed during the Company’s fourth quarter of the year in accordance with
the measurement provisions of the accounting guidance for goodwill. The tests are performed at the reporting unit level
which is defined as one level below operating segment with the exception of Agricultural Sciences, which is both an
operating segment and a reporting unit. Reporting units are the level at which discrete financial information is available
and reviewed by business management on a regular basis. The Company has defined six operating segments and
28 reporting units, and goodwill is carried by 20 of these reporting units.
In addition to the annual goodwill impairment tests, the Company reviews the financial performance of its reporting
units over the course of the year to assess whether circumstances have changed that would more likely than not indicate
that the fair value of a reporting unit has declined below its carrying value. In cases where an indication of impairment is
determined to exist, the Company completes an interim goodwill impairment test specifically for that reporting unit.
In 2011, the Company early adopted Accounting Standards Update (“ASU”) 2011-08, “Intangibles-Goodwill and
Other (Topic 350): Testing Goodwill for Impairment.” As permitted by this new guidance, the Company first assesses
qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value amount and as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test. Qualitative factors assessed for the Company included, but were not limited to, GDP growth rates, long-term
hydrocarbon and energy prices, equity and credit market activity, discount rates, foreign exchange rates and overall
financial performance. Qualitative factors assessed for each of the reporting units carrying goodwill included, but were not
limited to, changes in industry and market structure, competitive environments, planned capacity and new product
launches, cost factors such as raw material prices, and financial performance of the reporting unit. If the initial assessment
indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional
quantitative testing is required.