Dow Chemical 2011 Annual Report Download - page 159

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as they are recognized in the market-related value of assets and are a component of the total net loss of $8,335 million for
2011 shown under “Pretax amounts recognized in AOCI at December 31” in the table entitled “Change in Projected
Benefit Obligations, Plan Assets and Funded Status of All Significant Plans” included in Note Q to the Consolidated
Financial Statements. The other $7,739 million of net losses represents cumulative changes in plan experience and
actuarial assumptions. The net decrease or increase in the market-related value of assets due to the recognition of prior
gains and losses is presented in the following table:
Net Decrease (Increase) in Market-Related Asset
Value Due to Recognition of Prior Gains and Losses
In millions
2012
2013
2014
2015
Total
$ 710
(186)
(12)
84
$ 596
Based on the 2012 pension assumptions and the changes in the market-related value of assets due to the recognition of
prior asset losses, the Company expects net periodic benefit costs to increase by approximately $220 million for all
pension and other postretirement benefits in 2012 compared with 2011.
A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s total
pension expense for 2012 by $41 million. A 25 basis point increase or decrease in the discount rate assumption would
change the Company’s total pension expense for 2012 by $51 million. A 25 basis point change in the long-term return and
discount rate assumptions would have an immaterial impact on the other postretirement benefit expense for 2012.
Income Taxes
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax
bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are
expected to reverse. Based on the evaluation of available evidence, both positive and negative, the Company recognizes
future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these
benefits is considered to be more likely than not.
At December 31, 2011, the Company had a net deferred tax asset balance of $1,810 million, after valuation allowances
of $1,152 million.
In evaluating the ability to realize the deferred tax assets, the Company relies on, in order of increasing subjectivity,
taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning
strategies and forecasted taxable income using historical and projected future operating results.
At December 31, 2011, the Company had deferred tax assets for tax loss and tax credit carryforwards of
$2,294 million, $56 million of which is subject to expiration in the years 2012-2016. In order to realize these deferred tax
assets for tax loss and tax credit carryforwards, the Company needs taxable income of approximately $5,980 million across
multiple jurisdictions. The taxable income needed to realize the deferred tax assets for tax loss and tax credit carryforwards
that are subject to expiration between 2012-2016 is approximately $673 million.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely
than not, based on technical merits, that the position will be sustained upon examination. At December 31, 2011, the
Company had uncertain tax positions for both domestic and foreign issues of $348 million.
The Company accrues for non-income tax contingencies when it is probable that a liability to a taxing authority has
been incurred and the amount of the contingency can be reasonably estimated. At December 31, 2011, the Company had a
non-income tax contingency reserve for both domestic and foreign issues of $134 million.
For additional information, see Notes A and X to the Consolidated Financial Statements.