Dow Chemical 2011 Annual Report Download - page 212

118
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, Chile, China, Argentina 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, Chile, China, Argentina and Europe. The aggregate
carrying amount of conditional asset retirement obligations recognized by the Company (included in the asset retirement
obligations balance shown below) was $31 million at December 31, 2011 ($40 million at December 31, 2010).
The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations for
the years ended December 31, 2011 and 2010:
Asset Retirement Obligations
In millions
Balance at January 1
Additional accruals
Liabilities settled
Accretion expense
Revisions in estimated cash flows
Other
Balance at December 31
2011
$ 99
4
(15)
1
—
(1)
$ 88
2010
$ 101
6
(10)
1
1
—
$ 99
The discount rate used to calculate the Company’s asset retirement obligations at December 31, 2011 was 1.96 percent
(1.78 percent at December 31, 2010). These obligations are included in the consolidated balance sheets as “Accrued and other
current liabilities" and "Other noncurrent obligations.”
The Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably
estimated in its consolidated financial statements. Assets that have not been submitted/reviewed for potential demolition
activities are considered to have continued usefulness and are generally still operating normally. Therefore, without a plan to
demolish the assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes in
accordance with the accounting guidance related to property, plant and equipment, the Company is unable to reasonably
forecast a time frame to use for present value calculations. As such, the Company has not recognized obligations for individual
plants/buildings at its manufacturing sites where estimates of potential settlement dates cannot be reasonably made. In addition,
the Company has not recognized conditional asset retirement obligations for the capping of its approximately 64 underground
storage wells and 136 underground brine mining and other wells at Dow-owned sites when there are no plans or expectations of
plans to exit the sites. It is the opinion of the Company’s management that the possibility is remote that such conditional asset
retirement obligations, when estimable, will have a material impact on the Company’s consolidated financial statements based
on current costs.