Dow Chemical 2012 Annual Report Download - page 115

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Goodwill Impairments
During the fourth quarter of 2012, the Company performed its annual impairment test for goodwill. The Company assessed
qualitative factors for 11 of its 20 reporting units carrying goodwill to determine whether it was more likely than not that the
fair value of each reporting unit was less than its carrying value amount. The 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 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 each reporting unit.
The qualitative assessment indicated that it was more likely than not that the fair value exceeded carrying value for those
reporting units included in the qualitative test. The Company performed the first step of the quantitative testing for the
remaining 9 reporting units. The Company utilized a discounted cash flow methodology to calculate the fair value of the
reporting units. Based on the fair value analysis, management concluded that fair value exceeded carrying value for all
reporting units except Dow Formulated Systems. Management completed the second step of the quantitative test for Dow
Formulated Systems which compared the implied fair value of the reporting unit's goodwill to the carrying value. As a result,
the Company recorded an impairment loss of $220 million in the fourth quarter of 2012, which is included in "Goodwill
impairment loss" in the consolidated statements of income and reflected in the Performance Materials segment. The goodwill
impairment loss represents the total amount of goodwill carried by the Dow Formulated Systems reporting unit.
During the fourth quarter of 2011, the Company performed its annual impairment test for goodwill. The Company assessed
qualitative factors to determine whether it was more likely than not that the fair value of each reporting unit was less than its
carrying value amount. The 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 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 each reporting unit. The qualitative assessment indicated that it was more likely
than not that the fair value of each reporting unit exceeded its carrying value. Additional quantitative testing was not required
for any of the Company's reporting units.
During the fourth quarter of 2010, the Company performed its annual impairment tests for goodwill. As a result of the
review, it was determined that no goodwill impairments existed.
Other Intangible Assets
The following table provides information regarding the Company’s other intangible assets:
Other Intangible Assets at December 31 2012 2011
In millions
Gross
Carrying
Amount
Accumulated
Amortization Net
Gross
Carrying
Amount
Accumulated
Amortization Net
Intangible assets with finite lives:
Licenses and intellectual property $ 1,729 $ (747) $ 982 $ 1,693 $ (594) $ 1,099
Patents 120 (100) 20 119 (97) 22
Software 1,047 (548) 499 1,049 (596) 453
Trademarks 691 (285) 406 695 (224) 471
Customer related 3,688 (974) 2,714 3,652 (730) 2,922
Other 158 (131) 27 150 (108) 42
Total other intangible assets, finite lives $ 7,433 $ (2,785) $ 4,648 $ 7,358 $ (2,349) $ 5,009
IPR&D (1), indefinite lives 63 — 63 52 — 52
Total other intangible assets $ 7,496 $ (2,785) $ 4,711 $ 7,410 $ (2,349) $ 5,061
(1) In-process research and development ("IPR&D") purchased in a business combination.
The following table provides information regarding amortization expense related to intangible assets:
Amortization Expense
In millions 2012 2011 2010
Other intangible assets, excluding software $ 478 $ 496 $ 509
Software, included in “Cost of sales” $ 63 $ 94 $ 87