Dow Chemical 2012 Annual Report Download - page 124

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There were no transfers between Levels 1 and 2 during the years ended December 31, 2012 and 2011.
For assets classified as Level 3 measurements, the fair value is based on significant unobservable inputs including
assumptions where there is little, if any, market activity. The fair value of the Company’s interests held in trade receivable
conduits is determined by calculating the expected amount of cash to be received using the key input of anticipated credit
losses in the portfolio of receivables sold that have not yet been collected. Given the short-term nature of the underlying
receivables, discount rate and prepayments are not factors in determining the fair value of the interests. See Note 15 for further
information on assets classified as Level 3 measurements.
The following table summarizes the changes in fair value measurements using Level 3 inputs for the years ended
December 31, 2012 and 2011:
Fair Value Measurements Using Level 3 Inputs for
Interests Held in Trade Receivable Conduits (1)
2012 2011
In millions
Balance at January 1 $ 1,141 $ 1,267
Gain included in earnings (2) 83
Purchases 2,558 1,679
Settlements (2,650) (1,808)
Balance at December 31 $ 1,057 $ 1,141
(1) Included in “Accounts and notes receivable – Other” in the consolidated balance
sheets.
(2) Included in "Selling, general and administrative expenses" in the consolidated
statements of income.
Fair Value Measurements on a Nonrecurring Basis
The following table summarizes the basis used to measure certain assets and liabilities at fair value on a nonrecurring basis in
the consolidated balance sheets in 2012:
Basis of Fair Value Measurements
on a Nonrecurring Basis
Significant
Other
Unobservable
Inputs
Total
Losses
In millions (Level 3) 2012
2012
Assets at fair value:
Long-lived assets, other assets and equity method $ 45 $ (693)
Goodwill $ — $ (220)
2011
Assets at fair value:
Long-lived assets, other assets and equity method investments $ — $ (27)
2010
Assets at fair value:
Long-lived assets, other assets and equity method investments $ — $ (75)
2012 Fair Value Measurements on a Nonrecurring Basis
As part of the 1Q12 Restructuring plan that was approved on March 27, 2012, the Company shut down a number of
manufacturing facilities during 2012. The manufacturing assets and facilities associated with this plan were written down to
zero in the first quarter of 2012 and a $94 million impairment charge was included in "Restructuring charges" in the
consolidated statements of income. During the fourth quarter of 2012, the Company reduced the 1Q12 Restructuring reserve by
$4 million. See Note 3 for additional information.
In the second half of 2012, a $27 million asset impairment charge was recognized in the Performance Materials segment.
The assets, classified as Level 3 measurements, were valued at $12 million using unobservable inputs, including assumptions a
market participant would use to measure the fair value of the group of assets.
As part of the 4Q12 Restructuring plan that was approved on October 23, 2012, the Company will shut down a number of
manufacturing facilities during the next two years. The manufacturing assets and facilities associated with this plan were