Dow Chemical 2012 Annual Report Download - page 83

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OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance.
Critical Accounting Policies
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect
the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial
Statements describes the significant accounting policies and methods used in the preparation of the consolidated financial
statements. Following are the Company’s critical accounting policies impacted by judgments, assumptions and estimates:
Litigation
The Company is subject to legal proceedings and claims arising out of the normal course of business. The Company
routinely assesses the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A
determination of the amount of the reserves required, if any, for these contingencies is made after thoughtful analysis of
each known claim. Dow has an active risk management program consisting of numerous insurance policies secured from
many carriers. These policies often provide coverage that is utilized to minimize the financial impact, if any, of the legal
proceedings. The required reserves may change in the future due to new developments in each matter. For further
discussion, see Note 14 to the Consolidated Financial Statements.
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved in a
large number of asbestos-related suits filed primarily in state courts during the past three decades. These suits principally
allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive
damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-
containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed
against a former Union Carbide subsidiary, Amchem Products, Inc. Each year, Analysis, Research and Planning
Corporation ("ARPC") performs a review for Union Carbide based upon historical asbestos claims and resolution activity.
Union Carbide compares current asbestos claim and resolution activity to the results of the most recent ARPC study at
each balance sheet date to determine whether the asbestos-related liability continues to be appropriate.
It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its
asbestos-related claims, including future defense costs, could have a material impact on the Company’s results of
operations and cash flows for a particular period and on the consolidated financial position of the Company.
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 14 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, 2012, the Company had accrued
obligations of $754 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 $733 million at December 31, 2011 for probable environmental remediation and restoration costs,
including $69 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 1 and 14 to the
Consolidated Financial Statements.
Goodwill
The Company assesses goodwill recoverability through business financial performance reviews, enterprise valuation
analysis and impairment tests.