Dow Chemical 2012 Annual Report Download - page 87

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A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s total
pension expense for 2013 by $42 million. A 25 basis point increase or decrease in the discount rate assumption would
change the Company’s total pension expense for 2013 by $69 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 2013.
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, 2012, the Company had a net deferred tax asset balance of $3,278 million, after valuation allowances
of $1,399 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, 2012, the Company had deferred tax assets for tax loss and tax credit carryforwards of $1,954
million, $221 million of which is subject to expiration in the years 2013-2017. In order to realize these deferred tax assets
for tax loss and tax credit carryforwards, the Company needs taxable income of approximately $11,103 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 2013-2017 is approximately $1,532 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, 2012, the
Company had uncertain tax positions for both domestic and foreign issues of $409 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, 2012, the Company had a
non-income tax contingency reserve for both domestic and foreign issues of $151 million.
For additional information, see Notes 1 and 22 to the Consolidated Financial Statements.
Environmental Matters
Environmental Policies
Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-
leading performance, a long-standing commitment to Responsible Care®, and a strong commitment to achieve the Company’s
2015 Sustainability Goals – goals that set the standard for sustainability in the chemical industry by focusing on improvements
in Dow’s local corporate citizenship and product stewardship, and by actively pursuing methods to reduce the Company’s
environmental impact.
To meet the Company’s public commitments, as well as the stringent laws and government regulations related to
environmental protection and remediation to which its global operations are subject, Dow has well-defined policies,
requirements and management systems. Dow’s EH&S Management System (“EMS”) defines the “who, what, when and how”
needed for the businesses to achieve the Company’s policies, requirements, performance objectives, leadership expectations
and public commitments. To ensure effective utilization, the EMS is integrated into a company-wide management system for
EH&S, Operations, Quality and Human Resources.
It is Dow’s policy to adhere to a waste management hierarchy that minimizes the impact of wastes and emissions on the
environment. First, Dow works to eliminate or minimize the generation of waste and emissions at the source through research,
process design, plant operations and maintenance. Second, Dow finds ways to reuse and recycle materials. Finally, unusable or
non-recyclable hazardous waste is treated before disposal to eliminate or reduce the hazardous nature and volume of the waste.
Treatment may include destruction by chemical, physical, biological or thermal means. Disposal of waste materials in landfills
is considered only after all other options have been thoroughly evaluated. Dow has specific requirements for waste that is
transferred to non-Dow facilities, including the periodic auditing of these facilities.