Dow Chemical 2013 Annual Report Download - page 119

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For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value
models, such as a discounted cash flow model or other standard pricing models. See Note 10 for further information on the
types of instruments used by the Company for risk management.
There were transfers of $4 million between Levels 1 and 2 during the year ended December 31, 2013 and no transfers in the
year ended December 31, 2012.
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,
2013 and 2012:
Fair Value Measurements Using Level 3 Inputs for
Interests Held in Trade Receivable Conduits (1)
2013 2012
In millions
Balance at January 1 $ 1,057 $ 1,141
Gain included in earnings (2) — 8
Purchases 1,198 2,558
Settlements (1,028) (2,650)
Balance at December 31 $ 1,227 $ 1,057
(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 2013, 2012 and 2011:
Basis of Fair Value Measurements
on a Nonrecurring Basis
Significant
Other
Unobservable
Inputs Total
Losses
In millions (Level 3)
2013
Assets at fair value:
Long-lived assets, other assets and equity method investments $ 127 $ (178)
2012
Assets at fair value:
Long-lived assets, other assets and equity method investments $ 45 $ (693)
Goodwill $ — $ (220)
2011
Assets at fair value:
Long-lived assets, other assets and equity method investments $ — $ (27)
2013 Fair Value Measurements on a Nonrecurring Basis
As a result of Dow's announcement of its new market-driven growth strategy, the Company recognized a $178 million asset
impairment charge in the fourth quarter of 2013, including charges for manufacturing plant shutdowns. The charge was
included in "Cost of sales" ($175 million) and "Amortization of intangibles" ($3 million) in the consolidated statements of
income and impacted the following businesses/operating segments: Dow Building and Construction business, part of the
Coatings and Infrastructure Solutions segment ($61 million); Dow Formulated Systems, Dow Plastics Additives and Epoxy
businesses, part of the Performance Materials segment ($36 million); Chlor-Alkali/Chlor-Vinyl, part of the Feedstocks and
Energy segment ($66 million); and Corporate ($15 million).