Dow Chemical 2013 Annual Report Download - page 132

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During the year ended December 31, 2013, the Company recognized a loss of $17 million on the sale of these receivables
($17 million loss for the year ended December 31, 2012, and $24 million loss for the year ended December 31, 2011), which is
included in “Interest expense and amortization of debt discount” in the consolidated statements of income.
The Company's interests in the conduits are carried at fair value and included in “Accounts and notes receivable – Other” in the
consolidated balance sheets. Fair value of the interests is determined by calculating the expected amount of cash to be received
and is based on unobservable inputs (a Level 3 measurement). The key input in the valuation is the percentage 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 rates and prepayments are not factors in determining the fair value of the interests.
The following table summarizes the carrying value of interests held, which represents the Company's maximum exposure to
loss related to the receivables sold, and the percentage of anticipated credit losses related to the trade accounts receivable sold.
Also provided is the sensitivity of the fair value of the interests held to hypothetical adverse changes in the anticipated credit
losses; amounts shown below are the corresponding hypothetical decreases in the carrying value of interests.
Interests Held at December 31
In millions 2013 2012
Carrying value of interests held $ 1,227 $ 1,057
Percentage of anticipated credit losses 0.71% 0.73%
Impact to carrying value - 10% adverse change $ 1 $ 1
Impact to carrying value - 20% adverse change $ 2 $ 2
Credit losses, net of any recoveries, were $1 million for the year ended December 31, 2013 ($1 million for the year ended
December 31, 2012, and $8 million for the year ended December 31, 2011).
Following is an analysis of certain cash flows between the Company and the conduits:
Cash Proceeds
In millions 2013 2012 2011
Sale of receivables $ 34 $ 57 $ 16
Collections reinvested in revolving receivables $ 25,864 $ 25,828 $ 28,609
Interests in conduits (1) $ 1,028 $ 2,650 $ 1,737
(1) Presented in "Operating Activities" in the consolidated statements of cash flows.
Following is additional information related to the sale of receivables under these facilities:
Trade Accounts Receivable Sold at December 31
In millions 2013 2012
Delinquencies on sold receivables still outstanding $ 138 $ 164
Trade accounts receivable outstanding and derecognized $ 2,494 $ 2,294
In 2013, the Company repurchased $10 million of previously sold receivables related to divestitures. In 2011, the Company
repurchased $71 million of previously sold receivables related to a divestiture.
Sale of Trade Accounts Receivable in Asia Pacific
The Company sells participating interests in trade accounts receivable of select Asia Pacific entities. The Company maintains
servicing responsibilities and the related costs are insignificant. The third-party holders of the participating interests do not have
recourse to the Company’s assets in the event of nonpayment by the debtors.
During the years ended December 31, 2013, 2012 and 2011, the Company recognized insignificant losses on the sale of the
participating interests in the receivables, which is included in “Interest expense and amortization of debt discount” in the
consolidated statements of income. The Company receives cash upon the sale of the participating interests in the receivables.