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74
The Dow Chemical Company and Subsidiaries
Notes to the Consolidated Financial Statements
Table of Contents
Note Page
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements of The Dow Chemical Company and its subsidiaries (“Dow” or the
“Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company
exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary
beneficiary. Intercompany transactions and balances are eliminated in consolidation. Investments in nonconsolidated affiliates
(20-50 percent owned companies, joint ventures and partnerships) are accounted for using the equity method.
Use of Estimates in Financial Statement Preparation
The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated
financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ
from those estimates.
Foreign Currency Translation
The local currency has been primarily used as the functional currency throughout the world. Translation gains and losses of
those operations that use local currency as the functional currency are included in the consolidated balance sheets in
“Accumulated other comprehensive income (loss)” (“AOCI”). Where the U.S. dollar is used as the functional currency or when
the foreign subsidiary operates in a hyper-inflationary environment, foreign currency translation gains and losses are reflected
in income.
Summary of Significant Accounting Policies 74
Recent Accounting Guidance 77
Restructuring 78
Acquisitions 83
Divestitures 83
Inventories 84
Property 85
Nonconsolidated Affiliates and Related Company Transactions 85
Goodwill and Other Intangible Assets 88
Financial Instruments 90
Fair Value Measurements 95
Supplementary Information 99
Earnings Per Share Calculations 100
Commitments and Contingent Liabilities 101
Transfers of Financial Assets 109
Notes Payable, Long-Term Debt and Available Credit Facilities 111
Pension Plans and Other Postretirement Benefits 114
Leased Property 122
Variable Interest Entities 122
Stock-Based Compensation 124
Stockholders' Equity 128
Income Taxes 129
Accumulated Other Comprehensive Income (Loss) 133
Operating Segments and Geographic Areas 133