Dow Chemical 2013 Annual Report Download - page 99

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Legal Costs
The Company expenses legal costs as incurred. Accruals for legal matters are recorded when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated.
Severance Costs
The Company routinely reviews its operations around the world in an effort to ensure competitiveness across its businesses and
geographic areas. When the reviews result in a workforce reduction related to the shutdown of facilities or other optimization
activities, severance benefits are provided to employees primarily under Dow’s ongoing benefit arrangements. These severance
costs are accrued once management commits to a plan of termination including the number of employees to be terminated, their
job classifications or functions, their locations and the expected termination date.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is
recognized in income in the period that includes the enactment date.
Annual tax provisions include amounts considered sufficient to pay assessments that may result from examinations of prior
year tax returns; however, the amount ultimately paid upon resolution of issues raised may differ from the amounts accrued.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not,
based on the technical merits, that the position will be sustained upon examination. The Company accrues for other 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. The current portion of uncertain income tax positions is included in “Income taxes payable” and the
long-term portion is included in “Other noncurrent obligations” in the consolidated balance sheets.
Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such
earnings are not deemed to be permanently invested.
Earnings per Common Share
The calculation of earnings per common share is based on the weighted-average number of the Company’s common shares
outstanding for the applicable period. The calculation of diluted earnings per common share reflects the effect of all dilutive
potential common shares that were outstanding during the respective periods, unless the effect of doing so is antidilutive.
NOTE 2 – RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
During the first quarter of 2013, the Company adopted Accounting Standards Update ("ASU") 2011-11, "Balance Sheet (Topic
210): Disclosures about Offsetting Assets and Liabilities," which requires entities to disclose both gross and net information
about both instruments and transactions eligible for offset in the statement of financial position and instruments and
transactions subject to an agreement similar to a master netting agreement and ASU 2013-01, "Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting Asset and Liabilities," which clarifies the scope of the offsetting
disclosures of ASU 2011-11. The objective of the disclosure is to facilitate comparison between those entities that prepare their
financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of
International Financial Reporting Standards ("IFRS"). The adoption of this standard was immaterial to the consolidated
financial statements.
During the first quarter of 2013, the Company adopted ASU 2013-02, "Comprehensive Income (Topic 220): Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income," which requires entities to provide information
about the amounts reclassified out of accumulated other comprehensive income, by component. In addition, entities are
required to present, either on the face of the statement where net income is presented or in the notes, significant amounts
reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount
reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-
reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. See Note 23 for the
disclosures related to this adoption.