Dow Chemical 2015 Annual Report Download - page 106

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The net unrealized gain/loss from mark-to-market adjustments recognized in earnings on trading securities held at the end of
the year was a $2 million loss in 2015, a $3 million gain in 2014 and a $13 million loss in 2013.
The following table provides the fair value and gross unrealized losses of the Company’s investments that were deemed to be
temporarily impaired at December 31, 2015 and 2014, aggregated by investment category:
Temporarily Impaired Securities at December 31, 2015
Less than 12 months 12 months or more Total
In millions Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses Fair Value Unrealized Losses
Government debt (1) $ 251 $ (7) $ 1 $ — $ 252 $ (7)
Corporate bonds 175 (8) 1 — 176 (8)
Equity securities 197 (54) 10 (6) 207 (60)
Total temporarily impaired securities $ 623 $ (69) $ 12 $ (6) $ 635 $ (75)
(1) U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities' obligations.
Temporarily Impaired Securities at December 31, 2014
Less than 12 months 12 months or more Total
In millions Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses Fair Value Unrealized Losses
Government debt (1) $ 74 $ (1) $ 31 $ (1) $ 105 $ (2)
Corporate bonds 102 (1) 4 — 106 (1)
Equity securities 175 (15) — — 175 (15)
Total temporarily impaired securities $ 351 $ (17) $ 35 $ (1) $ 386 $ (18)
(1) U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities' obligations.
Portfolio managers regularly review the Company’s holdings to determine if any investments are other-than-temporarily
impaired. The analysis includes reviewing the amount of the impairment, as well as the length of time it has been impaired. In
addition, specific guidelines for each instrument type are followed to determine if an other-than-temporary impairment has
occurred.
For debt securities, the credit rating of the issuer, current credit rating trends, the trends of the issuer’s overall sector, the ability
of the issuer to pay expected cash flows and the length of time the security has been in a loss position are considered in
determining whether unrealized losses represent an other-than-temporary impairment. The Company did not have any credit-
related losses during 2015, 2014 or 2013.
For equity securities, the Company’s investments are primarily in Standard & Poor’s (“S&P”) 500 companies; however, the
Company’s policies allow investments in companies outside of the S&P 500. The largest holdings are Exchange Traded Funds
that represent the S&P 500 index or an S&P 500 sector or subset; the Company also has holdings in Exchange Traded Funds
that represent emerging markets. The Company considers the evidence to support the recovery of the cost basis of a security
including volatility of the stock, the length of time the security has been in a loss position, value and growth expectations, and
overall market and sector fundamentals, as well as technical analysis, in determining whether unrealized losses represent an
other-than-temporary impairment. In 2015, other-than-temporary impairment write-downs on investments still held by the
Company were $2 million ($6 million in 2014).
The aggregate cost of the Company's cost method investments totaled $157 million at December 31, 2015 ($181 million at
December 31, 2014). Due to the nature of these investments, either the cost basis approximates fair market value or fair value is
not readily determinable. These investments are reviewed quarterly for impairment indicators. During the second quarter of
2015, a write-down of $55 million was recorded as part of the 2015 restructuring charge due to a change in the Company's
strategy to monetize and exit certain Venture Capital portfolio investments. See Note 3 for more information on the Company's
restructuring activities. The Company's impairment analysis resulted in additional reductions in the cost basis of these
investments of less than $1 million for the year ended December 31, 2015; the analysis in 2014 resulted in an $18 million
reduction for the year ended December 31, 2014.