Dow Chemical 2015 Annual Report Download - page 124

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The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations for the
years ended December 31, 2015 and 2014:
Asset Retirement Obligations
In millions 2015 2014
Balance at January 1 $ 84 $ 89
Additional accruals 8 3
Liabilities settled (8) (8)
Accretion expense 1 1
Revisions in estimated cash flows 17 3
Other (6) (4)
Balance at December 31 $ 96 $ 84
The discount rate used to calculate the Company’s asset retirement obligations at December 31, 2015 was 1.48 percent
(1.48 percent at December 31, 2014). These obligations are included in the consolidated balance sheets as "Accrued and other
current liabilities" and "Other noncurrent obligations."
The Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated
in its consolidated financial statements. Assets that have not been submitted/reviewed for potential demolition activities are
considered to have continued usefulness and are generally still operating normally. Therefore, without a plan to demolish the
assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes in accordance with the
accounting guidance related to property, plant and equipment, the Company is unable to reasonably forecast a time frame to use
for present value calculations. As such, the Company has not recognized obligations for individual plants/buildings at its
manufacturing sites where estimates of potential settlement dates cannot be reasonably made. In addition, the Company has not
recognized conditional asset retirement obligations for the capping of its approximately 42 underground storage wells and
141 underground brine mining and other wells at Dow-owned sites when there are no plans or expectations of plans to exit the
sites. It is the opinion of the Company’s management that the possibility is remote that such conditional asset retirement
obligations, when estimable, will have a material impact on the Company’s consolidated financial statements based on current
costs.
K-Dow Arbitration
In February 2009, the Company initiated arbitration proceedings against Petrochemical Industries Company (K.S.C.) ("PIC")
alleging that PIC breached the Joint Venture Formation Agreement related to the establishment of K-Dow, a proposed 50:50
global petrochemicals joint venture with PIC, by failing to close the transaction. On May 6, 2013, the Company and PIC
entered into a Deed providing for payment and resolution of the Company's claims against PIC under the K-Dow arbitration.
On May 7, 2013, the Company received a $2.195 billion cash payment from PIC, which included damages awarded of
$2.161 billion as well as recovery of Dow's costs incurred in the arbitration, including legal fees. In the second quarter of 2013,
the Company recorded a pretax gain of $2.195 billion, of which $2.161 billion is included in "Sundry income (expense) - net"
and $34 million is included in "Cost of sales" in the consolidated statements of income and reflected in Corporate. The K-Dow
arbitration is considered final and settled in full.