Dow Chemical 2015 Annual Report Download - page 138

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and obligations of ownership were transferred to the Company. The Company’s variable interest in the owner trust related to a
fixed purchase price option. On January 2, 2014, the Company purchased the ethylene production facility for $406 million. The
Company classified $346 million as "Payments on long-term debt" and $60 million as "Purchases of noncontrolling interests"
in the consolidated statements of cash flows.
The Company's consolidated financial statements include the assets, liabilities and results of operations of variable interest
entities ("VIEs") for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in "Net
income attributable to noncontrolling interests" in the consolidated statements of income and "Redeemable Noncontrolling
Interest," "Non-redeemable noncontrolling interests" and "Accrued and other current liabilities" in the consolidated balance
sheets. The following table summarizes the carrying amounts of these entities’ assets and liabilities included in the Company’s
consolidated balance sheets at December 31, 2015 and 2014:
Assets and Liabilities of Consolidated VIEs at December 31
In millions 2015 2014
Cash and cash equivalents (1) $ 158 $ 190
Other current assets (2) 112 174
Property 1,717 2,726
Other noncurrent assets (2) 65 72
Total assets (2) (3) $ 2,052 $ 3,162
Current liabilities (nonrecourse 2015: $256; 2014: $389) (2) $ 258 $ 392
Long-term debt (nonrecourse 2015: $487; 2014: $1,216) (2) 504 1,247
Other noncurrent obligations (nonrecourse 2015: $51; 2014: $62) 51 62
Total liabilities (2) $ 813 $ 1,701
(1) Included $20 million at December 31, 2014 specifically restricted for the debt servicing and
operational expenses of a manufacturing facility.
(2) Presented in accordance with newly implemented ASU 2015-03. See Note 2 for additional
information.
(3) All assets were restricted at December 31, 2015 and December 31, 2014.
In addition, the Company holds a variable interest in an entity created to monetize accounts receivable of select European
entities. The Company is the primary beneficiary of this entity as a result of holding subordinated notes while maintaining
servicing responsibilities for the accounts receivable. The carrying amounts of assets and liabilities included in the Company’s
consolidated balance sheets pertaining to this entity were current assets of $103 million (zero restricted) at December 31, 2015
($99 million, zero restricted, at December 31, 2014) and current liabilities were less than $1 million (zero nonrecourse) at
December 31, 2015 (less than $1 million, zero nonrecourse, at December 31, 2014).
Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations
relating to consolidated VIEs at December 31, 2015 and 2014 are adjusted for intercompany eliminations and parental
guarantees.
Nonconsolidated Variable Interest Entities
The Company holds a variable interest in a joint venture that manufactures crude acrylic acid in the United States and Germany
on behalf of the Company and the other joint venture partner. The variable interest relates to a cost-plus arrangement between
the joint venture and each joint venture partner. The Company is not the primary beneficiary, as a majority of the joint venture’s
output is committed to the other joint venture partner; therefore, the entity is accounted for under the equity method of
accounting. At December 31, 2015, the Company’s investment in the joint venture was $160 million ($162 million at
December 31, 2014), classified as “Investment in nonconsolidated affiliates” in the consolidated balance sheets, representing
the Company’s maximum exposure to loss.
The Company holds variable interests in AFSI, a company that produces and sells proprietary technologies for the horticultural
and agronomic markets. The variable interests in AFSI relate to a sublease agreement between Dow and AFSI; a tax receivable
agreement that entitles Dow to additional consideration in the form of tax savings, which is contingent on the operations and
earnings of AFSI; and contingent consideration, which is subject to certain performance conditions. The Company is not the
primary beneficiary, as Dow is a minority shareholder in AFSI and AFSI is governed by a board of directors, the composition
of which is mandated by AFSI's corporate governance requirements that a majority of the directors be independent. At
December 31, 2015, the Company's investment in AFSI was $191 million (zero at December 31, 2014), and is classified as
"Investment in nonconsolidated affiliates" in the consolidated balance sheets. In addition, the Company has a receivable with
AFSI for six million warrants, which is currently valued at $6 million and classified as "Accounts and notes receivable - other"
in the consolidated balance sheets. The Company's maximum exposure to loss was $197 million at December 31, 2015.