Question: Dow Chemical Company provides chemical plastic and agricultural products and

Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow’s annual report.
Notes to the Financial Statements (excerpt)
Dow Chemical had accrued obligations of $381 million for environmental remediation and restoration costs, including $40 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration.

1. Does the excerpt describe a contingent liability?
2. Under what conditions would Dow record such a contingency?
3. How did Dow record the $381 million?

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  • CreatedJuly 15, 2014
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