Dow 1012B Registration of securities | DOW 7 Sep 18

Exhibit 99.2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of The Dow Chemical Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Dow Chemical Company and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 15, 2018, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 16 to the financial statements, in the fourth quarter of 2016, the Company changed its accounting policy from expensing asbestos-related defense and processing costs as incurred to the accrual of asbestos-related defense and processing costs when probable of occurring and estimable.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Midland, Michigan

February 15, 2018

We have served as the Company’s auditor since 1905.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Income


(In millions) For the years ended Dec 31,	2017		2016		2015
Net Sales	$	55,508	$	48,158	$	48,778
Cost of sales		44,308		37,640		37,745
Research and development expenses		1,637		1,584		1,598
Selling, general and administrative expenses		2,917		2,956		2,948
Amortization of intangibles		624		544		419
Restructuring, goodwill impairment and asset related charges—net		3,100		595		559
Integration and separation costs		786		349		23
Asbestos-related charge		—		1,113		—
Equity in earnings of nonconsolidated affiliates		762		442		674
Sundry income (expense)—net		877		1,452		4,716
Interest expense and amortization of debt discount		976		858		946
Income Before Income Taxes		2,799		4,413		9,930
Provision for income taxes		2,204		9		2,147
Net Income		595		4,404		7,783
Net income attributable to noncontrolling interests		129		86		98
Net Income Attributable to The Dow Chemical Company		466		4,318		7,685
Preferred stock dividends		—		340		340
Net Income Available for The Dow Chemical Company Common Stockholder	$	466	$	3,978	$	7,345

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Comprehensive Income


(In millions) For the years ended Dec 31,	2017			2016			2015
Net Income	$	595		$	4,404		$	7,783
Other comprehensive income (loss), net of tax
Unrealized losses on investments		(46	)		(4	)		(94	)
Cumulative translation adjustments		900			(644	)		(986	)
Pension and other postretirement benefit plans		391			(620	)		552
Derivative instruments		(14	)		113			(122	)
Total other comprehensive income (loss)		1,231			(1,155	)		(650	)
Comprehensive Income		1,826			3,249			7,133
Comprehensive income attributable to noncontrolling interests, net of tax		172			83			65
Comprehensive Income Attributable to The Dow Chemical Company	$	1,654		$	3,166		$	7,068

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Balance Sheets


(In millions, except share amounts) At Dec 31,	2017			2016
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted—2017: $107; 2016: $75)	$	6,188		$	6,607
Marketable securities		4			—
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables—2017: $117; 2016: $110)		7,338			4,666
Other		4,711			4,312
Inventories		8,376			7,363
Other current assets		627			711
Total current assets		27,244			23,659
Investments
Investment in nonconsolidated affiliates		3,742			3,747
Other investments (investments carried at fair value—2017: $1,512; 2016: $1,959)		2,510			2,969
Noncurrent receivables		594			708
Total investments		6,846			7,424
Property
Property		60,426			57,438
Less accumulated depreciation		36,614			33,952
Net property (variable interest entities restricted—2017: $907; 2016: $961)		23,812			23,486
Other Assets
Goodwill		13,938			15,272
Other intangible assets (net of accumulated amortization—2017: $5,161; 2016: $4,295)		5,549			6,026
Deferred income tax assets		1,722			3,079
Deferred charges and other assets		829			565
Total other assets		22,038			24,942
Total Assets	$	79,940		$	79,511
Liabilities and Equity
Current Liabilities
Notes payable	$	484		$	272
Long-term debt due within one year		752			635
Accounts payable:
Trade		5,360			4,519
Other		3,062			2,097
Income taxes payable		694			600
Accrued and other current liabilities		4,025			4,481
Total current liabilities		14,377			12,604
Long-Term Debt (variable interest entities nonrecourse—2017: $249; 2016: $330)		19,765			20,456
Other Noncurrent Liabilities
Deferred income tax liabilities		764			923
Pension and other postretirement benefits—noncurrent		10,794			11,375
Asbestos-related liabilities—noncurrent		1,237			1,364
Other noncurrent obligations		5,994			5,560
Total other noncurrent liabilities		18,789			19,222
Stockholders’ Equity
Common stock (2017: authorized and issued 100 shares of $0.01 par value each; 2016: authorized 1,500,000,000 shares of $2.50 par value each; issued: 1,242,794,836 shares)		—			3,107
Additionalpaid-in capital		6,553			4,262
Retained earnings		28,050			30,338
Accumulated other comprehensive loss		(8,591	)		(9,822	)
Unearned ESOP shares		(189	)		(239	)
Treasury stock at cost (2017: zero shares; 2016: 31,661,501 shares)		—			(1,659	)
The Dow Chemical Company’s stockholders’ equity		25,823			25,987
Noncontrolling interests		1,186			1,242
Total equity		27,009			27,229
Total Liabilities and Equity	$	79,940		$	79,511

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Cash Flows


(In millions) For the years ended Dec 31,	2017			2016			2015
Operating Activities
Net income	$	595		$	4,404		$	7,783
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,155			2,862			2,521
Provision (Credit) for deferred income tax		933			(1,259	)		305
Earnings of nonconsolidated affiliates less than dividends received		95			243			142
Net periodic pension benefit cost		1,137			389			755
Pension contributions		(1,676	)		(629	)		(844	)
Net gain on sales of assets, businesses and investments		(1,156	)		(214	)		(4,655	)
Net gain on step acquisition of nonconsolidated affiliates		—			(2,445	)		(361	)
Restructuring, goodwill impairment and asset related charges—net		3,100			595			559
Asbestos-related charge		—			1,113			—
Other net loss		378			361			437
Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable		(4,734	)		(1,539	)		(84	)
Proceeds from interests in trade accounts receivable conduits		2,269			1,257			1,034
Inventories		(1,225	)		610			780
Accounts payable		1,735			569			(717	)
Other assets and liabilities, net		(104	)		(717	)		(48	)
Cash provided by operating activities		4,502			5,600			7,607
Investing Activities
Capital expenditures		(3,144	)		(3,804	)		(3,703	)
Investment in gas field developments		(121	)		(113	)		—
Construction of assets pending sale / leaseback		—			(63	)		—
Proceeds from sale / leaseback of assets		—			87			3
Purchases of previously leased assets		(187	)		—			(46	)
Payment into escrow account		(130	)		(835	)		—
Distribution from escrow account		130			835			—
Proceeds from sales of property and businesses, net of cash divested		1,691			284			2,383
Acquisitions of property and businesses, net of cash acquired		16			(187	)		(123	)
Cash acquired in step acquisition of nonconsolidated affiliate		—			1,050			—
Investments in and loans to nonconsolidated affiliates		(749	)		(1,020	)		(803	)
Distributions and loan repayments from nonconsolidated affiliates		69			109			17
Proceeds from sales of ownership interests in nonconsolidated affiliates		64			22			1,528
Purchases of investments		(643	)		(577	)		(1,246	)
Proceeds from sales and maturities of investments		1,163			733			640
Other investing activities, net		(100	)		—			—
Cash used for investing activities		(1,941	)		(3,479	)		(1,350	)
Financing Activities
Changes in short-term notes payable		293			(33	)		(82	)
Proceeds from issuance of long-term debt		—			32			1,383
Payments on long-term debt		(621	)		(588	)		(1,114	)
Purchases of treasury stock		—			(916	)		(1,166	)
Proceeds from issuance of parent company stock		66			—			—
Proceeds from sales of common stock		423			398			508
Employee taxes paid for share-based payment arrangements		(93	)		(65	)		(50	)
Distributions to noncontrolling interests		(129	)		(176	)		(112	)
Purchases of noncontrolling interests		—			(202	)		(175	)
Contributions from noncontrolling interests		—			—			17
Dividends paid to stockholders		(2,179	)		(2,462	)		(2,253	)
Dividends paid to parent		(1,056	)		—			—
Other financing activities, net		(4	)		(2	)		(88	)
Cash used for financing activities		(3,300	)		(4,014	)		(3,132	)
Effect of exchange rate changes on cash		320			(77	)		(202	)
Summary
Increase (decrease) in cash and cash equivalents		(419	)		(1,970	)		2,923
Cash and cash equivalents at beginning of year		6,607			8,577			5,654
Cash and cash equivalents at end of year	$	6,188		$	6,607		$	8,577

Supplemental cash flow information
Cash paid during year for:
Interest, net of amounts capitalized	$	1,178		$	1,192		$	1,137
Income taxes	$	1,805		$	1,592		$	1,405

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Equity


(In millions)	Preferred Stock			Common Stock			Add’l Paid in Capital			Retained Earnings			Accum Other Comp Loss			Unearned ESOP			Treasury Stock			Non- controlling Interests			Total Equity
2015
Balance at Jan 1, 2015	$	4,000		$	3,107		$	4,846		$	23,045		$	(8,017	)	$	(325	)	$	(4,233	)	$	931		$	23,354
Net income available for The Dow Chemical Company common stockholders		—			—			—			7,345			—			—			—			—			7,345
Other comprehensive loss		—			—			—			—			(650	)		—			—			—			(650	)
Dividends to stockholders		—			—			—			(1,942	)		—			—			—			—			(1,942	)
Common stock issued/sold		—			—			508			—			—			—			766			—			1,274
Stock-based compensation and allocation of ESOP shares		—			—			(429	)		—			—			53			—			—			(376	)
Impact of noncontrolling interests		—			—			—			—			—			—			—			(122	)		(122	)
Treasury stock purchases		—			—			—			—			—			—			(2,688	)		—			(2,688	)
Other		—			—			11			(23	)		—			—			—			—			(12	)
Balance at Dec 31, 2015	$	4,000		$	3,107		$	4,936		$	28,425		$	(8,667	)	$	(272	)	$	(6,155	)	$	809		$	26,183
2016
Net income available for The Dow Chemical Company common stockholders		—			—			—			3,978			—			—			—			—			3,978
Other comprehensive loss		—			—			—			—			(1,155	)		—			—			—			(1,155	)
Dividends to stockholders		—			—			—			(2,037	)		—			—			—			—			(2,037	)
Common stock issued/sold		—			—			398			—			—			—			717			—			1,115
Stock-based compensation and allocation of ESOP shares		—			—			(376	)		—			—			51			—			—			(325	)
ESOP shares acquired		—			—			—			—			—			(18	)		—			—			(18	)
Impact of noncontrolling interests		—			—			—			—			—			—			—			433			433
Treasury stock purchases		—			—			—			—			—			—			(916	)		—			(916	)
Preferred stock converted to common stock		(4,000	)		—			(695	)		—			—			—			4,695			—			—
Other		—			—			(1	)		(28	)		—			—			—			—			(29	)
Balance at Dec 31, 2016	$	—		$	3,107		$	4,262		$	30,338		$	(9,822	)	$	(239	)	$	(1,659	)	$	1,242		$	27,229
2017
Net income available for The Dow Chemical Company common stockholder		—			—			—			466			—			—			—			—			466
Other comprehensive income		—			—			—			—			1,231			—			—			—			1,231
Dividends to stockholders		—			—			—			(1,673	)		—			—			—			—			(1,673	)
Dividends to parent		—			—			—			(1,056	)		—			—			—			—			(1,056	)
Common stock issued/sold		—			—			423			—			—			—			724			—			1,147
Issuance of parent company stock		—			—			66			—			—			—			—			—			66
Stock-based compensation and allocation of ESOP shares		—			—			(368	)		—			—			50			—			—			(318	)
Impact of noncontrolling interests		—			—			—			—			—			—			—			(56	)		(56	)
Merger impact		—			(3,107	)		2,172			—			—			—			935			—			—
Other		—			—			(2	)		(25	)		—			—			—			—			(27	)
Balance at Dec 31, 2017	$	—		$	—		$	6,553		$	28,050		$	(8,591	)	$	(189	)	$	—		$	1,186		$	27,009

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Notes to the Consolidated Financial Statements

Table of Contents


Note		Page
1	Summary of Significant Accounting Policies		8

2	Recent Accounting Guidance		13

3	Merger with DuPont		16

4	Acquisitions		18

5	Divestitures		20

6	Restructuring, Goodwill Impairment and Asset Related Charges—Net		22

7	Reverse Morris Trust Transaction		27

8	Supplementary Information		28

9	Income Taxes		29

10	Inventories		33

11	Property		33

12	Nonconsolidated Affiliates		33

13	Goodwill and Other Intangible Assets		37

14	Transfers of Financial Assets		39

15	Notes Payable, Long-Term Debt and Available Credit Facilities		40

16	Commitments and Contingent Liabilities		43

17	Stockholders’ Equity		54

18	Noncontrolling Interests		57

19	Pension Plans and Other Postretirement Benefits		58

20	Stock-Based Compensation		66

21	Financial Instruments		71

22	Fair Value Measurements		79

23	Variable Interest Entities		82

24	Related Party Transactions		85

25	Business and Geographic Regions		85

26	Selected Quarterly Financial Data		88

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of The Dow Chemical Company and its subsidiaries (“Dow” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. Intercompany transactions and balances are eliminated in consolidation. Investments in nonconsolidated affiliates(20-50 percent owned companies or less than 20 percent owned companies over which significant influence is exercised) are accounted for using the equity method.

Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017, Dow and E. I. du Pont de Nemours and Company (“DuPont”) each merged with subsidiaries of DowDuPont Inc. (“DowDuPont”) and, as a result, Dow and DuPont became subsidiaries of DowDuPont (the “Merger”). In accordance with the accounting guidance for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries. See Note 3 for additional information on the Merger.

Beginning September 1, 2017, transactions between DowDuPont, Dow and DuPont and their affiliates are reflected in these consolidated financial statements and will be disclosed as related party transactions, when material. Transactions between Dow and DuPont primarily consist of the sale and procurement of certain feedstocks and raw materials that are consumed in each company’s manufacturing process. Transactions with DuPont during the period from September 1, 2017 through December 31, 2017, were not material to the consolidated financial statements. See Note 24 for additional information.

Effective with the Merger, Dow’s business activities are components of its parent company’s business operations. Dow’s business activities, including the assessment of performance and allocation of resources, are reviewed and managed by DowDuPont. Information used by the chief operating decision maker of Dow relates to the Company in its entirety. Accordingly, there are no separate reportable business segments for the Company under Accounting Standards Codification (“ASC”) Topic 280 “Segment Reporting” and the Company’s business results are reported in this Form10-K as a single operating segment.

Use of Estimates in Financial Statement Preparation

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

Significant Accounting Policies

Asbestos-Related Matters

Accruals for asbestos-related matters, including defense and processing costs, are recorded based on an analysis of claim and resolution activity, defense spending, and pending and future claims. These accruals are assessed at each balance sheet date to determine if the asbestos-related liability remains appropriate. Accruals for asbestos-related matters are included in the consolidated balance sheets in “Accrued and other current liabilities” and “Asbestos-related liabilities—noncurrent.” This accounting policy was added in the fourth quarter of 2016. See Note 16 for additional information.

Legal Costs

The Company expenses legal costs as incurred, with the exception of defense and processing costs associated with asbestos-related matters.

Foreign Currency Translation

The local currency has been primarily used as the functional currency throughout the world. Translation gains and losses of those operations that use local currency as the functional currency are included in the consolidated balance sheets in “Accumulated other comprehensive loss” (“AOCL”). For certain subsidiaries, the U.S. dollar is used as the functional currency. This occurs when the subsidiary operates in an economic environment where the products produced and sold are tied to U.S. dollar-denominated markets, or when the foreign subsidiary operates in a hyper-inflationary environment. Where the U.S. dollar is used as the functional currency, foreign currency translation gains and losses are reflected in income.

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the consolidated balance sheets in “Accrued and other current liabilities” and “Other noncurrent obligations” at undiscounted amounts. Accruals for related insurance or other third-party recoveries for environmental liabilities are recorded when it is probable that a recovery will be realized and are included in the consolidated balance sheets in “Accounts and notes receivable—Other.”

Environmental costs are capitalized if the costs extend the life of the property, increase its capacity and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalized in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and cleanup are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and reasonably estimable.

Cash and Cash Equivalents

Cash and cash equivalents include time deposits and investments with maturities of three months or less at the time of purchase.

Financial Instruments

The Company calculates the fair value of financial instruments using quoted market prices when available. When quoted market prices are not available for financial instruments, the Company uses standard pricing models with market-based inputs that take into account the present value of estimated future cash flows.

The Company utilizes derivatives to manage exposures to foreign currency exchange rates, commodity prices and interest rate risk. The fair values of all derivatives are recognized as assets or liabilities at the balance sheet date. Changes in the fair values of these instruments are reported in income or AOCL, depending on the use of the derivative and whether the Company has elected hedge accounting treatment.

Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in AOCL, to the extent the hedges are effective, until the underlying transactions are recognized in income. To the extent effective, gains and losses on derivative andnon-derivative instruments used as hedges of the Company’s net investment in foreign operations are recorded in AOCL as part of the cumulative translation adjustment. The ineffective portions of cash flow hedges and hedges of net investment in foreign operations, if any, are recognized in income immediately.

Gains and losses on derivatives designated and qualifying as fair value hedging instruments, as well as the offsetting losses and gains on the hedged items, are reported in income in the same accounting period. Derivatives not designated as hedging instruments aremarked-to-market at the end of each accounting period with the results included in income.

Inventories

Inventories are stated at the lower of cost or net realizable value. The method of determining cost for each subsidiary varies amonglast-in,first-out (“LIFO”);first-in,first-out (“FIFO”); and average cost, and is used consistently from year to year. At December 31, 2017, approximately 24 percent, 67 percent and 9 percent of the Company’s inventories were accounted for under the LIFO, FIFO and average cost methods, respectively. At December 31, 2016, approximately 28 percent, 62 percent and 10 percent of the Company’s inventories were accounted for under the LIFO, FIFO and average cost methods, respectively.

The Company routinely exchanges and swaps raw materials and finished goods with other companies to reduce delivery time, freight and other transportation costs. These transactions are treated asnon-monetary exchanges and are valued at cost.

Property

Land, buildings and equipment, including property under capital lease agreements, are carried at cost less accumulated depreciation. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method, unless the asset was capitalized before 1997 when the declining balance method was used. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts, and the net amounts, less proceeds from disposal, are included in income.

Impairment and Disposal of Long-Lived Assets

The Company evaluates long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When undiscounted future cash flows are not expected to be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value based on bids received from third parties or a discounted cash flow analysis based on market participant assumptions.

Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of and reported at the lower of carrying amount or fair value, and depreciation is recognized over the remaining useful life of the assets.

Goodwill and Other Intangible Assets

The Company records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the fair value of a reporting unit is less than its carrying value, additional quantitative testing is performed. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, an impairment charge is recognized based on the difference between the reporting unit’s carrying value and its fair value. The Company primarily utilizes a discounted cash flow methodology to calculate the fair value of its reporting units.

Finite-lived intangible assets such as purchased customer lists, developed technology, patents, trademarks and software, are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from three to twenty years. Indefinite-lived intangible assets are reviewed for impairment or obsolescence annually, or more frequently when events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows.

Asset Retirement Obligations

The Company records asset retirement obligations as incurred and reasonably estimable, including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. The fair values of obligations are recorded as liabilities on a discounted basis and are accreted over time for the change in present value. Costs associated with the liabilities are capitalized and amortized over the estimated remaining useful life of the asset, generally for periods of 10 years or less.

Investments

Investments in debt and marketable equity securities (including warrants), primarily held by the Company’s insurance operations, are classified as trading,available-for-sale orheld-to-maturity. Investments classified as trading are reported at fair value with unrealized gains and losses related tomark-to-market adjustments included in income. Those classified asavailable-for-sale are reported at fair value with unrealized gains and losses recorded in AOCL. Those classified asheld-to-maturity are recorded at amortized cost. The cost of investments sold is determined by FIFO or specific identification. The Company routinely reviewsavailable-for-sale andheld-to-maturity securities for other-than-temporary declines in fair value below the cost basis. When events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the security is written down to fair value, establishing a new cost basis.

Revenue

Sales are recognized when the revenue is realized or realizable, and the earnings process is complete. Approximately 98 percent of the Company’s sales in 2017 related to sales of product (99 percent in 2016 and 99 percent in 2015). The remaining 2 percent in 2017 primarily related to the Company’s insurance operations and licensing of patents and technology (1 percent in 2016 and 1 percent in 2015). Revenue for product sales is recognized as risk and title to the product transfer to the customer, which usually occurs at the time shipment is made. As such, title to the product passes when the product is delivered to the freight carrier. The Company’s standard terms of delivery are included in its contracts of sale, order confirmation documents and invoices. Freight costs and any directly related costs of transporting finished product to customers are recorded as “Cost of sales” in the consolidated statements of income.

Revenue related to the Company’s insurance operations includes third-party insurance premiums, which are earned over the terms of the related insurance policies and reinsurance contracts. Revenue related to the initial licensing of patents and technology is recognized when earned; revenue related to running royalties is recognized according to licensee production levels.

Severance Costs

The Company routinely reviews its operations around the world in an effort to ensure competitiveness across its businesses and geographic regions. 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 and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated.

Integration and Separation Costs

The Company classifies expenses related to the Merger and the ownership restructure of Dow Corning Corporation (“Dow Corning”) as “Integration and separation costs” in the consolidated statements of income. Merger-related costs include: costs incurred to prepare for and close the Merger, post-Merger integration expenses and costs incurred to prepare for the separation of the agriculture business, specialty products business and materials science business. The Dow Corning related-costs include: costs incurred to prepare for and close the ownership restructure, as well as integration expenses. These costs primarily consist of financial advisor, information technology, legal, accounting, consulting and other professional advisory fees associated with preparation and execution of these activities. This accounting policy was added in the third quarter of 2017 as a result of the Merger.

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. Effective with the Merger, the Company and DuPont are subsidiaries of DowDuPont. The Company is included in DowDuPont’s consolidated tax groups and related income tax returns within certain jurisdictions. The Company will continue to record a separate tax liability for its share of the taxable income and tax attributes and obligations on DowDuPont’s consolidated income tax returns following a formula consistent with the economic sharing of tax attributes and obligations. Dow and DuPont compute the amount due to DowDuPont for their share of taxable income and tax attributes and obligations on DowDuPont’s consolidated tax return. The amounts reported as income tax payable or receivable represent the Company’s payment obligation (or refundable amount) to DowDuPont based on a theoretical tax liability calculated based on the methodologies agreed, elected or required in each combined or consolidated filing jurisdiction.

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.

See Note 9 for further information relating to the enactment of the Tax Cuts and Jobs Act.

Adoption of Accounting Standards Update (“ASU”)2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”

In the first quarter of 2017, the Company adopted ASU2016-09 and elected to apply changes on a retrospective basis to the consolidated statements of cash flows related to the classification of excess tax benefits and employee taxes paid for share-based payment arrangements. See Note 2 for additional information. The following table summarizes the changes made to the consolidated statements of cash flows for the years ended December 31, 2016 and 2015:


Summary of Changes to the Consolidated Statements of Cash Flows In millions	2016						2015
	As Filed			Updated			As Filed			Updated
Operating Activities
Excess tax benefits from share-based payment arrangements	$	(57	)	$	—		$	(41	)	$	—
Other assets and liabilities, net	$	(34	)	$	31		$	878		$	928
Cash provided by operating activities	$	5,478		$	5,600		$	7,516		$	7,607
Financing Activities
Excess tax benefits from share-based payment arrangements	$	57		$	—		$	41		$	—
Employee taxes paid for share-based payment arrangements	$	—		$	(65	)	$	—		$	(50	)
Cash used for financing activities	$	(3,892	)	$	(4,014	)	$	(3,041	)	$	(3,132	)

Changes in Financial Statement Presentation

As a result of the Merger, certain reclassifications of prior period amounts were made to improve comparability with DowDuPont and conform with the current period presentation. Presentation changes were made to the consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and consolidated statements of equity. In addition, certain reclassifications of prior period data were made in the Notes to the Consolidated Financial Statements to conform with the current period presentation.

The changes to the financial statements are summarized as follows:

Consolidated Statements of Income

Asset impairment charges were reclassified from “Cost of sales” and “Sundry income (expense)—net” to “Restructuring, goodwill impairment and asset related charges—net.” Costs associated with integration and separation activities are now separately reported as “Integration and separation costs” and were reclassified from “Cost of sales” and “Selling, general and administrative expenses.” In addition, “Interest income” was reclassified to “Sundry income (expense)—net.” The following table summarizes the changes made to the consolidated statements of income for the years ended December 31, 2016 and 2015:


Summary of Changes to the Consolidated Statements of Income In millions	2016				2015
	As Filed		Updated		As Filed		Updated
Cost of sales	$	37,641	$	37,640	$	37,836	$	37,745
Selling, general and administrative expenses	$	3,304	$	2,956	$	2,971	$	2,948
Restructuring, goodwill impairment and asset related charges—net	$	452	$	595	$	415	$	559
Integration and separation costs	$	—	$	349	$	—	$	23
Sundry income (expense)—net	$	1,202	$	1,452	$	4,592	$	4,716
Interest income	$	107	$	—	$	71	$	—

Consolidated Balance Sheets

The Company reclassified “Dividends payable” to “Accrued and other current liabilities” and the current portion of deferred revenue was reclassified from “Accounts payable—Other” to “Accrued and other current liabilities.” In addition, certain derivative assets were reclassified from “Accounts and notes receivable—Other” to “Other current assets” and certain derivative liabilities were reclassified from “Accounts payable—Other” to “Accrued and other current liabilities.” A summary of the changes made to the consolidated balance sheets is as follows:


Summary of Changes to the Consolidated Balance Sheets	Dec 31, 2016
In millions	As Filed		Updated
Accounts and notes receivable—Other	$	4,358	$	4,312
Other current assets	$	665	$	711
Accounts payable—Other	$	2,401	$	2,097
Dividends payable	$	508	$	—
Accrued and other current liabilities	$	3,669	$	4,481

Consolidated Statements of Cash Flows

The following table summarizes the changes made to the consolidated statements of cash flows for the years ended December 31, 2016 and 2015:


Summary of Changes to the Consolidated Statements of Cash Flows	2016						2015
In millions	As Filed			Updated			As Filed			Updated
Operating Activities
Net periodic pension benefit cost	$	—		$	389		$	—		$	755
Net gain on sales of assets, businesses and investments	$	—		$	(214	)	$	—		$	(4,655	)
Net gain on sales of investments	$	(116	)	$	—		$	(95	)	$	—
Net gain on sales of property, businesses and consolidated companies	$	(88	)	$	—		$	(3,811	)	$	—
Net gain on sales of ownership interests in nonconsolidated affiliates	$	(10	)	$	—		$	(749	)	$	—
Asset impairments and related costs	$	143		$	—		$	144		$	—
Restructuring, goodwill impairment and asset related charges—net	$	452		$	595		$	415		$	559
Loss on early extinguishment of debt	$	—		$	—		$	8		$	—
Other net loss	$	113		$	361		$	172		$	437
Accounts payable	$	458		$	569		$	(681	)	$	(717	)
Other assets and liabilities, net¹	$	31		$	(717	)	$	928		$	(48	)
Financing Activities
Transaction financing, debt issuance and other costs	$	(2	)	$	—		$	(88	)	$	—
Other financing activities, net	$	—		$	(2	)	$	—		$	(88	)

1. As updated for ASU2016-09.

Consolidated Statements of Equity

The following table summarizes the changes made to “Retained Earnings” in the consolidated statements of equity for the years ended December 31, 2016 and 2015:


Summary of Changes to the Consolidated Statements of Equity	2016						2015
In millions	As Filed			Updated			As Filed			Updated
Dividend equivalents on participating securities	$	(28	)	$	—		$	(23	)	$	—
Other	$	—		$	(28	)	$	—		$	(23	)

Prior to the Merger, the Company declared dividends of $1.38 per share in 2017 ($1.84 per share in 2016 and $1.72 per share in 2015). Effective with the Merger, Dow no longer has publicly traded common stock. Dow’s common shares are owned solely by its parent company, DowDuPont. As a result, the Company’s Board of Directors (“Board”) determines whether or not there will be a dividend distribution to DowDuPont. See Note 24 for additional information.

NOTE 2 – RECENT ACCOUNTING GUIDANCE

Recently Adopted Accounting Guidance

In the first quarter of 2017, the Company adopted ASU2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for share-based payment awards to employees, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. The new standard was

effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Under the new guidance, excess tax benefits related to equity compensation are now recognized in “Provision for income taxes” in the consolidated statements of income rather than in “Additionalpaid-in capital” in the consolidated balance sheets and this change was applied on a prospective basis. Changes to the consolidated statements of cash flows related to the classification of excess tax benefits and employee taxes paid for share-based payment arrangements were implemented on a retrospective basis. See Note 1 for additional information.

In the fourth quarter of 2017, the Company early adopted ASU2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new guidance eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new guidance, goodwill impairment testing is performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption was permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company adopted the new guidance for goodwill impairment tests performed in the fourth quarter of 2017. See Note 13 for additional information.

Accounting Guidance Issued But Not Adopted at December 31, 2017

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606),” which is the new comprehensive revenue recognition standard that will supersede all existing revenue recognition guidance under U.S. GAAP. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which was issued in August 2015, revised the effective date for this ASU to annual and interim periods beginning on or after December 15, 2017, with early adoption permitted, but not earlier than the original effective date of annual and interim periods beginning on or after December 15, 2016, for public entities. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in ASU2014-09.

In May 2014, the FASB and International Accounting Standards Board formed The Joint Transition Resource Group for Revenue Recognition (“TRG”), consisting of financial statement preparers, auditors and users, to seek feedback on potential issues related to the implementation of the new revenue standard. As a result of feedback from the TRG, the FASB issued additional guidance to provide clarification, implementation guidance and practical expedients to address some of the challenges of implementation. In March 2016, the FASB issued ASU2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which is an amendment on assessing whether an entity is a principal or an agent in a revenue transaction. This amendment addresses issues to clarify the principal versus agent assessment and lead to more consistent application. In April 2016, the FASB issued ASU2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” which contains amendments to the new revenue recognition standard on identifying performance obligations and accounting for licenses of intellectual property. The amendments related to identifying performance obligations clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in the context of a contract. The licensing implementation amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which provides clarity and implementation guidance on assessing collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The new standards have the same effective date and transition requirements as ASU2014-09.

The Company analyzed the impact of ASU2014-09, and the related ASU’s, across all revenue streams to evaluate the impact of the new standard on revenue contracts. This included reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. The Company completed contract reviews and validated the results of applying the new revenue guidance. The Company finalized its accounting policies, the evaluation of the impact of the accounting and disclosure requirements on its business processes, controls and systems, and is drafting new disclosures required post-implementation in 2018. The Company will adopt the new standard using the modified

retrospective approach, under which the cumulative effect of initially applying the new guidance will be recognized as an adjustment to the opening balance of retained earnings in the first quarter of 2018. Based on the completed analysis, the Company has determined the adjustment will not have a material impact on the consolidated financial statements.

In January 2016, the FASB issued ASU2016-01, “Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends the guidance under U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company will adopt the new guidance in the first quarter of 2018 and the adoption of this guidance will not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842),” which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases with lease terms of more than twelve months and recognition, presentation and measurement in the financial statements will depend on its classification as a finance or operating lease. In addition, the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting remains largely unchanged from current U.S. GAAP but does contain some targeted improvements to align with the new revenue recognition guidance issued in 2014. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, using a modified retrospective approach, and early adoption is permitted. The Company has a team in place to evaluate the new guidance and is in the process of implementing a software solution to facilitate the development of business processes and controls around leases to meet the new accounting and disclosure requirements upon adoption in the first quarter of 2019.

In August 2016, the FASB issued ASU2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows with respect to eight specific cash flow issues. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The amendments should be applied using a retrospective transition method to each period presented, if practicable. Early adoption is permitted, including adoption in an interim period, and any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. All amendments must be adopted in the same period. A key provision in the new guidance will impact the presentation of proceeds from interests in trade accounts receivable conduits which will be retrospectively reclassified from “Operating Activities” to “Investing Activities” in the consolidated statements of cash flows when the Company adopts the new guidance in the first quarter of 2018.

In October 2016, the FASB issued ASU2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company will adopt the new guidance in the first quarter of 2018 and the adoption of this guidance will not have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the new guidance must be applied retrospectively to all periods presented. The new guidance will change the presentation of restricted cash in the consolidated statements of cash flows and will be applied retrospectively in the first quarter of 2018.

In February 2017, the FASB issued ASU2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,” which clarifies the scope of guidance on nonfinancial asset derecognition in ASC610-20 and the accounting for partial sales of nonfinancial assets. The new guidance also conforms the derecognition guidance for nonfinancial assets with the model in the new revenue standard (ASU2014-09). The new standard is effective for annual reporting periods, and interim periods within those fiscal years, beginning after December 15, 2017, and an entity is required to apply the amendments at the same time that it applies the amendments in ASU2014-09. The Company will apply the new guidance with the implementation of the new revenue standard in the first quarter of 2018.

In March 2017, the FASB issued ASU2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which amends the requirements related to the income statement presentation of the components of net periodic benefit cost for employer sponsored defined benefit pension and other postretirement benefit plans. Under the new guidance, an entity must disaggregate and present the service cost component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period, and only the service cost component will be eligible for capitalization. Other components of net periodic benefit cost will be presented separately from the line item(s) that includes the service cost. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted at the beginning of an annual period in which the financial statements have not been issued. Entities must use a retrospective transition method to adopt the requirement for separate presentation of the income statement service cost and other components, and a prospective transition method to adopt the requirement to limit the capitalization of benefit cost to the service cost component. The Company will adopt the new guidance in the first quarter of 2018, using a retrospective transition method to reclassify net periodic benefit cost, other than the service cost component, from “Cost of sales,” “Research and development expenses” and “Selling, general and administrative expenses” to “Sundry income (expense)—net” in the consolidated statements of income.

In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which amends the hedge accounting recognition and presentation defined under ASC 815, with the objectives of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities and simplifying the application of hedge accounting by preparers. The new standard expands the strategies eligible for hedge accounting, relaxes the timing requirements of hedge documentation and effectiveness assessments, and permits, in certain cases, the use of qualitative assessments on an ongoing basis to assess hedge effectiveness. The new guidance also requires new disclosures and presentation. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted in any interim or annual period after issuance of the ASU. Entities must adopt the new guidance by applying a modified retrospective approach to hedging relationships existing as of the adoption date. The Company is currently evaluating the impact of adopting this guidance.

NOTE 3 – MERGER WITH DUPONT

Effective August 31, 2017, Dow and DuPont completed the previously announced merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 (the “Merger Agreement”), by and among the Company, DuPont, DowDuPont, Diamond Merger Sub, Inc. and Orion Merger Sub, Inc. Pursuant to the Merger Agreement, (i) Diamond Merger Sub, Inc. was merged with and into Dow, with Dow surviving the merger as a subsidiary of DowDuPont (the “Diamond Merger”) and (ii) Orion Merger Sub, Inc. was merged with and into DuPont, with DuPont surviving the merger as a subsidiary of DowDuPont (the “Orion Merger” and, together with the Diamond Merger,

the “Mergers”). Following the consummation of the Mergers, each of Dow and DuPont became subsidiaries of DowDuPont (collectively, the “Merger”). Following the Merger, Dow and DuPont intend to pursue, subject to approval by the board of directors of DowDuPont (“DowDuPont Board”), the separation of the combined company’s agriculture business, specialty products business and materials science business through one or moretax-efficient transactions (“Intended Business Separations”). Additional information about the Merger is included in Current Reports on Form8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on December 11, 2015, March 31, 2017, August 4, 2017 and September 1, 2017.

Upon completion of the Diamond Merger, each share of common stock, par value $2.50 per share, of Dow (“Dow Common Stock”) (excluding any shares of Dow Common Stock that were held in treasury immediately prior to the effective time of the Diamond Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive one fully paid andnon-assessable share of common stock, par value $0.01 per share, of DowDuPont (“DowDuPont Common Stock”). As provided in the Merger Agreement, at the effective time of the Mergers, (i) all options, deferred stock, performance deferred stock and other equity awards relating to shares of Dow Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and deferred stock and other equity awards relating to shares of DowDuPont Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generally on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers. See Note 20 for additional information on the conversion of the equity awards.

In the third quarter of 2017, as a result of the Diamond Merger and the Merger, the Company recorded a reduction in “Treasury stock” of $935 million, a reduction in “Common stock” of $3,107 million and an increase in “Additional paid in capital” of $2,172 million. At September 1, 2017, the Company has 100 shares of common stock issued and outstanding, par value $0.01 per share, owned solely by its parent, DowDuPont.

On August 31, 2017, following the Diamond Merger, Dow requested that the New York Stock Exchange (“NYSE”) withdraw the shares of Dow Common Stock from listing on the NYSE and filed a Form 25 with the SEC to report that the shares of Dow Common Stock are no longer listed on the NYSE. The shares of Dow Common Stock were suspended from trading on the NYSE prior to the open of trading on September 1, 2017.

As a condition of the regulatory approval of the Merger, Dow and DuPont agreed to certain closing conditions, which are as follows:

•

Dow divested its global Ethylene Acrylic Acid copolymers and ionomers business (“EAA Business”) to SK Global Chemical Co., Ltd., on September 1, 2017, as part of a divestiture commitment given to the European Commission (“EC”) in connection with the EC’s conditional approval of the Merger granted on March 27, 2017. See Note 5 for additional information on this transaction.

•

DuPont divested its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios as well as its Crop Protection research and development (“R&D”) pipeline and organization (excluding seed treatment, nematicides, late-stage R&D programs and certain personnel needed to support marketed products and R&D programs that will remain with DuPont) (collectively, the “DuPont Divested Assets”) to FMC Corporation (“FMC”) on November 1, 2017, as part of the EC’s conditional approval granted on March 27, 2017. Also on November 1, 2017, DuPont completed its acquisition of FMC’s Health and Nutrition business, excluding itsOmega-3 products.

•

On May 2, 2017, Dow and DuPont announced that China’s Ministry of Commerce (“MOFCOM”) granted conditional regulatory approval for the companies’ proposed merger of equals which included commitments already made to the EC including DuPont’s divestiture of the DuPont Divested Assets and Dow’s divestiture of the EAA Business. In addition, Dow and DuPont have made commitments related to the supply and distribution in China of certain herbicide and insecticide ingredients and formulations for rice crops for five years after the closing of the Merger.

•

Dow divested a select portion of Dow AgroSciences’ corn seed business in Brazil (“DAS Divested Ag Business”) to CITIC Agri Fund on November 30, 2017. The divestiture was part of the commitment given to Brazil’s Administrative Council for Economic Defense (“CADE”) in connection with the CADE’s conditional approval of the Merger granted on May 17, 2017, which was incremental to commitments already made to the EC, China and regulatory agencies in other jurisdictions. See Note 5 for additional information on this transaction.

•

On June 15, 2017, Dow and DuPont announced that a proposed agreement had been reached with the Antitrust Division of the United States Department of Justice that permitted the companies to proceed with the proposed merger of equals transaction. The proposed agreement was consistent with commitments already made to the EC.

NOTE 4 – ACQUISITIONS

Ownership Restructure of Dow Corning

On June 1, 2016, the Company announced the closing of the transaction with Corning Incorporated (“Corning”), Dow Corning and HS Upstate Inc., (“Splitco”), pursuant to which Corning exchanged with Dow Corning its 50 percent equity interest in Dow Corning for 100 percent of the stock of Splitco which held Corning’s historical proportional interest in the Hemlock Semiconductor Group (“HSC Group”) and approximately $4.8 billion in cash (the “DCC Transaction”). As a result of the DCC Transaction, Dow Corning, previously a 50:50 joint venture between Dow and Corning, became a wholly owned subsidiary of Dow. In connection with the DCC Transaction, on May 31, 2016, Dow Corning incurred $4.5 billion of indebtedness in order to fund the contribution of cash to Splitco. See Notes 12, 13, 15 and 23 for additional information.

At June 1, 2016, the Company’s equity interest in Dow Corning, excluding the HSC Group, was $1,968 million. This equity interest was remeasured to fair value. As a result, the Company recognized anon-taxable gain of $2,445 million in the second quarter of 2016, net of closing costs and other comprehensive loss related to the Company’s interest in Dow Corning. The gain was included in “Sundry income (expense)—net” in the consolidated statements of income. The Company recognized a tax benefit of $141 million on the DCC Transaction in the second quarter of 2016, primarily due to the reassessment of a previously recognized deferred tax liability related to the basis difference in the Company’s investment in Dow Corning.

The Company utilized an income approach with a discounted cash flow model to determine the fair value of Dow Corning. The valuation process resulted in a fair value of $9,636 million. The following table summarizes the fair values of Dow Corning’s assets and liabilities, excluding the HSC Group, which are now fully consolidated by Dow. The valuation process was complete at December 31, 2016.


Assets Acquired and Liabilities Assumed on Jun 1, 2016
In millions
Fair Value of Previously Held Equity Investment, excluding the HSC Group	$	4,818
Fair Value of Assets Acquired
Cash and cash equivalents	$	1,050
Accounts and notes receivable—Trade		647
Accounts and notes receivable—Other		223
Inventories		1,147
Other current assets		51
Investment in nonconsolidated affiliates		110
Noncurrent receivables		112
Net property		3,996
Other intangible assets¹		2,987
Deferred income tax assets		999
Other assets		98
Total Assets Acquired	$	11,420
Fair Value of Liabilities Assumed
Accounts payable—Trade	$	374
Income taxes payable		260
Accrued and other current liabilities		404
Other current liabilities		112
Long-Term Debt		4,672
Deferred income tax liabilities		1,858
Pension and other postretirement benefits—noncurrent²		1,241
Other noncurrent obligations		437
Total Liabilities Assumed	$	9,358
Noncontrolling interests	$	473
Goodwill	$	3,229

1. Includes $30 million of trademarks/tradenames, $1,200 million of developed technology, $2 million of software and $1,755 million of customer-related intangibles. See Note 13 for additional information.

2. Includes pension and other postretirement benefits as well as long-term disability obligations.

The DCC Transaction resulted in the recognition of $3,229 million of goodwill which is not deductible for tax purposes. Goodwill largely consisted of expected synergies resulting from the DCC Transaction. Cost synergies will be achieved through a combination of workforce consolidation and savings from actions such as harmonizing energy contracts at large sites, optimizing warehouse and logistics footprints, implementing materials and maintenance best practices, combining information technology service structures and leveraging existing R&D knowledge management systems. See Note 13 for additional information on goodwill.

The fair value of “Accounts and notes receivables—Trade” acquired was $647 million, with gross contractual amounts receivable of $654 million. The fair valuestep-up of “Inventories” acquired was an increase of $317 million, which was expensed to “Cost of sales” over a three-month period beginning on June 1, 2016. Liabilities assumed from Dow Corning on June 1, 2016, included certain contingent liabilities relating to breast implant and other product liability claims which were valued at $290 million and included in “Other noncurrent obligations” and commercial creditor issues which were valued at $105 million and included in “Accrued and other current liabilities” in the consolidated balance sheets. See Note 16 for additional information on these contingent liabilities. Gross operating loss carryforwards of $568 million were assumed from Dow Corning on June 1, 2016. The operating loss carryforwards expire either in years beyond 2020 or have an indefinite carryforward period.

The Company evaluated the disclosure requirements under ASC 805 “Business Combinations” and determined the DCC Transaction was not considered a material business combination for purposes of disclosing the revenue and earnings of Dow Corning since the date of the ownership restructure as well as supplemental pro forma information.

Beginning in June 2016, the results of Dow Corning, excluding the HSC Group, were fully consolidated in the Company’s consolidated statements of income. Prior to June 2016, the Company’s 50 percent share of Dow Corning’s results of operations was reported in “Equity in earnings of nonconsolidated affiliates” in the consolidated statements of income. The results of the HSC Group continue to be treated as an equity method investment and reported as “Equity in earnings of nonconsolidated affiliates” in the consolidated statements of income.

Step Acquisition of Univation Technologies, LLC

On May 5, 2015, Univation Technologies, LLC (“Univation”), previously a 50:50 joint venture between Dow and ExxonMobil Chemical Company (“ExxonMobil”), became a wholly owned subsidiary of Dow as a result of ExxonMobil redeeming its entire equity interest in Univation in exchange for certain assets and liabilities of Univation. The Company’s equity interest in Univation of $159 million, previously classified as “Investment in nonconsolidated affiliates” in the consolidated balance sheets, was remeasured to fair value which resulted in anon-taxable gain of $361 million recognized in the second quarter of 2015, included in “Sundry income (expense)—net” in the consolidated statements of income.

Beginning in May 2015, Univation’s results of operations were fully consolidated in the Company’s consolidated statements of income. Prior to May 2015, the Company’s 50 percent share of Univation’s results of operations was reported in “Equity in earnings of nonconsolidated affiliates” in the consolidated statements of income.

NOTE 5 – DIVESTITURES

Merger Remedy—Divestiture of the Global Ethylene Acrylic Acid Copolymers and Ionomers Business

On February 2, 2017, as a condition of regulatory approval of the Merger, Dow announced it would divest the EAA Business to SK Global Chemical Co., Ltd. The divestiture included production assets located in Freeport, Texas, and Tarragona, Spain, along with associated intellectual property and product trademarks. Under terms of the purchase agreement, SK Global Chemical Co., Ltd will honor certain customer and supplier contracts and other agreements. On September 1, 2017, the sale was completed for $296 million, net of working capital adjustments, costs to sell and other adjustments, with proceeds subject to customary post-closing adjustments.

In 2017, the Company recognized a pretax gain of $227 million on the sale, included in “Sundry income (expense)—net” in the consolidated statements of income.


EAA Business Assets Divested on Sep 1, 2017
In millions
Current assets	$	34
Net property		12
Goodwill		23
Total assets divested	$	69

Merger Remedy—Divestiture of a Portion of Dow AgroSciences’ Brazil Corn Seed Business

On July 11, 2017, as a condition of regulatory approval of the Merger, Dow announced it had entered into a definitive agreement with CITIC Agri Fund to sell the DAS Divested Ag Business, including four corn seed production sites and four research centers, a copy of Dow AgroSciences’ Brazilian corn germplasm bank, certain commercial and pipeline hybrids, the MORGAN™ trademark and a license to the DOW SEMENTES™ trademark for 12 months. On November 30, 2017, the sale was completed for $1,093 million, net of working capital adjustments, costs to sell and other adjustments, with proceeds subject to customary post-closing adjustments.

In 2017, the Company recognized a pretax gain of $635 million on the sale, included in “Sundry income (expense)—net” in the consolidated statements of income.


DAS Divested Ag Business Assets and Liabilities Divested on Nov 30, 2017
In millions
Cash and cash equivalents	$	22
Accounts and notes receivable—trade and other		59
Inventories		139
Net property		70
Goodwill		128
Noncurrent receivables, deferred charges and other assets		102
Total assets divested	$	520
Current liabilities	$	39
Long-Term Debt and other noncurrent liabilities		23
Total liabilities divested	$	62
Net carrying value divested	$	458

Divestiture of the Global Sodium Borohydride Business

On January 30, 2015, the Company sold its global Sodium Borohydride business (“SBH”) to Vertellus Performance Chemicals LLC. The divestiture included a manufacturing facility located in Elma, Washington, as well as the associated business, inventory, customer contracts and lists, process technology, businessknow-how and certain intellectual property. The sale was completed for $184 million, net of working capital adjustments and costs to sell, with proceeds subject to customary post-closing adjustments.

Post-closing adjustments were finalized in the fourth quarter of 2015. In 2015, the Company recognized a pretax gain of $20 million on the sale, including post-closing adjustments of $2 million. The gain was included in “Sundry income (expense)—net” in the consolidated statements of income. The Company recognized anafter-tax loss of $10 million on the sale, primarily due tonon-deductible goodwill included with this transaction.

Divestiture of ANGUS Chemical Company

On February 2, 2015, the Company sold ANGUS Chemical Company (“ANGUS”) to Golden Gate Capital. The divestiture included the business headquarters and research and development facility in Buffalo Grove, Illinois; manufacturing facilities located in Sterlington, Louisiana, and Ibbenbueren, Germany; a packaging facility in Niagara Falls, New York; as well as the associated business, inventory, customer contracts, process technology, businessknow-how and certain intellectual property. The sale was completed for $1,151 million, net of working capital adjustments, costs to sell and other transaction expenses, with proceeds subject to customary post-closing adjustments. The proceeds included a $10 million note receivable included in “Noncurrent receivables” in the consolidated balance sheets.

Post-closing adjustments were finalized in the fourth quarter of 2015. In 2015, the Company recognized a pretax gain of $682 million on the sale, including post-closing adjustments of $12 million. The gain was included in “Sundry income (expense)—net” in the consolidated statements of income.

Divestiture of the AgroFresh Business

On July 31, 2015, the Company sold its AgroFresh business to Boulevard Acquisition Corp., which was subsequently renamed AgroFresh Solutions, Inc. (“AFSI”). The divestiture included trade receivables, inventory, property, customer lists, trademarks and certain intellectual property. The sale was completed for $859 million, net of working capital adjustments, costs to sell and other transaction expenses, with proceeds subject to customary post-closing adjustments. The proceeds included a $635 million cash payment; 17.5 million common shares of AFSI, which represented a 35 percent equity interest valued at $210 million based on the closing stock price on July 31, 2015 and included in “Investment in nonconsolidated affiliates” in the consolidated balance sheets; and, a receivable for six million warrants to purchase common shares of AFSI, which was valued at $14 million and classified as “Accounts and notes receivable—Other” in the consolidated balance sheets. In addition, the Company has an ongoing tax receivable agreement with AFSI, where AFSI is obligated to share with Dow tax savings associated with the purchase of the AgroFresh business. The Company did not recognize the tax receivable agreement as proceeds.

In 2015, the Company recognized a pretax gain of $626 million on the sale (including post-closing adjustments of $2 million), of which $128 million related to the Company’s retained equity interest in AFSI. The pretax gain was included in “Sundry income (expense)—net” in the consolidated statements of income.

In the fourth quarter of 2016, as a result of a decline in the market value of AFSI, the Company recognized a $143 million pretax impairment charge related to its equity interest in AFSI. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. The Company also recognized a pretax loss of $20 million for post-closing adjustments related tonon-cash consideration. The post-closing adjustments were included in “Sundry income (expense)—net” in the consolidated statements of income.

On April 4, 2017, the Company and AFSI revised certain agreements related to the divestiture of the AgroFresh business, including termination of an agreement related to the six million warrants, which was valued at $1 million at December 31, 2016. The Company also entered into an agreement to purchase up to 5,070,358 shares of AFSI’s common stock, which represented approximately 10 percent of AFSI’s common stock outstanding at signing of the agreement, subject to certain terms and conditions. See Notes 6, 12, 22 and 23 for further information on the Company’s equity interest and variable interests in AFSI.

The Company evaluated the divestitures of the EAA Business, SBH, ANGUS and AgroFresh and determined they did not represent a strategic shift that had a major effect on the Company’s operations and financial results and did not qualify as individually significant components of the Company. The divestiture of the DAS Divested Ag Business did not qualify as a component of the Company. As a result, these divestitures were not reported as discontinued operations.

Divestiture of Investment in MEGlobal

On December 23, 2015, the Company completed the sale of its ownership interest in MEGlobal, a nonconsolidated affiliate, to EQUATE Petrochemical Company K.S.C. (“EQUATE”). The Company received pretax proceeds of $1,472 million, net of costs to sell and other transaction expenses. The Company eliminated 42.5 percent of the gain on the sale (equivalent to Dow’s ownership interest in EQUATE), or $555 million. In 2015, the Company recorded a pretax gain of $723 million on the sale, which was included in “Sundry income (expense) – net” in the consolidated statements of income. The Company recognized anafter-tax gain of $589 million on the sale. See Note 12 for further information on the Company’s equity interest in EQUATE.

NOTE 6 – RESTRUCTURING, GOODWILL IMPAIRMENT AND ASSET RELATED CHARGES—NET

The “Restructuring, goodwill impairment and asset related charges—net” line in the consolidated statements of income is used to record charges for restructuring programs, goodwill impairment, and other asset related charges, which includes other asset impairments.

Restructuring Plans

DowDuPont Cost Synergy Program

In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”) which is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations. Based on all actions approved to date under the Synergy Program, the Company expects to record total pretax restructuring charges of approximately $1.3 billion, comprised of approximately $525 million to $575 million of severance and related benefit costs; $400 million to $440 million of asset write-downs and write-offs, and $290 million to $310 million of costs associated with exit and disposal activities.

As a result of these actions, the Company recorded pretax restructuring charges of $687 million in 2017, consisting of severance and related benefit costs of $357 million, asset write-downs and write-offs of $287 million and costs associated with exit and disposal activities of $43 million. The impact of these charges is shown as “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. The Company expects to record the remaining restructuring charges over the next two years and expects the Synergy Program to be substantially complete by the end of 2019.

The following table summarizes the activities related to the Synergy Program, of which $231 million was included in “Accrued and other current liabilities” and $118 million was included in “Other noncurrent obligations” in the consolidated balance sheets.


DowDuPont Synergy Program	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities		Total
In millions	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities		Total
2017 restructuring charges	$	357		$	287		$	43	$	687
Charges against the reserve		—			(287	)		—		(287	)
Cash payments		(51	)		—			—		(51	)
Reserve balance at Dec 31, 2017	$	306		$	—		$	43	$	349

Asset Write-downs and Write-offs

The restructuring charges related to the write-down andwrite-off of assets in 2017 totaled $287 million. Details regarding thewrite-downs andwrite-offs are as follows:

•

The Company will close or consolidate several manufacturing, R&D and administrative facilities around the world aligned with seed and crop protection activities, including the write-down of othernon-manufacturing assets. As a result, the Company recorded a charge of $94 million. These facilities will be shut down or consolidated by the end of the fourth quarter of 2019.

•

The Company recorded a charge of $83 million for asset write-downs and write-offs aligned with electronics and imaging product lines, including the shutdown of a metalorganic manufacturing facility in Cheonan, South Korea, thewrite-off ofin-process research and development and other intangible assets, and the consolidation of certain R&D facilities. The Korean facility will be shut down by the second quarter of 2018.

•

The Company recorded a charge of $22 million for asset write-downs and write-offs aligned with an energy project, including thewrite-off of capital projects and othernon-manufacturing assets.

•

The Companywrote-off $21 million of assets aligned with safety and construction products, including intangible assets as a result of the Clean Filtration Technologies plant shutdown in the fourth quarter of 2017.

•

The Company recorded a charge of $67 million for other miscellaneous asset write-downs and write-offs, including the shutdown of several small manufacturing facilities and thewrite-off ofnon-manufacturing assets, certain corporate facilities and data centers. These manufacturing facilities will be shut down over the next two years.

Costs Associated with Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation liabilities, totaled $43 million in 2017.

2016 Restructuring

On June 27, 2016, Dow’s Board approved a restructuring plan that incorporated actions related to the ownership restructure of Dow Corning. These actions, aligned with Dow’s value growth and synergy targets, will result in a global workforce reduction of approximately 2,500 positions, with most of these positions resulting from synergies related to the ownership restructure of Dow Corning. These actions are expected to be substantially completed by June 30, 2018.

As a result of these actions, the Company recorded pretax restructuring charges of $449 million in the second quarter of 2016, consisting of severance and related benefit costs of $268 million, asset write-downs and write-offs of $153 million and costs associated with exit and disposal activities of $28 million. The impact of these charges is shown as “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income.

The following table summarizes the activities related to the Company’s 2016 restructuring reserve, which was primarily included in “Accrued and other current liabilities” in the consolidated balance sheets.


2016 Restructuring Charges	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities			Total
In millions	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities			Total
2016 restructuring charges	$	268		$	153		$	28		$	449
Charges against the reserve		—			(153	)		—			(153	)
Cash payments		(67	)		—			(1	)		(68	)
Reserve balance at Dec 31, 2016	$	201		$	—		$	27		$	228
Adjustments to the reserve¹		—			—			(7	)		(7	)
Cash payments		(150	)		—			(3	)		(153	)
Reserve balance at Dec 31, 2017	$	51		$	—		$	17		$	68

1. Included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income.

Asset Write-downs and Write-offs

The restructuring charges related to the write-down andwrite-off of assets in the second quarter of 2016 totaled $153 million. Details regarding the write-downs and write-offs are as follows:

•

The Company recorded a charge of $70 million for asset write-downs and write-offs including the shutdown of a solar manufacturing facility in Midland, Michigan; the write-down of a solar facility in Milpitas, California; and, thewrite-off of capital projects andin-process research and development. The Midland facility was shut down in the third quarter of 2016.

•

To enhance competitiveness and streamline costs associated with the ownership restructure of Dow Corning, a silicones manufacturing facility in Yamakita, Japan, will be shut down by the end of 2018. In addition, an idled facility was shut down in the second quarter of 2016. As a result, the Company recorded a charge of $25 million.

•

The Company recorded a charge of $25 million to close and/or consolidate certain corporate facilities and data centers. These facilities will be shut down no later than the end of the second quarter of 2018.

•

A decision was made to shut down a small manufacturing facility and to write-down othernon-manufacturing assets, including a cost method investment and certain aircraft. As a result, the Company recorded a charge of $33 million. The manufacturing facility was shut down in the second quarter of 2016.

Costs Associated with Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities, including contract cancellation penalties, environmental remediation and warranty liabilities, were $28 million in the second quarter of 2016.

2015 Restructuring

On April 29, 2015, Dow’s Board approved actions to further streamline the organization and optimize the Company’s footprint as a result of the separation of a significant portion of Dow’s chlorine value chain. These actions, which further accelerated Dow’s value growth and productivity targets, resulted in a reduction of approximately 1,750 positions and adjustments to the Company’s asset footprint to enhance competitiveness. These actions were substantially completed at June 30, 2017.

As a result of these actions, the Company recorded pretax restructuring charges of $375 million in the second quarter of 2015 consisting of severance and related benefit costs of $196 million, asset write-downs and write-offs of $169 million and costs associated with exit and disposal activities of $10 million. In the fourth quarter of 2015, the Company recorded restructuring charge adjustments of $40 million, including severance and related benefit costs of $39 million for the separation of approximately 500 additional positions as part of the Company’s efforts to further streamline the organization, and $1 million of costs associated with exit and disposal activities. The impact of these charges is shown as “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income.

The following table summarizes the activities related to the Company’s 2015 restructuring reserve.


2015 Restructuring Charges	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities			Total
In millions	Severance and Related Benefit Costs			Asset Write- downs and Write-offs			Costs Associated with Exit and Disposal Activities			Total
2015 restructuring charges	$	196		$	169		$	10		$	375
Charges against the reserve		—			(169	)		—			(169	)
Adjustments to the reserve¹		39			—			1			40
Impact of currency		—			—			(1	)		(1	)
Cash payments		(92	)		—			—			(92	)
Reserve balance at Dec 31, 2015	$	143		$	—		$	10		$	153
Charges against the reserve		—			3			—			3
Adjustments to the reserve¹		—			(3	)		6			3
Cash payments		(98	)		—			(8	)		(106	)
Reserve balance at Dec 31, 2016	$	45		$	—		$	8		$	53
Adjustments to the reserve¹		(9	)		—			(1	)		(10	)
Cash payments		(33	)		—			—			(33	)
Reserve balance at Jun 30, 2017	$	3		$	—		$	7		$	10

1. Included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income.

The Company also recorded $14 million of restructuring charges to “Net income attributable to noncontrolling interests” in the consolidated statements of income in the second quarter of 2015 for the noncontrolling interests’ portion of the charge.

The 2015 restructuring activities were substantially completed at June 30, 2017, with remaining liabilities for severance and related benefit costs and costs associated with exit and disposal activities to be settled over time.

Asset Write-downs and Write-offs

Asset write-downs and write-offs in the second quarter of 2015 totaled $169 million. Details regarding the write-downs and write-offs are as follows:

•

As a result of changing market dynamics in certainend-use markets, select manufacturing facilities andnon-core assets aligned with electronics and imaging products were shut down in 2016. The assets impacted included certain display films and metalorganic precursors, including a metalorganic materials manufacturing site in North Andover, Massachusetts, and related operations in Taoyuan, Taiwan, as well as certain display films’ manufacturing assets aligned with SKC Haas Display Films Co., Ltd., a former majority-owned joint venture located in Cheonan, South Korea. The Company recorded a $51 million charge for asset write-downs and write-offs.

•

The Company shut down and/or consolidated manufacturing capacity aligned with safety and construction products during 2016. As a result, the Company recorded a charge of $15 million.

•

A manufacturing facility that produces water soluble polymers in Institute, West Virginia, was shut down in the fourth quarter of 2015. As a result, an asset write-down of $14 million was recorded.

•

A photovoltaic plant in Schkopau, Germany, was permanently shut down in the second quarter of 2015, resulting in an assetwrite-off of $12 million.

•

Select operations for seed and crop protection products were shut down, closed or idled in the second half of 2015, resulting in a pretax charge of $8 million for the write-down of assets.

•

A decision was made to shut down two small manufacturing facilities and an administrative facility to optimize the Company’s asset footprint, resulting in a charge of $14 million. The manufacturing facilities were shut down in 2015 and the administrative facility was shut down in 2017.

•

Due to a change in the Company’s strategy to monetize and exit certain Venture Capital portfolio investments, a write-down of $55 million was recorded.

Costs Associated with Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities, primarily environmental remediation and contract penalties, totaled $10 million in the second quarter of 2015.

Dow expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.

Goodwill Impairment

Upon completion of the goodwill impairment testing in the fourth quarter of 2017, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,491 million in the fourth quarter of 2017, included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. See Note 13 for additional information on the impairment charge.

Asset Related Charges

2017 Charges

In the fourth quarter of 2017, the Company recognized a $622 million pretax impairment charge related to a biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil. The Company determined it will not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as the Company’s new assets coming online in the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. See Notes 22 and 23 for additional information.

2016 Charges

In the fourth quarter of 2016, the Company recognized a $143 million pretax impairment charge related to its equity interest in AFSI due to a decline in the market value of AFSI. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. See Notes 5, 12, 22 and 23 for additional information.

2015 Charges

As a result of the Company’s continued actions to optimize its footprint, the Company recognized an impairment charge of $144 million in the fourth quarter of 2015, related to manufacturing assets and facilities and an equity method investment. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. See Note 22 for additional information.

NOTE 7 – REVERSE MORRIS TRUST TRANSACTION

On October 5, 2015, (i) the Company completed the transfer of its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses (“chlorine value chain”) into a new company (“Splitco”), (ii) participating Dow shareholders tendered, and the Company accepted, Dow shares for Splitco shares in a public exchange offer, and (iii) Splitco merged with a wholly owned subsidiary of Olin Corporation (“Olin”) in atax-efficient Reverse Morris Trust transaction (collectively, the “Transaction”). The Transaction was subject to Olin shareholder approval, customary regulatory approvals, tax authority rulings including a favorable private letter ruling from the U.S. Internal Revenue Service which confirms the Transaction to be substantially free of U.S. federal income tax, and expiration of the public exchange offer. Dow does not have an ownership interest in Olin as a result of the Transaction.

Under the terms of a debt exchange offer, Dow received $1,220 million principal amount of new debt instruments from Splitco, which were subsequently transferred to certain investment banks in anon-cash fair value exchange for $1,154 million principal amount of the Company’s outstanding debt instruments owned by such investment banks. As a result of this debt exchange offer and related transactions, the Company retired $1,161 million of certain notes and recognized a $68 million loss on the early extinguishment of debt, included in “Sundry income (expense)—net” in the consolidated statements of income and included as a component of the pretax gain on the Transaction. See Note 15 for additional information on the early extinguishment of debt. Dow shareholders who elected to participate in the public exchange offer tendered 34.1 million shares of Dow common stock in exchange for 100 million shares of Splitco. Following the merger of Splitco with Olin, each share of Splitco common stock was automatically converted to the right to receive 0.87482759 shares of Olin common stock, or 87.5 million shares, which represented approximately 52.7 percent of Olin’s common stock outstanding. As a result of thisnon-cash share exchange offer, the Company recorded an increase of $1,523 million in “Treasury Stock” in the consolidated statements of equity, which is valued based on Dow’s opening stock price on October 5, 2015. The Company’s outstanding common shares were reduced by 3 percent as a result of the Transaction.

Under the terms of the Transaction, Dow received cash proceeds of $875 million in the form of aone-time special payment from Splitco from proceeds received from a term loan and included in “Proceeds from issuance of long-term debt” in the consolidated statements of cash flows. The Company also received a $434 million advance payment from Olin, included in “Other assets and liabilities, net” in the consolidated statements of cash flows, related to a long-term ethylene supply agreement, of which $16 million was classified as “Accrued and other current liabilities” and $418 million was classified as “Other noncurrent obligations” in the consolidated balance sheets at the time of receipt. The Transaction also resulted in numerous long-term supply, service and purchase agreements between Dow and Olin.

In connection with the Transaction, the Company purchased Mitsui & Co. Texas Chlor-Alkali Inc.’s (“Mitsui”) 50 percent equity interest in a membrane chlor-alkali joint venture (“JV Entity”), which resulted in Dow becoming the sole equity owner of the JV Entity. The Company purchased Mitsui’s equity interest for $133 million, which resulted in a loss of $25 million included in “Sundry income (expense)—net” in the consolidated statements of income and included as a component of the pretax gain on the Transaction. The JV Entity was included in the transfer of the chlorine value chain to Splitco. See Note 23 for further information on the acquisition of Mitsui’s equity interest in the JV Entity.

The Company also transferred $439 million of net unfunded defined pension and other postretirement benefit obligations in the United States and Germany to Olin.

In the fourth quarter of 2015, the Company completed thesplit-off of the chlorine value chain for $3,510 million, net of working capital adjustments and costs to sell, with proceeds subject to post-closing adjustments. The proceeds included cash received from Splitco in the form of aone-time special payment from proceeds received from a term loan, the principal amount of the Splitco debt included in the debt exchange offer and the market value of the Dow common shares tendered in the public exchange offer. The Company recognized a pretax gain of $2,233 million on the Transaction, included in “Sundry income (expense)—net” in the consolidated statements of income, which is the excess of the sum of the net proceeds received over the chlorine value chain’s net book value, a loss on the early extinguishment of debt and a loss on the acquisition of Mitsui’s noncontrolling interest. The Company recognized anafter-tax gain of $2,215 million, primarily due to thetax-efficient nature of the Transaction.

In 2016, the Company recognized a pretax gain of $6 million for post-closing adjustments, including a $5 million reduction to the net unfunded defined pension and other postretirement benefit obligation. The gain was included in “Sundry income (expense)—net” in the consolidated statements of income. See Note 19 for additional information.

In 2017, the Company recognized a pretax gain of $7 million for post-closing adjustments. The gain was included in “Sundry income (expense)—net” in the consolidated statements of income.

The Company did not report the historical results of the chlorine value chain as discontinued operations in Dow’s financial statements as the divestiture of these businesses did not represent a strategic shift that had a major effect on the Company’s operations and financial results. However, the chlorine value chain was considered an individually significant component and select income statement information is presented below:


Dow Chlorine Value Chain Income Statement Information In millions	2015¹
Income Before Income Taxes²	$	139
Loss before income taxes attributable to noncontrolling interests		11
Income Before Income Taxes attributable to The Dow Chemical Company²	$	150

1. Income statement information for 2015 includes results through September 30, 2015.

2. Excludes transaction costs associated with the separation of the chlorine value chain, which are reported below.

In 2015, the Company incurred pretax charges of $119 million for nonrecurring transaction costs associated with the separation of the chlorine value chain, consisting primarily of financial and professional advisory fees, legal fees and information systems infrastructure costs. These charges were included in “Sundry income (expense)—net” in the consolidated statements of income.

NOTE 8 – SUPPLEMENTARY INFORMATION


Sundry Income (Expense) – Net In millions	2017			2016			2015
Gain on sales of other assets and investments	$	182		$	170		$	237
Interest income		106			107			71
Foreign exchange losses		(72	)		(126	)		(191	)
Gain on divestiture of DAS Divested Ag Business¹		635			—			—
Gain on divestiture of the EAA Business¹		227			—			—
Gain related to Nova patent infringement award²		137			—			—
Impact ofsplit-off of chlorine value chain³		7			6			2,233
Loss related to Bayer CropScience arbitration matter²		(469	)		—			—
Gain on ownership restructure of Dow Corning⁴		—			2,445			—
Settlement of the urethane matters class action lawsuit andopt-out cases²		—			(1,235	)		—
Costs associated with transactions and productivity actions⁵		—			(41	)		(119	)
Implant liability adjustment²		—			27			—
Gain (loss) on divestiture of AgroFresh business^{1, 6}		—			(25	)		618
Gain (loss) on sale of MEGlobal¹		—			(1	)		723
Gain on sale of a Dow AgroSciences subsidiary⁷		—			—			44
Gain on divestiture of ANGUS Chemical Company¹		—			—			682
Gain on Univation step acquisition⁴		—			—			361
Gain on divestiture of Sodium Borohydride business¹		—			—			20
Loss on early extinguishment of debt⁸		—			—			(8	)
Reclassification of cumulative translation adjustments		8			—			(4	)
Other—net		116			125			49
Total sundry income (expense) – net	$	877		$	1,452		$	4,716

1. See Note 5 for additional information.

2. See Note 16 for additional information.

3. See Note 7 for additional information.

4. See Note 4 for additional information.

5. Transaction costs primarily associated with the separation of the chlorine value chain.

6. Includes a $5 million loss in 2016 ($8 million loss in 2015) onmark-to-market adjustments related to warrants.

7. See Note 23 for additional information.

8. Excludes $68 million related to thesplit-off of the chlorine value chain. See Notes 7 and 15 for additional information.

Accrued and Other Current Liabilities

“Accrued and other current liabilities” were $4,025 million at December 31, 2017 and $4,481 million at December 31, 2016. Accrued payroll, which is a component of “Accrued and other current liabilities,” was $1,109 million at December 31, 2017 and $1,105 million at December 31, 2016. No other components of “Accrued and other current liabilities” was more than 5 percent of total current liabilities.

Other Noncurrent Obligations

The Company received $524 million in the third quarter of 2017 for advance payments from customers related to long-term ethylene supply agreements. At December 31, 2017, $12 million was classified as “Accrued and other current liabilities” with the remaining balance of $508 million classified as “Other noncurrent obligations.”

Other Investments

The Company has investments in company-owned life insurance policies, which are recorded at their cash surrender value as of each balance sheet date. In 2015, the Company repaid $697 million of principal outstanding loan amounts plus accrued interest, which was reflected in “Purchases of investments” in the consolidated statements of cash flows.

NOTE 9 – INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves to a territorial system. At December 31, 2017, the Company had not completed its accounting for the tax effects of The Act; however, as described below, the Company made a reasonable estimate of the effects on its existing deferred tax balances and theone-time transition tax. In accordance with Staff Accounting Bulletin 118 (“SAB 118”), income tax effects of The Act may be refined upon obtaining, preparing, or analyzing additional information during the measurement period and such changes could be material. During the measurement period, provisional amounts may also be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies.

•

As a result of The Act, the Company remeasured its U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. However, the Company is still analyzing certain aspects of The Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balance was $50 million, recorded as a charge to “Provision for income taxes.”

•

The Act requires a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (“E&P”), which results in aone-time transition tax. As a result, the Company recorded a provisional amount for the transition tax liability for its foreign subsidiaries of $865 million, recorded as a charge to “Provision for income taxes.” The Company has not yet completed its calculation of the total post-1986 foreign E&P for its foreign subsidiaries as E&P will not be finalized until the DowDuPont federal income tax return is filed. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets, which is a defined term under The Act.

•

For tax years beginning after December 31, 2017, The Act introduces new provisions for U.S. taxation of certain global intangiblelow-taxed income (“GILTI”). Due to its complexity and a current lack of guidance as to how to calculate the tax, the Company is not yet able to determine a reasonable estimate for the impact of the incremental tax liability. When additional guidance is available, the Company will make a policy election for how the additional liability will be recorded in the period in which it is incurred or recognized for the basis differences that would be expected to reverse in future years.


Geographic Allocation of Income and Provision for Income Taxes
In millions	2017			2016			2015
Income (Loss) Before Income Taxes
Domestic^{1, 2}	$	(1,973	)	$	485		$	5,313
Foreign¹		4,772			3,928			4,617
Income Before Income Taxes	$	2,799		$	4,413		$	9,930
Current tax expense (benefit)
Federal	$	(308	)	$	91		$	583
State and local		—			21			38
Foreign		1,579			1,156			1,221
Total current tax expense	$	1,271		$	1,268		$	1,842
Deferred tax expense (benefit)
Federal³	$	1,027		$	(1,255	)	$	358
State and local		56			(10	)		(8	)
Foreign		(150	)		6			(45	)
Total deferred tax expense (benefit)	$	933		$	(1,259	)	$	305
Provision for income taxes	$	2,204		$	9		$	2,147
Net Income	$	595		$	4,404		$	7,783

1. In 2017, the domestic component of “Income Before Income Taxes” included approximately $308 million ($2.1 billion and $3.5 billion in 2016 and 2015, respectively) and the foreign component contained $562 million (zero and $1.1 billion in 2016 and 2015, respectively) of income from portfolio actions. See Notes 4, 5 and 7 for additional information.

2. In 2017, the domestic component of “Income Before Income Taxes” included approximately $2.7 billion of expense related to a goodwill impairment,non-qualified pension plan change in control charges and litigation settlements. In 2016, the domestic component of “Income Before Income Taxes” included approximately $2.6 billion of expenses related to the urethane matters class action lawsuit andopt-out cases settlements, asbestos-related charge and charges for environmental matters. See Notes 13, 16 and 19 for additional information.

3. The 2017 amount reflects the tax impact of The Act which accelerated the utilization of tax credits and required remeasurement of all U.S. deferred tax assets and liabilities. The 2016 amount reflects the tax impact of accruedone-time items and reduced domestic income which limited the utilization of tax credits.


Reconciliation to U.S. Statutory Rate	2017			2016			2015
Statutory U.S. federal income tax rate		35.0	%		35.0	%		35.0	%
Equity earnings effect		(4.2	)		(1.2	)		(1.8	)
Foreign income taxed at rates other than 35%¹		(15.9	)		(7.0	)		(4.0	)
U.S. tax effect of foreign earnings and dividends		(1.6	)		(4.6	)		1.3
Unrecognized tax benefits		1.1			(0.8	)		0.8
Acquisitions, divestitures and ownership restructuring activities²		11.7			(21.2	)		(9.5	)
Impact of U.S. tax reform		32.7			—			—
State and local income taxes³		3.2			0.2			0.6
Goodwill impairment		19.2			—			—
Excess tax benefits from stock compensation		(3.5	)		—			—
Other—net³		1.0			(0.2	)		(0.8	)
Effective Tax Rate		78.7	%		0.2	%		21.6	%

1. Includes the impact of valuation allowances in foreign jurisdictions.

2. See Notes 4, 5 and 7 for additional information.

3. Prior year was adjusted to conform with the current year presentation.


Deferred Tax Balances at Dec 31 In millions	2017					2016
Deferred Tax Balances at Dec 31 In millions	Assets			Liabilities		Assets			Liabilities
Property	$	508		$	2,474	$	307		$	2,860
Tax loss and credit carryforwards		1,734			—		2,450			—
Postretirement benefit obligations		2,442			136		3,715			75
Other accruals and reserves		1,251			146		1,964			883
Intangibles		176			1,010		128			1,536
Inventory		35			171		50			197
Investments		272			158		179			119
Other – net		420			414		737			643
Subtotal	$	6,838		$	4,509	$	9,530		$	6,313
Valuation allowances		(1,371	)		—		(1,061	)		—
Total	$	5,467		$	4,509	$	8,469		$	6,313

As a result of the Merger and subsequent change in the Company’s ownership, certain net operating loss carryforwards available for the Company’s consolidated German tax group were derecognized. In addition, the sale of stock between two consolidated subsidiaries in 2014 created a gain that was initially deferred for tax purposes. This deferred gain became taxable as a result of activities executed in anticipation of the Intended Business Separations. As a result, in 2017, the Company decreased “Deferred income tax assets” in the consolidated balance sheets and recorded a charge to “Provision for income taxes” in the consolidated statements of income of $267 million.


Operating Loss and Tax Credit Carryforwards In millions	2017		2016
Operating Loss and Tax Credit Carryforwards In millions	Assets		Assets
Operating loss carryforwards
Expire within 5 years	$	246	$	176
Expire after 5 years or indefinite expiration		1,305		1,346
Total operating loss carryforwards	$	1,551	$	1,522
Tax credit carryforwards
Expire within 5 years	$	39	$	28
Expire after 5 years or indefinite expiration		144		900
Total Operating Loss and Tax Credit Carryforwards	$	183	$	928

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $7,052 million at December 31, 2017 and $18,668 million at December 31, 2016. The Act imposed U.S. tax on all foreign unrepatriated earnings. These undistributed earnings are still subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.

The following table provides a reconciliation of the Company’s unrecognized tax benefits:


Total Gross Unrecognized Tax Benefits In millions	2017			2016			2015
Total unrecognized tax benefits at Jan 1	$	231		$	280		$	240
Decreases related to positions taken on items from prior years		(4	)		(12	)		(6	)
Increases related to positions taken on items from prior years¹		37			153			92
Increases related to positions taken in the current year²		10			135			10
Settlement of uncertain tax positions with tax authorities¹		(12	)		(325	)		(56	)
Decreases due to expiration of statutes of limitations		(9	)		—			—
Total unrecognized tax benefits at Dec 31	$	253		$	231		$	280
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	243		$	223		$	206
Total amount of interest and penalties (benefit) recognized in “Provision for income taxes”	$	2		$	(55	)	$	80
Total accrual for interest and penalties recognized in the consolidated balance sheets	$	110		$	89		$	178

1. The 2016 balance includes the impact of a settlement agreement related to a historical change in the legal ownership structure of a nonconsolidated affiliate discussed below.

2. The 2016 balance includes $126 million assumed in the DCC Transaction.

On January 9, 2017, the U.S. Supreme Court deniedcertiorari in the Company’s tax treatment of partnerships and transactions associated with Chemtech, a wholly owned subsidiary. The Company has fully accrued the position and does not expect a future impact to “Provision for income taxes” in the consolidated statements of income as a result of the ruling.

In the fourth quarter of 2016, a settlement of $206 million was reached on a tax matter associated with a historical change in the legal ownership structure of a nonconsolidated affiliate. As a result of the settlement, the Company recorded a net decrease in uncertain tax positions of $67 million, included in “Other noncurrent obligations” in the consolidated balance sheets, and an unfavorable impact of $13 million to “Provision for income taxes” in the consolidated statements of income.

Dow and its consolidated subsidiaries are included in DowDuPont’s consolidated federal income tax group and consolidated tax return. Generally, the consolidated tax liability of the DowDuPont U.S. tax group for each year will be apportioned among the members of the consolidated group based on each member’s separate taxable income. Dow and DuPont intend that, to the extent federal and/or state corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’ssub-group attributes will be in accordance with a tax sharing agreement and/or tax matters agreement.

Each year, the Company files tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The impact on the Company’s results of operations is not expected to be material.

Tax years that remain subject to examination for the Company’s major tax jurisdictions are shown below:


Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31, 2017 Jurisdiction		Earliest Open Year
Argentina		2010
Brazil		2007
Canada		2014
China		2007
Germany		2006
Italy		2013
The Netherlands		2015
Switzerland		2014
United States:
Federal income tax		2004
State and local income tax		2004

The reserve fornon-income tax contingencies related to issues in the United States and foreign locations was $110 million at December 31, 2017 and $108 million at December 31, 2016. This is management’s best estimate of the potential liability fornon-income tax contingencies. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law, both legislated and concluded through the various jurisdictions’ tax court systems. It is the opinion of the Company’s management that the possibility is remote that costs in excess of those accrued will have a material impact on the Company’s consolidated financial statements.

NOTE 10 – INVENTORIES

The following table provides a breakdown of inventories:


Inventories at Dec 31 In millions	2017			2016
Finished goods	$	5,213		$	4,230
Work in process		1,747			1,510
Raw materials		898			853
Supplies		848			823
Total	$	8,706		$	7,416
Adjustment of inventories to a LIFO basis		(330	)		(53	)
Total inventories	$	8,376		$	7,363

NOTE 11 – PROPERTY

The following table provides a breakdown of property:


Property at Dec 31¹ In millions	Estimated Useful Lives (Years)		2017		2016
Property at Dec 31¹ In millions	Estimated Useful Lives (Years)		2017		2016
Land and land improvements		0-25	$	2,535	$	2,524
Buildings		5-50		5,920		5,935
Machinery and equipment		3-25		43,208		38,499
Other property		3-50		5,277		4,380
Construction in progress		—		3,486		6,100
Total property			$	60,426	$	57,438

1. Updated to conform with the presentation adopted for DowDuPont.


In millions	2017		2016		2015
Depreciation expense	$	2,329	$	2,130	$	1,908
Capitalized interest	$	240	$	243	$	218

NOTE 12 – NONCONSOLIDATED AFFILIATES

The Company’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”), by classification in the consolidated balance sheets, and dividends received from nonconsolidated affiliates are shown in the following tables:


Investments in Nonconsolidated Affiliates at Dec 31 In millions	2017¹			2016¹
Investment in nonconsolidated affiliates	$	3,742		$	3,747
Other noncurrent obligations		(752	)		(1,030	)
Net investment in nonconsolidated affiliates	$	2,990		$	2,717

1. The carrying amount of the Company’s investments in nonconsolidated affiliates at December 31, 2017, was $32 million less than its share of the investees’ net assets, exclusive of additional differences for EQUATE and AFSI, which are discussed separately in the disclosures that follow. At December 31, 2016, the carrying amount of the Company’s investments in nonconsolidated affiliates was $62 million more than its share of the investees’ net assets, exclusive of additional differences relating to EQUATE and AFSI.

Dividends Received from Nonconsolidated Affiliates

In millions

2017 ¹

2016

2015

Dividends from nonconsolidated affiliates

865

685

816

1. Includes anon-cash dividend of $8 million.

Except for AFSI, the nonconsolidated affiliates in which the Company has investments are privately held companies; therefore, quoted market prices are not available.

Dow Corning and the HSC Group

As a result of the DCC Transaction, Dow Corning, previously a 50:50 joint venture between Dow and Corning, became a wholly owned subsidiary of Dow as of June 1, 2016. The Company’s equity interest in Dow Corning, which was previously classified as “Investment in nonconsolidated affiliates” in the consolidated balance sheets, was remeasured to fair value. See Note 4 for additional information on the DCC Transaction, including details on the fair value of assets acquired and liabilities assumed. Dow Corning continues to maintain equity interests in the HSC Group, which includes Hemlock Semiconductor L.L.C. and DC HSC Holdings LLC. The negative investment balance in Hemlock Semiconductor L.L.C. was $752 million at December 31, 2017 ($902 million at December 31, 2016).

EQUATE

At December 31, 2017, the Company had an investment balance in EQUATE of $42 million, which is classified as “Investment in nonconsolidated affiliates” in the consolidated balance sheets (negative $128 million at December 31, 2016, classified as “Other noncurrent obligations” in the consolidated balance sheets). The Company’s investment in EQUATE was $516 million less than the Company’s proportionate share of EQUATE’s underlying net assets at December 31, 2017 ($536 million less at December 31, 2016), which represents the difference between the fair values of certain MEGlobal assets acquired by EQUATE and the Company’s related valuation on a U.S. GAAP basis. A basis difference of $200 million at December 31, 2017 ($216 million at December 31, 2016) is being amortized over the remaining useful lives of the assets and the remainder is considered a permanent difference.

AFSI

On July 31, 2015, the Company sold its AgroFresh business to AFSI. Proceeds received on the divestiture of AgroFresh included 17.5 million common shares of AFSI, which were valued at $210 million and represented an approximate 35 percent ownership interest in AFSI. Based on the December 31, 2016 closing stock price of AFSI, the value of this investment would have been lower than the carrying value by $143 million. In the fourth quarter of 2016, the Company determined the decline in market value of AFSI was other-than-temporary and recognized a $143 million pretax impairment charge related to its equity interest in AFSI. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. At December 31, 2017, the Company’s investment in AFSI was $92 million less than the Company’s proportionate share of AFSI’s underlying net assets ($96 million at December 31, 2016). This amount primarily relates to the other-than-temporary decline in the Company’s investment in AFSI.

On April 4, 2017, the Company and AFSI revised certain agreements related to the divestiture of the AgroFresh business and Dow entered into an agreement to purchase up to 5,070,358 shares of AFSI’s common stock, which represented approximately 10 percent of AFSI’s common stock outstanding at signing of the agreement, subject to certain terms and conditions. At December 31, 2017, the Company held an approximate 36 percent ownership interest in AFSI (35 percent at December 31, 2016). See Notes 5, 22 and 23 for further information on this investment.

Sadara

The Company and Saudi Arabian Oil Company formed Sadara Chemical Company (“Sadara”) to build and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. Sadara achieved its first polyethylene production in December 2015 and announced thestart-up of its mixed feed cracker and a third polyethylene train (which added to the two polyethylene trains already in operation) in August 2016. Sadara achieved successful startup of its remaining production units in 2017. At December 31, 2017, the Company had a $275 million note receivable with Sadara, included in “Noncurrent receivables” in the consolidated balance sheets ($258 million at December 31, 2016). In 2017, the Company loaned $735 million to Sadara and $718 million was converted to equity ($1,015 million loaned and $1,230 million converted to equity in 2016).

Transactions with Nonconsolidated Affiliates

The Company has service agreements with certain nonconsolidated affiliates, including contracts to manage the operations of manufacturing sites and the construction of new facilities; licensing and technology agreements; and marketing, sales, purchase, lease and sublease agreements.

The Company sells excess ethylene glycol produced at Dow’s manufacturing facilities in the United States and Europe to MEGlobal, an EQUATE subsidiary. The Company also sells ethylene to MEGlobal as a raw material for its ethylene glycol plants in Canada. Sales of these products to MEGlobal represented 1 percent of total net sales in 2017 (1 percent of total net sales in 2016 and 1 percent of total net sales in 2015).

Dow Corning supplies trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group. Sales of this material to the HSC Group represented less than 1 percent of total net sales in 2017. Sales of this material to the HSC Group for the period of June 1, 2016 through December 31, 2016 represented less than 1 percent of total net sales in 2016.

Dow is responsible for marketing the majority of Sadara products outside of the Middle East zone through the Company’s established sales channels. Under this arrangement, the Company purchases and sells Sadara products for a marketing fee. Purchases of Sadara products represented 3 percent of “Cost of sales” in 2017. Purchases of Sadara products were not material in prior periods.

Dow purchases products from TheSCG-Dow Group, primarily for marketing and distribution in the Asia Pacific region. Purchases of TheSCG-Dow Group products represented 2 percent of “Cost of sales” in 2017 (3 percent in 2016 and 3 percent in 2015).

Sales to and purchases from other nonconsolidated affiliates were not material to the consolidated financial statements.

Balances due to or due from nonconsolidated affiliates at December 31, 2017 and 2016 are as follows:


Balances Due To or Due From Nonconsolidated Affiliates at Dec 31 In millions	2017		2016
Accounts and notes receivable—Other	$	474	$	388
Noncurrent receivables		283		267
Total assets	$	757	$	655
Notes payable	$	—	$	44
Accounts payable—Other¹		1,260		400
Total current liabilities	$	1,260	$	444

1. Increase in “Accounts payable—Other” at December 31, 2017, compared with December 31, 2016, is primarily due to higher purchases from Sadara.

Principal Nonconsolidated Affiliates

Dow had an ownership interest in 53 nonconsolidated affiliates at December 31, 2017 (59 at December 31, 2016). The Company’s principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2017, 2016 and 2015 are as follows:


Principal Nonconsolidated Affiliates at Dec 31	Ownership Interest
	2017			2016			2015
Dow Corning Corporation¹		N/A			N/A			50	%
EQUATE Petrochemical Company K.S.C.		42.5	%		42.5	%		42.5	%
The HSC Group:²
DC HSC Holdings LLC		50	%		50	%		N/A
Hemlock Semiconductor L.L.C.		50.1	%		50.1	%		N/A
The Kuwait Olefins Company K.S.C.		42.5	%		42.5	%		42.5	%
The Kuwait Styrene Company K.S.C.		42.5	%		42.5	%		42.5	%
Map Ta Phut Olefins Company Limited³		32.77	%		32.77	%		32.77	%
Sadara Chemical Company		35	%		35	%		35	%
TheSCG-Dow Group:
Siam Polyethylene Company Limited		50	%		50	%		50	%
Siam Polystyrene Company Limited		50	%		50	%		50	%
Siam Styrene Monomer Co., Ltd.		50	%		50	%		50	%
Siam Synthetic Latex Company Limited		50	%		50	%		50	%

1. On June 1, 2016, Dow became the 100 percent owner of Dow Corning. See Note 4 for additional information.

2. The HSC Group was previously part of the Dow Corning equity method investment and was added as principal nonconsolidated affiliates in the fourth quarter of 2016.

3. The Company’s effective ownership of Map Ta Phut Olefins Company Limited is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited.

The Company’s investment in and equity earnings from its principal nonconsolidated affiliates are shown in the tables below:


Investment in Principal Nonconsolidated Affiliates at Dec 31 In millions	2017			2016
Investment in nonconsolidated affiliates	$	3,323		$	3,029
Other noncurrent obligations		(752	)		(1,030	)
Net investment in principal nonconsolidated affiliates	$	2,571		$	1,999


Equity Earnings from Principal Nonconsolidated Affiliates In millions	2017		2016 ¹		2015 ²
Equity in earnings of principal nonconsolidated affiliates	$	701	$	449	$	704

1. Equity in earnings of principal nonconsolidated affiliates for 2016 includes the results of Dow Corning through May 31, 2016.

2. Equity in earnings of principal nonconsolidated affiliates for 2015 includes the results of Univation through April 30, 2015.

The summarized financial information that follows represents the combined accounts (at 100 percent) of the principal nonconsolidated affiliates.


Summarized Balance Sheet Information at Dec 31 In millions	2017		2016¹
Current assets	$	8,039	$	6,092
Noncurrent assets		28,300		28,588
Total assets	$	36,339	$	34,680
Current liabilities	$	5,164	$	3,953
Noncurrent liabilities		22,240		23,223
Total liabilities	$	27,404	$	27,176
Noncontrolling interests	$	304	$	300

1. The summarized balance sheet information for 2016 does not include Dow Corning.


Summarized Income Statement Information¹ In millions	2017		2016²		2015³
Sales	$	13,345	$	12,003	$	15,468
Gross profit	$	2,461	$	2,518	$	3,206
Net income	$	1,401	$	831	$	1,343

1. The results in this table reflect purchase and sale activity between certain principal nonconsolidated affiliates and the Company, as previously discussed in the “Transactions with Nonconsolidated Affiliates” section.

2. The summarized income statement information for 2016 includes the results of Dow Corning through May 31, 2016.

3. The summarized income statement information for 2015 includes the results of Univation through April 30, 2015 and MEGlobal through November 30, 2015.

NOTE 13 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table shows changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016:


Goodwill In millions
Balance at Jan 1, 2016	$	12,154
Acquisition of an aniline plant		37
Sale of product lines		(15	)
Goodwill related to the DCC Transaction¹		3,229
Foreign currency impact		(133	)
Balance at Dec 31, 2016	$	15,272
Sale of SKC Haas Display Films²		(34	)
Divestiture of the EAA Business³		(23	)
Divestiture of the DAS Divested Ag Business⁴		(128	)
Dissolution of joint venture⁵		48
Goodwill impairment		(1,491	)
Foreign currency impact		299
Other		(5	)
Balance at Dec 31, 2017	$	13,938

1. See Note 4 for information on the DCC Transaction.

2. On June 30, 2017, the Company sold its ownership interest in the SKC Haas Display Films group of companies. See Note 18 for additional information.

3. On September 1, 2017, the Company divested its EAA Business to SK Global Chemical Co., Ltd. See Note 5 for additional information.

4. On November 30, 2017, the Company divested the DAS Divested Ag Business to CITIC Agri Fund. See Note 5 for additional information.

5. On December 31, 2017, the Company dissolved a crude acrylic acid joint venture. See Note 23 for additional information.

Effective with the Merger, the Company updated its reporting units to align with the level at which discrete financial information is available for review by management. A relative fair value method was used to reallocate goodwill for reporting units of which the composition had changed. The new reporting units are: Agriculture, Coatings & Performance Monomers, Construction Chemicals, Consumer Solutions, Electronics & Imaging, Energy Solutions, Hydrocarbons & Energy, Industrial Biosciences, Industrial Solutions, Nutrition & Health, Packaging and Specialty Plastics, Polyurethanes & CAV, Safety & Construction and Transportation & Advanced Polymers. At December 31, 2017, goodwill was carried by all of these reporting units.

Goodwill Impairments

The carrying amounts of goodwill at December 31, 2017 and 2016 were net of accumulated impairments of $1,920 million and $429 million, respectively.

Goodwill Impairment Testing

The Company performs an impairment test of goodwill annually in the fourth quarter. In the fourth quarter of 2017, the Company early adopted ASU2017-04. See Note 2 for additional information.

In 2017, the Company performed quantitative testing for 11 reporting units (3 in 2016 and 3 in 2015) and a qualitative assessment was performed for the remaining reporting units. The qualitative assessment indicated that it was not more likely than not that fair value was less than the carrying value for those reporting units included in the qualitative test.

Upon completion of the quantitative testing in the fourth quarter of 2017, the Company determined the Coatings & Performance Monomers reporting unit was impaired. Throughout 2017, the Coatings & Performance Monomers reporting unit did not consistently meet expected financial performance targets, primarily due to increasing commoditization in coatings markets and competition, as well as customer consolidation in end markets which reduced growth opportunities. As a result, the Coatings & Performance Monomers reporting unit lowered future revenue and profitability expectations. The fair value of the Coatings & Performance Monomers reporting unit was determined using a discounted cash flow methodology that reflected reductions in projected revenue growth rates, primarily driven by modified sales volume and pricing assumptions, as well as revised expectations for future growth rates. These discounted cash flows did not support the carrying value of the Coatings & Performance Monomers reporting unit. As a result, the Company recorded a goodwill impairment charge for the Coatings & Performance Monomers reporting unit of $1,491 million in the fourth quarter of 2017, included in “Restructuring, goodwill impairment and asset related charges—net” in the consolidated statements of income. The Coatings & Performance Monomers reporting unit carried $1,071 million of goodwill at December 31, 2017.

No other goodwill impairments were identified as a result of the 2017 testing. Impairment tests conducted in 2016 and 2015 concluded that no goodwill impairments existed.

Other Intangible Assets

The following table provides information regarding the Company’s other intangible assets:


Other Intangible Assets at Dec 31¹	2017						2016
In millions	Gross Carrying Amount		Accum Amort		Net		Gross Carrying Amount		Accum Amort		Net
Intangible assets with finite lives:
Developed technology	$	3,263	$	(1,690)	$	1,573	$	3,254	$	(1,383)	$	1,871
Software		1,420		(780)		640		1,336		(696)		640
Trademarks/tradenames		697		(570)		127		696		(503)		193
Customer-related		5,035		(1,965)		3,070		4,806		(1,567)		3,239
Other		245		(156)		89		168		(146)		22
Total other intangible assets, finite lives	$	10,660	$	(5,161)	$	5,499	$	10,260	$	(4,295)	$	5,965
In-process research and development (“IPR&D”)		50		—		50		61		—		61
Total other intangible assets	$	10,710	$	(5,161)	$	5,549	$	10,321	$	(4,295)	$	6,026

1. Prior year amounts have been updated to conform with the current year presentation.

The following table provides information regarding amortization expense related to intangible assets:


Amortization Expense In millions	2017		2016		2015
Other intangible assets, excluding software	$	624	$	544	$	419
Software, included in “Cost of sales”	$	87	$	73	$	72

In the fourth quarter of 2017, the Companywrote-off $69 million of intangible assets (including $11 million of IPR&D) as part of the Synergy Program. In the second quarter of 2016, the Companywrote-off $11 million of IPR&D as part of the 2016 restructuring charge. See Note 6 for additional information.

Total estimated amortization expense for the next five fiscal years is as follows:


Estimated Amortization Expense for Next Five Years In millions
2018	$	737
2019	$	665
2020	$	628
2021	$	595
2022	$	523

NOTE 14 – TRANSFERS OF FINANCIAL ASSETS

The Company sells trade accounts receivable of select North American entities and qualifying trade accounts receivable of select European entities on a revolving basis to certain multi-seller commercial paper conduit entities (“conduits”). The proceeds received are comprised of cash and interests in specified assets of the conduits (the receivables sold by the Company) that entitle the Company to the residual cash flows of such specified assets in the conduits after the commercial paper has been repaid. Neither the conduits nor the investors in those entities have recourse to other assets of the Company in the event of nonpayment by the debtors.

In the fourth quarter of 2017, the Company suspended further sales of trade accounts receivable through these facilities and began reducing outstanding balances under these facilities through collections of trade accounts receivable previously sold to such conduits. The Company has the ability to resume such sales to the conduits, subject to certain prior notice requirements, at the discretion of the Company.

For the year ended December 31, 2017, the Company recognized a loss of $25 million on the sale of these receivables ($20 million loss for the year ended December 31, 2016 and $15 million loss for the year ended December 31, 2015), which is included in “Interest expense and amortization of debt discount” in the consolidated statements of income.

The Company’s interests in the conduits are carried at fair value and included in “Accounts and notes receivable – Other” in the consolidated balance sheets. Fair value of the interests is determined by calculating the expected amount of cash to be received and is based on unobservable inputs (a Level 3 measurement). The key input in the valuation is the percentage of anticipated credit losses in the portfolio of receivables sold that have not yet been collected. Given the short-term nature of the underlying receivables, discount rates and prepayments are not factors in determining the fair value of the interests.

The following table summarizes the carrying value of interests held, which represents the Company’s maximum exposure to loss related to the receivables sold, and the percentage of anticipated credit losses related to the trade accounts receivable sold. Also provided is the sensitivity of the fair value of the interests held to hypothetical adverse changes in the anticipated credit losses; amounts shown below are the corresponding hypothetical decreases in the carrying value of interests.


Interests Held at Dec 31 In millions			2017			2016
Carrying value of interests held			$	677		$	1,237
Percentage of anticipated credit losses				2.64	%		0.36	%
Impact to carrying value—10% adverse change			$	—		$	1
Impact to carrying value—20% adverse change			$	1		$	1
Credit losses, net of any recoveries, were insignificant for the year ended December 31, 2017 (insignificant for the year ended December 31, 2016, and $1 million for the year ended December 31, 2015). Following is an analysis of certain cash flows between the Company and the conduits:
Cash Proceeds In millions	2017		2016			2015
Sale of receivables	$	1	$	1		$	18
Collections reinvested in revolving receivables	$	21,293	$	21,652		$	22,951
Interests in conduits¹	$	2,269	$	1,257		$	1,034
1. Presented in “Operating Activities” in the consolidated statements of cash flows.
Following is additional information related to the sale of receivables under these facilities:
Trade Accounts Receivable Sold at Dec 31 In millions			2017			2016
Delinquencies on sold receivables still outstanding			$	82		$	86
Trade accounts receivable outstanding and derecognized			$	612		$	2,257

In 2017, the Company repurchased $5 million of previously sold receivables ($4 million in 2016).

NOTE 15 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES


Notes Payable at Dec 31 In millions	2017			2016
Commercial paper	$	231		$	—
Notes payable to banks and other lenders		253			225
Notes payable to related companies		—			44
Notes payable trade		—			3
Total notes payable	$	484		$	272
Year-end average interest rates		4.42	%		4.60	%


Long-Term Debt at Dec 31	2017 Average Rate			2017			2016 Average Rate			2016
In millions	2017 Average Rate			2017			2016 Average Rate			2016
Promissory notes and debentures:
Final maturity 2017		—	%	$	—			6.06	%	$	442
Final maturity 2018		5.78	%		339			5.78	%		339
Final maturity 2019		8.55	%		2,122			8.55	%		2,122
Final maturity 2020		4.46	%		1,547			4.46	%		1,547
Final maturity 2021		4.71	%		1,424			4.72	%		1,424
Final maturity 2022¹		3.50	%		1,373			3.50	%		1,371
Final maturity 2023 and thereafter		6.00	%		7,182			5.98	%		7,199
Other facilities:
U.S. dollar loans, various rates and maturities		2.44	%		4,564			1.60	%		4,595
Foreign currency loans, various rates and maturities		3.00	%		814			3.42	%		882
Medium-term notes, varying maturities through 2025¹		3.20	%		873			3.18	%		905
Tax-exempt bonds, varying maturities through 2038		5.66	%		343			5.66	%		343
Capital lease obligations					282						295
Unamortized debt discount and issuance costs					(346	)					(373	)
Long-term debt due within one year²					(752	)					(635	)
Long-term debt				$	19,765					$	20,456


1. Prior year data has been updated to conform with the current year presentation.
2. Presented net of current portion of unamortized debt issuance costs.


Maturities of Long-Term Debt for Next Five Years at Dec 31, 2017¹ In millions
2018		$ 752
2019		$ 6,935
2020		$ 1,831
2021		$ 1,573
2022		$ 1,497

1. Assumes the option to extend a term loan facility related to the DCC Transaction will be exercised.

2017 Activity

In 2017, the Company redeemed $436 million of 6.0 percent notes that matured on September 15, 2017, and $32 million aggregate principal amount of InterNotes at maturity. In addition, approximately $119 million of long-term debt was repaid by consolidated variable interest entities.

2016 Activity

In 2016, the Company redeemed $349 million of 2.5 percent notes that matured on February 15, 2016, and $52 million principal amount of InterNotes at maturity. In addition, approximately $128 million of long-term debt (net of $28 million of additional borrowings) was repaid by consolidated variable interest entities.

As part of the DCC Transaction, the fair value of debt assumed by Dow was $4,672 million and is reflected in the long-term debt table above. See Note 4 for additional information.

2015 Activity

In the fourth quarter of 2015, the Company redeemed $724 million aggregate principal amount of InterNotes of various interest rates and maturities between 2016 and 2024. As a result of this redemption, the Company realized an $8 million pretax loss related to the early extinguishment of debt, included in “Sundry income (expense)—net” in the consolidated statements of income.

On October 5, 2015, (i) the Company completed the transfer of its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses into a new company (“Splitco”), (ii) participating Dow shareholders tendered, and the Company accepted, Dow shares for Splitco shares in a public exchange offer, and (iii) Splitco merged with a wholly owned subsidiary of Olin in atax-efficient Reverse Morris Trust transaction (collectively, the “Transaction”). Under the terms of a debt exchange offer, the Company received $1,220 million principal amount of new debt instruments from Splitco, which were subsequently transferred to certain investment banks in anon-cash fair value exchange for $1,154 million principal amount of the Company’s outstanding debt instruments owned by such investment banks. As a result of this debt exchange offer and related transactions, the Company retired $1,161 million of certain notes, including $401 million of 2.50 percent notes due 2016, $182 million of 5.70 percent notes due 2018, $278 million of 4.25 percent notes due 2020 and a $300 million term loan facility with a maturity date of 2016. The Company recognized a loss on the early extinguishment of debt of $68 million, included in “Sundry income (expense)—net” in the consolidated statements of income as a component of the pretax gain on the Transaction. In connection with the Transaction, a membrane chlor-alkali joint venture was included as part of the assets and liabilities divested. This resulted in an additional reduction of $569 million principal amount of debt. See Notes 7 and 23 for further information.

In 2015, the Company issued $346 million aggregate principal amount of InterNotes and approximately $163 million of long-term debt (net of $8 million of additional borrowings) was repaid by consolidated variable interest entities.

Available Credit Facilities

The following table summarizes the Company’s credit facilities:

Committed and Available Credit Facilities at Dec 31, 2017

In millions

Effective Date

Committed
Credit

Credit
Available

Maturity Date

Interest

Five Year Competitive Advance and Revolving Credit Facility

March 2015

5,000

March 2020

Floating rate