FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2020

FAIR VALUE MEASUREMENTS

A summary of the Company's recurring and nonrecurring fair value measurements can be found in Note 24 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

Fair Value Measurements on a Recurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis:


Basis of Fair Value Measurements on a Recurring Basis	Sep 30, 2020											Dec 31, 2019
			Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)			Total		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)			Total
In millions
Assets at fair value
Cash equivalents
Held-to-maturity securities ¹	$	—	$	696		$	696	$	—	$	220		$	220
Money market funds	—		691			691		—		408			408
Marketable securities ²	—		30			30		—		21			21
Equity securities ³	8		—			8		15		—			15
Debt securities: ³
Government debt ⁴	—		491			491		—		555			555
Corporate bonds	24		851			875		22		992			1,014
Derivatives relating to: ⁵
Interest rates	—		229			229		—		35			35
Foreign currency	—		86			86		—		149			149
Commodities	12		186			198		23		67			90
Total assets at fair value	$	44	$	3,260		$	3,304	$	60	$	2,447		$	2,507
Liabilities at fair value
Long-term debt including debt due within one year ⁶	$	—	$	19,641		$	19,641	$	—	$	18,661		$	18,661
Derivatives relating to: ⁵
Interest rates	—		361			361		—		310			310
Foreign currency	—		135			135		—		69			69
Commodities	8		230			238		14		137			151
Total liabilities at fair value	$	8	$	20,367		$	20,375	$	14	$	19,177		$	19,191

1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.

2.The Company’s investments in marketable securities are included in “Other current assets” in the consolidated balance sheets.

3.The Company’s investments in debt securities, which are primarily available-for-sale, and equity securities are included in “Other investments” in the consolidated balance sheets.

4.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.

5.See Note 19 for the classification of derivatives in the consolidated balance sheets.

6.See Note 19 for information on fair value measurements of long-term debt.

For equity securities calculated at net asset value per share (or its equivalent), the Company had $109 million in private market securities and $20 million in real estate at September 30, 2020 ($117 million in private market securities and $18 million in real estate at December 31, 2019). There are no redemption restrictions and the unfunded commitments on these investments were $67 million at September 30, 2020 ($76 million at December 31, 2019).

Fair Value Measurements on a Nonrecurring Basis

As part of the 2020 Restructuring Program, the Company has or will shut down and write off several small manufacturing facilities and miscellaneous assets around the world. In the third quarter of 2020, the assets associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $110 million using unobservable inputs. The impairment charges related to the 2020 Restructuring Program, totaling $197 million, were included in "Restructuring and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($11 million),

Industrial Intermediates & Infrastructure ($22 million), Performance Materials & Coatings ($117 million) and Corporate ($47 million).

In the third quarter of 2020, the Company recognized impairment charges of $39 million related to the write-down of a non-manufacturing asset and certain corporate leased equipment and the write-off of a capital project. The assets, classified as Level 3 measurements, were valued at $11 million using unobservable inputs. The impairment charges were included in "Restructuring and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($15 million) and Corporate ($24 million).

In the first nine months of 2020, the Company recognized an additional pretax impairment charge of $19 million related to capital additions made to a bio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The assets were written down to zero in 2020. The impairment charge was included in “Restructuring and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics. On September 29, 2020, the Company divested the bio-ethanol manufacturing facility. See Note 6 for additional information.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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