United states securities and exchange commission

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 and related to Performance Materials & Coatings. 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. Dow 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 Dow’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 and related to Packaging & Specialty Plastics. See Notes 22 and 23 for additional information.

The Company also recognized other pretax impairment charges of $317 million in the fourth quarter of 2017, including charges related to manufacturing assets of $230 million , an equity method investment of $81 million and other assets of $6 million . The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ( $82 million ), Industrial Intermediates & Infrastructure ( $6 million ), Packaging & Specialty Plastics ( $57 million ), Electronics & Imaging ( $39 million ), Safety & Construction ( $32 million ) and Corporate ( $101 million ). See Note 22 for additional information.

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2016 Charges

In the fourth quarter of 2016, Dow 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 and related to Corporate. See Notes 4 , 12 , 22 and 23 for additional information.

2015 Charges

As a result of Dow’s continued actions to optimize its footprint, Dow 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 and related to Performance Materials & Coatings ( $71 million ), Packaging & Specialty Plastics ( $57 million ) and Safety & Construction ( $16 million ). See Note 22 for additional information.

NOTE 6 - REVERSE MORRIS TRUST TRANSACTION

On October 5, 2015, (i) Dow 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 Dow 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 a tax-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 a non-cash fair value exchange for $1,154 million principal amount of Dow’s outstanding debt instruments owned by such investment banks. As a result of this debt exchange offer and related transactions, Dow 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 and related to Corporate. 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 this non-cash share exchange offer, Dow 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. Dow's outstanding 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 a one-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. Dow 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, Dow 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. Dow 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 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.
Dow also transferred $439 million of net unfunded defined pension and other postretirement benefit obligations in the United States and Germany to Olin. See Note 19 for further details.
In the fourth quarter of 2015, Dow completed the split-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
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in the form of a one-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. A pretax gain of $2,233 million was recognized on the Transaction, 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 pretax gain was included in "Sundry income (expense) - net" in the consolidated statements of income and related to the following operating segments: Industrial Intermediates & Infrastructure (gain of $1,984 million ), Packaging & Specialty Plastics (gain of $317 million ) and Corporate (loss of $68 million ). Dow recognized an after-tax gain of $2,215 million , primarily due to the tax-efficient nature of the Transaction.
In 2016, Dow 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 and related to the Industrial Intermediates & Infrastructure segment. See Note 19 for further details.
In 2017, Dow 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 and related to Corporate.
Dow did not report the historical results of the chlorine value chain as discontinued operations in the financial statements, as the divestiture of these businesses did not represent a strategic shift that had a major effect on Dow'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			2015 1
Income from continuing operations before income taxes 2			$	139
Loss before income taxes attributable to noncontrolling interests			11
Income from continuing operations before income taxes attributable to DowDuPont Inc. 2			$	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, Dow 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, which are part of transaction costs and productivity actions, were included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate.

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NOTE 7 - SUPPLEMENTARY INFORMATION

Sundry Income (Expense) - Net
In millions	2017			2016			2015
Gain on sales of other assets and investments	$	198		$	170		$	237
Interest income	147			107			71
Foreign exchange losses	(63		)	(126		)	(190		)
Gain on DAS Divested Ag Business 1	635			—			—
Gain on divestiture of Dow's EAA Business 1	227			—			—
Gain related to Dow's Nova patent infringement award 2	137			—			—
Impact of split-off of Dow's chlorine value chain  3	7			6			2,233
Loss related to Dow's Bayer CropScience arbitration matter 2	(469		)	—			—
Gain on Dow's ownership restructure of Dow Corning  4	—			2,445			—
Settlement of Dow's urethane matters class action lawsuit and opt-out cases  2	—			(1,235		)	—
Gain (Loss) on divestitures  1	—			(26		)	2,043
Gain on Dow's Univation step acquisition  4	—			—			361
Costs associated with Dow's portfolio and productivity actions  5	—			(41		)	(119		)
Other - net	147			152			80
Total sundry income (expense) - net	$	966		$	1,452		$	4,716

1. See Note 4 for additional information.

2. See Note 16 for additional information.

3. See Note 6 for additional information.

4. See Note 3 for additional information.

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


Accrued and Other Current Liabilities

“Accrued and other current liabilities” were $8,409 million at December 31, 2017 and $4,481 million at December 31, 2016 . Components of "Accrued and other current liabilities" that were more than 5 percent of total current liabilities were:

Accrued and Other Current Liabilities at Dec 31	2017			2016
In millions
Accrued payroll	$	1,931		$	1,105
Deferred revenue	$	2,606		$	274

Other Investments

Dow has investments in company-owned life insurance policies, which are recorded at their cash surrender value as of each balance sheet date. In 2015, Dow 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.

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NOTE 8 - 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 a one-time transition tax on earnings of 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 has not completed its accounting for the tax effects of The Act; however, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-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 $2,666 million , recorded as a benefit to “Provision (Credit) for income taxes on continuing operations.”

•

The Act requires a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (“E&P”), which results in a one-time transition tax. As a result, the Company recorded a provisional amount for the transition tax liability for its foreign subsidiaries of $1,580 million , recorded as a charge to “Provision (Credit) for income taxes on continuing operations.” 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 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.

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For tax years beginning after December 31, 2017, The Act introduces new provisions for U.S. taxation of certain global intangible low-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 on whether 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.