Dow Chemical Co. (DOW)

Inventory Accounting Policy

Inventories are stated at the lower of cost or market. The method of determining cost for each subsidiary varies among last-in, first-out ("LIFO"); first-in, first-out ("FIFO"); and average cost, and is used consistently from year to year.

Dow Chemical 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 as non-monetary exchanges and are valued at cost.

Source: Dow Chemical Co., Annual Report

Inventory Disclosure

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Dow Chemical Co., Statement of Financial Position, Inventory

USD $ in millions

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Finished goods
	Work in process
	Raw materials
	Supplies
	Inventories

Source: Based on data from Dow Chemical Co. Annual Reports

Item	Description	The company
Finished goods	Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale.	Dow Chemical Co.'s finished goods increased from 2009 to 2010 and from 2010 to 2011.
Work in process	Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing.	Dow Chemical Co.'s work in process declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
Raw materials	Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product.	Dow Chemical Co.'s raw materials declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
Supplies	Carrying amount as of the balance sheet date of products used directly or indirectly in the manufacturing or production process, which may or may not become part of the final product. May also include items used in the storage, presentation or transportation of physical goods.	Dow Chemical Co.'s supplies declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
Inventories	Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer).	Dow Chemical Co.'s inventories increased from 2009 to 2010 and from 2010 to 2011.

Adjustment to Inventory: from LIFO to FIFO

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Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Adjustment to Inventories
	Inventories at LIFO (as reported)
	Add: LIFO reserve, ending balance
	Inventories at FIFO (adjusted)
	Adjustment to Current Assets
	Current assets (as reported)
	Add: LIFO reserve, ending balance
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Add: LIFO reserve, ending balance
	Total assets (adjusted)
	Adjustment to The Dow Chemical Company's Stockholders' Equity
	The Dow Chemical Company's stockholders' equity (as reported)
	Add: LIFO reserve, ending balance
	The Dow Chemical Company's stockholders' equity (adjusted)
	Adjustment to Net Income Attributable To The Dow Chemical Company
	Net income attributable to The Dow Chemical Company (as reported)
	Add: Increase (decrease) in LIFO reserve, ending balance
	Net income attributable to The Dow Chemical Company (adjusted)

Dow Chemical Co.'s inventory value on Dec 31, 2011 would be $8,682 (in millions) if the FIFO inventory method was used instead of LIFO. Dow Chemical Co.'s inventories, valued on a LIFO basis, on Dec 31, 2011 were $7,577 . Dow Chemical Co.'s inventories would have been $1,105 higher than reported on Dec 31, 2011 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

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Dow Chemical Co., adjusted ratios

	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
Current Ratio
Reported current ratio (LIFO)
Adjusted current ratio (FIFO)
Net Profit Margin
Reported net profit margin (LIFO)	%	%	%	%	%
Adjusted net profit margin (FIFO)	%	%	%	%	%
Total Asset Turnover
Reported total asset turnover (LIFO)
Adjusted total asset turnover (FIFO)
Financial Leverage
Reported financial leverage (LIFO)
Adjusted financial leverage (FIFO)
Return on Equity (ROE)
Reported ROE (LIFO)	%	%	%	%	%
Adjusted ROE (FIFO)	%	%	%	%	%
Return on Assets (ROA)
Reported ROA (LIFO)	%	%	%	%	%
Adjusted ROA (FIFO)	%	%	%	%	%

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Dow Chemical Co.'s adjusted current ratio improved from 2009 to 2010 but then slightly deteriorated from 2010 to 2011.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Dow Chemical Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Dow Chemical Co.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Dow Chemical Co.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Dow Chemical Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Dow Chemical Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Current Ratio

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Current assets (USD $ in millions)
	Current liabilities (USD $ in millions)

	Current ratio¹
	Adjusted: from LIFO to FIFO
	Adjusted current assets (USD $ in millions)
	Current liabilities (USD $ in millions)

	Adjusted current ratio²

2011 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= ÷ =

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Dow Chemical Co.'s adjusted current ratio improved from 2009 to 2010 but then slightly deteriorated from 2010 to 2011.

Adjusted Net Profit Margin

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to The Dow Chemical Company (USD $ in millions)
Net sales (USD $ in millions)

Net profit margin¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to The Dow Chemical Company (USD $ in millions)
Net sales (USD $ in millions)

Adjusted net profit margin²	%	%	%	%	%

2011 Calculations

¹ Net profit margin = 100 × Net income attributable to The Dow Chemical Company ÷ Net sales
= 100 × ÷ = %

² Adjusted net profit margin = 100 × Adjusted net income attributable to The Dow Chemical Company ÷ Net sales
= 100 × ÷ = %

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Dow Chemical Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Total Asset Turnover

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net sales (USD $ in millions)
	Total assets (USD $ in millions)

	Total asset turnover¹
	Adjusted: from LIFO to FIFO
	Net sales (USD $ in millions)
	Adjusted total assets (USD $ in millions)

	Adjusted total asset turnover²

2011 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Dow Chemical Co.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Financial Leverage

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Total assets (USD $ in millions)
	The Dow Chemical Company's stockholders' equity (USD $ in millions)

	Financial leverage¹
	Adjusted: from LIFO to FIFO
	Adjusted total assets (USD $ in millions)
	Adjusted the Dow Chemical Company's stockholders' equity (USD $ in millions)

	Adjusted financial leverage²

2011 Calculations

¹ Financial leverage = Total assets ÷ The Dow Chemical Company's stockholders' equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted the Dow Chemical Company's stockholders' equity
= ÷ =

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Dow Chemical Co.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.

Adjusted Return On Equity (ROE)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to The Dow Chemical Company (USD $ in millions)
The Dow Chemical Company's stockholders' equity (USD $ in millions)

ROE¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to The Dow Chemical Company (USD $ in millions)
Adjusted the Dow Chemical Company's stockholders' equity (USD $ in millions)

Adjusted ROE²	%	%	%	%	%

2011 Calculations

¹ ROE = 100 × Net income attributable to The Dow Chemical Company ÷ The Dow Chemical Company's stockholders' equity
= 100 × ÷ = %

² Adjusted ROE = 100 × Adjusted net income attributable to The Dow Chemical Company ÷ Adjusted the Dow Chemical Company's stockholders' equity
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Dow Chemical Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Return On Assets (ROA)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to The Dow Chemical Company (USD $ in millions)
Total assets (USD $ in millions)

ROA¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to The Dow Chemical Company (USD $ in millions)
Adjusted total assets (USD $ in millions)

Adjusted ROA²	%	%	%	%	%

2011 Calculations

¹ ROA = 100 × Net income attributable to The Dow Chemical Company ÷ Total assets
= 100 × ÷ = %

² Adjusted ROA = 100 × Adjusted net income attributable to The Dow Chemical Company ÷ Adjusted total assets
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Dow Chemical Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

Dow Chemical Co. (DOW) | Analysis of Inventory

Inventory Accounting Policy

Inventory Disclosure

Adjustment to Inventory: from LIFO to FIFO

Adjusted Ratios: LIFO vs. FIFO (Summary)

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

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