Major companies often have investments in a number of other entities. The types of entities, ownership shares, and circumstances may differ considerably for these various investments, thus leading to different reporting methods for the different investments. The Dow Chemical Company is a company with numerous investments in other corporations, joint ventures, and partnerships.
a. Approximately how many subsidiaries (10, 50, or more than 100) does Dow Chemical have? What is Dow’s consolidation policy?
b. For what types of entities does Dow use the equity method of reporting? What is the highest percentage ownership for affiliates actually owned by Dow and reported using the equity method? Exclusive of Dow Corning, MEGlobal, Equipolymers, and EQUATE Petrochemical, what was the total differential associated with Dow’s equity-method investments at December 31, 2005? What was the nature of the differential relating to MEGlobal, Equipolymers, and EQUATE Petrochemical?
c. In conjunction with what activity does Dow evaluate goodwill for impairment?
d. An investment that suffers a significant decline in value that is judged as being other than temporary must be written down to its fair value and a loss recognized. Did Dow Chemical experience such a loss in the past with respect to any of its partnership or joint venture investments? Explain.