Contingency; Dow Chemical Company disclosure
Response to the following problem:
The Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow's 2013 annual report:
In total, the Company's accrued liability for probable environmental remediation and restoration costs was $722 million at December 31, 2013, compared with $754 million at the end of 2012. This is management's best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to theseparticular matters could range up to approximately two and a half times that amount.
Required:
Does the excerpt describe a loss contingency? Under what conditions would Dow accrue such a contingency? What journal entry would Dow use to record this amount of provision (loss)?