Note 13 - Hedging Activities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

13.      Hedging Activities

Undesignated Hedges

The table below includes a total gross notional value for translated earnings contracts of $17.6 billion and $12.0 billion at September 30, 2016 and December 31, 2015, respectively.  The translated earnings contracts include purchased and zero-cost collars of $2.8 billion and $5.6 billion and average rate forwards of $14.8 billion and $6.4 billion at September 30, 2016 and December 31, 2015, respectively.  With respect to the purchased and zero-cost collars, the gross notional amount includes the value of both the put and call options.  However, due to the nature of the purchased and zero-cost collars, either the put or the call option can be exercised at maturity.  The total net notional value of the purchased and zero-cost collars was $1.4 billion and $2.9 billion at September 30, 2016 and December 31, 2015, respectively.

The following tables summarize the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis for September 30, 2016 and December 31, 2015 (in millions):

	U.S. Dollar		Asset derivatives			Liability derivatives
	Gross notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
	Sept. 30, 2016	Dec. 31, 2015		Sept. 30, 2016	Dec. 31, 2015		Sept. 30, 2016	Dec. 31, 2015
Derivatives designated as hedging instruments
Foreign exchange contracts  (1)	$    527	$    782	Other current assets	$     1	$     5	Other accrued liabilities	$    (54)	$  (10)
			Other assets		1	Other liabilities	(12)	(23)
Interest rate contracts	550	550	Other assets	7		Other liabilities		(4)
Derivatives not designated as hedging instruments
Foreign exchange contracts, other	759	1,095	Other current assets	2	6	Other accrued liabilities	(36)	(12)
Translated earnings contracts	17,595	11,972	Other current assets	66	511	Other accrued liabilities	(114)	(33)
			Other assets	27	472	Other liabilities	(1,531)	(61)
Total derivatives	$19,431	$14,399		$103	$995		$(1,747)	$(143)

(1) Cash flow hedges with a typical duration of 24 months or less.

The following tables summarize the effect of derivative financial instruments on Corning’s consolidated financial statements for the three months ended September 30, 2016 and 2015 (in millions):

	Effect of designated derivative instruments on the consolidated financial statements for the three months ended September 30
Derivatives in hedging relationships	Gain/(loss) recognized in other comprehensive income (OCI)				Location of gain/(loss) reclassified from accumulated OCI into income (effective)	Gain/(loss) reclassified from accumulated OCI into income (effective)  (1)
	2016		2015			2016		2015
Interest rate hedges					Sales	$	1	$	4
					Cost of sales		(13)		1
Foreign exchange contracts	$	26	$	(58)
Total cash flow hedges	$	26	$	(58)		$	(12)	$	5

(1) The amount of hedge ineffectiveness at September 30, 2016 and 2015 was insignificant.

The following tables summarize the effect of derivative financial instruments on Corning’s consolidated financial statements for the nine months ended September 30, 2016 and 2015 (in millions):

	Effect of  derivative instruments on the consolidated financial statements for the nine months ended September 30
Derivatives in hedging relationships	Gain/(loss) recognized in other comprehensive income (OCI)				Location of gain/(loss) reclassified from accumulated OCI into income (effective)	Gain/(loss) reclassified from accumulated OCI into income (effective)  (1)
	2016		2015			2016		2015
Interest rate hedges			$	(7)	Sales	$	2	$	14
					Cost of sales		(27)		7
Foreign exchange contracts	$	(37)		(24)
Total cash flow hedges	$	(37)	$	(31)		$	(25)	$	21

(1) The amount of hedge ineffectiveness at September 30, 2016 and 2015 was insignificant.

The following table summarizes the effect on the consolidated financial statements relating to Corning’s derivative financial instruments (in millions):

Undesignated derivatives	Location of gain/(loss) recognized in income	Gain (loss) recognized in income
		Three months ended September 30,				Nine months ended September 30,
		2016		2015		2016		2015
Foreign exchange contracts – balance sheet	Foreign currency hedge gain (loss), net	$	1	$	(6)	$	(27)	$	7
Foreign exchange contracts – loans	Foreign currency hedge gain (loss), net		(4)		1		(48)		3
Foreign currency hedges related to translated earnings	Foreign currency hedge gain (loss), net		(237)		(149)		(2,295)		42
Total undesignated		$	(240)	$	(154)	$	(2,370)	$	52