Hedging Activities

6 Months Ended

Jun. 30, 2017

Hedging Activities [Abstract]

Hedging Activities

11.   Hedging Activities

Undesignated Hedges

The table below includes a total gross notional value for translated earnings contracts of $14.3 billion and $16.7 billion at June 30, 2017 and December 31, 2016, respectively.  The translated earnings contracts include average rate forwards of $13.1 billion and $14.7 billion and zero-cost collars of $1.2 billion and $2.0 billion at June 30, 2017 and December 31, 2016, respectively.  The majority of the average rate forward contracts hedge a significant portion of the Company’s exposure to the Japanese yen for 2017-2022 with gross notional values of $12.1 billion and $13.6 billion at June 30, 2017 and December 31, 2016, respectively. The average rate forward contracts also partially hedge the impacts of the South Korean won, New Taiwan dollar, Chinese yuan, Euro and British pound translation on the Company’s projected net income. With respect to the zero-cost collars, the gross notional amount includes the value of both the put and call options.  However, due to the nature of the zero-cost collars, either the put or the call option can be exercised at maturity.  The total net notional value of the zero-cost collars was $0.6 billion and $1.0 billion at June 30, 2017 and December 31, 2016, respectively.

The following tables summarize the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis for June 30, 2017 and December 31, 2016 (in millions):

					Asset derivatives					Liability derivatives
	Gross notional amount				Balance	Fair value				Balance	Fair value
	June 30,		Dec. 31,		sheet	June 30,		Dec. 31,		sheet	June 30,		Dec. 31,
	2017		2016		location	2017		2016		location	2017		2016
Derivatives   designated as   hedging   instruments
Foreign   exchange   contracts (1)	$	472	$	458	Other current assets	$	10	$	1	Other accrued liabilities	$	(7)	$	(29)
					Other assets		10
Interest rate   contracts		550		550						Other liabilities		(5)		(5)
Derivatives not   designated as   hedging   instruments
Foreign   exchange   contracts, other		649		890	Other current assets		4		11	Other accrued liabilities		(7)		(7)
Translated   earnings   contracts		14,264		16,711	Other current assets		213		423	Other accrued liabilities		(29)		(52)
					Other assets		40		146	Other liabilities		(353)		(277)
Total derivatives	$	15,935	$	18,609		$	277	$	581		$	(401)	$	(370)

(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 and six months ended June 30, 2017 and 2016 (in millions):

	Effect of  derivative instruments on the consolidated financial statements
	for the three months ended June 30,
	Gain/(loss)
	recognized in other				Location of gain/(loss)	Gain/(loss) reclassified from
	comprehensive income				reclassified from	accumulated OCI into
Derivatives in hedging	(OCI)				accumulated OCI into	income (effective) (1)
relationships	2017		2016		income (effective)	2017		2016
					Cost of sales	$	(3)	$	(9)
Foreign exchange contracts	$	9	$	(35)	Other expense, net		(1)		(1)
Total cash flow hedges	$	9	$	(35)		$	(4)	$	(10)

	Effect of  derivative instruments on the consolidated financial statements
	for the six months ended June 30,
	Gain/(loss)
	recognized in other				Location of gain/(loss)	Gain/(loss) reclassified from
	comprehensive income				reclassified from	accumulated OCI into
Derivatives in hedging	(OCI)				accumulated OCI into	income ineffective/effective (1)
relationships	2017		2016		income (effective)	2017		2016
					Sales	$	1	$	1
					Cost of sales		(9)		(14)
Foreign exchange contracts	$	32	$	(63)	Other expense, net		(1)		(1)
Total cash flow hedges	$	32	$	(63)		$	(9)	$	(14)

(1) The amount of hedge ineffectiveness at June 30, 2017 and 2016 was insignificant.

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

		Gain (loss) recognized in income
		Three months ended				Six months ended
	Location of gain/(loss)	June 30,				June 30,
Undesignated derivatives	recognized in income	2017		2016		2017		2016
Foreign exchange contracts   – balance sheet and loans	Other expense, net	$	(15)	$	(35)	$	(13)	$	(72)
Foreign currency hedges   related to translated earnings	Translated earnings contract   gain (loss), net		219		(1,201)		(219)		(2,058)
Total undesignated		$	204	$	(1,236)	$	(232)	$	(2,130)