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Note 13 - Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Fair Value Disclosures [Text Block]

13. Fair Value Measurements

Fair value standards under GAAP define fair value, establish a framework for measuring fair value in applying generally accepted accounting principles, and require disclosures about fair value measurements. The standards identify two kinds of inputs that are used to determine the fair value of assets and liabilities: observable and unobservable. Observable inputs are based on market data or independent sources, while unobservable inputs are based on the Company’s own market assumptions. Once inputs have been characterized, the inputs are prioritized into one of three broad levels (provided in the table below) used to measure fair value. Fair value standards apply whenever an entity is measuring fair value under other accounting pronouncements that require or permit fair value measurement and require the use of observable market data when available.

The following tables provide fair value measurement information for the Company’s major categories of financial assets and liabilities measured on a recurring basis; Level 1, quoted market prices in active markets for identical assets, Level 2, significant other observable inputs, and Level 3, significant unobservable inputs (in millions):

						Fair value measurements at reporting date
		September 30, 2021				(Level 1)				(Level 2)				(Level 3)
Current assets:
Other current assets ^(1)(2)(3)		$	197			$	11			$	176			$	10
Non-current assets:
Other assets ⁽¹⁾⁽²⁾		$	162							$	155			$	7
Current liabilities:
Other accrued liabilities ⁽¹⁾		$	72							$	72
Non-current liabilities:
Other liabilities ⁽¹⁾⁽⁴⁾		$	46							$	46

⁽¹⁾	Derivative assets and liabilities include foreign exchange contracts which were measured using observable inputs for similar assets and liabilities.
⁽²⁾	Included in other current assets and other assets is a contingent consideration asset for a cost adjustment contract of $17 million, resulting from the HSG Transactions as of September 9, 2020, that was measured using unobservable (Level 3) inputs.
⁽³⁾	Equity securities with readily available fair values of $11 million were measured using Level 1 inputs and have been included in other current assets as of September 30, 2021. An investment was sold for $84 million during the second quarter of 2021.
⁽⁴⁾	Other liabilities include a $17 million put option pursuant to the Share Repurchase Agreement with SDC, which was measured using significant other observable (Level 2) inputs. Refer to Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information.

						Fair value measurements at reporting date
		December 31, 2020				(Level 1)				(Level 2)				(Level 3)
Current assets:
Other current assets ^(1)(2)(3)		$	152							$	148			$	4
Non-current assets:
Investments ⁽⁴⁾		$	137			$	137
Other assets ^(1)(2)(3)		$	139							$	123			$	16
Current liabilities:
Other accrued liabilities ⁽¹⁾		$	189							$	189
Non-current liabilities:
Other liabilities ⁽¹⁾		$	155							$	155

⁽¹⁾	Derivative assets and liabilities include foreign exchange contracts which were measured using observable inputs for similar assets and liabilities.
⁽²⁾	Included in other current assets and other assets is a contingent consideration asset for a cost adjustment contract of $20 million, resulting from the HSG Transactions as of September 9, 2020, that was measured using unobservable (Level 3) inputs.
⁽³⁾	For the year ended December 31, 2020, assets and liabilities that were measured using unobservable (Level 3) inputs resulted in losses recognized in earnings of $21 million for a renewable energy derivative contract and $4 million for auction rate securities.
⁽⁴⁾	Included in investments were equity securities with readily available fair values that were measured using Level 1 inputs. A pre-tax gain of $107 million was recognized from the initial public offering of an investment for the year ended December 31, 2020.

Assets and Liabilities Measured on a Non-Recurring Basis

For the year ended December 31, 2020, Corning incurred a long-lived asset impairment and disposal loss for an asset group related to the reassessment of research and development programs within “All Other”. Given the economic environment and market opportunities, Corning discontinued its investment in these research and development programs. The impairment analysis and disposition of certain assets resulted in a total pre-tax charge of $217 million primarily recorded in the second quarter of 2020, which was substantially all the carrying value, inclusive of an insignificant amount of goodwill. The fair value of the asset group for the impairment analysis was measured using unobservable (Level 3) inputs.

Fair value measurements (Level 3) related to the Redemption are disclosed in Note 3 (HSG Transactions) to the consolidated financial statements.

There were no other significant financial assets and liabilities measured on a nonrecurring basis as of September 30, 2021 and December 31, 2020.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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