Corning 2007 Annual Report

Notes to Consolidated Financial Statements Corning Incorporated and Subsidiary Companies
1. Summary of Significant Accounting Policies
Organization
Corning Incorporated is a provider of high-performance glass for computer monitors, LCD televisions, and other information display
applications; optical fiber and cable and hardware and equipment products for the telecommunications industry; ceramic substrates for
gasoline and diesel engines in automotive and heavy duty vehicle markets; laboratory products for the scientific community and
specialized polymer products for biotechnology applications; advanced optical materials for the semiconductor industry and the
scientific community; and other technologies. In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning
Incorporated and subsidiary companies.
Basis of Presentation and Principles of Consolidation
Our consolidated financial statements were prepared in conformity with GAAP and include the assets, liabilities, revenues and
expenses of all majority-owned subsidiaries over which Corning exercises control and, when applicable, entities for which Corning
has a controlling financial interest.
For variable interest entities, we assess the terms of our interest in the entity to determine if we are the primary beneficiary as
prescribed by FASB Interpretation 46R, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research
Bulletin No. 51” (FIN 46R). The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s
expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests. Variable interests
are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net
assets excluding variable interests. We consolidate one variable interest entity in which we are the primary beneficiary.
The equity method of accounting is used for investments in affiliated companies which are not controlled by Corning and in which our
interest is generally between 20% and 50% and we have significant influence over the entity. Our share of earnings or losses of
affiliated companies, in which at least 20% of the voting securities is owned and we have significant influence but not control over the
entity, is included in consolidated operating results.
We use the cost method to account for our investments in companies that we do not control and for which we do not have the ability
to exercise significant influence over operating and financial policies. In accordance with the cost method, these investments are
recorded at cost or fair value, as appropriate.
All material intercompany accounts, transactions and profits are eliminated in consolidation.
Certain prior year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no impact
on our results of operations or changes in shareholders’ equity.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
amounts reported in the consolidated financial statements and related notes. Significant estimates and assumptions in these
consolidated financial statements include restructuring and other charges and credits, allowances for doubtful accounts receivable,
estimates of fair value associated with goodwill and long-lived asset impairment tests, estimates of the fair value of assets held for
disposal, estimates of fair value of investments, environmental and legal liabilities, warranty liabilities, income taxes and deferred tax
valuation allowances, the determination of discount and other rate assumptions for pension and other postretirement employee benefit
expenses and the determination of the fair value of stock based compensation involving assumptions about termination rates, stock
volatility, discount rates, and expected time to exercise. Due to the inherent uncertainty involved in making estimates, actual results
reported in future periods may be different from these estimates.
Revenue Recognition
Revenue for sales of goods is recognized when a firm sales agreement is in place, delivery has occurred and sales price is fixed and
determinable and collectibility is reasonably assured. If customer acceptance of products is not reasonably assured, sales are recorded
only upon formal customer acceptance. Sales of goods typically do not include multiple product and/or service elements.
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