Corning 2007 Annual Report

1. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments that are readily convertible into cash. We consider securities with contractual
maturities of three months or less, when purchased, to be cash equivalents. The carrying amount of these securities approximates fair
value because of the short-term maturity of these instruments.
Supplemental disclosure of cash flow information follows (in millions):
2007
Years ended December 31,
2006 2005
Non-cash transactions:
Retirement of debt in exchange for stock $ 388
Pension contribution in common shares $ 199
Issued credit memoranda for settlement of customer receivables $ 231 $ 126 $ 29
Capital leases
Cash paid for interest and income taxes:
$ 44
Interest (1) $ 113 $ 106 $ 126
Income taxes, net of refunds received $ 153 $ 225 $ 140
(1) Included in this amount is approximately $19 million, $37 million, and $27 million of interest costs that were capitalized as part of property, net in 2007, 2006, and
2005, respectively.
Short-Term Investments
Our short-term investments consist of debt securities classified as available-for-sale, which are stated at fair value. These debt
securities may include U.S. treasury notes, state and municipal bonds, asset-backed securities, auction rate securities, corporate bonds,
commercial paper and certificates of deposit. These investments are on deposit with a major financial institution. Unrealized gains and
losses, net of tax, are computed on the first-in first-out basis and are reported as a separate component of accumulated other
comprehensive income (loss) in shareholders’ equity until realized. Realized gains and losses are recorded in other income (expense),
net.
Allowance for Doubtful Accounts
The Company’s allowance for doubtful accounts is determined based on a variety of factors that affect the potential collectibility of
the related receivables, including length of time receivables are past due, customer credit ratings, financial stability of customers,
specific one-time events and past customer history. In addition, in circumstances where the Company is made aware of a specific
customer’s inability to meet its financial obligations, a specific allowance is established. The majority of accounts are individually
evaluated on a regular basis and appropriate reserves are established as deemed appropriate based on the above criteria. The remainder
of the reserve is based on management’s estimates and takes into consideration historical trends, market conditions and the
composition of the Company’s customer base.
Environmental Liabilities
The Company accrues for its environmental investigation, remediation, operating, and maintenance costs when it is probable that a
liability has been incurred and the amount can be reasonably estimated. For environmental matters, the most likely cost to be incurred
is accrued based on an evaluation of currently available facts with respect to each individual site, current laws and regulations and
prior remediation experience. For sites with multiple potential responsible parties (PRP’s), the Company considers its likely
proportionate share of the anticipated remediation costs and the ability of the other parties to fulfill their obligations in establishing a
provision for those costs. Where no amount within a range of estimates is more likely to occur than another, the minimum is accrued.
When future liabilities are determined to be reimbursable by insurance coverage, an accrual is recorded for the potential liability and a
receivable is recorded related to the insurance reimbursement when reimbursement is virtually certain. The uncertain nature inherent
in such remediation and the possibility that initial estimates may not reflect the final outcome could result in additional costs.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or market.
50