Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2015 | |
Document and Entity Information | |
Entity Registrant Name | INTERNATIONAL BUSINESS MACHINES CORP |
Entity Central Index Key | 51,143 |
Document Type | 8-K |
Document Period End Date | Dec. 31, 2015 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Document Fiscal Year Focus | 2,015 |
Document Fiscal Period Focus | FY |
Trading Symbol | IBM |
Consolidated Statement of Earni
Consolidated Statement of Earnings - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue | |||
Services | $ 49,911 | $ 55,673 | $ 57,655 |
Sales | 29,967 | 35,063 | 38,666 |
Financing | 1,864 | 2,057 | 2,047 |
Total revenue (Note T) | 81,741 | 92,793 | 98,367 |
Cost | |||
Services | 33,126 | 36,034 | 37,564 |
Sales | 6,920 | 9,312 | 11,009 |
Financing | 1,011 | 1,040 | 1,110 |
Total cost | 41,057 | 46,386 | 49,683 |
Gross profit | 40,684 | 46,407 | 48,684 |
Expense and other (income) | |||
Selling, general and administrative | 20,430 | 23,180 | 23,451 |
Research, development and engineering (Note O) | 5,247 | 5,437 | 5,743 |
Intellectual property and custom development income | (682) | (742) | (822) |
Other (income) and expense | (724) | (1,938) | (333) |
Interest expense (Note D&J) | 468 | 484 | 402 |
Total expense and other (income) | 24,740 | 26,421 | 28,440 |
Income from continuing operations before income taxes | 15,945 | 19,986 | 20,244 |
Provision for income taxes (Note N) | 2,581 | 4,234 | 3,363 |
Income from continuing operations | 13,364 | 15,751 | 16,881 |
Loss from discontinued operations, net of tax (Note C) | (174) | (3,729) | (398) |
Net income | $ 13,190 | $ 12,022 | $ 16,483 |
Assuming dilution | |||
Continuing operations (in dollars per share) (Note P) | $ 13.6 | $ 15.59 | $ 15.3 |
Discontinued operations (in dollars per share) (Note P) | (0.18) | (3.69) | (0.36) |
Total (in dollars per share) (Note P) | 13.42 | 11.9 | 14.94 |
Basic | |||
Continuing operations (in dollars per share) (Note P) | 13.66 | 15.68 | 15.42 |
Discontinued operations (in dollars per share) (Note P) | (0.18) | (3.71) | (0.36) |
Total (in dollars per share) (Note P) | $ 13.48 | $ 11.97 | $ 15.06 |
Weighted-average number of common shares outstanding | |||
Assuming dilution (in shares) | 982,700,267 | 1,010,000,480 | 1,103,042,156 |
Basic (in shares) | 978,744,523 | 1,004,272,584 | 1,094,486,604 |
Consolidated Statement of Compr
Consolidated Statement of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||
Net income | $ 13,190 | $ 12,022 | $ 16,483 |
Other comprehensive income/(loss), before tax | |||
Foreign currency translation adjustments (Note L) | (1,379) | (1,636) | (1,335) |
Net changes related to available-for-sale securities (Note L) | |||
Unrealized gains/(losses) arising during the period | (54) | (29) | (4) |
Reclassification of (gains)/losses to net income | 86 | 5 | (8) |
Subsequent changes in previously impaired securities arising during the period | 4 | ||
Total net changes related to available-for-sale securities | 32 | (24) | (8) |
Unrealized gains/(losses) on cash flow hedges (Note L) | |||
Unrealized gains/(losses) arising during the period | 618 | 958 | 43 |
Reclassification of (gains)/losses to net income | (1,072) | (97) | (166) |
Total unrealized gains/(losses) on cash flow hedges | (454) | 861 | (123) |
Retirement-related benefit plans (Note L) | |||
Prior service costs/(credits) | 6 | 1 | 16 |
Net (losses)/gains arising during the period | (2,963) | (9,799) | 5,369 |
Curtailments and settlements | 33 | 24 | (3) |
Amortization of prior service (credits)/costs | (100) | (114) | (114) |
Amortization of net (gains)/losses | 3,304 | 2,531 | 3,499 |
Total retirement-related benefit plans | 279 | (7,357) | 8,767 |
Other comprehensive income/(loss), before tax (Note L) | (1,523) | (8,156) | 7,301 |
Income tax (expense)/benefit related to items of other comprehensive income (Note L) | (208) | 1,883 | (3,144) |
Other comprehensive income/(loss) (Note L) | (1,731) | (6,274) | 4,157 |
Total comprehensive income | $ 11,459 | $ 5,748 | $ 20,641 |
Consolidated Statement of Finan
Consolidated Statement of Financial Position - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Current assets | |||
Cash and cash equivalents | $ 7,686 | $ 8,476 | |
Marketable securities (Note D) | 508 | 0 | |
Notes and accounts receivable - trade (net of allowances of $367 in 2015 and $336 in 2014) | 8,333 | 9,090 | |
Short-term financing receivables (net of allowances of $490 in 2015 and $452 in 2014) (Note F) | 19,020 | 19,835 | |
Other accounts receivable (net of allowances of $51 in 2015 and $40 in 2014) | 1,201 | 2,906 | |
Inventories (Note E) | 1,551 | 2,103 | |
Prepaid expenses and other current assets | 4,205 | 4,967 | |
Total current assets | 42,504 | 47,377 | [1] |
Property, plant and equipment (Note G) | 29,342 | 39,034 | |
Less: Accumulated depreciation (Note G) | 18,615 | 28,263 | |
Property, plant and equipment - net (Note G) | 10,727 | 10,771 | |
Long-term financing receivables (net of allowances of $118 in 2015 and $126 in 2014) (Note F) | 10,013 | 11,109 | |
Prepaid pension assets (Note S) | 1,734 | 2,160 | |
Deferred taxes (Note N) | 4,822 | 6,675 | [1] |
Goodwill (Note I) | 32,021 | 30,556 | |
Intangible assets - net (Note I) | 3,487 | 3,104 | |
Investments and sundry assets (Note H) | 5,187 | 5,520 | [2] |
Total assets | 110,495 | 117,271 | [1],[2] |
Current liabilities | |||
Taxes (Note N) | 2,847 | 5,084 | |
Short-term debt (Note D&J) | 6,461 | 5,731 | [2] |
Accounts payable | 6,028 | 6,864 | |
Compensation and benefits | 3,560 | 4,031 | |
Deferred income | 11,021 | 11,877 | |
Other accrued expenses and liabilities | 4,353 | 5,994 | [1] |
Total current liabilities | 34,269 | 39,581 | [1],[2] |
Long-term debt (Note D&J) | 33,428 | 34,991 | [2] |
Retirement and nonpension postretirement benefit obligations (Note S) | 16,504 | 18,261 | |
Deferred income | 3,771 | 3,691 | |
Other liabilities (Note K) | 8,099 | 8,733 | [1] |
Total liabilities | $ 96,071 | $ 105,257 | [1],[2] |
Contingencies and commitments (Note M) | |||
IBM stockholders' equity | |||
Common stock, par value $0.20 per share, and additional paid-in capital; Shares authorized: 4,687,500,000; Shares issued (2015 -- 2,221,223,449; 2014 -- 2,215,209,574) | $ 53,262 | $ 52,666 | |
Retained earnings | 146,124 | 137,793 | |
Treasury stock, at cost (shares: 2015 -- 1,255,494,724; 2014 -- 1,224,685,815) | (155,518) | (150,715) | |
Accumulated other comprehensive income/(loss) | (29,607) | (27,875) | |
Total IBM stockholders' equity | 14,262 | 11,868 | |
Noncontrolling interests (Note A) | 162 | 146 | |
Total equity | 14,424 | 12,014 | |
Total liabilities and equity | $ 110,495 | $ 117,271 | [1],[2] |
[1] | Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. | ||
[2] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Consolidated Statement of Fina5
Consolidated Statement of Financial Position (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
Notes and accounts receivable - trade, allowances | $ 367 | $ 336 |
Short-term financing receivables, allowances | 490 | 452 |
Other accounts receivable, allowances | 51 | 40 |
Long-term financing receivables, allowances | $ 118 | $ 126 |
Common stock, par value (in dollars per share) | $ 0.2 | $ 0.2 |
Common stock, Shares authorized (in shares) | 4,687,500,000 | 4,687,500,000 |
Common stock, Shares issued (in shares) | 2,221,223,449 | 2,215,209,574 |
Treasury stock, Shares (in shares) | 1,255,494,724 | 1,224,685,815 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities | |||
Net income | $ 13,190 | $ 12,022 | $ 16,483 |
Adjustments to reconcile net income to cash provided by operating activities | |||
Depreciation | 2,662 | 3,145 | 3,327 |
Amortization of intangibles | 1,193 | 1,347 | 1,351 |
Stock-based compensation | 468 | 512 | 614 |
Deferred taxes | 1,387 | (237) | (1,610) |
Net (gain)/loss on asset sales and other | 481 | (1,535) | (236) |
Loss on Microelectronics business disposal | 71 | 3,381 | |
Changes in operating assets and liabilities, net of acquisitions/divestitures | |||
Receivables (including financing receivables) | 812 | 1,270 | (1,407) |
Retirement related | (22) | (655) | 294 |
Inventories | 133 | (39) | (57) |
Other assets/other liabilities | (3,448) | (1,886) | (747) |
Accounts payable | 81 | (456) | (529) |
Net cash provided by operating activities | 17,008 | 16,868 | 17,485 |
Cash flows from investing activities | |||
Payments for property, plant and equipment | (3,579) | (3,740) | (3,623) |
Proceeds from disposition of property, plant and equipment | 370 | 404 | 372 |
Investment in software | (572) | (443) | (517) |
Purchases of marketable securities and other investments | (3,073) | (2,338) | (4,608) |
Proceeds from disposition of marketable securities and other investments | 2,842 | 2,493 | 4,873 |
Non-operating finance receivables - net | (398) | (1,078) | (1,063) |
Acquisition of businesses, net of cash acquired | (3,349) | (656) | (3,056) |
Divestitures of businesses, net of cash transferred | (401) | 2,357 | 297 |
Net cash used in investing activities | (8,159) | (3,001) | (7,326) |
Cash flows from financing activities | |||
Proceeds from new debt | 5,540 | 8,180 | 16,353 |
Payments to settle debt | (5,622) | (4,644) | (10,013) |
Short-term borrowings/(repayments) less than 90 days - net | 101 | (1,753) | 621 |
Common stock repurchases | (4,609) | (13,679) | (13,859) |
Common stock transactions - other | 322 | 709 | 1,074 |
Cash dividends paid | (4,897) | (4,265) | (4,058) |
Net cash used in financing activities | (9,166) | (15,452) | (9,883) |
Effect of exchange rate changes on cash and cash equivalents | (473) | (655) | 28 |
Net change in cash and cash equivalents | (790) | (2,240) | 304 |
Cash and cash equivalents at January 1 | 8,476 | 10,716 | 10,412 |
Cash and cash equivalents at December 31 | 7,686 | 8,476 | 10,716 |
Supplemental data | |||
Income taxes paid-net of refunds received | 2,657 | 5,748 | 4,024 |
Interest paid on debt | 995 | 1,061 | 982 |
Capital lease obligations | $ 4 | $ 2 | $ 14 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Equity - USD ($) $ in Millions | Total | Total IBM Stockholders' Equity | Common Stock and Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income/(Loss) | Non-Controlling Interests |
Equity - at Dec. 31, 2012 | $ 18,984 | $ 18,860 | $ 50,110 | $ 117,641 | $ (123,131) | $ (25,759) | $ 124 |
Net income plus other comprehensive income/(loss) | |||||||
Net income | 16,483 | 16,483 | 16,483 | ||||
Other comprehensive income/(loss) | 4,157 | 4,157 | 4,157 | ||||
Total comprehensive income | 20,641 | 20,641 | |||||
Cash dividends paid - common stock | (4,058) | (4,058) | (4,058) | ||||
Common stock issued under employee plans (Shares - 6,013,875, 7,687,026 and 9,961,389 for 2015, 2014 and 2013, respectively) | 1,216 | 1,216 | 1,216 | ||||
Purchases (Shares - 1,625,820, 1,313,569 and 1,666,069) and sales (Shares - 1,155,558, 1,264,232 and 1,849,883) of treasury stock under employee plans - net, for 2015, 2014 and 2013, respectively | (142) | (142) | (25) | (117) | |||
Other treasury shares purchased, not retired (Shares - 30,338,647, 71,504,867 and 73,121,942 for 2015, 2014 and 2013, respectively) | (13,993) | (13,993) | (13,993) | ||||
Changes in other equity | 268 | 268 | 268 | ||||
Changes in noncontrolling interests | 13 | 13 | |||||
Equity - at Dec. 31, 2013 | 22,929 | 22,792 | 51,594 | 130,042 | (137,242) | (21,602) | 137 |
Net income plus other comprehensive income/(loss) | |||||||
Net income | 12,022 | 12,022 | 12,022 | ||||
Other comprehensive income/(loss) | (6,274) | (6,274) | (6,274) | ||||
Total comprehensive income | 5,748 | 5,748 | |||||
Cash dividends paid - common stock | (4,265) | (4,265) | (4,265) | ||||
Common stock issued under employee plans (Shares - 6,013,875, 7,687,026 and 9,961,389 for 2015, 2014 and 2013, respectively) | 977 | 977 | 977 | ||||
Purchases (Shares - 1,625,820, 1,313,569 and 1,666,069) and sales (Shares - 1,155,558, 1,264,232 and 1,849,883) of treasury stock under employee plans - net, for 2015, 2014 and 2013, respectively | (85) | (85) | (6) | (79) | |||
Other treasury shares purchased, not retired (Shares - 30,338,647, 71,504,867 and 73,121,942 for 2015, 2014 and 2013, respectively) | (13,395) | (13,395) | (13,395) | ||||
Changes in other equity | 95 | 95 | 95 | ||||
Changes in noncontrolling interests | 8 | 8 | |||||
Equity - at Dec. 31, 2014 | 12,014 | 11,868 | 52,666 | 137,793 | (150,715) | (27,875) | 146 |
Net income plus other comprehensive income/(loss) | |||||||
Net income | 13,190 | 13,190 | 13,190 | ||||
Other comprehensive income/(loss) | (1,731) | (1,731) | (1,731) | ||||
Total comprehensive income | 11,459 | 11,459 | |||||
Cash dividends paid - common stock | (4,897) | (4,897) | (4,897) | ||||
Common stock issued under employee plans (Shares - 6,013,875, 7,687,026 and 9,961,389 for 2015, 2014 and 2013, respectively) | 606 | 606 | 606 | ||||
Purchases (Shares - 1,625,820, 1,313,569 and 1,666,069) and sales (Shares - 1,155,558, 1,264,232 and 1,849,883) of treasury stock under employee plans - net, for 2015, 2014 and 2013, respectively | (63) | (63) | 39 | (102) | |||
Other treasury shares purchased, not retired (Shares - 30,338,647, 71,504,867 and 73,121,942 for 2015, 2014 and 2013, respectively) | (4,701) | (4,701) | (4,701) | ||||
Changes in other equity | (10) | (10) | (10) | ||||
Changes in noncontrolling interests | 16 | 16 | |||||
Equity - at Dec. 31, 2015 | $ 14,424 | $ 14,262 | $ 53,262 | $ 146,124 | $ (155,518) | $ (29,607) | $ 162 |
Consolidated Statement of Chan8
Consolidated Statement of Changes in Equity (Parenthetical) - shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||
Common stock issued under employee plans (in shares) | 6,013,875 | 7,687,026 | 9,961,389 |
Purchases of treasury stock under employee plans (in shares) | 1,625,820 | 1,313,569 | 1,666,069 |
Sales of treasury stock under employee plans (in shares) | 1,155,558 | 1,264,232 | 1,849,883 |
Other treasury shares purchased, not retired (in shares) | 30,338,647 | 71,504,867 | 73,121,942 |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Significant Accounting Policies | |
Significant Accounting Policies | Note A. Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculat ed from the underlying whole-dollar amounts. Certain prior year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. On October 20, 2014, the company announced a definitive agreement to divest its Microelectronics business and manufacturing operations to GLOBALFOUNDRIES. The assets and liabilities of the Microelectronics business were reported as held for sale at December 31, 2014 and the operating results of the Microelectronics business have been reported as discontinued operations. The transaction closed on July 1, 2015. Prior periods have been reclassified to conform to this presentation to allow for a meaningful comparison of continuing operations. Refer to note C, “Acquisitions/Divestitures,” for additional information on the transaction. In January 2016, the company made a number of changes to its organiza tional structure and management system. These changes impacted the company’s reportable segments, but did not impact the company’s Consolidated Financial Statements. Refer to note T, “Segment Information,” on pages 124 to 129 for additional information on the changes in reportable segments. Noncontrolling interest amounts of $ 8 million, $ 6 million and $ 7 million, net of tax, for the years ended December 31, 2015, 2014 and 2013, respectively, are included in the Consolidated Statement of Earnings within the other (income) and expense line item. Principles of Consolidation The Consolidated Financial Statements include the accounts of IBM and its controlled subsidiaries, which are primarily majority owned. Any noncontrolling interest in the equity of a sub sidiary is reported in Equity in the Consolidated Statement of Financial Position. Net income and losses attributable to the noncontrolling interest is reported as described above in the Consolidated Statement of Earnings. The accounts of variable interest entities (VIEs) are included in the Consolidated Financial Statements, if required. Investments in business entities in which the company does not have control, but has the ability to exercise significant influence over operating and financial policies, a re accounted for using the equity method and the company’s proportionate share of income or loss is recorded in other (income) and expense. The accounting policy for other investments in equity securities is on page 90 within “Marketable Securities.” Equit y investments in non-publicly traded entities are primarily accounted for using the cost method. All intercompany transactions and accounts have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity wi th GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) (OCI) that are reported in the Consolidated Financial Statements and accompanying d isclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. See “Critical Accounting Estimates” on pages 48 to 51 for a discussion of the company’s critical accounting estimates. Revenue The company recognizes revenue when it is realized or realizable and earned. The company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery doe s not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either client acceptance has been obtained, client acceptance provisions have lapsed, or the company has objective ev idence that the criteria specified in the client acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved. The company recognizes revenue on sa les to solution providers, resellers and distributors (herein referred to as “resellers”) when the reseller has: economic substance apart from the company, credit risk, title and risk of loss to the inventory; and, the fee to the company is not contingent upon resale or payment by the end user, the company has no further obligations related to bringing about resale or delivery and all other revenue recognition criteria have been met. The company reduces revenue for estimated client returns, stock rotation , price protection, rebates and other similar allowances. (See Schedule II, “Valuation and Qualifying Accounts and Reserves” included in the company’s Annual Report on Form 10-K). Revenue is recognized only if these estimates can be reasonably and reliably determined. The company bases its estimates on historical results taking into consideration the type of client, the type of transaction and the specifics of each arrangement. Payments made under cooperative marketing programs are recognized as an expense only if the company receives from the client an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably and reliably estimated. If the company does not receive an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably estimated, such payments are recorded as a reduction of revenue. Revenue from sales of third-party vendor products or services is recorded net of costs when the company is acting as an agent between th e client and the vendor, and gross when the company is a principal to the transaction. Several factors are considered to determine whether the company is an agent or principal, most notably whether the company is the primary obligor to the client, or has i nventory risk. Consideration is also given to whether the company adds meaningful value to the vendor’s product or service, was involved in the selection of the vendor’s product or service, has latitude in establishing the sales price or has credit risk. The company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In addition to the aforementioned general policies, the following are the spec ific revenue recognition policies for multiple-deliverable arrangements and for each major category of revenue. Multiple-Deliverable Arrangements The company enters into revenue arrangements that may consist of multiple deliverables of its products and services based on the needs of its clients. These arrangements may include any combination of services, software, hardware and/or financing. For example, a client may purchase a server that includes operating system software. In addition, the arrangement may include post-contract support for the software and a contract for post-warranty maintenance service for the hardware. These types of arrangements can also include financing provided by the company. These arrangements consist of multiple deliverables, w ith the hardware and software delivered in one reporting period and the software support and hardware maintenance services delivered across multiple reporting periods. In another example, a client may outsource the running of its datacenter operations to t he company on a long-term, multiple-year basis and periodically purchase servers and/or software products from the company to upgrade or expand its facility. The outsourcing services are provided on a continuous basis across multiple reporting periods and the hardware and software products are delivered in one reporting period. To the extent that a deliverable in a multiple-deliverable arrangement is subject to specific accounting guidance that deliverable is accounted for in accordance with such specific g uidance. Examples of such arrangements may include leased hardware which is subject to specific leasing guidance or software which is subject to specific software revenue recognition guidance on whether and/or how to separate multiple-deliverable arrangeme nts into separate units of accounting ( separability ) and how to allocate the arrangement consideration among those separate units of accounting (allocation). For all other deliverables in multiple-deliverable arrangements, the guidance below is applied for separability and allocation. A multiple-deliverable arrangement is separated into more than one unit of accounting if the following criteria are met: The delivered item(s) has value to the client on a stand-alone basis; and If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the company. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undel ivered element is delivered. If these criteria are met for each element and there is a relative selling price for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The following revenue policies are then applied to each unit of accounting, as applicable. Revenue from the company’s cloud, analytics, mobile, security, and cognitive offerings follow the specific revenue recognition policies fo r multiple deliverable arrangements and for each major category of revenue depending on the type of offering which can be comprised of services, hardware and/or software. Services The company’s primary services offerings include information technology (IT) datacenter and business process outsourcing, application management services, consulting and systems integration, technology infrastructure and system maintenance, hosting and the design and development of complex IT systems to a client’s specificati ons (design and build). Many of these services can be delivered entirely or partially through the cloud. These services are provided on a time-and-material basis, as a fixed-price contract or as a fixed-price per measure of output contract and the contrac t terms range from less than one year to over 10 years. Revenue from IT datacenter and business process outsourcing contracts is recognized in the period the services are provided using either an objective measure of output or on a straight-line basis ov er the term of the contract. Under the output method, the amount of revenue recognized is based on the services delivered in the period. Revenue from application management services, technology infrastructure and system maintenance and hosting contracts is recognized on a straight-line basis over the terms of the contracts. Revenue from time-and-material contracts is recognized as labor hours are delivered and direct expenses are incurred. Revenue related to extended warranty and product maintenance contr acts is recognized on a straight-line basis over the delivery period. Revenue from fixed-price design and build contracts is recognized under the percentage-of-completion (POC) method. Under the POC method, revenue is recognized based on the labor costs incurred to date as a percentage of the total estimated labor costs to fulfill the contract. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These r evisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known by the company. The company performs ongoing pro fitability analyses of its services contracts accounted for under the POC method in order to determine whether the latest estimates of revenues, costs and profits require updating. If at any time these estimates indicate that the contract will be unprofita ble, the entire estimated loss for the remainder of the contract is recorded immediately. For non-POC method services contracts, any losses are recorded as incurred. In some services contracts, the company bills the client prior to recognizing revenue fr om performing the services. Deferred income of $ 6,039 million and $ 6,352 million at December 31, 2015 and 2014, respectively, is included in the Consolidated Statement of Financial Position. In other services contracts, the company performs the services pr ior to billing the client. Unbilled accounts receivable of $ 1,630 million and $ 1,833 million at December 31, 2015 and 2014, respectively, is included in notes and accounts receivable-trade in the Consolidated Statement of Financial Position. Billings usu ally occur in the month after the company performs the services or in accordance with specific contractual provisions. Unbilled receivables are expected to be billed within four months. Hardware The company’s hardware offerings include the sale or leas e of system servers, storage solutions and the sale of semiconductors. The company also offers installation services for its more complex hardware products. Revenue from hardware sales and sales-type leases is recognized when risk of loss has transferred to the client and there are no unfulfilled company obligations that affect the client’s final acceptance of the arrangement. Any cost of standard warranties and remaining obligations that are inconsequential or perfunctory are accrued when the correspondi ng revenue is recognized. Revenue from rentals and operating leases is recognized on a straight-line basis over the term of the rental or lease. Software Revenue from perpetual (one-time charge) license software is recognized at the inception of the license term if all revenue recognition criteria have been met. Revenue from term (recurring license charge) license software is recognized on a straight-line basis over the period that the client is entitled to use the license. Revenue from post-contract support, which may include unspecified upgrades on a when-and-if-available basis, is recognized on a straight-line basis over the period such items are delivered. Revenue from software hosting or Software-as-a-Service arrangements is recognized as the serv ice is delivered, generally on a straight-line basis, over the longer of the term of the arrangement or the expected period of the customer relationship. In software hosting arrangements, the rights provided to the customer (e.g., ownership of a license, c ontract termination provisions and the feasibility of the customer to operate the software) are considered in determining whether the arrangement includes a license. In arrangements which include a software license, the associated revenue is recognized ac cording to whether the license is perpetual or term, subject to the guidance above. In multiple-deliverable arrangements that include software that is more than incidental to the products or services as a whole (software multiple-deliverable arrangemen ts), software and software-related elements are accounted for in accordance with software revenue recognition guidance. Software-related elements include software products and services for which a software deliverable is essential to its functionality. Tan gible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are not within the scope of software revenue recognition guidance and are accounted for based on othe r applicable revenue recognition guidance. A software multiple-deliverable arrangement is separated into more than one unit of accounting if all of the following criteria are met: The functionality of the delivered element(s) is not dependent on the undelivered element(s); There is vendor-specific objective evidence (VSOE) of fair value of the undelivered element(s). VSOE of fair value is based on the price charged when the deliverable is sold separately by the comp any on a regular basis and not as part of the multiple-deliverable arrangement; and Delivery of the delivered element(s) represents the culmination of the earnings process for that element(s). If any one of these criteria is not met, t he arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each element and there is VSOE of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative VSOE of fair value. There ma y be cases, however, in which there is VSOE of fair value of the undelivered item(s) but no such evidence for the delivered item(s). In these cases, the residual method is used to allocate the arrangement consideration. Under the residual method, the amoun t of consideration allocated to the delivered item(s) equals the total arrangement consideration less the aggregate VSOE of fair value of the undelivered elements. The company’s multiple-deliverable arrangements may have a stand-alone software deliverabl e that is subject to the existing software revenue recognition guidance. The revenue for these multiple-deliverable arrangements is allocated to the software deliverable and the non-software deliverables based on the relative selling prices of all of the d eliverables in the arrangement using the hierarchy: VSOE, third-party evidence (TPE) or best estimate of selling price (BESP). In circumstances where the company cannot determine VSOE or TPE of the selling price for all of the deliverables in the arrangeme nt, including the software deliverable, BESP is used for the purpose of performing this allocation. Financing Financing income attributable to sales-type leases, direct financing leases and loans is recognized on the accrual basis using the effective interest method. Operating lease income is recognized on a straight-line basis over the term of the lease. Best Estimate of Selling Price In certain instances, the company is not able to establish VSOE for all elements in a multiple-deliverable arrange ment. When VSOE cannot be established, the company attempts to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When the company is unable to establish s elling price using VSOE or TPE, the company uses BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the company would transact a sale if the product or service were sold on a stand-alone basis. BES P may be used, for example, if a product is not sold on a stand-alone basis or when the company sells a new product, for which VSOE and TPE does not yet exist, in a multiple-deliverable arrangement prior to selling the new product on a stand-alone basis. The company determines BESP by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, competitive positioning, competitor actions, internal costs, profit objectives and pri cing practices. The determination of BESP is a formal process that includes review and approval by the company’s management. In addition, the company regularly reviews VSOE and TPE for its products and services, in addition to BESP. Services Costs Recu rring operating costs for services contracts, including costs related to bid and proposal activities, are recognized as incurred. For fixed-price design and build contracts, the costs of external hardware and software accounted for under the POC method are deferred and recognized based on the labor costs incurred to date, as a percentage of the total estimated labor costs to fulfill the contract. Certain eligible, nonrecurring costs incurred in the initial phases of outsourcing contracts are deferred and su bsequently amortized. These costs consist of transition and setup costs related to the installation of systems and processes and are amortized on a straight-line basis over the expected period of benefit, not to exceed the term of the contract. Additionall y, fixed assets associated with outsourcing contracts are capitalized and depreciated on a straight-line basis over the expected useful life of the asset. If an asset is contract specific, then the depreciation period is the shorter of the useful life of t he asset or the contract term. Amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements are deferred and amortized on a straight-line basis as a reduction of revenue over the expected period of benefit not to exceed the term of the contract. The company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. This review is done by comparing the estimated minimum remaining undiscounted cash flows of a contract to t he unamortized contract costs. If such minimum undiscounted cash flows are not sufficient to recover the unamortized costs, an impairment loss is recognized. Deferred services transition and setup costs were $ 2,144 million and $ 2,230 million at December 31, 2015 and 2014, respectively. Amortization of deferred services transition and setup costs was estimated at December 31, 2015 to be $ 653 million in 2016, $ 522 million in 2017, $ 366 million in 2018, $ 254 million in 2019 and $ 349 million thereafter. Def erred amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements were $ 184 million and $ 64 million at December 31, 2015 and 2014, respectively. Amortization of deferred amounts paid to clients in excess of the f air value of acquired assets is recorded as an offset of revenue and was estimated at December 31, 2015 to be $ 53 million in 2016, $ 41 million in 2017, $ 39 million in 2018, $ 21 million in 2019 and $ 30 million thereafter. In situations in which an outsourci ng contract is terminated, the terms of the contract may require the client to reimburse the company for the recovery of unbilled accounts receivable, unamortized deferred costs incurred to purchase specific assets utilized in the delivery of services and to pay any additional costs incurred by the company to transition the services. Software Costs Costs that are related to the conceptual formulation and design of licensed software programs are expensed as incurred to research, development and engineeri ng expense; costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Capitalized amounts are amortized on a straight-line basis over periods ranging up to three yea rs and are recorded in software cost within cost of sales. The company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. Costs to support or service licensed programs are charged to software cost wit hin cost of sales as incurred. The company capitalizes certain costs that are incurred to purchase or to create and implement internal-use software programs, including software coding, installation, testing and certain data conversions. These capitalized costs are amortized on a straight-line basis over periods ranging up to two years and are recorded in selling, general and administrative expense. Product Warranties The company offers warranties for its hardware products that generally range up to three years, with the majority being either one or three years. Estimated costs for warranty terms standard to the deliverable are recognized when revenue is recorded for the related deliverable. The company estimates its warranty costs standard to the del iverable based on historical warranty claim experience and estimates of future spending, and applies this estimate to the revenue stream for products under warranty. Estimated future costs for warranties applicable to revenue recognized in the current peri od are charged to cost of sales. The warranty liability is reviewed quarterly to verify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period. Adjustments are made when actual war ranty claim experience differs from estimates. Costs from fixed-price support or maintenance contracts, including extended warranty contracts, are recognized as incurred. Revenue from extended warranty contracts is initially recorded as deferred income a nd subsequently recognized on a straight-line basis over the delivery period. Changes in deferred income for extended warranty contracts, and in the warranty liability for standard warranties, which are included in other accrued expenses and liabilities an d other liabilities in the Consolidated Statement of Financial Position, are presented in the following tables: Standard Warranty Liability ($ in millions) 2015 2014 Balance at January 1 $ 197 $ 376 Current period accruals 173 240 Accrual adjustments to reflect experience* 7 (120) Changes incurred (196) (298) Balance at December 31 $ 181 $ 197 * Includes an adjustment of $(125 million) in 2014 related to the System x business divestiture. Extended Warranty Liability (Deferred Income) ($ in millions) 2015 2014 Balance at January 1 $ 536 $ 579 Revenue deferred for new extended warranty contracts 286 298 Amortization of deferred revenue* (253) (316) Other** (31) (24) Balance at December 31 $ 538 $ 536 Current portion $ 238 $ 254 Noncurrent portion 300 282 * Includes an adjustment of $(21 million) in 2014 related to the System x business divestiture. ** Other consists primarily of foreign currency translation adjustments. Shipping and Handling Costs related to shipping and handling are recognized as incurred and included in cost in the Consolidated Statement of Earnings. Expense and Other Income Selling, General and Administrative Selling, general and administrative (SG&A) expense is charged to income as incurred. Expenses of promoting and selling products and services are classified as selling expense and include such items as compensation, advertising, sales commissions and travel. General and administrative expens e includes such items as compensation, legal costs, office supplies, non-income taxes, insurance and office rental. In addition, general and administrative expense includes other operating items such as an allowance for credit losses, workforce rebalancing charges for contractually obligated payments to employees terminated in the ongoing course of business, acquisition costs related to business combinations, amortization of certain intangible assets and environmental remediation costs. Advertising and Pr omotional Expense The company expenses advertising and promotional costs as incurred. Cooperative advertising reimbursements from vendors are recorded net of advertising and promotional expense in the period in which the related advertising and promotion al expense is incurred. Advertising and promotional expense, which includes media, agency and promotional expense, was $ 1,290 million, $ 1,307 million and $ 1,294 million in 2015, 2014 and 2013, respectively, and is recorded in SG&A expense in the Consolidat ed Statement of Earnings. Research, Development and Engineering Research, development and engineering (RD&E) costs are expensed as incurred. Software costs that are incurred to produce the finished product after technological feasibility has been estab lished are capitalized as an intangible asset. Intellectual Property and Custom Development Income The company licenses and sells the rights to certain of its intellectual property (IP) including internally developed patents, trade secrets and technol ogical know-how. Certain IP transactions to third parties are licensing/royalty-based and others are transaction-based sales and other transfers. Licensing/royalty-based fees involve transfers in which the company earns the income over time, or the amount of income is not fixed or determinable until the licensee sells future related products (i.e., variable royalty, based upon licensee’s revenue). Sales and other transfers typically include transfers of IP whereby the company has fulfilled its obligations a nd the fee received is fixed or determinable at the transfer date. The company also enters into cross-licensing arrangements of patents, and income from these arrangements is recorded when earned. In addition, the company earns income from certain custom d evelopment projects for strategic technology partners and specific clients. The company records the income from these projects when the fee is realized and earned, is not refundable and is not dependent upon the success of the project. Other (Income) and Expense Other (income) and expense includes interest income (other than from Global Financing external transactions), gains and losses on certain derivative instruments, gains and losses from securities and other investments, gains and losses from certa in real estate transactions, foreign currency transaction gains and losses, gains and losses from the sale of businesses , other than reported as discontinued operations, and amounts related to accretion of asset retirement obligations. Business Combinations and Intangible Assets Including Goodwill The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are recorded at their acquisition date fair values. Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as a separately identifiable intangible asset. Goodwill recorded in an acquisition is assigned to applicable reporting units b ased on expected revenues. Identifiable intangible assets with finite lives are amortized over their useful lives. Amortization of completed technology is recorded in Cost, and amortization of all other intangible assets is recorded in SG&A expense. Acquis ition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date. Impairment Long-lived assets, other than goodwill and indefinite-lived intangible assets, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment test is based on undiscounted cash flows and, if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values. Goodwill and indefinite-lived intangible assets are tested annually, in the fourth quarter, for impairment and whenever changes in circumstances indicate an impairment may exist. Goodwill is tested at the reporting unit level which is the operating segment, or a business, which is one level below that operating segment (the “component” level) if discrete financial information is prepared and regularly reviewed by management at the segment level. Components are aggregated as a single reporting unit if they have similar economic characteristics. Depreciation and Amortization Property, plant and equipment are carried at cost and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of certain depreciable |
Accounting Changes
Accounting Changes | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Changes | |
Accounting Changes | Note B. Accounting Changes New Standards to be Implemented In January 2016, the Financial Accounting Standards Board (FASB) issued guidance which addresses aspects of recognition, measurement, presentation and disclosure of financial instruments. Certain equity investments will be measured at fair value with changes recognized in net income. The amendment also simplifies the impairment test of equity investments that lack read ily determinable fair value. The guidance is effective January 1, 2018 and early adoption is not permitted except for limited provisions. The guidance is not expected to have a material impact in the consolidated financial results. In September 2015, the FASB issued guidance eliminating the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which the amount of the adjustment is determined. In addition, the port ion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. The guidance was effective January 1, 2016 on a prospective basis. The guidance is not expected to have a material impact in the consolidated financial results. In July 2015, the FASB issued guidanc e which requires all inventories, except those using the last-in, first-out or retail methods, to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reason ably predictable cost of completion, disposal, and transportation. The guidance is effective January 1, 2017 with early adoption permitted. The guidance is not expected to have a material impact in the consolidated financial results. In May 2015, the FASB issued guidance which r emoved the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also removed the requirement to make certa in disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance was effective January 1, 2016. The guidance was a change in disclosure only and will not have an impact in the consolidated financial results. In April 2015, the FASB issued guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a services contract. All software licenses recognized under this guidance will be accounted for consistent wit h other licenses of intangible assets. The guidance was effective January 1, 2016 and the company will adopt it on a prospective basis. The guidance is not expected to have a material impact in the consolidated financial results. In May 2014, the FASB iss ued guidance on the recognition of revenue from contracts with customers. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exc hange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance was initially effective January 1, 2017 and early adoption was not permitted. In August 2015, the FASB issued guidance which provides for a one-year deferral of the effective date to January 1, 2018, with an option of applying the standard on the original effective date. The company wil l adopt the guidance on January 1, 2018 and apply the cumulative catch-up transition method. The company is continuing to evaluate the impact of the new guidance in the consolidated financial results. Standards Implemented In November 2015, the FASB issued guidance which requires deferred tax liabilities and assets be classified as noncurrent in the statement of financial position. The guidance was effective January 1, 2016 with early adoption permitted. The company adopted the guidance in the fourt h quarter of 2015 on a retrospective basis. The company reclassified current deferred tax assets of $2.0 billion at December 31, 2014 to deferred tax assets and current deferred tax liabilities of $19 million at December 31, 2014 to other liabilities from other accrued expenses and liabilities in the Consolidated Statement of Financial Position. In order to offset deferred tax assets and liabilities for presentation as a single noncurrent amount by tax jurisdiction, the company also reclassified $178 milli on at December 31, 2014 from deferred tax assets to other liabilities in the Consolidated Statement of Financial Position. In April 2015, the FASB issued guidance which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance was effective January 1, 2016 with early adoption permitted. The company adopted the guidance in the fourth quarter of 2 015 on a retrospective basis. At December 31, 2015 and 2014, the company had $ 74 million and $ 83 million, respectively, in debt issuance costs. Debt issuance costs were previously included in investments and sundry assets in the Consolidated Statement of Financial Position. In April 2014, the FASB issued guidance that changed the criteria for reporting a discontinued operation. Only disposals of a component that represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results is a discontinued operation. The guidance also requires expanded disclosures about discontinued operations and disposals of a significant part of an entity that does not qualify for discontinued operations reporting. The guidance was effective January 1, 2015. The impact to the company will be dependent on any transaction that is within the scope of the new guidance. There were no such transactions in 2015. In July 2013, the FASB issued guidance regarding the presentation of an unreco gnized tax benefit when a net operating loss carryforward , a similar tax loss, or a tax credit carryforward exists. Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asse t for a net operating loss carryforward , a similar tax loss, or a tax credit carryforward . The guidance was effective January 1, 2014. The guidance was a change in financial statement presentation only and did not have a material impact in the consolidated financial results. In March 2013, the FASB issued guidance on when foreign currency translation adjustments should be released to net income. When a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The guidance was effective January 1, 2014 and did not have a material impact in the consolidated financial results. In Fe bruary 2013, the FASB issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the repor ting date. Examples include debt arrangements, other contractual obligations and settled litigation matters. The guidance requires an entity to measure such obligations as the sum of the amount that the reporting entity agreed to pay on the basis of its ar rangement among its co-obligors plus additional amounts the reporting entity expects to pay on behalf of its co-obligors. The guidance was effective January 1, 2014 and did not have a material impact in the consolidated financial results. |
Acquisitions_Divestitures
Acquisitions/Divestitures | 12 Months Ended |
Dec. 31, 2015 | |
Acquisitions/Divestitures | |
Acquisitions/Divestitures | Note C. Acquisitions/Divestitures Acquisitions Purchase price consideration for all acquisitions, as reflected in the tables in this note, is paid primarily in cash. All acquisitions are reported in the Consolidated Statement of Cash Flows net of acquired cash and cash equivalents. 2015 In 2015 , the company completed fourteen acquisitions at an aggregate cost of $3,555 million. Merge Healthcare , Inc. (Merge) — On October 13, 2015, the company completed the acquisition of 100 percent of Merge, a publicly held company, for cash consideration of $1,036 million. Merge is a leading provider of medical image handling and processing, interoperability and clinical systems designed to advance he althcare quality and efficiency. Merge joined the company’s Watson Health business unit, bolstering clients’ ability to analyze and cross-reference medical images against billions of data points already in the Watson Health Cloud. Goodwill of $695 million has been assigned to the Cognitive Solutions ($502 million) and Techno logy Services & Cloud Platforms ($193 million) segments. At the acquisition date, it was expected that none of the goodwill would be deductible for tax purposes. The overall weighted-ave rage useful life of the identified intangible assets acquired is 7.0 years. Cleversafe , Inc. ( Cleversafe ) — On November 6, 2015, the company completed the acquisition of 100 percent of Cleversafe , a privately held company, for cash consideration of $1,30 9 million. Cleversafe is a leading developer and manufacturer of object-based storage software and appliances. Cleversafe will be integrated into the company’s Cloud business to give clients strategic data flexibility, simplified management and consistency with on-premise , cloud and hybrid cloud deployment options. Goodwill of $1,000 million has been assigned to the Techno logy Services & Cloud Platforms ($590 million) and Systems ($410 million) segments. At the acquisition date, it was expected that none of the goodwill would be deductible for tax purposes. The overall weighted-average useful life of the identified intangible assets acquired is 6.9 years. Ot her Acquisitions — The Cognitive Solutions segment completed acquisitions of six privately held busin esses: in the first quarter, AlchemyAPI , Inc. ( AlchemyAPI ) and Blekko , Inc. ( Blekko ); in the second quarter, Explorys , Inc. ( Explorys ) and Phytel , Inc. ( Phytel ); in the third quarter, Compose, Inc. (Compose); and in the fourth quarter, IRIS Analytics. The Technology Services & Cloud Platforms segment completed acquisitions of four privately held businesses: in the second quarter, Blue Box Group, Inc. (Blue Box); in the third quarter, StrongLoop , Inc. ( StrongLoop ); and in the fourth quarter, Gravitant, Inc. (Gravitant) and Clearleap, Inc. (Clearleap). Global Business Services (GBS) completed acquisitions of two privately held businesses in the fourth quarter, Advanced Application Corporation (AAC) and Meteorix, LLC. (Meteorix). Each acquisition is expected to enhance the company’s portfolio of product and services capabilities. AlchemyAPI is a leading provider of scalable cognitive computing application program interface services and computing applications. Blekko technology provides advanced We b-crawling, categorization and intelligent filtering. Explorys provides secure cloud-based solutions for clinical integration, at-risk population management, cost of care measurement and pay-for-performance. Phytel is a leading provider of SaaS-based popul ation health management offerings that help providers identify patients at risk for care gaps and engage the patient to begin appropriate preventative care. Blue Box provides hosted, managed, OpenStack-based production-grade private clouds for the enterpri se and service provider markets. Compose offers auto-scaling, production-ready databases to help software development teams deploy data services efficiently. StrongLoop is a leading provider of application development software that enables software develop ers to build applications using application programming interfaces. AAC engages in system integration application development, software support and services. AAC was an affiliate of JBCC Ho ldings Inc. and IBM Japan Ltd. The company acquired all the shares of AAC which became a wholly owned subsidiary as of October 1, 2015. Gravitant develops cloud-based software to enable organizations to easily plan, buy and manage, or “broker,” software and computing services from multiple suppliers across hybrid clouds. Meteorix offers consulting, deployment, integration and on-going post production services for Workday Financial Management and Human Capital Management applications. Clearleap is a provider of cloud-based video services. IRIS Analytics provides technology and consultancy services to the payments industry to detect electronic payment fraud. All acquisitions were for 100 percent of the acquired companies with the exception of the AAC acquisition. The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of December 31, 2015 . 2015 Acquisitions Amortization Other ($ in millions) Life (in Years) Merge Cleversafe Acquisitions Current assets $ 94 $ 23 $ 60 Fixed assets/noncurrent assets 128 63 82 Intangible assets Goodwill N/A 695 1,000 895 Completed technology 5 - 7 133 364 163 Client relationships 5 - 7 145 23 95 Patents/trademarks 2 - 7 54 11 23 Total assets acquired 1,248 1,484 1,318 Current liabilities (73) (15) (34) Noncurrent liabilities (139) (160) (73) Total liabilities assumed (212) (175) (107) Total purchase price $ 1,036 $ 1,309 $ 1,210 N/A - not applicable The acquisitions were accounted for as business combinations using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity were recorded at their estimated fair values at the date of acquisition. The primary items that generated the goodwill are the value of the synergies between the acquired businesses and IBM and the acquired assembled workfo rce, neither of which qualify as an amortizable intangible asset. For the “Other Acquisitions,” the overall weighted-average life of the identified intangible assets acquired is 6.4 years. These identified intangible assets will be amortized on a straight -line basis over their useful lives. Goodwill of $518 million has been assigned to the Cognitive Solutions segment, $303 million has been assigned to the Technology Services & Cloud Platforms segment, and $74 million was assigned to the GBS segment. It is expected that 7 percent of the goodwill will be deductible for tax purposes. On December 17, 2015, the company announced that it had entered into a definitive agreement with AT&T to acquire their application and hosting services business. The acquisition is expected to strengthen IBM's outsourcing portfolio and will align with IBM's cloud strategy. On January 21, 2016, the company announced that it had acquired Ustream , Inc. ( Ustream ), a privately held company based in San Francisco, California. Ustream p rovides cloud-based video streaming to enterprises and broadcasters. On January 29, 2016, the company announced that it had acquired The Weather Company’s B2B, mobile and cloud-based web-properties, weather.com, Weather Underground, The Weather Company br and and WSI, its gl obal business-to-business brand for cash consideration of approximately $2 billion. The cable television segment was not acquired by IBM, but will license weather forecast data and analytics from IBM under a long-term contract. On February 2, 2016, the company announced its intent to acquire Aperto , a digital agency with headquarters in Berlin, Germany. Aperto will join the IBM Interactive Experience (IBM iX ) team. IBM iX provides clients a unique fusion of services spanning stra tegy, analytics and systems integration for scalable digital, commerce, mobile and wearable platforms. The transaction is expected to close in the first quarter of 2016. On February 3, 2016, the company announced its intent to acquire ecx.io, a digital ag ency headquartered in Dusseldorf, Germany. The proposed acquisition of ecx.io will enhance IBM iX w ith new digital marketing, commerce and platform skills to accelerate clients’ digital transformations. The transaction is expected to close in the first qua rter of 2016. On February 18, 2016, the company announced that it had acquired Resource/ Ammirati , a leading U.S. based digital marketing and creative agency, addressing the rising demand from businesses seeking to reinvent themselves for the digital econo my. On February 18, 2016, the company announced its intent to acquire Truven Health Analytics ( Truven ), a leading provider of healthcare analytics solutions, for estimated cash consideration of $2.6 billion. Truven has developed proprietary analytic methods and assembled analytic content assets, creating extensive national healthcare utilization, performance, quality, and cost data. The transaction is expected to close in the first quarter of 2016. At the date of i ssuance of the financial statements, the ini tial purchase accounting for the Ustream , The Weather Company and Resource/ Ammirati transactions was not complete . 2014 In 2014 , the company completed six acquisitions at an aggregate cost of $608 million. The Cognitive Solutions segment completed acquisitions of four privately held companies: in the first quarter, Cloudant , Inc. ( Cloudant ); in the second quarter, Silverpop Systems, Inc. ( Silverpop ) and Cognea Group Pty LTD ( Cognea ); and in the third quarter, CrossIdeas Srl ( CrossIdeas ). Technology Services & Cloud Platforms completed acquisitions of two privately held companies: in the fir st quarter, Aspera , Inc. ( Aspera ); and in the third quarter, Lighthouse Security Group, LLC (Lighthouse). Aspera’s technology helps make cloud computing faster, more predictable and more cost effective for big data transfers such as enterprise storage, sharing virtual images or accessing the cloud for increased computing capacity. Cloudant extends the company’s mobile and cloud platform by enabling developers to easily and quickly create next-generation mobile and web-based applications. Silverpop is a p rovider of cloud-based capabilities that deliver personalized customer engagements in highly scalable environments. Cognea offers personalized artificial intelligence capabilities designed to serve as an intuitive interface between human users and data-dri ven information. CrossIdeas delivers next generation identity and access governance capabilities to help mitigate access risks and segregation of duty violations. Lighthouse is a provider of cloud-enabled managed identity and access management solutions. The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of December 31, 2014 . 2014 Acquisitions Amortization Total ($ in millions) Life (in Years) Acquisitions Current assets $ 56 Fixed assets/noncurrent assets 39 Intangible assets Goodwill N/A 442 Completed technology 5-7 68 Client relationships 7 77 Patents/trademarks 1-7 18 Total assets acquired 701 Current liabilities (26) Noncurrent liabilities (67) Total liabilities assumed (93) Total purchase price $ 608 N/A - Not applicable The overall weighted-average life of the identified amortizable intangible assets acquired is 6.8 years. These identified intangible assets will be amortized on a straight-line basis over their useful lives. Goodwill of $442 million h as been assigned to the Cognitive Solutions ($311 million) and Technology Services & Cloud Platforms ($131 million) segments. It was expected that approximately 1 percent of the goodwill will be deductible for tax purposes. All acquisitions were for 100 percent of the acquired co mpanies . 2013 In 2013 , the company comp leted 10 a cquisitions at an aggregate cost of $ 3 , 219 million. SoftLayer Technologies, Inc. ( SoftLayer ) — On July 3, 2013, the company completed the acquisition of 100 percent of the privately held company, SoftLayer , a cloud computing infrastructure provider based in Dallas, Texas for cash consideration of $1,977 million. SoftLayer joined the company’s Cloud business unit, which combined SoftLayer with IBM SmartCloud into a global platform. Goodwill of $1,28 5 million h as been assigned to the Technology Services & Cloud Platforms ($1,257 million) and Cognitive Solutions ($28 million) segments. At the acquisition date, it was expected that none of the goodwill would be deductible for tax purposes. The overall weight ed-average useful life of the identified intangible assets acquired is 7.0 years. Other Acquisitions—The Cognitive Solutions segment completed acquisitions of seven privately held companies: in the first quarter, StoredIQ Inc. ( StoredIQ ) and Star Analytics, Inc. (Star Analytics); in the third quarter, Trusteer , Ltd. ( Trusteer ) and Daeja Image Systems, Ltd. ( Daeja ); and in the fourth quarter, Xtify , Inc. ( Xtify ), The Now Factory and Fiberlink Communications ( Fiberlink ). The Technology Ser vices & Cloud Platforms segment completed one acquisition in the second quarter, UrbanCode Inc. ( UrbanCode ), a privately held company. Systems completed one acquisition in the third quarter, CSL International (CSL), a privately held company. All acquisiti ons in 2013 were for 100 percent of the acquired companies. The acquisition of StoredIQ advances the company’s efforts to help clients derive value from big data. The combination of the company’s and Star Analytics’ software advances the company’s busines s analytics initiatives. UrbanCode automates the delivery of software, helping businesses quickly release and update mobile, social, big data and cloud applications. CSL deepens the consolidation cloud capabilities by offering simplified management of the virtualization environment. Trusteer extends the company’s data security capabilities further into the cloud, mobile and endpoint security space. Daeja delivers software that helps employees across all industries, especially data intensive ones such as ban king, insurance and healthcare, get faster access to critical business information, and complements the company’s big data capabilities. Xtify is a leading provider of cloud-based mobile messaging tools that help organizations improve mobile sales, drive i n-store traffic and engage customers with personalized offers. The Now Factory is a provider of analytics software that helps communications service providers (CSPs) deliver better customer experiences and drive new revenue opportunities. Fiberlink is a mo bile management and security company, that supports the company’s expanding vision for enterprise mobility management, which encompasses secure transactions between businesses, partners, and customers. The following table reflects the purchase price relat ed to these acquisitions and the resulting purchase price allocations as of December 31, 2013 . 2013 Acquisitions Amortization Other ($ in millions) Life (in Years) SoftLayer Acquisitions Current assets $ 80 $ 97 Fixed assets/noncurrent assets 300 41 Intangible assets Goodwill N/A 1,285 961 Completed technology 5-7 290 181 Client relationships 6-7 245 97 In-process R&D N/A 2 — Patents/trademarks 2-7 75 32 Total assets acquired 2,277 1,408 Current liabilities (56) (61) Noncurrent liabilities (244) (105) Total liabilities assumed (300) (166) Total purchase price $ 1,977 $ 1,242 N/A - not applicable For the “Other Acquisitions,” the overall weighted-average life of the identified amortizable intangible assets acquired is 6.6 years. These identified intangible assets will be amortized on a straight-line basis over their useful lives. Goodwill of $961 m illion has been assigned to the Cognitive Solutions ($684 million), Technology Services & Cloud Platforms ($264 million) and Systems ($13 million) segments. At the acquisition dates, it was expected that approximately 2 percent of the goodwill would be deductib le for tax purposes . Divestitures Microelectronics – On October 20, 2014, IBM and GLOBALFOUNDRIES announced a definitive agreement in which GLOBALFOUNDRIES would acquire the company’s Microelectronics business, including existing semiconductor manufacturing assets and operations in East Fishkill, NY and Essex Junction, VT. The commercial OEM business to be acquired by GLOBALFOUNDRIES included custom logic and specialty foundry, manufacturing and related operations. The transaction closed on July 1, 2015. The transacti on included a 10-year exclusive manufacturing sourcing agreement in which GLOBALFOUNDRIES will provide server processor semiconductor technology for use in IBM Systems. The agreement provides the company with capacity and market-based pricing for current s emiconductor nodes in production and progression to nodes in the future for both development and production needs. As part of the transaction, the company provides GLOBALFOUNDRIES with certain transition services, including IT, supply chain, packaging and test services and lab services. The initial term for these transition services is one to three years, with GLOBALFOUNDRIES having the ability to renew. In the third quarter of 2014, the company recorded a pre-tax charge of $4.7 billion related to the sal e of the Microelectronics disposal group, which was part of the Syste ms reportable segment. The pre-tax charge reflected the fair value less the estimated cost of selling the disposal group including an impairment to the semiconductor long-lived a ssets of $2.4 billion, $1.5 billion representing the cash consideration expected to be transferred to GLOBALFOUNDRIES and $0.8 billion of other related costs. Additional pre-tax charges of $116 million were recorded during 2015 related to the disposal. The cumulative pre-tax charge was $4.8 billion as of December 31, 2015. Additional charges may be recorded in future periods. All assets and liabilities of the business, which were held for sale at June 30, 2015, were transferred at closing. The company transferred $515 million of net cash to GLOBALFOUNDRIES in the third quarter of 2015. This amount included $750 million of cash consideration, adjusted by the amount of working capital due from GLOBALFOUNDRIES and other miscellaneous items. The remaining cash consideration will be transferred over two years. Reporting the related assets and liabilities initially as held for sale at September 30, 2014 was based on meeting all of the criteria for such reporting in the appl icable accounting guidance. While the company met certain criteria for held for sale reporting in prior periods, it did not meet all of the criteria until September 30, 2014. In addition, at September 30, 2014, the company concluded that the Microelectroni cs business met the criteria for discontinued operations reporting. The disposal group constitutes a component under accounting guidance. The continuing cash inflows and outflows with the discontinued component are related to the manufacturing sourcing arr angement and the transition, packaging and test services. These cash flows are not direct cash flows as they are not significant and the company will have no significant continuing involvement. Summarized financial information for disco ntinued operations is shown below. ($ in millions) For the year ended December 31: 2015 2014 2013 Total revenue $ 720 $ 1,335 $ 1,384 Loss from discontinued operations, before tax (175) (619) (720) Loss on disposal, before tax (116) (4,726) — Total loss from discontinued operations, before income taxes (291) (5,346) (720) Provision/(benefit) for income taxes (117) (1,617) (322) Loss from discontinued operations, net of tax $ (174) $ (3,729) $ (398) The assets and liabilities at December 31, 2014 presented below were classified as held for sale. ($ in millions) At December 31: 2015 2014 Assets: Accounts receivable $ — $ 245 Inventory — 380 Property, plant & equipment, net — — Other assets — 92 Total assets $ — $ 717 Liabilities: Accounts payable $ — $ 177 Deferred income — 87 Other liabilities — 163 Total liabilities $ — $ 427 Industry Standard Server — On January 23, 2014, IBM and Lenovo Group Limited (Lenovo) announced a definitive agreement in which Lenovo would acquire the company’s industry standard server portfolio (System x) for an adjusted purchase price of $2.1 billion, consisting of approximately $1.8 billion in cash, with the balance in Lenovo common stock. The stock represented less than 5 percent equity ownership in Lenovo. The company would sell to Lenovo its System x, BladeCenter and Flex System blade serve rs and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. IBM and Lenovo entered into a strategic relationship which included a global OEM and reseller agreeme nt for sales of IBM’s industry-leading entry and midrange Storwize disk storage systems, tape storage systems, General Parallel File System software, SmartCloud Entry offering, and elements of IBM’s system software, including Systems Director and Platform Computing solutions. Effective with the initial closing of the transaction, Lenovo assumed related customer service and maintenance operations. IBM will continue to provide maintenance delivery on Lenovo’s behalf for an extended period of time. In addition , as part of the transaction agreement, the company will provide Lenovo with certain transition services, including IT and supply chain services. The initial term for these transition services ranges from less than one year to three years. Lenovo can renew certain services for an additional year. The initial closing was completed on October 1, 2014. A subsequent closing occurred in most other countries in which there was a large business footprint on December 31, 2014. T he remaining countries closed on Mar ch 31, 2015 resulting in a pre-tax gain of $16 million in the first quarter of 2015. In the second quarter of 2015, an additional pre-tax gain of $36 million was recorded attributed to certain adjustments resolved during the quarter. An assessment of the o ngoing contractual terms of the transaction resulted in the recognition of a pre-tax gain of $11 million in the fourth quarter of 2015. A total pre-tax gain of $63 million was recognized in 2015. Overall, the company expects to recognize a total pre-tax g ain on the sale of approximately $1.6 billion , which does not include associated costs related to transition and performance-based costs. Net of these charges, the pre-tax gain is approximately $1.2 billion, of which $1.1 billion was recorded in the fourth quarter of 2014. The balance of the gain is expected to be recognized in 2019 upon conclusion of the maintenance agreement. Customer Care — On September 10, 2013, IBM and SYNNEX announced a definitive agreement in which SYNNEX would acquire the company’s worldwide customer care business process outsourcing services business for $501 million, consisting of approximately $430 million in cash, net of balance sheet adjustments, and $71 million in SYNNEX common stock, which represented less than 5 percent equity ownership in SYNNEX. As part of the transaction, SYNNEX entered into a multi-year agreement with the company, and Concentrix, SYNNEX’s o utsourcing business, became an IBM strategic business partner for global customer care business process outsourcing services. The initial closing was completed on January 31, 2014, with subsequent closings occurring in 2014. For the full year of 2014, th e company recorded a pre-tax gain of $202 million related to this transaction. In the second quarter of 2015, resolution of the final balance sheet adjustments was concluded. An assessment of the ongoing contractual terms of the transaction resulted in the recognition of a pre-tax gain of $7 million in 2015. Through December 31, 2015, the cumulative pre-tax gain attributed to this transaction was $209 million. Retail Store Solutions – On April 17, 2012, the company announced that it had signed a definitive agreement with Toshiba TEC for the sale of its Retail Store Solutions business. As part of the transaction, the company agreed to transfer the maintenance business to Toshiba TEC within three years of the original closing of the transaction. Th e company completed the final phase of the transfer of the maintenance workforce to Toshiba in the second quarter of 2015. The parts and inventory transfer to Toshiba will commence in 2018. An assessment of the ongoing contractual terms of the transaction resulted in the recognition of a pre-tax gain of $8 million in 2015. Overall, the company has recognized a cumulative total pre-tax gain on the sale of $519 million. Others ‒ In addition to those above, the company completed the following di vestitures: 2015 ‒ In the fourth quarter of 2015, the company completed the divestiture of its Kenexa Compensation Portfolio business to SCMC Acquisition, LLC. and the divestiture of the Rational System Architect and SPSS Data Collections suite of products to UNICOM. In the second quarter of 2015, the company completed the divestiture of its Travel & Transportation kiosk business to Embross North America Ltd., and the divestiture of its Telecom Expense Management product to Tangoe , Inc. In the first quarter of 2015, the company completed the divestiture of the Algorithmics Collateral Management suite of products to SmartStream , Inc. and the divestiture of the Commerce ILOG Supply Chain Optimization Tools suite of products to Llamasoft , Inc. All of the above transactions closed in 2015 and the f inancial terms related to these transactions were not material. Overall, the company recorded a pre-tax gain of $81 million related to these transactions in 2015. 2014 ‒ In the second quarter of 2014, the company comple ted the divestitures of its solidDB suite of products to UNICOM Systems, Inc. and its Human Capital Management business line in France to Sopra Group. In the third quarter of 2014, the company completed the divestiture of its Cognos Finance product to UNIC OM Systems, Inc., its IMS Tools Suite of products to Rocket Software, Inc., its Sterling Transportation Management System to Kewill Inc., and its ILOG JViews and Elixir Visualization products to Rogue Wave Software, Inc. In the fourth quarter of 2014, the company completed the divestiture of its Focal Point and PurifyPlus product suite to UNICOM Systems, Inc. All of the above transactions closed in 2014 and the f inancial terms related to these transaction s were not m aterial . Overall, the company recorded a pre-tax gain of $132 million related to these transactions in 2014. 2013 ‒ In the first quarter of 2013, the company completed the divestiture of its Showcase Reporting product set to Help/Systems. In the fourt h quarter of 2013, the company completed two divestitures, the Applicazioni Contabili Gestionali (ACG) business to TeamSystem and the Cognos Application Development Tools (ADT) business to UNICOM Systems, Inc. Financial terms of these transactions did not have a material impact in the consolidated financial results . |
Financial Instruments
Financial Instruments | 12 Months Ended |
Dec. 31, 2015 | |
Financial Instruments | |
Financial Instruments | Note D. Financial Instruments Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at December 31, 2015 and 2014 . ($ in millions) At December 31, 2015: Level 1 Level 2 Level 3 Total Assets Cash equivalents(1) Time deposits and certificates of deposit $ — $ 2,856 $ — $ 2,856 Money market funds 2,069 — — 2,069 Other securities — 18 — 18 Total 2,069 2,874 — 4,943 (6) Debt securities — current (2) — 506 — 506 (6) Debt securities — noncurrent (3) 1 6 — 8 Trading security investments (3) 28 — — 28 Available-for-sale equity investments (3) 192 — — 192 Derivative assets (4) Interest rate contracts — 656 — 656 Foreign exchange contracts — 332 — 332 Equity contracts — 6 — 6 Total — 994 — 994 (7) Total assets $ 2,290 $ 4,381 $ — $ 6,671 (7) Liabilities Derivative liabilities (5) Foreign exchange contracts $ — $ 164 $ — $ 164 Equity contracts — 19 — 19 Interest rate contracts — 3 — 3 Total liabilities $ — $ 186 $ — $ 186 (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Commercial paper and certificates of deposit reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statemen t of Financial Position at December 31, 2015 were $292 million and $702 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2015 were $164 million and $22 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $139 million each. ($ in millions) At December 31, 2014: Level 1 Level 2 Level 3 Total Assets Cash equivalents(1) Time deposits and certificates of deposit $ — $ 3,517 $ — $ 3,517 Commercial paper — 764 — 764 Money market funds 662 — — 662 U.S. government securities — 410 — 410 Other securities — 6 — 6 Total 662 4,697 — 5,359 (5) Debt securities — noncurrent (2) 1 8 — 9 Trading security investments (2) 74 — — 74 Available-for-sale equity investments (2) 243 — — 243 Derivative assets (3) Interest rate contracts — 633 — 633 Foreign exchange contracts — 775 — 775 Equity contracts — 24 — 24 Total — 1,432 — 1,432 (6) Total assets $ 980 $ 6,138 $ — $ 7,118 (6) Liabilities Derivative liabilities (4) Foreign exchange contracts $ — $ 177 $ — $ 177 Equity contracts — 19 — 19 Total liabilities $ — $ 196 $ — $ 196 (6) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (3) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2014 were $751 million and $681 million, respectivel y. (4) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2014 were $165 million and $31 million, respectively . (5) Available-for-sale securities with carrying values that approximate fair value. (6) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative as set and liability positions would have been reduced by $ 97 million each. There were no transfers between Levels 1 and 2 for the year ended December 31, 2015. During the year ended December 31, 2014, the company transferred trading security investments v alued at $74 million from Level 2 to Level 1 due to the expiration of certain regulatory restrictions. Financial Assets and Liabilities Not Measured at Fair Value Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Loans and Long-Term Receivables Fair values are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remainin g maturities. At December 31, 2015 and 2014 , the difference between the carrying amount and estimated fair value for loans and long-term receivables was immaterial. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Long-Term Debt Fair value of publicly traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. The carrying amount of long-term debt is $3 3,428 million and $34,991 million and the estimated fair value is $ 35,22 0 million and $ 37,524 million at December 31, 2015 and 2014 , respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would b e classified as Level 2 in the fair value hierarchy. Debt and Marketable Equity Securities The company’s cash equivalents and current debt securities are considered available-for-sale and recorded at fair value, which is not materially different from c arrying value, in the Consolidated Statement of Financial Position. The following tables summarize the company’s noncurrent debt and marketable equity securities which are also considered available-for-sale and recorded at fair value in the Consolidated Statement of Financial Position. ($ in millions) Gross Gross Adjusted Unrealized Unrealized Fair At December 31, 2015: Cost Gains Losses Value Debt securities – noncurrent(1) $ 5 $ 3 $ — $ 8 Available-for-sale equity investments (1) $ 186 $ 6 $ 0 $ 192 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. ($ in millions) Gross Gross Adjusted Unrealized Unrealized Fair At December 31, 2014: Cost Gains Losses Value Debt securities – noncurrent (1) $ 7 $ 3 $ — $ 9 Available-for-sale equity investments (1) $ 272 $ 2 $ 31 $ 243 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. During the fourth quarter of 2014, the company acquired equity securities in conjunction with the sale of System x business which are classified as available-for-sale securities. Based on an evaluation of available evidence as of December 31, 2015, the company re corded an other -than-temporary impairment due to the duration and extent of the decline in fair value of these securities. The impairment charge of $86 million was recorded in other (income) and expense in the Consolidated Statement of Earnings. The adjusted cost basis of these securities was $185 million as of December 31, 2015. Sales of debt and available-for-sale equity investments during the period were as follows: ($ in millions) For the year ended December 31: 2015 2014 2013 Proceeds $ 8 $ 21 $ 41 Gross realized gains (before taxes) 1 0 13 Gross realized losses (before taxes) 1 5 5 The after-tax net unrealized gains/(losses) on available-for-sale debt and equity securities that have been included in other comprehensive income/(loss) and the after-tax net (gains)/losses reclassified from accumulated other comprehensive income/(loss) t o net income were as follows: ($ in millions) For the year ended December 31: 2015 2014 Net unrealized gains/(losses) arising during the period $ (33) $ (18) Net unrealized (gains)/losses reclassified to net income * 53 3 * Includes pre-tax writedowns of $86 million in 2015. There were no writedowns in 2014. The contractual maturities of substantially all available-for-sale debt securities are less than one year at December 31, 2015 . Derivative Financial Instruments The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity and commodity price changes and client credit risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the company’s lease and other financial asset s and the interest rates associated with its financing debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchange rate flu ctuations. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the company has a policy of only entering into contracts with carefully selected major financial institutions based upon their overall credit profile. The company’s established policies and procedures for mitigating credit risk on principal transactions include reviewing and esta blishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangement to net amounts d ue to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with most of its major derivative counterparties. These arrangements require t he company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings receive d from the major credit agencies. The aggregate fair value of all derivative instruments under these collateralized arrangements that were in a liability position at December 31, 2015 and 2014 was $ 28 million and $ 21 million, respectively, for which no col lateral was posted at either date. Full collateralization of these agreements would be required in the event that the company’s credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuan t to the terms of the collateral security arrangements. The aggregate fair value of derivative instruments in net asset positions as of December 31, 2015 and 2014 was $ 994 million and $ 1,432 million, respectively. This amount represents the maximum exposur e to loss at the reporting date as a result of the counterparties failing to perform as contracted. This exposure was reduced by $ 139 million and $ 97 million at December 31, 2015 and 2014 , respectively, of liabilities included in master netting arrangement s with those counterparties. Additionally, at December 31, 2015 and 2014 , this exposure was reduced by $ 90 million and $ 487 million of cash collateral and $40 million and $31 million of non-cash collateral in U.S. Treasury securities, respectively, receive d by the company. At December 31, 2015 and 2014, the net exposure related to derivative assets recorded in the Statement of Financial Position was $ 726 million and $ 817 million, respectively. At December 31, 2015 and 2014 , the net amount related to deriv ative liabilities recorded in the Statement of Financial Position was $ 47 million and $ 99 million, respectively. In the Consolidated Statement of Financial Position, the company does not offset derivative assets against liabilities in master netting arran gements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. No amount was recognized in other receivables at December 31, 2015 and 2014 for the righ t to reclaim cash collateral. The amount recognized in accounts payable for the obligation to return cash collateral totaled $ 90 million and $ 487 million at December 31, 2015 and 2014 , respectively. The company restricts the use of cash collateral received to rehypothecation , and therefore reports it in prepaid expenses and other current assets in the Consolidated Statement of Financial Position. No amount was rehypothecated at December 31, 2015 and 2014 . The company may employ derivative instruments to hedge the volatility in stockholders’ equity resulting from changes in currency exchange rates of significant foreign subsidiaries of the company with respect to the U.S. dollar. These instruments, designated as net investment hedges, expose the company to liquidity risk as the derivatives have an immediate cash flow impact upon maturity which is not offset by a cash flow from the translation of the underlying hedged equity. The company monitors this cash loss potential on an ongoing basis, and may disconti nue some of these hedging relationships by de-designating or terminating the derivative instrument in order to manage the liquidity risk. Although not designated as accounting hedges, the company may utilize derivatives to offset the changes in the fair va lue of the de-designated instruments from the date of de-designation until maturity. In its hedging programs, the company uses forward contracts, futures contracts, interest-rate swaps, cross-currency swaps and options depending upon the underlying expos ure. The company is not a party to leveraged derivative instruments. A brief description of the major hedging programs, categorized by underlying risk, follows. Interest Rate Risk Fixed and Variable Rate Borrowings The company issues debt in the global capital markets, principally to fund its financing lease and loan portfolio. Access to cost-effective financing can result in interest rate mismatches with the underlying assets. To manage these mismatches and to reduce overall interest cost, the company uses interest rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). At December 31, 2015 and 2014 , the total notional amount of the company’s interest rate swaps was $7.3 billion and $5.8 billion, respectively. The weighted-average remaining maturity of these instruments at December 31, 2015 and 2014 was approximately 7.2 years and 8.7 years, respectively. Forecasted Debt Issuance The company is exposed to interest rate volatility on future debt issuances. To manage this risk, the company may use forward-starting interest rate swaps to lock in the rate on the interest payments related to the forecasted deb t issuance. These swaps are accounted for as cash flow hedges. The company did not have any derivative instruments relating to this program outstanding at December 31, 2015 and 2014 . At December 31, 2015 and 2014 , net gains of less than $1 million (before taxes), respectively, were recorded in accumulated other comprehensive income/(loss) in connection with cash flow hedges of the company’s borrowings. Within these amounts, less than $1 million of gains, respectively, are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying transactions. Foreign Exchange Risk Long-Term Investments in Foreign Subsidiaries (Net Investment) A large portion of the company’s foreign currency denomi nated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with resp ect to the U.S. dollar. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. At December 31, 2015 and 2014 , the total notional amount of derivative instruments designated as net investment hedg es was $5.5 billion and $2.2 billion, respectively. The weighted-average remaining maturity of these instruments at December 31, 2015 and 2014 was approximately 0.2 years for both periods. Anticipated Royalties and Cost Transactions The company’s operati ons generate significant nonfunctional currency, third-party vendor payments and intercompany payments for royalties and goods and services among the company’s non-U.S. subsidiaries and with the parent company. In anticipation of these foreign currency cas h flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum length of time over wh ich the company is hedging its exposure to the variability in future cash flows is four years. At December 31, 2015 and 2014 , the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.2 billion and $9.3 billion, respectively, with a weighted-average remaining maturity of 0.7 years for both periods. At December 31, 2015 and 2014 , in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net gains of $147 million and net gains of $602 million (before taxes), respectively, in accumulated other comprehensive income/(loss). Within these amounts $121 million of gains and $572 million of gains, respectively, are expected to be reclassified to net i ncome within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Foreign Currency Denominated Borrowings The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps are accounted for as cash flow hedges. The maximum length of time over which the company hedges its exposure to the variability in future cash flows is approximately seven years. At December 31, 2015 and December 31, 2014 , no amounts were outstanding under this program. At December 31, 2015 and 2014 , in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses of $2 million (before taxes), respectively, in accumula ted other comprehensive income/(loss). Within these amounts, less than $1 million of losses, respectively, are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying exposure. Subsidiary Cash and Foreign Currency Asset/Liability Management The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition , the company uses foreign exchange forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are genera lly less than one year. The changes in the fair values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Statement of Earnings. At December 31, 2015 and 2014 , the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $11.7 billion and $13.1 billion, respectively. Equity Risk Management The company is exposed to market price changes in certain broad market indice s and in the company’s own stock primarily related to certain obligations to employees. Changes in the overall value of these employee compensation obligations are recorded in SG&A expense in the Consolidated Statement of Earnings. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock. They are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Statement of Earnings. At December 31, 2015 and 2014 , the total notional amount of derivative instrum ents in economic hedges of these compensation obligations was $1.2 billion and $1.3 billion, respectively. Other Risks The company may hold warrants to purchase shares of common stock in connection with various investments that are deemed derivatives bec ause they contain net share or net cash settlement provisions. The company records the changes in the fair value of these warrants in other (income) and expense in the Consolidated Statement of Earnings. The company did not have any warrants qualifying as derivatives outstanding at December 31, 2015 and 2014 . The company is exposed to a potential loss if a client fails to pay amounts due under contractual terms. The company may utilize credit default swaps to economically hedge its credit exposures. These derivatives have terms of one year or less. The swaps are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. The company did not have any derivative instruments relating to this pr ogram outstanding at December 31, 2015 and 2014 . The company is exposed to market volatility on certain investment securities. The company may utilize options or forwards to economically hedge its market exposure. The derivatives are recorded at fair val ue with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. At December 31, 2015 and 2014 , the total notional amount of derivative instruments in economic hedges of investment securities was less than $0.1 bi llion for both periods. The following tables provide a quantitative summary of the derivative and non-derivative instrument-related risk management activity as of December 31, 2015 and 2014 , as well as for the years ended December 31, 2015 , 2014 and 2013 , respectively. Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position ($ in millions) Fair Value of Derivative Assets Fair Value of Derivative Liabilities Balance Sheet Balance Sheet At December 31: Classification 2015 2014 Classification 2015 2014 Designated as hedging instruments Interest rate contracts Prepaid expenses and Other accrued other current assets $ — $ 5 expenses and liabilities $ — $ 0 Investments and sundry assets 656 628 Other liabilities 3 — Foreign exchange Prepaid expenses and Other accrued contracts other current assets 197 632 expenses and liabilities 70 50 Investments and sundry assets 5 17 Other liabilities 19 21 Fair value of derivative Fair value of derivative assets $ 858 $ 1,281 liabilities $ 92 $ 72 Not designated as hedging instruments Foreign exchange Prepaid expenses and Other accrued contracts other current assets $ 90 $ 90 expenses and liabilities $ 75 $ 101 Investments and sundry assets 40 37 Other liabilities — 4 Equity contracts Prepaid expenses and Other accrued other current assets 6 24 expenses and liabilities 19 14 Investments and sundry assets — 0 Other liabilities — 5 Fair value of derivative Fair value of derivative assets $ 136 $ 151 liabilities $ 94 $ 125 Total debt designated as hedging instruments Short-term debt N/A N/A $ — $ 0 Long-term debt N/A N/A $ 7,945 $ 7,747 * Total $ 994 $ 1,432 $ 8,131 $ 7,944 * * Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to Note B, "Accounting Changes," for additional information. N/A-not applicable The Effect of Derivative Instruments in the Consolidated Statement of Earnings ($ in millions) Gain/(Loss) Recognized in Earnings Consolidated Statement of Earnings Recognized on Attributable to Risk Line Item Derivatives(1) Being Hedged(2) For the year ended December 31: 2015 2014 2013 2015 2014 2013 Derivative instruments in fair value hedges(5) Interest rate contracts Cost of financing $ 108 $ 231 $ (109) $ (1) $ (127) $ 202 Interest expense 94 206 (74) (1) (114) 138 Derivative instruments not designated as hedging instruments(1) Foreign exchange contracts Other (income) and expense 127 (776) (328) N/A N/A N/A Interest rate contracts Other (income) and expense (1) 34 — N/A N/A N/A Equity contracts SG&A expense (27) 51 164 N/A N/A N/A Other (income) and expense (9) (9) — N/A N/A N/A Total $ 291 $ (263) $ (347) $ (1) $ (241) $ 340 ($ in millions) Gain/(Loss) Recognized in Earnings and Other Comprehensive Income Consolidated Statement of Ineffectiveness and Effective Portion Earnings Effective Portion Amounts Excluded from For the year Recognized in OCI Line Item Reclassified from AOCI Effectiveness Testing(3) ended December 31: 2015 2014 2013 2015 2014 2013 2015 2014 2013 Derivative instruments in cash flow hedges Interest rate contracts $ — $ — $ — Interest expense $ 0 $ (1) $ — $ — $ — $ — Foreign exchange Other (income) contracts 618 958 43 and expense 731 98 162 5 (1) 0 Cost of sales 192 (15) (34) — — — SG&A expense 149 15 39 — — — Instruments in net investment hedges(4) Foreign exchange contracts 889 1,136 173 Interest expense — — — 13 0 3 Total $ 1,507 $ 2,095 $ 216 $ 1,072 $ 97 $ 167 $ 18 $ (1) $ 3 (1) The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts. (2) The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period. (3) The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships. (4) Instruments in net investment hedges include derivative and non-derivative instruments. (5) For the years ended December 31, 2015 and December 31, 2014 , fair value hedges resulted in a loss of $ 2 million and a gain of $ 4 million in ineffectiveness, respectively. There were no amounts recorded as ineffectiveness on fair value hedges for the year ended December 31, 2013 . N/A—Not applicable For the 12 months ending December 31, 2015 , 2014 and 2013 , there were no significant gains or losses recognized in earnings representing hedge ineffectiveness or excluded from the assessment of hedge effectiveness (for fair value hedges), or associated with an underlying exposure that did not or was not exp ected to occur (for cash flow hedges); nor are there any anticipated in the normal course of business. |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2015 | |
Inventories | |
Inventories | Note E . Inventories ($ in millions) At December 31: 2015 2014 Finished goods $ 352 $ 430 Work in process and raw materials 1,199 1,674 Total $ 1,551 $ 2,103 |
Financing Receivables
Financing Receivables | 12 Months Ended |
Dec. 31, 2015 | |
Financing Receivables | |
Financing Receivables | Note F. Financing Receivables The following table presents financing receivables, net of allowances for credit losses, including residual values. ($ in millions) At December 31: 2015 2014 Current Net investment in sales-type and direct financing leases $ 3,057 $ 3,781 Commercial financing receivables 8,948 8,423 Client loan and installment payment receivables (loans) 7,015 7,631 Total $ 19,020 $ 19,835 Noncurrent Net investment in sales-type and direct financing leases $ 4,501 $ 4,449 Client loan and installment payment receivables (loans) 5,512 6,660 Total $ 10,013 $ 11,109 Net investment in sales-type and direct financing leases relates principally to the company’s systems products and are for terms ranging generally from two to six years. Net investment in sales-type and direct financing leases includes unguaranteed residual values of $ 645 million and $ 671 million at December 31, 2015 and 2014 , respectively, and is reflected net of unearned income of $ 536 million and $ 517 million, and net of the allowance for credit losses of $ 213 million and $ 165 million at those dat es, respectively. Scheduled maturities of minimum lease payments outstanding at December 31, 2015 , expressed as a percentage of th e total, are approximately: 2016 , 4 4 percent; 201 7 , 2 7 percent; 201 8 , 1 8 percent; 201 9 , 8 percent; and 20 20 and beyond, 3 perc ent. Commercial financing receivables, net of allowance for credit losses of $ 19 million and $ 17 million at December 31, 2015 and 2014 , respectively, relate primarily to inventory and accounts receivable financing for dealers and remarketers of IBM and OE M products. Payment terms for inventory and accounts receivable financing generally range from 30 to 90 days. Client loan and installment payment receivables (loans), net of allowance for credit losses of $ 377 million and $ 396 million at December 31, 2015 an d 2014 , respectively, are loans that are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are generally for terms up to seven years. Client loan and installment paym ent financing contracts are priced independently at competitive market rates. The company has a history of enforcing these financing agreements. The company utilizes certain of its financing receivables as collateral for nonrecourse borrowings. Financing receivables pledged as collateral for borrowings were $ 545 million and $ 642 million at December 31, 2015 and 2014 , respectively. These borrowings are included in note J, “Borrowings,” on pages 94 to 96 . The company did not have any financing receivable s held for sale as of December 31, 2015 and 2014 . Financing Receivables by Portfolio Segment The following tables present financing receivables on a gross basis, excluding the allowance for credit losses and residual value, by portfolio segment and by class, excluding commercial financing receivables and other miscellaneous financing receivables at December 31, 2015 and 2014 . The company determines its allowance for credit losses based on two portfolio segments: lease receivables and loan receivables, and further segments the portfo lio into two classes: major markets and growth markets. ($ in millions) Major Growth At December 31, 2015: Markets Markets Total Financing receivables Lease receivables $ 5,517 $ 1,524 $ 7,041 Loan receivables 9,739 3,165 12,904 Ending balance $ 15,256 $ 4,689 $ 19,945 Collectively evaluated for impairment $ 15,180 $ 4,227 $ 19,406 Individually evaluated for impairment $ 76 $ 462 $ 539 Allowance for credit losses Beginning balance at January 1, 2015 Lease receivables $ 32 $ 133 $ 165 Loan receivables 79 317 396 Total $ 111 $ 450 $ 561 Write-offs (14) (48) (62) Provision 20 122 141 Other (8) (43) (51) Ending balance at December 31, 2015 $ 109 $ 481 $ 590 Lease receivables $ 25 $ 188 $ 213 Loan receivables $ 83 $ 293 $ 377 Collectively evaluated for impairment $ 43 $ 36 $ 79 Individually evaluated for impairment $ 65 $ 445 $ 511 ($ in millions) Major Growth At December 31, 2014: Markets Markets Total Financing receivables Lease receivables $ 5,702 $ 1,943 $ 7,645 Loan receivables 10,049 4,639 14,687 Ending balance $ 15,751 $ 6,581 $ 22,332 Collectively evaluated for impairment $ 15,665 $ 6,156 $ 21,821 Individually evaluated for impairment $ 86 $ 425 $ 511 Allowance for credit losses Beginning balance at January 1, 2014 Lease receivables $ 42 $ 80 $ 123 Loan receivables 95 147 242 Total $ 137 $ 228 $ 365 Write-offs (18) (6) (24) Provision 3 240 243 Other (12) (11) (23) Ending balance at December 31, 2014 $ 111 $ 450 $ 561 Lease receivables $ 32 $ 133 $ 165 Loan receivables $ 79 $ 317 $ 396 Collectively evaluated for impairment $ 42 $ 39 $ 81 Individually evaluated for impairment $ 69 $ 411 $ 480 When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For individually evaluated receivables, the company determines the expected cash flow for the receivable and calculates an estimate of the potential loss and the probability of loss. For those accounts in which the loss is probable, the company records a specific reserve. In addition, the company records an unallocated reserve that is calculated by applying a reserve rate to its different portfolios, excluding accounts that have been specifically reserved. This reserve rate is based upon credit rating, probability of default, term, characteristics (lease/loan) and loss history. Financing Receivables on Non-Accrual Status The following table presents the recorded investment in financing receivables which were on non-accrual status at December 31, 2015 and 2014 . ($ in millions) At December 31: 2015 2014 Major markets $ 2 $ 13 Growth markets 63 40 Total lease receivables $ 65 $ 53 Major markets $ 13 $ 27 Growth markets 91 151 Total loan receivables $ 104 $ 178 Total receivables $ 168 $ 231 Impaired Loans The company considers any loan with an individually evaluated reserve as an impaired loan. Depending on the level of impairment, loans will also be placed on a non-accrual status. The following tables present impaired client loan receivables at December 31, 2015 and 2014 . ($ in millions) Recorded Related At December 31, 2015: Investment Allowance Major markets $ 50 $ 47 Growth markets 297 284 Total $ 347 $ 331 ($ in millions) Recorded Related At December 31, 2014: Investment Allowance Major markets $ 54 $ 47 Growth markets 299 293 Total $ 353 $ 340 ($ in millions) Interest Average Interest Income Recorded Income Recognized on For the year ended December 31, 2015: Investment Recognized Cash Basis Major markets $ 51 $ 0 $ — Growth markets 315 0 — Total $ 367 $ 0 $ — ($ in millions) Interest Average Interest Income Recorded Income Recognized on For the year ended December 31, 2014: Investment Recognized Cash Basis Major markets $ 68 $ 0 $ — Growth markets 208 0 — Total $ 276 $ 0 $ — Credit Quality Indicators The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit rating . The tables present the gross recorded investment for each class of receivables, by credit quality indicator, at December 31, 2015 and 2014 . Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators do not reflect mitigation actions that the company may take to transfer credit risk to third parties. Lease Receivables ($ in millions) Major Growth At December 31, 2015: Markets Markets Credit Rating Aaa – Aa3 $ 538 $ 39 A1 – A3 1,324 162 Baa1 – Baa3 1,493 392 Ba1 – Ba2 1,214 352 Ba3 – B1 513 277 B2 – B3 403 215 Caa – D 33 87 Total $ 5,517 $ 1,524 Loan Receivables ($ in millions) Major Growth At December 31, 2015: Markets Markets Credit Rating Aaa – Aa3 $ 949 $ 80 A1 – A3 2,338 336 Baa1 – Baa3 2,635 813 Ba1 – Ba2 2,143 732 Ba3 – B1 905 576 B2 – B3 711 447 Caa – D 59 181 Total $ 9,739 $ 3,165 At December 31, 2015 , the industries which made up Global Financing’s receivables portfolio consisted of: Financial ( 36 percent), Manufacturing ( 14 percent), Government ( 11 percent), Services ( 11 percent), Retail ( 9 percent), Communications ( 7 percent), Healthcare ( 6 percent) and Other ( 6 percent). Lease Receivables ($ in millions) Major Growth At December 31, 2014: Markets Markets Credit Rating Aaa – Aa3 $ 563 $ 46 A1 – A3 1,384 178 Baa1 – Baa3 1,704 900 Ba1 – Ba2 1,154 272 Ba3 – B1 470 286 B2 – B3 372 176 Caa – D 55 85 Total $ 5,702 $ 1,943 Loan Receivables ($ in millions) Major Growth At December 31, 2014: Markets Markets Credit Rating Aaa – Aa3 $ 993 $ 110 A1 – A3 2,438 425 Baa1 – Baa3 3,003 2,148 Ba1 – Ba2 2,034 649 Ba3 – B1 827 683 B2 – B3 655 420 Caa – D 98 203 Total $ 10,049 $ 4,639 At December 31, 2014 , the industries which made up Global Financing’s receivables portfolio consisted of: Financial ( 40 percent), Manufacturing ( 14 percent), Government ( 13 percent), Services ( 9 percent), Retail ( 8 percent), Communications ( 6 percent), Healthcare ( 5 percent) and Other ( 5 percent). Past Due Financing Receivables ($ in millions) Recorded Total Total Investment Past Due Financing > 90 Days At December 31, 2015: > 90 days* Current Receivables and Accruing Major markets $ 5 $ 5,512 $ 5,517 $ 5 Growth markets 30 1,494 1,524 13 Total lease receivables $ 35 $ 7,006 $ 7,041 $ 19 Major markets $ 7 $ 9,732 $ 9,739 $ 7 Growth markets 31 3,134 3,165 14 Total loan receivables $ 38 $ 12,866 $ 12,904 $ 22 Total $ 73 $ 19,872 $ 19,945 $ 40 * Does not include accounts that are fully reserved. ($ in millions) Recorded Total Total Investment Past Due Financing > 90 Days At December 31, 2014: > 90 days* Current Receivables and Accruing Major markets $ 6 $ 5,696 $ 5,702 $ 6 Growth markets 32 1,911 1,943 14 Total lease receivables $ 38 $ 7,607 $ 7,645 $ 20 Major markets $ 9 $ 10,040 $ 10,049 $ 9 Growth markets 35 4,603 4,639 18 Total loan receivables $ 44 $ 14,643 $ 14,687 $ 27 Total $ 82 $ 22,250 $ 22,332 $ 47 * Does not include accounts that are fully reserved. Troubled Debt Restructurings The company assessed all restructurings that occurred on or after January 1, 2014 and determined that there were no significant troubled debt restructurings for the years ended December 31, 2014 and 2015 . |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note G. Property, Plant and Equipment ($ in millions) At December 31: 2015 2014 Land and land improvements $ 558 $ 667 Buildings and building improvements 6,552 9,524 Plant, laboratory and office equipment 21,116 27,388 Plant and other property—gross 28,226 37,578 Less: Accumulated depreciation 18,051 27,500 Plant and other property—net 10,176 10,078 Rental machines 1,115 1,456 Less: Accumulated depreciation 565 763 Rental machines—net 551 693 Total—net $ 10,727 $ 10,771 In 2015, the company retired the assets associated with the divestiture of the Microelectronics business impacting both plant and other property-gross and accumulate d depreciation . |
Investments and Sundry Assets
Investments and Sundry Assets | 12 Months Ended |
Dec. 31, 2015 | |
Investments and Sundry Assets | |
Investments and Sundry Assets | Note H. Investments and Sundry Assets ($ in millions) At December 31: 2015 2014 Deferred transition and setup costs and other deferred arrangements* $ 1,624 $ 1,527 Derivatives—noncurrent 702 681 Alliance investments Equity method 82 98 Non-equity method 393 496 Prepaid software 273 332 Long-term deposits 256 300 Other receivables 516 509 Employee benefit-related 273 356 Prepaid income taxes 496 518 Other assets 571 705 ** Total $ 5,187 $ 5,520 ** * Deferred transition and setup costs and other deferred arra ngements are related to s ervices client arrangements. Refer to note A, “Significant Accounting Policies,” on page 68 for additional information . ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information . |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets Including Goodwill | |
Intangible Assets Including Goodwill | Note I. Intangible Assets Including Goodwill Intangible Assets The following table details the company’s intangible asset balances by major asset class. ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2015: Amount Amortization Amount Intangible asset class Capitalized software $ 1,348 $ (581) $ 767 Client relationships 1,856 (927) 929 Completed technology 2,960 (1,397) 1,563 Patents/trademarks 335 (142) 193 Other* 44 (10) 35 Total $ 6,543 $ (3,057) $ 3,487 * Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2014: Amount Amortization Amount Intangible asset class Capitalized software $ 1,375 $ (679) $ 696 Client relationships 2,208 (1,271) 937 Completed technology 2,831 (1,533) 1,298 Patents/trademarks 374 (214) 161 Other* 18 (6) 12 Total $ 6,806 $ (3,702) $ 3,104 * Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems . The net carrying amount of intangible assets increased $ 383 million during the year ended December 31, 2015 , primarily due to intangible asset additions resulting from acquisitions, partially offset by amortization. There was no impairment of intangible assets recorded in 2015 and 2014 . The aggregate intangible amortization expense was $1,193 million and $1,347 m illion for the years ended December 31, 2015 and 2014 , respectively. In addition, in 2015 and 2014 , respectively, the company retired $ 1,809 million and $ 724 million of fully amortized intangible assets, impacting both the gross carrying amount and accumul ated amortization by this amount. The amortization expense for each of the five succeeding years relating to intangible assets currently recorded in the Consolidated Statement of Financial Position is estimated to be the following at December 31, 2015 : ($ in millions) Capitalized Acquired Software Intangibles Total 2016 $ 426 $ 760 $ 1,185 2017 256 650 906 2018 85 492 577 2019 — 338 338 2020 — 240 240 Goodwill As described in Note T, “Segment Information,” the company changed its reportable segments in January 2016. Goodwill was a ssign ed to the new reportable segments on a f air value allocation basis . The changes in the goodwill balances by reportable segment, for the years ended December 31, 2015 and 2014 , are as follows: ($ in millions) Foreign Currency Balance Purchase Translation Balance January 1, Goodwill Price And Other December 31, Segment 2015 Additions Adjustments Divestitures Adjustments* 2015 Cognitive Solutions $ 15,156 $ 1,020 $ (2) $ (18) $ (535) $ 15,621 Global Business Services 4,555 74 0 (1) (232) 4,396 Technology Services & Cloud Platforms 9,373 1,087 (1) (7) (296) 10,156 Systems 1,472 410 0 — (33) 1,848 Total $ 30,556 $ 2,590 $ (3) $ (26) $ (1,096) $ 32,021 *Primarily driven by foreign currency translation. ($ in millions) Foreign Currency Balance Purchase Translation Balance January 1, Goodwill Price And Other December 31, Segment 2014 Additions Adjustments Divestitures Adjustments* 2014 Cognitive Solutions $ 15,244 $ 311 $ (12) $ (14) $ (372) $ 15,156 Global Business Services 4,855 — 0 (52) (248) 4,555 Technology Services & Cloud Platforms 9,485 131 16 (8) (252) 9,373 Systems 1,601 — — (110) (19) 1,472 Total $ 31,184 $ 442 $ 4 $ (183) $ (891) $ 30,556 *Primarily driven by foreign currency translation. Purchase price adjustments recorded in 2015 and 2014 were related to acquisitions that were completed on or prior to December 31, 2014 or December 31, 2013 , respectively, and were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. There were no goodwill impairment losses recorded during the full year of 2015 or 2014 and the company has no accumulated impairment losses . |
Borrowings
Borrowings | 12 Months Ended |
Dec. 31, 2015 | |
Borrowings | |
Borrowings | Note J. Borrowings Short-Term Debt ($ in millions) At December 31: 2015 2014 Commercial paper $ 600 $ 650 Short-term loans 590 480 Long-term debt—current maturities 5,271 4,601 * Total $ 6,461 $ 5,731 * * Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. The weighted-average interest rate for commercial paper at December 31, 2015 and 2014 was 0.4 percent and 0.1 percent, respectively. The weighted-average interest rates for short-term loans was 5.2 percent and 4.0 percent at December 31, 2015 and 2014, respectively. Long-Term Debt Pre-Swap Borrowing ($ in millions) At December 31: Maturities 2015 2014 U.S. dollar notes and debentures (average interest rate at December 31, 2015): 2.80% 2016–2017 $ 9,351 $ 9,254 ** 3.34% 2018–2019 7,591 6,835 1.46% 2020–2021 3,717 6,555 2.35% 2022 1,900 1,000 3.38% 2023 1,500 1,500 3.63% 2024 2,000 2,000 7.00% 2025 600 600 6.22% 2027 469 469 6.50% 2028 313 313 5.88% 2032 600 600 8.00% 2038 83 83 5.60% 2039 745 745 4.00% 2042 1,107 1,107 7.00% 2045 27 27 7.13% 2096 316 316 30,319 31,404 Other currencies (average interest rate at December 31, 2015, in parentheses): Euros (1.8%) 2016–2025 4,892 5,463 Pound sterling (2.7%) 2017–2022 1,555 1,176 Japanese yen (0.4%) 2017–2022 1,180 733 Swiss francs (6.3%) 2020 9 162 Canadian (2.2%) 2017 360 432 Other (13.8%) 2016–2020 506 367 38,820 39,737 Less: net unamortized discount 838 853 Less: net unamortized debt issuance costs 74 83 ** Add: fair value adjustment* 790 792 38,699 39,593 ** Less: current maturities 5,271 4,601 ** Total $ 33,428 $ 34,991 ** * The portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Statement of Financial Position as an amount equal to the sum of the debt’s carrying value plus a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information. The c ompany’s indenture governing its debt securities and its various credit facilities each contain significant covenants which obligate the company to promptly pay principal and interest, limit the aggregate amount of secured indebtedness and sale and leaseback transactions to 10 percent of the company’s consolidated net tangible assets, and restrict the company’s ability to merge or consolidate unless certain conditions are met. The credit faci lities also include a covenant on the company’s consolidated net interest expense ratio, which cannot be less than 2.20 to 1.0, as well as a cross default provision with respect to other defaulted indebtedness of at least $ 500 million. The company is in compliance with all of its significant debt covenants and provides periodic certifications to its lenders. The failure to comply with its debt covenants could constitute an event of default with respect to the debt to which such provisions apply. If certain events of default were to occur, the principal and interest on the debt to which such event of default applied would become immediately due and payable. Post-Swap Borrowing (Long-Term Debt, Including Current Portion) ($ in millions) 2015 2014** For the year ended December 31: Amount Average Rate Amount Average Rate Fixed-rate debt $ 25,499 3.41 % $ 27,180 3.09 % Floating-rate debt* 13,199 0.96 % 12,412 0.82 % Total $ 38,699 $ 39,593 * Includes $ 7,338 million in 2015 and $ 5,839 million in 2014 of notional interest rate swaps that effectively convert fixed-rate long-term debt into floating-rate debt. ( See note D, “Financial Instruments,” on pages 84 through 88 ). ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information . Pre-swap annual contractual maturities of long-term debt outstanding at December 31, 2015 , are as follows: ($ in millions) Total 2016 $ 5,273 2017 5,674 2018 4,691 2019 4,003 2020 4,505 2021 and beyond 14,675 Total $ 38,820 Interest on Debt ($ in millions) For the year ended December 31: 2015 2014 2013 Cost of financing $ 540 $ 542 $ 587 Interest expense 481 484 405 Net investment derivative activity (13) 0 (3) Interest capitalized 0 4 22 Total interest paid and accrued $ 1,008 $ 1,030 $ 1,011 Refer to the related discussion on page 127 in note T, “Segment Information,” for total interest expense of the Global Financing segment. See note D, “Financial Instruments,” on pages 84 through 88 for a discussion of the use of currency and interest rate swaps in the company’s debt risk management program. Lines of Credit In 2015 , the company extended the term of its five-year, $ 10 billion Credit Agreement (the “Credit Agreement”) by one yea r to November 10, 2020. The total expense recorded by the company related to this global credit facility was $ 5.3 million in 2015 , $ 5.4 million in 2014 and $ 5.4 million in 2013 . The Credit Agreement permits the company and its Subsidiary Borrower s to borrow up to $10 billion on a revolving basis. Borrowings of the Subsidiary Borrowers will be unconditionally backed by the company. The company may also, upon the agreement of either existing lenders, or of the additional banks not currently party to the Credit Agreement, increase the commitments under the Credit Agreement up to an additional $ 2.0 billion. Subject to certain terms of the Credit Agreement, the company and Subsidiary Borrowers may borrow, prepay and reborrow amounts under the Credit Agr eement at any time during the Credit Agreement. Interest rates on borrowings under the Credit Agreement will be based on prevailing market interest rates, as further described in the Credit Agreement. The Credit Agreement contains customary representations and warranties, covenants, events of default, and indemnification provisions. The company believes that circumstances that might give rise to breach of these covenants or an event of default, as specified in the Credit Agreement, are remote. As of December 31, 2015 , there were no borrowings by the company, or its subsidiaries, under the Credit Agreement. The company also has other committed lines of credit in some of the geographies which are not significant in the aggregate. Interest rates and other terms of borrowing under these lines of credit vary from country to country, depending on local market conditions. |
Other Liabilities
Other Liabilities | 12 Months Ended |
Dec. 31, 2015 | |
Other Liabilities | |
Other Liabilities | Note K. Other Liabilities ($ in millions) At December 31: 2015 2014 Income tax reserves $ 3,150 $ 3,146 Excess 401(k) Plus Plan 1,445 1,658 Disability benefits 590 675 Derivative liabilities 22 31 Special restructuring actions 362 431 Workforce reductions 407 469 Deferred taxes 253 129 ** Other taxes payable 89 17 Environmental accruals 270 240 Warranty accruals 83 91 Asset retirement obligations 134 136 Acquisition related 200 50 Divestiture related* 575 1,124 Other 519 536 Total $ 8,099 $ 8,733 ** * Primarily related to the divestiture of the Microelectronics business. ** Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. In response to changing business needs, the company periodically takes workforce reduction actions to improve productivity, cost competitiveness and to rebalance skills. The noncurrent contractually obligated future payments associated with these activities are reflected in the workforce reductions caption in the previous table. In addition, the company executed certain special restructuring-related actions prior to 2006. The previous table provides the noncurrent liabilities associated with thes e special actions. Current liabilities are included in other accrued expenses and liabilities in the Consolidated Statement of Financial Position and were immaterial at December 31, 2015 . The noncurrent liabilities are workforce accruals related to terminated employees who are no longer working for the company who were granted annual payments to supplement their incomes in certain countries. Depending on the individual country’s legal requirements, these required payments will continue until the former employe e begins receiving pension benefits or passes away. The company employs extensive internal environmental protection programs that primarily are preventive in nature. The company also participates in environmental assessments and cleanups at a number of locations, including operating facilities, previously owned facilities and Superfund sites. The company’s maximum exposure for all environmental liabilities cannot be estimated and no amounts have been recorded for non-ARO environmental liabilities that ar e not probable or estimable. The total amounts accrued for non-ARO environmental liabilities, including amounts classified as current in the Consolidated Statement of Financial Position, that do not reflect actual or anticipated insurance recoveries, were $ 283 million and $ 254 million at December 31, 2015 and 2014 , respectively. Estimated environmental costs are not expected to materially affect the consolidated financial position or consolidated results of the company’s operations in future periods. Howeve r, estimates of future costs are subject to change due to protracted cleanup periods and changing environmental remediation regulations. As of December 31, 2015 , the company was unable to estimate the range of settlement dates and the related probabiliti es for certain asbestos remediation AROs. These conditional AROs are primarily related to the encapsulated structural fireproofing that is not subject to abatement unless the buildings are demolished and non-encapsulated asbestos that the company would rem ediate only if it performed major renovations of certain existing buildings. Because these conditional obligations have indeterminate settlement dates, the company could not develop a reasonable estimate of their fair values. The company will continue to a ssess its ability to estimate fair values at each future reporting date. The related liability will be recognized once sufficient additional information becomes available. The total amounts accrued for ARO liabilities, including amounts classified as curre nt in the Consolidated Statement of Financial Position were $ 166 million and $ 180 million at December 31, 2015 and 2014 , respectively. |
Equity Activity
Equity Activity | 12 Months Ended |
Dec. 31, 2015 | |
Equity Activity | |
Equity Activity | Note L. Equity Activity The authorized capital stock of IBM consists of 4,687,500,000 shares of common stock with a $.20 per share par value, of which 965,728,725 shares were outstanding at December 31, 2015 and 150,000,000 shares of preferred stock with a $ .01 per share par value, none of which were outstanding at December 31, 2015. Stock Repurchases The Board of Directors authorizes the company to repurchase IBM common stock. The company repurchased 30,338,647 common shares at a cost of $4,701 m illion, 71,504,867 common shares at a cost of $13,395 million and 73,121,942 common shares at a cost of $13,993 million in 2015, 2014 and 2013, respectively. These amounts reflect transactions executed through December 31 of each year. Actual cash disburse ments for repurchased shares may differ due to varying settlement dates for these transactions. At December 31, 2015 , $ 5 , 563 million of Board common stock repurchase authorization was available. The company plans to purchase shares on the open market or in private transactions from time to time, depending on market conditions. Other Stock Transactions The company issued the following shares of common stock as part of its stock-based compensation plans and employees stock purchase plan: 6,013,875 shares in 2015, 7,687,026 shares in 2014, and 9,961,389 shares in 2013. The company issued 1,155,558 treasury shares in 2015, 1,264,232 treasury shares in 2014 and 1,849,883 treasury shares in 2013, as a result of restricted stock unit releases and exercises of st ock options by employees of certain acquired businesses and by non-U.S. employees. Also, as part of the company’s stock-based compensation plans , 1, 625 , 820 common shares at a cost of $ 248 million, 1, 313 , 569 common shares at a cost of $ 236 million, and 1,66 6,069 common shares at a cost of $ 336 million in 2015, 2014 and 2013, respectively, were remitted by employees to the company in order to satisfy minimum statutory tax withholding requirements. These amounts are included in the treasury stock balance in th e Consolidated Statement of Financial Position and the Consolidated Statement of Changes in Equity. Reclassifications and Taxes Related to Items of Other Comprehensive Income ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2015: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,379) $ (342) $ (1,721) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (54) $ 21 $ (33) Reclassification of (gains)/losses to other (income) and expense 86 (33) 53 Total net changes related to available-for-sale securities $ 32 $ (12) $ 20 Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 618 $ (218) $ 399 Reclassification of (gains)/losses to: Cost of sales (192) 57 (135) SG&A expense (149) 43 (105) Other (income) and expense (731) 281 (451) Interest expense 0 0 0 Total unrealized gains/(losses) on cash flow hedges $ (454) $ 162 $ (292) Retirement-related benefit plans(1) Prior service costs/(credits) $ 6 $ (2) $ 4 Net (losses)/gains arising during the period (2,963) 1,039 (1,925) Curtailments and settlements 33 (9) 24 Amortization of prior service (credits)/costs (100) 36 (65) Amortization of net (gains)/losses 3,304 (1,080) 2,223 Total retirement-related benefit plans $ 279 $ (17) $ 262 Other comprehensive income/(loss) $ (1,523) $ (208) $ (1,731) (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2014: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,636) $ (438) $ (2,074) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (29) $ 11 $ (18) Reclassification of (gains)/losses to other (income) and expense 5 (2) 3 Total net changes related to available-for-sale securities $ (24) $ 9 $ (15) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 958 $ (341) $ 618 Reclassification of (gains)/losses to: Cost of sales 15 (7) 9 SG&A expense (15) 6 (9) Other (income) and expense (98) 38 (60) Interest expense 1 0 0 Total unrealized gains/(losses) on cash flow hedges $ 861 $ (304) $ 557 Retirement-related benefit plans(1) Prior service costs/(credits) $ 1 $ 0 $ 1 Net (losses)/gains arising during the period (9,799) 3,433 (6,366) Curtailments and settlements 24 (7) 17 Amortization of prior service (credits)/costs (114) 41 (73) Amortization of net (gains)/losses 2,531 (852) 1,678 Total retirement-related benefit plans $ (7,357) $ 2,615 $ (4,742) Other comprehensive income/(loss) $ (8,156) $ 1,883 $ (6,274) (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2013: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,335) $ (66) $ (1,401) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (4) $ 2 $ (3) Reclassification of (gains)/losses to other (income) and expense (8) 2 (5) Subsequent changes in previously impaired securities arising during the period 4 (1) 3 Total net changes related to available-for-sale securities $ (8) $ 3 $ (5) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 43 $ (15) $ 28 Reclassification of (gains)/losses to: Cost of sales 34 (14) 21 SG&A expense (39) 14 (25) Other (income) and expense (162) 62 (99) Interest expense 0 0 0 Total unrealized gains/(losses) on cash flow hedges $ (123) $ 47 $ (76) Retirement-related benefit plans(1) Prior service costs/(credits) $ 16 $ 0 $ 16 Net (losses)/gains arising during the period 5,369 (1,974) 3,395 Curtailments and settlements (3) 1 (2) Amortization of prior service (credits)/costs (114) 40 (75) Amortization of net (gains)/losses 3,499 (1,195) 2,304 Total retirement-related benefit plans $ 8,767 $ (3,128) $ 5,639 Other comprehensive income/(loss) $ 7,301 $ (3,144) $ 4,157 (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) Accumulated Other Comprehensive Income/(Loss) (net of tax) ($ in millions) Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive Hedges Adjustments* Plans Securities Income/(Loss) December 31, 2012 $ (90) $ 1,733 $ (27,406) $ 4 $ (25,759) Other comprehensive income before reclassifications 28 (1,401) 3,409 0 2,036 Amount reclassified from accumulated other comprehensive income (103) 0 2,229 (5) 2,121 Total change for the period (76) (1,401) 5,639 (5) 4,157 December 31, 2013 (165) 332 (21,767) (1) (21,602) Other comprehensive income before reclassifications 618 (2,074) (6,348) (18) (7,822) Amount reclassified from accumulated other comprehensive income (60) 0 1,605 3 1,548 Total change for the period 557 (2,074) (4,742) (15) (6,274) December 31, 2014 392 (1,742) (26,509) (15) (27,875) Other comprehensive income before reclassifications 399 (1,721) (1,897) (33) (3,252) Amount reclassified from accumulated other comprehensive income (691) 0 2,158 53 1,520 Total change for the period (292) (1,721) 262 20 (1,731) December 31, 2015 $ 100 $ (3,463) $ (26,248) $ 5 $ (29,607) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. |
Contingencies and Commitments
Contingencies and Commitments | 12 Months Ended |
Dec. 31, 2015 | |
Contingencies and Commitments | |
Contingencies and Commitments | Note M. Contingencies and Commitments Contingencies As a company with a substantial employee population and with clients in more than 175 countries, IBM is involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The company is a leader in the information technology industry and, as such, has been and will continue to be subject to claims challenging its IP rights and associated products and offerings, including claims of copyright and patent infringement and violations of trade secrets and other IP rights. In addition, the company enforces its own IP against infringement, through license negotiations, la wsuits or otherwise. Also, as is typical for companies of IBM’s scope and scale, the company is party to actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employme nt decisions, country-specific labor and employment laws, and the company’s pension, retirement and other benefit plans), as well as actions with respect to contracts, product liability, securities, foreign operations, competition law and environmental mat ters. These actions may be commenced by a number of different parties, including competitors, clients, current or former employees, government and regulatory agencies, stockholders and representatives of the locations in which the company does business. So me of the actions to which the company is party may involve particularly complex technical issues, and some actions may raise novel questions under the laws of the various jurisdictions in which these matters arise. The company records a provision with r espect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any recorded liabilities, including any changes to such liabilities for the years ended Dece mber 31, 2015 , 2014 and 2013 were not material to the Consolidated Financial Statements. In accordance with the relevant accounting guidance, the company provides disclosures of matters for which the likelihood of material loss is at least reas onably possible. In addition, the company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer and employee relations considerations. With respect to certain of the claims, suits, investigations and proceedings discussed herein, the company believes at this time that the likelihood of any material loss is remote, given, for example, the procedural status, court rulings, and/or the str ength of the company’s defenses in those matters. With respect to the remaining claims, suits, investigations and proceedings discussed in this Note, except as specifically discussed herein, the company is unable to provide estimates of reasonably possible losses or range of losses, including losses in excess of amounts accrued, if any, for the following reasons. Claims, suits, investigations and proceedings are inherently uncertain, and it is not possible to predict the ultimate outcome of these matters. I t is the company’s experience that damage amounts claimed in litigation against it are unreliable and unrelated to possible outcomes, and as such are not meaningful indicators of the company’s potential liability. Further, the company is unable to provide such an estimate due to a number of other factors with respect to these claims, suits, investigations and proceedings, including considerations of the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. The company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasona bly possible losses or range of losses (individually or in the aggregate), to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter. Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the company’s business, financial condition, results of operations or cash flows will depend on a numbe r of variables, including: the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the Consolidated Financial Statements; and the unique f acts and circumstances of the particular matter that may give rise to additional factors. While the company will continue to defend itself vigorously, it is possible that the company’s business, financial condition, results of operations or cash flows coul d be affected in any particular period by the resolution of one or more of these matters. The following is a summary of the more significant legal matters involving the company. The company is a defendant in an action filed on March 6, 2003 in state co urt in Salt Lake City, Utah by the SCO Group (SCO v. IBM). The company removed the case to Federal Court in Utah. Plaintiff is an alleged successor in interest to some of AT&T’s UNIX IP rights, and alleges copyright infringement, unfair competition, interf erence with contract and breach of contract with regard to the company’s distribution of AIX and Dynix and contribution of code to Linux and the company has asserted counterclaims. On September 14, 2007, plaintiff filed for bankruptcy protection, and all p roceedings in this case were stayed. The court in another suit, the SCO Group, Inc. v. Novell, Inc., held a trial in March 2010. The jury found that Novell is the owner of UNIX and UnixWare copyrights; the judge subsequently ruled that SCO is obligated to recognize Novell’s waiver of SCO’s claims against IBM and Sequent for breach of UNIX license agreements. On August 30, 2011, the Tenth Circuit Court of Appeals affirmed the district court’s ruling and denied SCO’s appeal of this matter. In June 2013, the F ederal Court in Utah granted SCO’s motion to reopen the SCO v. IBM case, and proceedings have resumed in that case. In February 2016, the Federal Court ruled in favor of IBM on all of SCO’s remaining claims. On May 13, 2010, IBM and the State of Indiana (acting on behalf of the Indiana Family and Social Services Administration) sued one another in a dispute over a 2006 contract regarding the modernization of social service program processing in Indiana. The State terminated the contract, claiming that IBM was in breach, and the State is seeking damages. IBM believes the State’s claims against it are without merit and is seeking payment of termination amounts specified in the contract. After six weeks of trial, on July 18, 2012, the Indiana Superior Court in Marion County rejected the State’s claims in their entirety and awarded IBM $52 million plus interest and costs. On February 13, 2014, the Indiana Court of Appeals reversed portions of the trial judge’s findings, found IBM in material br each, and ordered the case remanded to the trial judge to determine the State's damages, if any. The Indiana Court of Appeals also affirmed approximately $50 million of the trial court's award of damages to IBM. This matter remains pending in the Indiana c ourts. On April 16, 2014, Iusacell SA de C.V. ( Iusacell ) sued IBM, claiming that IBM made fraudulent misrepresentations that induced Iusacell to enter into an agreement with IBM Mexico. Iusacell claims damages for lost profits. Iusacell’s complaint relat es to a contractual dispute in Mexico, which is the subject of a pending arbitration proceeding in Mexico initiated by IBM Mexico against Iusacell for breach of the underlying agreement. On November 14, 2014, the District Court in the Southern District o f New York granted IBM's motion to stay Iusacell's action against the company pending the arbitration in Mexico between Iusacell and IBM Mexico. IBM United Kingdom Limited (IBM UK) initiated legal proceedings in May 2010 before the High Court in London a gainst the IBM UK Pensions Trust (the UK Trust) and two representative beneficiaries of the UK Trust membership. IBM UK is seeking a declaration that it acted lawfully both in notifying the Trustee of the UK Trust that it was closing its UK defined benefit plans to future accruals for most participants and in implementing the company’s new retirement policy. In April 2014, the High Court acknowledged that the changes made to its UK defined benefit plans were within IBM’s discretion, but ruled that IBM breac hed its implied duty of good faith both in implementing these changes and in the manner in which it consulted with employees. Proceedings to determine remedies were held in July 2014, and in February 2015 the High Court held that for IBM to make changes to accruals under the plan would require a new consultation of the participants, but other changes (including to early retirement policy) would not require such consultation. IBM UK has appealed both the breach and remedies judgments . If the appeal is unsucc essful, the Court’s rulings would require IBM to reverse the changes made to the UK defined benefit plans retroactive to their effective dates. This could result in an estimated non-operating one-time pre-tax charge of approximately $250 million, plus ongo ing defined benefit related accruals. In addition, IBM UK is a defendant in approximately 290 individual actions brought since early 2010 by participants of the defined benefits plans who left IBM UK. These actions, which allege constructive dismissal and age discrimination, are pending before the Employment Tribunal in Southampton UK. On March 24, 2014, in a suit brought by local Works Councils, the Supreme Court of Spain held that IBM Spain’s Defined Contribution (DC) Plan implemented in 1993 based on the voluntary participation of its employees was null and void. The Supreme Court also held that current employees could reinstate their rights to a Defined Benefit (DB) Plan, although with an offset for DC contributions paid to date. The Court held that I BM Spain did not consult with the Works Councils in seeking to change the pension scheme, and recommended that IBM Spain and the Works Councils engage in discussions over how to carry out the offset. The Constitutional Court denied IBM Spain’s requested le ave to appeal the decision. In March 2015, the National Audience Court ruled that the Works Council was not entitled to dictate the means by which IBM should carry out the offset of DC contributions, but also ruled that the Supreme Court's judgment could b e executed without the need for individual lawsuits by employees, rejecting the position that the judgment was declaratory only. The National Audience Court also ruled that IBM should stop making DC contributions, and that the company should promptly reins tate the DB Plan. IBM Spain appealed that ruling and in May 2015, the National Audien ce Court dismissed the appeal . In February 2016, IBM Spain and the Works Councils agreed on a process to resolve their differences relating to calculating the offset for D C contributions paid to date and the form of a new alternative DC plan. They also agreed to a pay reduction for current employees who elect to remain in the DB plan and to close the DB plan to new hires . In March 2011, the company announced that it had agreed to settle a civil enforcement action with the Securities and Exchange Commission (SEC) relating to alleged violations of the Foreign Corrupt Practices Act of 1977 (FCPA). On July 25, 2013, the court approved that 2011 settlement and required that for a two -year period IBM make reports to the SEC and the court on certain matters, including those relating to compliance with the FCPA. The two-year period expired in July 2015. In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Co rruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM is cooperating with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Dep artment of Justice (DOJ) is also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ is also seeking information regarding the company's global FCPA complianc e program and its public sector business. The company is cooperating with the DOJ in this matter. In March 2015, putative class action litigation was commenced in the United States District Court for the Southern District of New York related to the compa ny's October 2014 announcement that it was divesting its global commercial semiconductor technology business. The company and three of its officers are named as defendants. Plaintiffs allege that defendants violated Sections 20(a) and 10(b) of the Securiti es Exchange Act of 1934 and Rule 10b-5 thereunder. In May 2015, a related putative class action was also commenced in the United States District Court for the Southern District of New York based on the same underlying facts, alleging violations of the Empl oyee Retirement Income Security Act. The company, management’s Retirement Plans Committee, and three current or former IBM executives are named as defendants. In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue rec ognition with respect to the accounting treatment of certai n transactions in the U.S., UK and Ireland. The company is cooperating with the SEC in this matter. The company is a defendant in numerous actions filed after January 1, 2008 in the Supreme Court for the State of New York, county of Broome, on behalf of hundreds of plaintiffs. The complaints allege numerous and different causes of action, including for negligence and recklessness, private nuisance and trespass. Plaintiffs in these cases seek medic al monitoring and claim damages in unspecified amounts for a variety of personal injuries and property damages allegedly arising out of the presence of groundwater contamination and vapor intrusion of groundwater contaminants into certain structures in whi ch plaintiffs reside or resided, or conducted business, allegedly resulting from the release of chemicals into the environment by the company at its former manufacturing and development facility in Endicott. These complaints also seek punitive damages in a n unspecified amount. The parties have settled substantially all of these cases. The company is party to, or otherwise involved in, proceedings brought by U.S. federal or state environmental agencies under the Comprehensive Environmental Response, Compe nsation and Liability Act (CERCLA), known as “Superfund,” or laws similar to CERCLA. Such statutes require potentially responsible parties to participate in remediation activities regardless of fault or ownership of sites. The company is also conducting en vironmental investigations, assessments or remediations at or in the vicinity of several current or former operating sites globally pursuant to permits, administrative orders or agreements with country, state or local environmental agencies, and is involve d in lawsuits and claims concerning certain current or former operating sites. The company is also subject to ongoing tax examinations and governmental assessments in various jurisdictions. Along with many other U.S. companies doing business in Brazil, t he company is involved in various challenges with Brazilian tax authorities regarding non-income tax assessments and non-income tax litigation matters. The total potential amount related to these matters for all applicable years is approximately $460 milli on. The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. Commitments The company’s extended lines of credit to third-party entities include unused amounts of $ 5,477 million and $ 5,365 million at December 31, 2015 and 2014 , respectively. A portion of these amounts was available to the company’s business partners to support their working capital needs. In addition, the company has committed to provide future financing to its client s in connection with client purchase agreements for approximately $ 2 , 097 million and $1, 816 million at December 31, 2015 and 2014 , respectively. The company has applied the guidance requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the company is the guaran tor. The company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the company, under w hich the company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants related to such matters as title to assets sold, certain IP rights, specified environmental matters, third-party perf ormance of nonfinancial contractual obligations and certain income taxes. In each of these circumstances, payment by the company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, the procedure s of which typically allow the company to challenge the other party’s claims. While typically indemnification provisions do not include a contractual maximum on the company’s payment, the company’s obligations under these agreements may be limited in terms of time and/or nature of claim, and in some instances, the company may have recourse against third parties for certain payments made by the company. It is not possible to predict the maximum potential amount of future payments under these or similar agr eements due to the conditional nature of the company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the company under these agreements have not had a material effect on the company ’s business, financial condition or results of operations. In addition, the company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees was $ 34 million and $ 46 million at December 31, 2015 and 2014 , respectively. The fair value of the guarantees recognized in the Consolidated Statement of Financial Position was immaterial . |
Taxes
Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Taxes | |
Taxes | Note N. Taxes ($ in millions) For the year ended December 31: 2015 2014 2013 Income from continuing operations before income taxes U.S. operations $ 5,915 $ 7,509 $ 7,577 Non-U.S. operations 10,030 12,477 12,667 Total income from continuing operations before income taxes $ 15,945 $ 19,986 $ 20,244 The income from continuing operations provision for income taxes by geographic operations is as follows: ($ in millions) For the year ended December 31: 2015 2014 2013 U.S. operations $ 849 $ 2,093 $ 1,315 Non-U.S. operations 1,732 2,141 2,048 Total continuing operations provision for income taxes $ 2,581 $ 4,234 $ 3,363 The components of the income from continuing operations provision for income taxes by taxing jurisdiction are as follows: ($ in millions) For the year ended December 31: 2015 2014 2013 U.S. federal Current $ (321) $ 1,134 $ 1,694 Deferred 553 105 (708) 232 1,239 986 U.S. state and local Current 128 541 277 Deferred 116 (105) (330) 244 436 (53) Non-U.S. Current 2,101 2,825 3,067 Deferred 4 (266) (637) 2,105 2,559 2,430 Total continuing operations provision for income taxes 2,581 4,234 3,363 Discontinued operations provision for income taxes (117) (1,617) (322) Provision for social security, real estate, personal property and other taxes 3,497 4,068 4,198 Total taxes included in net income $ 5,961 $ 6,685 $ 7,238 A reconciliation of the statutory U.S. federal tax rate to the company’s effective tax rate from continuing operations is as follows: For the year ended December 31: 2015 2014 2013 Statutory rate 35 % 35 % 35 % Foreign tax differential (17) (14) (13) State and local 1 1 0 Domestic incentives (2) (2) (3) Other (1) 1 (2) Effective rate 16 % 21 % 17 % Percentages rounded for disclosure purposes. The significant components reflected within the tax rate reconciliation labeled “Foreign tax differential” include the effects of foreign subsidiaries’ earnings taxed at rates other than the U.S. statutory rate, foreign export incentives, the U.S. tax impacts of non-U.S. earnings repatriation and any net impacts of intercompany transactions. These items also reflect audit settlements or changes in the amount of unrecognized tax benefits associated with each of these items. In the fourth quarter of 2015, the U.S. Internal Revenue Service (IRS) concluded its examination of the company's income tax returns for 2011and 2012 and issued a final Revenue Agent's Report (RAR). The company has agreed with all of the adjustments in the RAR with the exception of the proposed adjustments related to the tax implications of an internal restructuring undertaken in 2011. The company disagrees with the IRS on this matter and intends to protest the proposed adj ustments. The company has redetermined its unrecognized tax benefits for all open years, based on the RAR and associated information and analysis. The 2015 continuing operations effective tax rate decreased 5.0 points from 2014 as a result of: the completion of the 2011-2012 U.S. tax audit, including reserve redeterminations (3.9 points), a benefit due to the geographic mix of pre-tax income in 2015 (3.5 points) and a benefit due to the 2014 tax charge related to the divestiture of the System x busi ness (0.9 points). These decreases were partially offset due to the following: a reduced benefit year to year in the utilization of foreign tax credits (2.5 points) and the year-to-year increase in tax charges related to intercompany payments made by foreign subsidiaries and the intercompany licensing of certain IP (0.8 points). The effect of tax law changes on deferred tax assets and liabilities did not have a material impact on the company’s effective tax rate. The significant components of deferred tax assets and liabilities recorded in the Consolidated Statement of Financial Position were: Deferred Tax Assets ($ in millions) At December 31: 2015 2014 Retirement benefits $ 4,621 $ 4,795 Share-based and other compensation 963 1,328 Domestic tax loss/credit carryforwards 1,066 858 Deferred income 762 957 Foreign tax loss/credit carryforwards 825 686 Bad debt, inventory and warranty reserves 528 529 Depreciation 329 329 Accruals 904 1,176 Other 931 1,306 Gross deferred tax assets 10,929 11,964 Less: valuation allowance 740 646 Net deferred tax assets $ 10,189 $ 11,318 Deferred Tax Liabilities ($ in millions) At December 31: 2015 2014 Depreciation $ 919 $ 487 Retirement benefits 252 205 Goodwill and intangible assets 1,407 1,263 Leases 916 912 Software development costs 554 421 Deferred transition costs 395 374 Other 1,177 1,111 Gross deferred tax liabilities $ 5,620 $ 4,773 For income tax return purposes, the company has foreign and domestic loss carryforwards , the tax effect of which is $ 742 million, as well as domestic and foreign credit carryforwards of $ 1,149 million. Substantially all of these carryforwards are available for at least two years or are available for 10 years or more. The valuation allowances as of December 31, 2015 , 2014 and 2013 were $740 million, $646 million and $ 734 million, respectively. The amounts principally apply to certain for eign, state and local loss carryforwards and credits that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. The amount of unrecognized tax benefits at December 31, 2015 de creased by $ 530 million in 2015 to $ 4 , 574 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: ($ in millions) 2015 2014 2013 Balance at January 1 $ 5,104 $ 4,458 $ 5,672 Additions based on tax positions related to the current year 464 697 829 Additions for tax positions of prior years 569 586 417 Reductions for tax positions of prior years (including impacts due to a lapse in statute) (1,348) (579) (2,201) Settlements (215) (58) (259) Balance at December 31 $ 4,574 $ 5,104 $ 4,458 The additions to unrecognized tax benefits related to the current and prior years are primarily attributable to non-U.S. issues, certain tax incentives and credits and state issues. The settlements and reductions to unrecognized tax benefits for tax positions of prior years are primarily attributable to the completion of the IRS examination for 2011 and 2012, currency, non-U.S. audits and impacts due to lapses in statutes of limitation. In April 2010, the company appealed the determination of the Japan Tax Authorities with respect to certain foreign tax losses. The unrecognized tax benefit of these losses totals $ 997 million as of December 31, 2015 . In April 2011, the company received notification that the appeal was denied, and in June 2011, the company filed a lawsuit challenging this decision. In May 2014, the Tokyo District Court ruled in favor of the company. The Japanese government appealed the ruling to the Tokyo High Court. In M arch 2015, the Tokyo High Court ruled in favor of the company and, in April 2015, the Japanese government appealed the ruling to the Japan Supreme Court. See Note U, “Subsequent Events,” for an update on this matter. The liability at December 31, 2015 of $ 4,574 million can be reduced by $ 850 million of offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, U.S. tax credits, state income taxes and timing adjustments. The net amount of $ 3,724 million, if rec ognized, would favorably affect the company’s effective tax rate. The net amounts at December 31, 2014 and 2013 were $ 4,229 million and $ 3,902 million, respectively. Interest and penalties related to income tax liabilities are included in income tax exp ense. During the year ended December 31, 2015 , the company recognized $ 141 million in interest expense and penalties; in 2014 , the company recognized $ 216 million in interest expense and penalties; and, in 2013 , the company recognized a benefit of $ 93 million in interest expense and penalties. The company has $ 613 million for the payment of interest and penalties accrued at December 31, 2015 , and had $ 593 million accrued at December 31, 2014 . Within the next 12 months, the company believes it is reasonably possible that the total amount of unrecognized tax benefits associated with certain positions may be reduced as certain foreign issues may be concluded. The company estimates that the unrecognized tax benefits at December 31, 2015 could be reduced by approxim ately $ 413 million, excluding the Japan matter discussed above. The company is subject to taxation in the U.S. and various state and foreign jurisdictions. With respect to major U.S. state and foreign taxing jurisdictions, the company is generally no lon ger subject to tax examinations for years prior to 20 11 . With limited exception, t he company is no longer subject to income tax examination of its U.S. federal tax return for years prior to 201 3 . The open years contain matters that could be subject to dif fering interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax and interest have been provided for any significant adjustments that are expected to result for these years. In the fourth quarter of 2013, the company received a draft tax assessment notice for approximately $ 866 million (approximately $ 810 million at 2015 year-en d currency rates) from the Indian Tax Authorities for 2009 . The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. At December 31, 2015 , the company has recorded $ 526 million as prepaid income ta xes in India. A significant portion of this balance represents cash tax deposits paid over time to protect the company’s right to appeal various income tax assessments made by the Indian Tax Authorities. In the first quarter of 2016, the IRS commenced it s audit of the company’s U.S. tax returns for 2013 and 2014. The company anticipates that this audit will be completed by the end of 2017. The company has not provided deferred taxes on $ 68.1 billion of undistributed earnings of non-U.S. subsidiaries at December 31, 2015 , as it is the company’s policy to indefinitely reinvest these earnings in non-U.S. operations. However, the company periodically repatriates a portion of these earnings to the extent that it does not incur an additional U.S. tax liability. Q uantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable. |
Research, Development and Engin
Research, Development and Engineering | 12 Months Ended |
Dec. 31, 2015 | |
Research, Development and Engineering | |
Research, Development and Engineering | Note O. Research, Development and Engineering RD&E expense was $5,247 million in 2015 , $5,437 million in 2014 and $5,743 million in 2013 . In addition, RD&E expense included in discontinued operations was $ 197 million in 2015 , $ 368 million in 2014 and $ 483 million in 2013 . The company incurred total expense of $ 5,178 million, $ 5,595 million and $ 5,959 million in 2015 , 2014 and 2013 , respectively, for scientific research and the application of scientific advances to the development of new and improved products and their uses, as well as services and their application. Within these amounts, software-related expense was $ 3,064 million, $ 3,064 million and $ 3,077 million in 2015 , 2014 and 2013 , respectively. Expense for product-related engineering was $ 26 7 million, $ 211 million and $ 267 million in 2015 , 2014 and 2013 , respectively. |
Earnings Per Share of Common St
Earnings Per Share of Common Stock | 12 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share of Common Stock | |
Earnings Per Share of Common Stock | Note P. Earnings Per Share of Common Stock The following table presents the computation of basic and diluted earnings per share of common stock. ($ in millions except per share amounts) For the year ended December 31: 2015 2014 2013 Weighted-average number of shares on which earnings per share calculations are based Basic 978,744,523 1,004,272,584 1,094,486,604 Add—incremental shares under stock-based compensation plans 3,037,001 4,332,155 6,751,240 Add—incremental shares associated with contingently issuable shares 918,744 1,395,741 1,804,313 Assuming dilution 982,700,267 1,010,000,480 1,103,042,156 Income from continuing operations $ 13,364 $ 15,751 $ 16,881 Loss from discontinued operations, net of tax (174) (3,729) (398) Net income on which basic earnings per share is calculated $ 13,190 $ 12,022 $ 16,483 Income from continuing operations $ 13,364 $ 15,751 $ 16,881 Net income applicable to contingently issuable shares (1) (3) (1) Income from continuing operations on which diluted earnings per share is calculated $ 13,363 $ 15,749 $ 16,880 Loss from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (174) (3,729) (398) Net income on which diluted earnings per share is calculated $ 13,189 $ 12,020 $ 16,483 Earnings/(loss) per share of common stock Assuming dilution Continuing operations $ 13.60 $ 15.59 $ 15.30 Discontinued operations (0.18) (3.69) (0.36) Total $ 13.42 $ 11.90 $ 14.94 Basic Continuing operations $ 13.66 $ 15.68 $ 15.42 Discontinued operations (0.18) (3.71) (0.36) Total $ 13.48 $ 11.97 $ 15.06 Weighted-average stock options to purchase 41,380 common shares in 2015 , 17,420 common shares in 2014 and 8,797 common shares in 2013 were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common shares for the full year, and therefore, the effect would have been antidilutive . |
Rental Expense and Lease Commit
Rental Expense and Lease Commitments | 12 Months Ended |
Dec. 31, 2015 | |
Rental Expense and Lease Commitments | |
Rental Expense and Lease Commitments | Note Q. Rental Expense and Lease Commitments Rental expense, including amounts charged to inventories and fixed assets, and excluding amounts previously reserved, was $ 1,474 million in 2015 , $ 1,592 million in 2014 and $ 1,759 million in 2013 . Within these amounts, rental expense reflected in discontinued operations was $ 29 million, $ 95 million and $ 1 15 million, in 2015 , 2014 and 2013 , respectively. Rental expense in agreements with rent holidays and scheduled rent increases is recorde d on a straight-line basis over the lease term. Contingent rentals are included in the determination of rental expense as accruable. The table below depicts gross minimum rental commitments under noncancelable leases, amounts related to vacant space associ ated with infrastructure reductions, sublease income commitments and capital lease commitments. These amounts reflect activities primarily related to office space, as well as data centers. ($ in millions) 2016 2017 2018 2019 2020 Beyond 2020 Operating lease commitments Gross minimum rental commitments (including vacant space below) $ 1,347 $ 1,231 $ 1,107 $ 985 $ 776 $ 988 Vacant space $ 14 $ 4 $ 1 $ — $ — $ — Sublease income commitments $ 11 $ 7 $ 5 $ 4 $ 1 $ 1 Capital lease commitments $ 7 $ 2 $ 2 $ 2 $ 1 $ — |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2015 | |
Stock-Based Compensation | |
Stock-Based Compensation | Note R. Stock-Based Compensation The following table presents total stock-based compensation cost included in income from continuing operations . ($ in millions) For the year ended December 31: 2015 2014 2013 Cost $ 100 $ 121 $ 122 Selling, general and administrative 322 350 435 Research, development and engineering 51 54 57 Other (income) and expense* (6) (13) — Pre-tax stock-based compensation cost 468 512 614 Income tax benefits (156) (174) (213) Net stock-based compensation cost $ 312 $ 338 $ 402 * Reflects the one-time effects related to divestitures. The amount of stock-based compensation cost included in discontinued operations, net of tax, was immaterial in all periods. Total unrecognized compensation cost related to non-vested awards at December 31, 2015 and 2014 was $ 871 million and $ 874 million, respectively. The amount at December 31, 2015 is expected to be recognized over a weighted-average period of approximately 2.7 years. There was no significant capitalized stock-based compensation cost at December 31, 2015 , 2014 , and 2013 . Inc entive Awards Stock-based incentive awards are provided to employees under the terms of the company’s long-term performance plans (the “Plans”). The Plans are administered by the Executive Compensation and Management Resources Committee of the Board of D irectors (the “Committee”). Awards available under the Plans principally include restricted stock units, performance share units, stock options or any combination thereof. The amount of shares originally authorized to be issued under the company’s existi ng Plans was 274 million at December 31, 2015 . In addition, certain incentive awards granted under previous plans, if and when those awards were canceled, could be reissued under the company’s existing Plans. As such, 66.2 million additional awards were consi dered authorized to be issued under the company’s existing Plans as of December 31, 2015 . There were 111.6 million unused shares available to be granted under the Plans as of December 31, 2015 . Under the company’s long-standing practices and policies, all awar ds are approved prior to or on the date of grant. The awards approval process specifies the individual receiving the grant, the number of options or the value of the award, the exercise price or formula for determining the exercise price and the date of gr ant. All awards for senior management are approved by the Committee. All awards for employees other than senior management are approved by senior management pursuant to a series of delegations that were approved by the Committee, and the grants made pursua nt to these delegations are reviewed periodically with the Committee. Awards that are given as part of annual total compensation for senior management and other employees are made on specific cycle dates scheduled in advance. With respect to awards given i n connection with promotions or new hires, the company’s policy requires approval of such awards prior to the grant date, which is typically the date of the promotion or the date of hire. Stock Awards Stock awards are made in the form of Restricted Stoc k Units (RSUs), including Retention Restricted Stock Units (RRSUs), or Performance Share Units (PSUs). The tables below summarize RSU and PSU activity under the Plans during the years ended December 31, 2015 , 2014 and 2013 . RSUs 2015 2014 2013 Weighted- Weighted- Weighted- Average Number Average Number Average Number Grant Price of Units Grant Price of Units Grant Price of Units Balance at January 1 $ 171 7,734,277 $ 166 8,635,317 $ 148 9,841,461 RSUs granted 143 4,230,186 172 2,525,947 189 2,541,081 RSUs released 164 (3,567,495) 157 (2,401,761) 131 (2,952,363) RSUs canceled/forfeited 167 (869,627) 167 (1,025,226) 154 (794,862) Balance at December 31 $ 159 7,527,341 $ 171 7,734,277 $ 166 8,635,317 PSUs 2015 2014 2013 Weighted- Weighted- Weighted- Average Number Average Number Average Number Grant Price of Units Grant Price of Units Grant Price of Units Balance at January 1 $ 185 3,140,707 $ 178 2,824,294 $ 151 3,172,201 PSUs granted at target 153 1,137,242 180 1,430,098 195 869,875 Performance adjustments* 185 (168,055) 157 29,960 118 152,069 PSUs released 185 (840,552) 157 (1,027,181) 118 (1,321,784) PSUs canceled/forfeited 184 (340,410) 187 (116,464) 170 (48,067) Balance at December 31 ** $ 173 2,928,932 $ 185 3,140,707 $ 178 2,824,294 * Represents the change in shares issued to employees after vesting of PSUs because final performance metrics were above or below specified targets. ** Represents the number of shares expected to be issued based on achievement of grant date performance targets. The actual number of shares issued will depend on final performance against specified targets over the vesting period. RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, typically over a one- to five-year period. For RSUs, dividend equivalents are not paid. The fair value of such RSUs is determined and fixed on the grant date based on the company’s stock price adjusted for the exclusion of dividend equivalents. The remaining weighted-average contractual term of RSUs at December 31, 2015 , 2014 and 2013 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately three years. The fair value of RSUs granted during the years ended December 31, 2015 , 2014 and 2013 was $ 606 million, $ 434 million and $ 481 million, respectively. The total fair value of RSUs ve sted and released during the years ended December 31, 2015 , 2014 and 2013 was $ 583 million, $ 378 million and $ 386 million, respectively. As of December 31, 2015 , 2014 and 2013 , there was $ 800 million, $ 754 million and $ 871 million, respectively, of unrecognized compensation cost related to non-vested RSUs. The company received no cash from employees as a result of employee vesting and release of RSUs for the years ended December 31, 2015 , 2014 and 2013 . PSUs are stock awards where the number o f shares ultimately received by the employee depends on the company’s performance against specified targets and typically vest over a three-year period. For PSUs, dividend equivalents are not paid. The fair value of each PSU is determined on the grant date , based on the company’s stock price, adjusted for the exclusion of dividend equivalents, and assumes that performance targets will be achieved. Over the performance period, the number of shares of stock that will be issued is adjusted upward or downward b ased upon the probability of achievement of performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final performance metrics to the specified targets. . The fair value of PSUs granted at target during the years ended December 31, 2015 , 2014 and 2013 was $ 174 million, $ 257 million and $ 170 million, respectively. Total fair value of PSUs vested and released during the years ended December 31, 2015 , 2014 and 2013 was $ 156 million, $ 161 million and $ 156 million, respectively. In connection with vesting and release of RSUs and PSUs, the tax benefits realized by the company for the years ended December 31, 2015 , 2014 and 2013 were $ 228 million, $ 222 million and $ 312 million, respectively. Stock Options Stock options are awards which allow the employee to purchase shares of the company’s stock at a fixed price. Stock options are granted at an exercise price equal to the company’s average high and low stock price on the date of grant. These awards generally vest in four equal increments on the first four anniversaries of the grant date and have a contractual term of 10 years. The company estimates the fair value of stock options at the date of grant using the Black-Scholes valuati on model. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the company’s stock, the risk-free rate and the company’s dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the company. Du ring the years ended December 31, 2015 , 2014 and 2013 , the company did not grant stock options. The following table summarizes option activity under the Plans during the years ended December 31, 2015 , 2014 and 2013 . 2015 2014 2013 Weighted- Number of Weighted- Number of Weighted- Number of Average Shares Average Shares Average Shares Exercise Price Under Option Exercise Price Under Option Exercise Price Under Option Balance at January 1 $ 97 1,750,949 $ 97 5,622,951 $ 94 11,389,721 Options exercised 98 (1,214,109) 97 (3,740,252) 90 (5,585,127) Options canceled/expired 100 (57,066) 95 (131,750) 86 (181,643) Balance at December 31 $ 94 479,774 $ 97 1,750,949 $ 97 5,622,951 Exercisable at December 31 $ 94 479,774 $ 97 1,750,949 $ 97 5,622,951 The shares u nder option at December 31, 2015 were in the following exercise price ranges: Options Outstanding and Exercisable Weighted-Average Weighted- Number of Aggregate Remaining Average Shares Intrinsic Contractual Life Exercise Price Range Exercise Price Under Option Value (in Years) $85 and under $ 83 192,959 $ 10,597,402 0.3 $86 and over 101 286,815 10,376,342 1.2 $ 94 479,774 $ 20,973,745 0.9 Exercises of Employee Stock Options The total intrinsic value of options exercised during the years ended December 31, 2015 , 2014 and 2013 was $ 74 million, $ 323 million and $ 614 million, respectively. The total cash received from employees as a result of employee stock option exercises for the years ended December 31, 2015 , 2014 and 2013 was approximately $ 119 million, $ 364 million and $ 505 million, respectively. In connection with these exercises, the tax benefits realized by the company for the years ended December 31, 2015 , 2014 and 2013 were $ 26 million, $ 107 million and $ 199 million, respectively. The company settles employee stock option exercises primarily with newly issued common shares and, occasionally, with treasury shares. To tal treasury shares held at December 31, 2015 and 2014 were approximately 1,255 million and 1,225 million shares, respectively. Acquisitions In connection with various acquisition transactions, there was an additional 0.4 million shares of stock-based aw ards, consisting of stock options and restricted stock units, outstanding at December 31, 2015 , as a result of the company’s conversion of stock-based awards previously granted by the acquired entities. The weighted-average exercise price of these awards was $ 50 per share. IBM Employees Stock Purchase Plan The company maintains a non-compensatory Employees Stock Purchase Plan (ESPP). The ESPP enables eligible participants to purchase full or fractional shares of IBM common stock at a 5 percent discount off the average market price on the day of purchase through payroll deductions of up to 10 percent of eligible compensation. Eligible compensation includes any compensation received by the employee during the year. The ESPP provides for of fering periods during which shares may be purchased and continues as long as shares remain available under the ESPP, unless terminated earlier at the discretion of the Board of Directors. Individual ESPP participants are restricted from purchasing more tha n $ 25,000 of common stock in one calendar year or 1,000 shares in an offering period. Employees purchased 1.3 million, 1.3 million and 1.5 million shares under the ESPP during the years ended December 31, 2015 , 2014 and 2013 , respectively. Cash divid ends declared and paid by the company on its common stock also include cash dividends on the company stock purchased through the ESPP. Dividends are paid on full and fractional shares and can be reinvested. The company stock purchased through the ESPP is c onsidered outstanding and is included in the weighted-average outstanding shares for purposes of computing basic and diluted earnings per share. In July 2014, the “2014 ESPP Reserve” became effective and 25 million additional shares of authorized common stock were reserved and approved for issuance. The 2014 ESPP provides for semi-annual offerings commencing July 1, 2014, and continuing as long as shares remain available under the ESPP, unless terminated earlier at the discretion of the Board of Directors . Approximately 23.1 million, 24.4 million and 2.3 million shares were available for purchase under the ESPP at December 31, 2015 , 2014 and 2013 , respectively. |
Retirement-Related Benefits
Retirement-Related Benefits | 12 Months Ended |
Dec. 31, 2015 | |
Retirement-Related Benefits | |
Retirement-Related Benefits | Note S. Retirement-Related Benefits Description of Plans IBM sponsors defined benefit pension plans and defined contribution plans that cover eligible regular employees, a supplemental retention plan that covers certain U.S. executives and nonpension postretirement benefit plans primarily consisting of retiree medical and dental benefits for eligible retirees and dependents. U.S. Plans Defined Benefit Pension Plans IBM Personal Pension Plan IBM provides U.S. regular, full-time and part-time em ployees hired prior to January 1, 2005 with noncontributory defined benefit pension benefits via the IBM Personal Pension Plan. Prior to 2008, the IBM Personal Pension Plan consisted of a tax qualified (qualified) plan and a non-tax qualified (nonqualified ) plan. Effective January 1, 2008, the nonqualified plan was renamed the Excess Personal Pension Plan (Excess PPP) and the qualified plan is now referred to as the Qualified PPP. The combined plan is now referred to as the PPP. The Qualified PPP is funded by company contributions to an irrevocable trust fund, which is held for the sole benefit of participants and beneficiaries. The Excess PPP, which is unfunded, provides benefits in excess of IRS limitations for qualified plans. Benefits provided to the P PP participants are calculated using benefit formulas that vary based on the participant. The first method uses a five-year, final pay formula that determines benefits based on salary, years of service, mortality and other participant-specific factors. The second method is a cash balance formula that calculates benefits using a percentage of employees’ annual salary, as well as an interest crediting rate. Benefit accruals under the IBM Personal Pension Plan ceased December 31, 2007 for all participants. U.S. Supplemental Executive Retention Plan The company also sponsors a nonqualified U.S. Supplemental Executive Retention Plan (Retention Plan). The Retention Plan, which is unfunded, provides benefits to eligible U.S. executives based on average earnin gs, years of service and age at termination of employment. Benefit accruals under the Retention Plan ceased December 31, 2007 for all participants. Defined Contribution Plans IBM 401(k) Plus Plan U.S. regular, full-time and part-time employees are eligible to participate in the IBM 401(k) Plus Plan, which is a qualified defined contribution plan under section 401(k) of the Internal Revenue Code. Under the IBM 401(k) Plus Plan, eligible employees receive a dollar-for-dollar match of their contributio ns generally up to 6 percent of eligible compensation for those hired prior to January 1, 2005, and, generally up to 5 percent of eligible compensation for those hired on or after January 1, 2005. In addition, eligible employees generally receive automatic contributions from the company equal to 1 , 2 or 4 percent of eligible compensation based on their eligibility to participate in the PPP as of December 31, 2007. Employees generally receive automatic contributions and matching contributions after the compl etion of one year of service. The company’s matching contributions vest immediately and participants are always fully vested in their own contributions. All contributions, including the company match, are made in cash and invested in accordance with part icipants’ investment elections. There are no minimum amounts that must be invested in company stock, and there are no restrictions on transferring amounts out of company stock to another investment choice, other than excessive trading rules applicable to s uch investments. Effective January 1, 2013, matching and automatic contributions are made once annually at the end of the year. In order to receive such contributions each year, a participant must be employed on December 15 of the plan year. However, if a participant separates from service prior to December 15, and has completed certain service and/or age requirements, then the participant will be eligible to receive such matching and automatic contributions following separation from service. IBM Excess 4 01(k) Plus Plan The IBM Excess 401(k) Plus Plan (Excess 401(k)) is an unfunded, nonqualified defined contribution plan. Employees whose eligible compensation is expected to exceed the IRS compensation limit for qualified plans are eligible to participate in the Excess 401(k). The purpose of the Excess 401(k) is to provide benefits that would be provided under the qualified IBM 401(k) Plus Plan if the compensation limits did not apply. Amounts deferred into the Excess 401(k) are record-keeping (notional) accounts and are not held in trust for the participants. Participants in the Excess 401(k) may invest their notional accounts in investments which mirror the primary investment options available under the 401(k) Plus Plan. Participants in the Excess 401(k ) are also eligible to receive company match and automatic contributions (at the same rate as under the 401(k) Plus Plan) on eligible compensation deferred into the Excess 401(k) and on compensation earned in excess of the Internal Revenue Code pay limit o nce they have completed one year of service. Amounts deferred into the Excess 401(k), including company contributions are recorded as liabilities in the Consolidated Statement of Financial Position. Effective January 1, 2013, matching and automatic contrib utions are recorded once annually at the end of the year. In order to receive such contributions each year, a participant must be employed on December 15 of the plan year. However, if a participant separates from service prior to December 15, and has compl eted certain service and/or age requirements, then the participant will be eligible to receive such matching and automatic contributions following separation from service. Nonpension Postretirement Benefit Plan U.S. Nonpension Postretirement Plan The company sponsors a defined benefit nonpension postretirement benefit plan that provides medical and dental benefits to eligible U.S. retirees and eligible dependents, as well as life insurance for eligible U.S. retirees. Effective July 1, 1999, the compan y established a Future Health Account (FHA) for employees who were more than five years from retirement eligibility. Employees who were within five years of retirement eligibility are covered under the company’s prior retiree health benefits arrangements. Under either the FHA or the prior retiree health benefit arrangements, there is a maximum cost to the company for retiree health benefits. Effective January 1, 2014, the company amended the plan to establish a Health Reimbursement Arrangement (HRA) for eac h Medicare-eligible plan retiree, surviving spouse and long-term disability plan participant who is eligible for company-subsidized coverage and who enrolls in an individual plan under the Medicare Exchange. The company also amended its life insurance plan . Employees retiring on or after January 1, 2015 are not eligible for life insurance. Since January 1, 2004, new hires, as of that date or later, are not eligible for company-subsidized nonpension postretirement benefits. Non-U.S. Plans Certain subsi diaries and branches outside the United States sponsor defined benefit and/or defined contribution plans that cover eligible regular employees. The company deposits funds under various fiduciary-type arrangements, purchases annuities under group contracts or provides reserves for these plans. Benefits under the defined benefit plans are typically based either on years of service and the employee’s compensation (generally during a fixed number of years immediately before retirement) or on annual credits. The range of assumptions that are used for the non-U.S. defined benefit plans reflect the different economic environments within the various countries. In addition, certain of the company’s non-U.S. subsidiaries sponsor nonpension postretirement benefit plans that provide medical and dental benefits to eligible non-U.S. retirees and eligible dependents, as well as life insurance for certain eligible non-U.S. retirees. However, most non-U.S. retirees are covered by local government sponsored and administered programs. Plan Financial Information Summary of Financial Information The following table presents a summary of the total retirement-related benefits net periodic (income)/cost recorded in the Consolidated Statement of Earnin gs. ($ in millions) U.S. Plans Non-U.S. Plans Total For the year ended December 31: 2015 2014 2013 2015 2014 2013 2015 2014 2013 Defined benefit pension plans $ (284) $ (833) $ (223) $ 1,421 $ 1,267 $ 1,396 $ 1,137 $ 434 $ 1,173 Retention Plan 23 15 21 — — — 23 15 21 Total defined benefit pension plans (income)/cost $ (261) $ (818) $ (202) $ 1,421 $ 1,267 $ 1,396 $ 1,160 $ 449 $ 1,195 IBM 401(k) Plus Plan and non-U.S. plans $ 676 $ 713 $ 785 $ 442 $ 526 $ 575 $ 1,117 $ 1,239 $ 1,361 Excess 401(k) 21 14 24 — — — 21 14 24 Total defined contribution plans cost $ 697 $ 727 $ 809 $ 442 $ 526 $ 575 $ 1,138 $ 1,253 $ 1,384 Nonpension postretirement benefit plans cost $ 218 $ 206 $ 218 $ 55 $ 66 $ 79 $ 273 $ 272 $ 298 Total retirement-related benefits net periodic cost $ 654 $ 115 $ 826 $ 1,918 $ 1,859 $ 2,051 $ 2,572 $ 1,974 $ 2,876 The following table presents a summary of the total PBO for defined benefit pension plans, APBO for nonpension postretirement benefit plans, fair value of plan assets and the associated funded status recorded in the Consolidated Statement of Financial Position. ($ in millions) Benefit Obligations Fair Value of Plan Assets Funded Status* At December 31: 2015 2014 2015 2014 2015 2014 U.S. Plans Overfunded plans Qualified PPP $ 51,287 $ 54,708 $ 51,716 $ 55,772 $ 429 $ 1,065 Underfunded plans Excess PPP $ 1,522 $ 1,602 $ — $ — $ (1,522) $ (1,602) Retention Plan 312 334 — — (312) (334) Nonpension postretirement benefit plan 4,652 5,053 71 16 (4,582) (5,037) Total underfunded U.S. plans $ 6,486 $ 6,989 $ 71 $ 16 $ (6,415) $ (6,973) Non-U.S. Plans Overfunded plans Qualified defined benefit pension plans $ 16,766 $ 16,794 $ 18,070 $ 17,888 $ 1,304 $ 1,094 Nonpension postretirement benefit plans 0 11 0 11 0 0 Total overfunded non-U.S. plans $ 16,766 $ 16,804 $ 18,070 $ 17,898 $ 1,304 $ 1,094 Underfunded plans Qualified defined benefit pension plans $ 22,039 $ 26,278 $ 17,677 $ 21,655 $ (4,362) $ (4,623) Nonqualified defined benefit pension plans 5,911 6,762 — — (5,911) (6,762) Nonpension postretirement benefit plans 618 806 59 73 (558) (733) Total underfunded non-U.S. plans $ 28,568 $ 33,846 $ 17,737 $ 21,729 $ (10,832) $ (12,118) Total overfunded plans $ 68,053 $ 71,512 $ 69,786 $ 73,671 $ 1,734 $ 2,159 Total underfunded plans $ 35,054 $ 40,836 $ 17,807 $ 21,745 $ (17,247) $ (19,091) * Funded status is recognized in the Consolidated Statement of Financial Position as follows: Asset amounts as prepaid pension assets; (Liability) amounts as compensation and benefits (current liability) and retirement and nonpension postretirement benefit obligations (noncurrent liability). At December 31, 2015 , the company’s qualified defined benefit pension plans worldwide were 97 percent funded compared to the benefit obligations, with the U.S. Qualified PPP 101 percent funded. Ove rall, including nonqualified plans, the company’s defined benefit pension plans worldwide were 8 9 percent funded. Defined Benefit Pension and Nonpension Postretirement Benefit Plan Financial Information The following tables through page 115 represent financial information for the company’s retirement-related benefit plans, excluding defined contribution plans. The defined benefit pension plans under U.S. Plans consists of the Qualified PPP, the Excess PPP and the Retention Plan. The defined benefit pension plans and the nonpension postretirement benefit plans under non-U.S. Plans consists of all plans sponsored by t he company’s subsidiaries. The nonpension postretirement benefit plan under U.S. Plan consists of only the U.S. Nonpension Postretirement Benefit Plan. The tables below present the components of net periodic (income)/cost of the retirement-related benefi t plans recognized in the Consolidated Statement of Earnings, excluding defined contribution plans. ($ in millions) Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans For the year ended December 31: 2015 2014 2013 2015 2014 2013 Service cost $ — $ — $ — $ 454 $ 449 $ 501 Interest cost 2,028 2,211 1,980 1,075 1,533 1,524 Expected return on plan assets (3,953) (4,096) (3,981) (1,919) (2,247) (2,195) Amortization of transition assets — — — 0 0 0 Amortization of prior service costs/(credits) 10 10 10 (98) (111) (119) Recognized actuarial losses 1,654 1,056 1,790 1,581 1,400 1,600 Curtailments and settlements — — — 35 26 0 Multi-employer plans/other costs* — — — 293 217 85 Total net periodic (income)/cost $ (261) $ (818) $ (202) $ 1,421 $ 1,267 $ 1,396 ($ in millions) Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans For the year ended December 31: 2015 2014 2013 2015 2014 2013 Service cost $ 24 $ 26 $ 35 $ 7 $ 7 $ 10 Interest cost 163 187 164 50 63 60 Expected return on plan assets 0 0 (1) (7) (9) (9) Amortization of transition assets — — — 0 0 0 Amortization of prior service costs/(credits) (7) (7) — (5) (5) (5) Recognized actuarial losses 39 0 21 10 11 23 Curtailments and settlements — — — 0 0 0 Total net periodic cost $ 218 $ 206 $ 218 $ 55 $ 66 $ 79 * The n on-U.S. plans amount includes $ 233 million and $148 million related to the IBM Spain pension litigation for 2015 and 2014 , respectively. See page 115 for additional information. The following table presents the changes in benefit obligations and plan assets of the company’s retirement-related benefit plans, excluding defined contribution plans. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2015 2014 2015 2014 2015 2014 2015 2014 Change in benefit obligation Benefit obligation at January 1 $ 56,643 $ 51,034 $ 49,834 $ 48,620 $ 5,053 $ 4,633 $ 817 $ 832 Service cost — — 454 449 24 26 7 7 Interest cost 2,028 2,211 1,075 1,533 163 187 50 63 Plan participants’ contributions — — 34 37 52 61 — — Acquisitions/divestitures, net — — 39 (90) (8) 0 0 0 Actuarial losses/(gains) (1,920) 6,968 (861) 6,662 (204) 548 (52) 38 Benefits paid from trust (3,514) (3,455) (1,784) (1,985) (406) (388) (5) (5) Direct benefit payments (117) (114) (402) (465) (23) (37) (26) (26) Foreign exchange impact — — (3,907) (5,073) — — (174) (91) Medicare/Government subsidies — — — — 1 23 — — Amendments/curtailments/ settlements/other — — 235 146 0 0 0 (1) Benefit obligation at December 31 $ 53,120 $ 56,643 $ 44,717 $ 49,834 $ 4,652 $ 5,053 $ 618 $ 817 Change in plan assets Fair value of plan assets at January 1 $ 55,772 $ 53,954 $ 39,543 $ 39,464 $ 16 $ 177 $ 84 $ 92 Actual return on plan assets (542) 5,274 417 5,579 0 0 7 9 Employer contributions — — 474 465 409 166 0 0 Acquisitions/divestitures, net — — 53 (59) 0 0 0 0 Plan participants’ contributions — — 34 37 52 61 — — Benefits paid from trust (3,514) (3,455) (1,784) (1,985) (406) (388) (5) (5) Foreign exchange impact — — (3,004) (4,049) — — (26) (11) Amendments/curtailments/ settlements/other — — 14 * 93 * — — (1) 0 Fair value of plan assets at December 31 $ 51,716 $ 55,772 $ 35,748 $ 39,543 $ 71 $ 16 $ 59 $ 84 Funded status at December 31 $ (1,405) $ (871) $ (8,969) $ (10,291) $ (4,582) $ (5,037) $ (558) $ (733) Accumulated benefit obligation** $ 53,120 $ 56,643 $ 44,071 $ 47,516 N/A N/A N/A N/A * Includes the reinstatement of certain plan assets in Brazil due to government ruling s in 2011 and 2013 allowing certain previously restricted plan assets to be returned to IBM. Return of assets to IBM over a three - year period began June 2011 and September 2013 respectively, with approximately $ 33 million returned in 2015 and $ 122 million returned during 201 4 . The remaining surplus in Brazil at December 31, 201 5 is excluded from total plan assets due to continued restrictions impose d by the government on the use of those plan assets. ** Represents the benefit obligation assuming no future participant compensation increases. N/A—Not applicable The following table presents the net funded status recognized in the Consolidated Statement of Financial Position. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans At December 31: 2015 2014 2015 2014 2015 2014 2015 2014 Prepaid pension assets $ 429 $ 1,065 $ 1,304 $ 1,095 $ 0 $ 0 $ 0 $ 0 Current liabilities— compensation and benefits (116) (111) (297) (326) (320) (381) (11) (13) Noncurrent liabilities—retirement and nonpension postretirement benefit obligations (1,718) (1,825) (9,976) (11,060) (4,262) (4,656) (547) (720) Funded status—net $ (1,405) $ (871) $ (8,969) $ (10,291) $ (4,582) $ (5,037) $ (558) $ (733) The following table presents the pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in OCI and the changes in the pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in AOCI for the retirement-related benefit plans. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2015 2014 2015 2014 2015 2014 2015 2014 Net loss at January 1 $ 18,442 $ 13,709 $ 21,676 $ 19,777 $ 852 $ 304 $ 189 $ 161 Current period loss/(gain) 2,576 5,789 661 3,324 (204) 548 (51) 38 Curtailments and settlements — — (33) (25) — — 0 1 Amortization of net loss included in net periodic (income)/cost (1,654) (1,056) (1,581) (1,400) (39) 0 (10) (11) Net loss at December 31 $ 19,363 $ 18,442 $ 20,724 $ 21,676 $ 609 $ 852 $ 128 $ 189 Prior service costs/(credits) at January 1 $ 110 $ 120 $ (386) $ (496) $ 23 $ 15 $ (26) $ (32) Current period prior service costs/(credits) — — (6) (1) — — 0 0 Amortization of prior service (costs)/ credits included in net periodic (income)/cost (10) (10) 98 111 7 7 5 5 Prior service costs/(credits) at December 31 $ 101 $ 110 $ (294) $ (386) $ 30 $ 23 $ (21) $ (26) Transition (assets)/liabilities at January 1 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Amortization of transition assets/ (liabilities) included in net periodic (income)/cost — — 0 0 — — 0 0 Transition (assets)/liabilities at December 31 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Total loss recognized in accumulated other comprehensive income/(loss)* $ 19,464 $ 18,552 $ 20,429 $ 21,290 $ 639 $ 875 $ 106 $ 163 * See note L, “Equity Activity,” for the total change in AOCI, and the Consolidated Statement of Comprehensive Income for the components of net periodic (income)/cost, including the related tax effects, recognized in OCI for the retirement-related benefit plans. The following table presents the pre-tax estimated net loss, estimated prior service costs/(credits) and estimated transition (assets)/ liabilities of the retirement-related benefit plans that will be amortized from AOC I into ne t periodic (income)/cost in 2016 . ($ in millions) Defined Benefit Nonpension Postretirement Pension Plans Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans Net loss $ 1,331 $ 1,361 $ 19 $ 8 Prior service costs/(credits) 10 (96) (7) (4) Transition (assets)/liabilities – – – – On March 24, 2014, the Supreme Court of Spain issued a ruling against IBM Spain in litigation involving its defined benefit and defined contribution plans. As a result of th e ruling, the company recorded pre-tax retirement-related obligation s of $ 233 million in 2015 and $ 148 million in 2014 in selling, general and administrative expense in the Consolid ated Statement of Earnings. These obligation s are reflected in "Non-U.S. Plans - Multi-employer plans/other costs" in the table on page 113 . See note M, “Contingencies and Commitments,” on page 102 for additional information regarding pension plan litigation matters. Assumptions Used to Determine Plan Financial Information Underlying both the measurement of benefit obligations and net periodic (income)/cost are actuarial valuations. These valuations use participant-specific information such as salary, age and years of service, as well as certain assumptions, the most significant of which include estimates of discount rates, expected return on pl an assets, rate of compensation increases, interest crediting rates and mortality rates. The company evaluates these assumptions, at a minimum, annually, and makes changes as necessary. The table below presents the assumptions used to measure the net per iodic (income)/cost and the year-end benefit obligations for retirement-related benefit plans. Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans 2015 2014 2013 2015 2014 2013 Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 Discount rate 3.70 % 4.50 % 3.60 % 2.34 % 3.32 % 3.23 % Expected long-term returns on plan assets 7.50 % 8.00 % 8.00 % 5.67 % 6.08 % 6.21 % Rate of compensation increase N/A N/A N/A 2.49 % 2.52 % 2.51 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 4.00 % 3.70 % 4.50 % 2.40 % 2.34 % 3.32 % Rate of compensation increase N/A N/A N/A 2.40 % 2.49 % 2.52 % N/A—Not applicable Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans 2015 2014 2013 2015 2014 2013 Weighted-average assumptions used to measure net periodic cost for the year ended December 31 Discount rate 3.40 % 4.10 % 3.30 % 7.51 % 7.78 % 6.43 % Expected long-term returns on plan assets N/A N/A 0.35 % 10.17 % 10.22 % 9.01 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 3.70 % 3.40 % 4.10 % 7.06 % 7.51 % 7.78 % N/A—Not applicable Discount Rate The discount rate assumptions used for retirement-related benefit plans accounting reflect the yields available on high-quality, fixed- income debt instruments at the measurement date. For the U.S. and certain non-U.S. countries, a portfolio of high-quality corporate bonds is used to construct a yield curve. The cash flows from the company’s expected benefit obligation payments are then matched to the yield curve to derive the discount rates. In other non-U.S. countries, where the ma rkets for high-quality long-term bonds are not generally as well developed, a portfolio of long-term government bonds is used as a base, to which a credit spread is added to simulate corporate bond yields at these maturities in the jurisdiction of each pla n, as the benchmark for developing the respective discount rates. For the U.S. defined benefit pension plans, the changes in the discount rate assumptions impacted the net periodic (income)/cost and the PBO. The changes in the discount rate assumptions r esulted in a decrease in 2015 net periodic income of $ 286 million, a n in crease in 2014 net periodic income of $ 275 million and a decrease in 201 3 net periodic income of $ 162 million. The changes in the discount rate assumptions resulted in a decrease in the PBO of $ 1,621 million and an increase of $ 4,437 million at December 31, 2015 and 2014 , respectively. For the U.S. nonpension postretirement benefit plans, the changes in the discount rate assumptions had no material impact on net periodic cost fo r the years ended December 31, 2015 , 2014 and 2013 and resulted in a decrease in the APBO of $ 109 million and an increase of $ 256 million at December 31, 2015 and 2014 , respectively. For all of the company’s retirement-related benefit plans, the change in the discount rate assumptions resulted in a decrease in the benefit obligation of approximately $2 billion at December 31, 2015 and an increase of approximately $11 billion at December 31, 2014 . Expected Long-Term Returns on Plan Assets Expected re turns on plan assets, a component of net periodic (income)/cost, represent the expected long-term returns on plan assets based on the calculated market-related value of plan assets. Expected long-term returns on plan assets take into account long-term expe ctations for future returns and the investment policies and strategies as described on page 1 18 . These rates of return are developed by the company and are tested for reasonableness against historical returns. The use of expected long-term returns on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns, and therefor e result in a pattern of income and cost recognition that more closely matches the pattern of the services provided by the employees. Differences between actual and expected returns are recognized as a component of net loss or gain in AOCI, which is amorti zed as a component of net periodic (income)/cost over the service lives or life expectancy of the plan participants, depending on the plan, provided such amounts exceed certain thresholds provided by accounting standards. The market-related value of plan a ssets recognizes changes in the fair value of plan assets systematically over a five-year period in the expected return on plan assets line in net periodic (income)/cost. For the U.S. d efined benefit pension plan, the expected long-term rate of return on plan assets for the years ended December 31, 2015 , 2014 and 2013 was 7.5 percent, 8 percent and 8 percent, respectively. The change in the rate in 2015 resulted in a decrease in 2015 net periodic income of $ 264 million. For 201 6 , the projected l ong-term rate of return on plan assets is approximately 7.0 percent. For the U.S. nonpension postretirement benefit plans, the company maintains a highly liquid trust fund balance to ensure timely payments are made. As a result, for the years ended December 31, 2015 , 2014 and 2013 , the expected long-term return on plan assets and the actual return on those assets were not material. Rate of Compensation Increases and Mortality Rate The rate of compensation increases is determined by the company, b ased upon its long-term plans for such increases. The rate of compensation increase is not applicable to the U.S. defined benefit pension plans as benefit accruals ceased December 31, 2007 for all participants. Mortality rate assumptions are based on life expectancy and death rates for different types of participants. Mortality rates are periodically updated based on actual experience. In the U.S., the Society of Actuaries released new mortality tables in 2014 and updated them in 2015. The company utilized these tables in its plan remeasurements at December 31, 2015 and 2014 . For the U.S. retirement related plans, the change in mortality assumptions resulted in a decrease to the plan benefit obligations of $0.7 billion and an increase of $2.6 billion at December 31, 2015 and 2014 , respectively. Interest Crediting Rate Benefits for certain participants in the PPP are calculated using a cash balance formula. An assumption underlying this formula is an interest crediting rate, which impacts both net periodic (income)/cost and the PBO. This assumption provides a basis for projecting the expected interest rate that participants will earn on the benefits that they are expected to receive in the following year and is based on the average from August to Oc tober of the one-year U.S. Treasury Constant Maturity yield plus one percent. For the PPP, the interest crediting rate of 1.1 percent for the year ended December 31, 2015 was unchanged from 2014 and, therefore, had no impact on the decrease in 2015 ne t periodic income . The change in the interest crediting rate to 1. 1 percent for the year ended December 31, 2014 , from 1 .2 percent for the year ended December 31, 2013 , resulted in a n in crease in 201 4 net periodic income of $ 8 million. The change in the interes t crediting rate to 1. 2 percent for the year ended December 31, 2013 , from 1.1 percent for the year ended December 31, 20 12, resulted in a de crease in 2013 net periodic income of $ 6 million. Healthcare Cost Trend Rate For nonpension postretirement be nefit plan accounting, the company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates. However, the healthcare cost trend rate has an insignificant effect on plan costs and obligations as a result of the terms of the plan which limit the company’s obligation to the participants. The company assumes that the hea lthcare cost trend rate for 2016 will be 7 percent. In addition, the company assumes that the same trend rate will decrease to 5 percent over the next eight years. A one percentage point increase or decrease in the assumed healthcare cost trend rate would not have had a material effect on 2015 , 2014 and 2013 net periodic cost or the benefit obligations as of December 31, 2015 and 2014 . Plan Assets Retirement-related benefit plan assets are recognized and measured at fair value . Because of the inherent uncertainty of valuations, these fair value measurements may not necessarily reflect the amounts the company could real ize in current market transactions. Investment Policies and Strategies The investment objectives of the Qualified PPP portfolio are designed to generate returns that will enable the plan to meet its future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on the current economic environment and other pertinent f actors described on pages 116 through 117 . The Qualified PPP portfolio’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio wi th less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could cause the plan to become underfunded, thereby increasing its dependence on contributions from the company. To mitigate any potential concentration risk, careful consideration is given to balancing the portfolio among industry sectors, companies and geographies, taking into account interest rate sensitivity, dependence on economic growth, curre ncy and other factors that affect investment returns. In 2014, the company changed its investment strategy, modifying the target asset allocation, primarily by reducing equity securities and increasing debt securities. This change was designed to reduce th e potential negative impact that equity markets might have on the funded status of the plan. The Qualified PPP portfolio’s target allocation is 34 percent equity securities, 56 percent fixed-income securities, 5 percent real estate and 5 percent other inve stments. The assets are managed by professional investment firms and investment professionals who are employees of the company. They are bound by investment mandates determined by the company’s management and are measured against specific benchmarks. Am ong these managers, consideration is given, but not limited to, balancing security concentration, issuer concentration, investment style and reliance on particular active and passive investment strategies. Market liquidity risks are tightly controlled, w ith $ 5,219 million of the Qualified PPP portfolio as of December 31, 2015 invested in private market assets consisting of private equities and private real estate investments, which are less liquid than publicly traded securities. In addition, the Qualified PPP portfolio had $ 2, 547 million in commitments for future investments in private markets to be made over a number of years. These commitments are expected to be funded from plan assets. Derivatives are used as an effective means to achiev e investment objectives and/or as a component of the plan’s risk management strategy. The primary reasons for the use of derivatives are fixed income management, including duration, interest rate management and credit exposure, cash equitization and to man age currency and commodity strategies. Outside the U.S., the investment objectives are similar to those described above, subject to local regulations. The weighted-average target allocation for the non-U.S. plans is 29 percent equity securities, 58 percent fixed - income securities, 2 percent real estate and 11 percent other investments, which is consistent with the allocation decisions made by the company’s management. The table on page 119 details the actual equity, fixed income, real estate and oth er types of inves |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2015 | |
Segment Information | |
Segment Information | Note T. Segment Information In January 2016, the company made a number of changes to its organizational structure and management system consistent with its ongoing transformation to a cognitive solutions and cloud platform business. With these changes, the company has updated its reportable segments. The company continues to have five reportable segments as follows: The Cognitive Solutions segment includes solutions units that address many of the company’s strategic areas, including analytics, c ommerce and security, several of the new initiatives around Watson, Watson Health, Watson Internet of Things and Transaction Processing Software. The Technology Services & Cloud Platforms segment includes the company’s cloud infrastructure and platform cap abilities, the previously reported Global Technology Services business and Integration Software. Operating Systems Software has been aligned with the underlying hardware platforms in the Systems segment. The Global Business Services and Global Financing se gments remain unchanged. The company also realigned a portion of its software support revenue, which was previously managed and reported in Integrated Technology Services within the previously reported Global Technology Services, to the underlying software product areas. Previously reported segm ent information has been recast throughout the financial statements, as applicable, for all periods presented to reflect the changes in the company’s reportable segments. The segments represent com ponents of the company for which separate financial information is available that is utilized on a regular basis by the chief executive officer in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Information about each segment’s business and the products and services that generate each segment’s revenue is located in the “D escription of Business” section on pages 9 to 11, and in “Segment Details,” on pages 13 to 18 in the Management Discussion. Segment revenue and pre-tax income include transactions between the segments that are intended to reflect an arm’s-length, market- based transfer price. Systems that are used by Technology Services & Cloud Platforms in outsourcing engagements are primarily sourced internally from the Systems segment and software is sourced from various segments. Software used by Technology Services & Cloud Platforms on external engagements is sourced internally through Cognitive Solutions and the Systems segments. For providing IT services that are used internally, Technology Services & Cloud Platforms and Global Business Services recover cost, as well as a reasonable fee, that is intended to reflect the arm’s-length value of providing the services. They enter into arm’s-length loans at prices equivalent to market rates with Global Financing to facilitate the acquisition of equipment used in services en gagements. All internal transaction prices are reviewed annually, and reset if appropriate. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the company’s management system, e.g., adve rtising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associated with the elimination of internal transactions and other miscellaneous items. The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company. Performance measurement is based on pre-tax income from continuing operations. These results a re used, in part, by senior management, both in evaluating the performance of, and in allocating resources to, each of the segments. The following tables reflect this recast for the prior-year periods. Management System Segment View ($ in millions) Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total For the year ended December 31: Solutions Services Platforms Systems Financing Segments 2015 External revenue $ 17,841 $ 17,166 $ 35,142 $ 9,547 $ 1,840 $ 81,535 Internal revenue 2,215 499 698 778 2,637 6,826 Total revenue $ 20,055 $ 17,664 $ 35,840 $ 10,325 $ 4,477 $ 88,361 Pre-tax income from continuing operations $ 7,245 $ 2,602 $ 5,669 $ 1,722 $ 2,364 $ 19,602 Revenue year-to-year change (8.4) % (11.9) % (9.8) % (22.4) % (1.0) % (11.2) % Pre-tax income year-to-year change (11.8) % (22.3) % (20.0) % 24.4 % 8.0 % (11.8) % Pre-tax income margin 36.1 % 14.7 % 15.8 % 16.7 % 52.8 % 22.2 % 2014 External revenue $ 19,689 $ 19,512 $ 38,889 $ 12,294 $ 2,034 $ 92,418 Internal revenue 2,216 543 840 1,006 2,488 7,093 Total revenue $ 21,906 $ 20,055 $ 39,729 $ 13,300 $ 4,522 $ 99,512 Pre-tax income from continuing operations $ 8,215 $ 3,347 $ 7,084 $ 1,384 $ 2,189 $ 22,219 Revenue year-to-year change (0.1) % (8.5) % (0.9) % (19.8) % 5.1 % (5.1) % Pre-tax income year-to-year change (5.2) % (2.9) % (7.3) % (21.5) % 0.8 % (6.2) % Pre-tax income margin 37.5 % 16.7 % 17.8 % 10.4 % 48.4 % 22.3 % 2013 External revenue $ 19,887 $ 21,210 $ 39,139 $ 15,630 $ 2,022 $ 97,889 Internal revenue 2,032 714 965 949 2,282 6,941 Total revenue $ 21,919 $ 21,924 $ 40,104 $ 16,579 $ 4,304 $ 104,830 Pre-tax income from continuing operations $ 8,663 $ 3,447 $ 7,645 $ 1,764 $ 2,171 $ 23,690 Pre-tax income margin 39.5 % 15.7 % 19.1 % 10.6 % 50.4 % 22.6 % Reconciliations of IBM as Reported ($ in millions) For the year ended December 31: 2015 2014 2013 Revenue Total reportable segments $ 88,361 $ 99,512 $ 104,830 Other revenue 206 374 478 Elimination of internal transactions (6,826) (7,093) (6,941) Total IBM consolidated revenue $ 81,741 $ 92,793 $ 98,367 ($ in millions) For the year ended December 31: 2015 2014 2013 Pre-tax income from continuing operations: Total reportable segments $ 19,602 $ 22,219 $ 23,690 Amortization of acquired intangible assets (677) (791) (758) Acquisition-related charges (26) (12) (46) Non-operating retirement- related (costs)/income (1,050) (353) (1,062) Elimination of internal transactions (1,791) (1,872) (1,483) Unallocated corporate amounts* (114) 795 (98) Total pre-tax income from continuing operations $ 15,945 $ 19,986 $ 20,244 * The 2014 and 2013 amounts include the gain related to the Retail Store Solutions divestiture. The 2014 amount also includes the net gain related to the System x business divestiture. Immaterial Items Investment in Equity Alliances and Equity Alliances Gains/(Losses) The investments in equity alliances and the resulting gains and (losses) from these investments that are attributable to the segments did not have a material effect on the financial position or the financial results of the segmen ts. Segment Assets and Other Items Cognitive Solutions assets are mainly goodwill, acquired intangible assets and accounts receivable. Global Business Services assets are primarily goodwill and accounts receivable. Technology Services & Cloud Platforms assets are primarily plant, property and equipment, including the assets associated with the outsourcing business, goodwill, accounts receivable, deferred services arrangement transition costs, maintenance parts inventory and acquired intangible assets. S ystems assets are primarily goodwill, plant, property and equipment, and manufacturing inventory. Global Financing assets are primarily financing receivables and fixed assets under operating leases. To ensure the efficient use of the company’s space and equipment, several segments may share plant, property and equipment assets. Where assets are shared, landlord ownership of the assets is assigned to one segment and is not allocated to each user segment. This is consistent with the company’s management sys tem and is reflected accordingly in the table on page 127. In those cases, there will not be a precise correlation between segment pre-tax income and segment assets. Similarly, the depreciation amounts reported by each segment are based on the assigned l andlord ownership and may not be consistent with the amounts that are included in the segments’ pre-tax income. The amounts that are included in pre-tax income reflect occupancy charges from the landlord segment and are not specifically identified by the m anagement reporting system. Capital expenditures that are reported by each segment also are consistent with the landlord ownership basis of asset assignment. Global Financing amounts for interest income and interest expense reflect the interest income an d interest expense associated with the Global Financing business, including the intercompany financing activities discussed on page 11 , as well as the income from investment in cash and marketable securities. The explanation of the difference between cost of financing and interest expense for segment presentation versus presentation in the Consolidated Statement of Earnings is included on page 56 of the Management Discussion. Management System Segment View ($ in millions) Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total For the year ended December 31: Solutions Services Platforms Systems Financing Segments 2015 Assets $ 20,017 $ 8,327 $ 23,530 $ 3,967 $ 36,157 $ 91,999 Depreciation/amortization of intangibles* 921 81 1,944 321 343 3,610 Capital expenditures/investments in intangibles 448 86 2,619 321 356 3,830 Interest income — — — — 1,720 1,720 Interest expense — — — — 469 469 2014 Assets $ 19,525 $ 8,831 $ 22,512 $ 4,219 $ 38,845 $ 93,933 Depreciation/amortization of intangibles* 1,040 98 1,982 734 455 4,308 Capital expenditures/investments in intangibles 413 79 2,321 627 482 3,921 Interest income — — — — 1,951 1,951 Interest expense — — — — 518 518 2013 Assets $ 20,705 $ 9,701 $ 22,981 $ 4,974 $ 40,138 $ 98,499 Depreciation/amortization of intangibles* 1,037 117 1,774 462 574 3,963 Capital expenditures/investments in intangibles 410 118 1,990 424 467 3,410 Interest income — — — — 1,904 1,904 Interest expense — — — — 405 405 * Segment pre-tax income from continuing operations does not include the amortization of intangible assets . Reconciliations of IBM as Reported ($ in millions) At December 31: 2015 2014 2013 Assets Total reportable segments $ 91,999 $ 93,933 $ 98,499 Elimination of internal transactions (4,709) (5,193) (4,740) Unallocated amounts Cash and marketable securities 6,634 7,182 9,697 Notes and accounts receivable 2,333 4,253 2,907 Deferred tax assets 4,693 6,465 * 4,030 * Plant, other property and equipment 2,650 2,169 4,827 Pension assets 1,734 2,160 5,551 Other 5,161 6,303 ** 4,869 ** Total IBM consolidated assets $ 110,495 $ 117,271 * ** $ 125,641 * ** * Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information. Major Clients No single client represented 10 percent or more of the company’s total revenue in 2015 , 2014 or 2013 . Geographic Information The following provides information for those countries that are 10 percent or more of the specific category. Revenue* ($ in millions) For the year ended December 31: 2015 2014 2013 United States $ 30,514 $ 32,021 $ 33,427 Other countries 51,227 60,772 64,941 Total IBM consolidated revenue $ 81,741 $ 92,793 $ 98,367 * Revenues are attributed to countries based on the location of the client . Plant and Other Property — Net ($ in millions) At December 31: 2015 2014 2013 United States $ 4,644 $ 4,388 $ 6,723 Other countries 5,532 5,690 6,257 Total $ 10,176 $ 10,078 $ 12,979 Revenue by Classes of Similar Products or Services The following table presents external revenue for similar classes of products or services within the company’s reportable segments. Client solutions often include IBM software and systems and other suppliers’ products if the client solution requires it. For each of the segments that include services; software-as-a-service, consulting, education, training and other product-related services are included as services. For each of these segments, software includes product license charges and ongoing subscriptions . ($ in millions) For the year ended December 31: 2015 2014 2013 Cognitive Solutions Software $ 14,557 $ 16,502 $ 16,897 Services 3,175 3,143 2,978 Systems 108 44 12 Global Business Services Services $ 16,851 $ 19,202 $ 20,874 Software 164 186 227 Systems 151 124 109 Technology Services & Cloud Platforms Services $ 23,947 $ 26,462 $ 26,483 Maintenance 6,085 6,790 7,038 Software 3,907 4,332 4,296 Systems 1,203 1,304 1,322 Systems Servers $ 5,032 $ 7,177 $ 9,795 Storage 2,325 2,641 3,006 Software 1,749 2,053 2,386 Services 442 423 443 Global Financing Financing $ 1,386 $ 1,543 $ 1,493 Used equipment sales 454 491 529 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events | |
Subsequent Events | Note U. Subsequent Events On January 26, 2016, the company announced that the Board of Directors approved a quarterly dividend of $1.30 per common share. The dividend is payable March 10, 2016 to shareholders of record on February 10, 2016. On February 16, 2016, the company issued $5.0 billion in bonds as follows: $900 million of 18-month floating-rate bonds priced at LIBOR plus 45 basis points, $1.2 billion of 3-year fixed-rate bonds with a 1.8 percent coupon, $900 million of 5-year fixed-rate bonds with a 2.25 percent coupon, $1.35 billion of 10-year fixed-rate bonds with a 3.45 percent coupon and $650 million of 30-year fixed-rate bonds with a 4.7 percent coupon . On February 18, 2016, the Japan Supreme Court declined to hear the appea l of the Tokyo High Court ruling related to the determination of certain foreign tax losses incurred by the company. The Tokyo High Court judgment, in favor of the co mpany, is now final. See Note N, “Taxes,” on page 1 05 for additional information on this m atter. The company will discuss the impact of this decision as part of its first quar ter 2016 earnings in April 2016 . |
Significant Accounting Polici30
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculat ed from the underlying whole-dollar amounts. Certain prior year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. On October 20, 2014, the company announced a definitive agreement to divest its Microelectronics business and manufacturing operations to GLOBALFOUNDRIES. The assets and liabilities of the Microelectronics business were reported as held for sale at December 31, 2014 and the operating results of the Microelectronics business have been reported as discontinued operations. The transaction closed on July 1, 2015. Prior periods have been reclassified to conform to this presentation to allow for a meaningful comparison of continuing operations. Refer to note C, “Acquisitions/Divestitures,” for additional information on the transaction. In January 2016, the company made a number of changes to its organiza tional structure and management system. These changes impacted the company’s reportable segments, but did not impact the company’s Consolidated Financial Statements. Refer to note T, “Segment Information,” on pages 124 to 129 for additional information on the changes in reportable segments. Noncontrolling interest amounts of $ 8 million, $ 6 million and $ 7 million, net of tax, for the years ended December 31, 2015, 2014 and 2013, respectively, are included in the Consolidated Statement of Earnings within the other (income) and expense line item. |
Principles of Consolidation | Principles of Consolidation The Consolidated Financial Statements include the accounts of IBM and its controlled subsidiaries, which are primarily majority owned. Any noncontrolling interest in the equity of a sub sidiary is reported in Equity in the Consolidated Statement of Financial Position. Net income and losses attributable to the noncontrolling interest is reported as described above in the Consolidated Statement of Earnings. The accounts of variable interest entities (VIEs) are included in the Consolidated Financial Statements, if required. Investments in business entities in which the company does not have control, but has the ability to exercise significant influence over operating and financial policies, a re accounted for using the equity method and the company’s proportionate share of income or loss is recorded in other (income) and expense. The accounting policy for other investments in equity securities is on page 90 within “Marketable Securities.” Equit y investments in non-publicly traded entities are primarily accounted for using the cost method. All intercompany transactions and accounts have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity wi th GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) (OCI) that are reported in the Consolidated Financial Statements and accompanying d isclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. See “Critical Accounting Estimates” on pages 48 to 51 for a discussion of the company’s critical accounting estimates. |
Revenue | Revenue The company recognizes revenue when it is realized or realizable and earned. The company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery doe s not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either client acceptance has been obtained, client acceptance provisions have lapsed, or the company has objective ev idence that the criteria specified in the client acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved. The company recognizes revenue on sa les to solution providers, resellers and distributors (herein referred to as “resellers”) when the reseller has: economic substance apart from the company, credit risk, title and risk of loss to the inventory; and, the fee to the company is not contingent upon resale or payment by the end user, the company has no further obligations related to bringing about resale or delivery and all other revenue recognition criteria have been met. The company reduces revenue for estimated client returns, stock rotation , price protection, rebates and other similar allowances. (See Schedule II, “Valuation and Qualifying Accounts and Reserves” included in the company’s Annual Report on Form 10-K). Revenue is recognized only if these estimates can be reasonably and reliably determined. The company bases its estimates on historical results taking into consideration the type of client, the type of transaction and the specifics of each arrangement. Payments made under cooperative marketing programs are recognized as an expense only if the company receives from the client an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably and reliably estimated. If the company does not receive an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably estimated, such payments are recorded as a reduction of revenue. Revenue from sales of third-party vendor products or services is recorded net of costs when the company is acting as an agent between th e client and the vendor, and gross when the company is a principal to the transaction. Several factors are considered to determine whether the company is an agent or principal, most notably whether the company is the primary obligor to the client, or has i nventory risk. Consideration is also given to whether the company adds meaningful value to the vendor’s product or service, was involved in the selection of the vendor’s product or service, has latitude in establishing the sales price or has credit risk. The company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In addition to the aforementioned general policies, the following are the spec ific revenue recognition policies for multiple-deliverable arrangements and for each major category of revenue. |
Multiple-Deliverable Arrangements | Multiple-Deliverable Arrangements The company enters into revenue arrangements that may consist of multiple deliverables of its products and services based on the needs of its clients. These arrangements may include any combination of services, software, hardware and/or financing. For example, a client may purchase a server that includes operating system software. In addition, the arrangement may include post-contract support for the software and a contract for post-warranty maintenance service for the hardware. These types of arrangements can also include financing provided by the company. These arrangements consist of multiple deliverables, w ith the hardware and software delivered in one reporting period and the software support and hardware maintenance services delivered across multiple reporting periods. In another example, a client may outsource the running of its datacenter operations to t he company on a long-term, multiple-year basis and periodically purchase servers and/or software products from the company to upgrade or expand its facility. The outsourcing services are provided on a continuous basis across multiple reporting periods and the hardware and software products are delivered in one reporting period. To the extent that a deliverable in a multiple-deliverable arrangement is subject to specific accounting guidance that deliverable is accounted for in accordance with such specific g uidance. Examples of such arrangements may include leased hardware which is subject to specific leasing guidance or software which is subject to specific software revenue recognition guidance on whether and/or how to separate multiple-deliverable arrangeme nts into separate units of accounting ( separability ) and how to allocate the arrangement consideration among those separate units of accounting (allocation). For all other deliverables in multiple-deliverable arrangements, the guidance below is applied for separability and allocation. A multiple-deliverable arrangement is separated into more than one unit of accounting if the following criteria are met: The delivered item(s) has value to the client on a stand-alone basis; and If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the company. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undel ivered element is delivered. If these criteria are met for each element and there is a relative selling price for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. The following revenue policies are then applied to each unit of accounting, as applicable. Revenue from the company’s cloud, analytics, mobile, security, and cognitive offerings follow the specific revenue recognition policies fo r multiple deliverable arrangements and for each major category of revenue depending on the type of offering which can be comprised of services, hardware and/or software. |
Services | Services The company’s primary services offerings include information technology (IT) datacenter and business process outsourcing, application management services, consulting and systems integration, technology infrastructure and system maintenance, hosting and the design and development of complex IT systems to a client’s specificati ons (design and build). Many of these services can be delivered entirely or partially through the cloud. These services are provided on a time-and-material basis, as a fixed-price contract or as a fixed-price per measure of output contract and the contrac t terms range from less than one year to over 10 years. Revenue from IT datacenter and business process outsourcing contracts is recognized in the period the services are provided using either an objective measure of output or on a straight-line basis ov er the term of the contract. Under the output method, the amount of revenue recognized is based on the services delivered in the period. Revenue from application management services, technology infrastructure and system maintenance and hosting contracts is recognized on a straight-line basis over the terms of the contracts. Revenue from time-and-material contracts is recognized as labor hours are delivered and direct expenses are incurred. Revenue related to extended warranty and product maintenance contr acts is recognized on a straight-line basis over the delivery period. Revenue from fixed-price design and build contracts is recognized under the percentage-of-completion (POC) method. Under the POC method, revenue is recognized based on the labor costs incurred to date as a percentage of the total estimated labor costs to fulfill the contract. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These r evisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which the circumstances that gave rise to the revision become known by the company. The company performs ongoing pro fitability analyses of its services contracts accounted for under the POC method in order to determine whether the latest estimates of revenues, costs and profits require updating. If at any time these estimates indicate that the contract will be unprofita ble, the entire estimated loss for the remainder of the contract is recorded immediately. For non-POC method services contracts, any losses are recorded as incurred. In some services contracts, the company bills the client prior to recognizing revenue fr om performing the services. Deferred income of $ 6,039 million and $ 6,352 million at December 31, 2015 and 2014, respectively, is included in the Consolidated Statement of Financial Position. In other services contracts, the company performs the services pr ior to billing the client. Unbilled accounts receivable of $ 1,630 million and $ 1,833 million at December 31, 2015 and 2014, respectively, is included in notes and accounts receivable-trade in the Consolidated Statement of Financial Position. Billings usu ally occur in the month after the company performs the services or in accordance with specific contractual provisions. Unbilled receivables are expected to be billed within four months. |
Hardware | Hardware The company’s hardware offerings include the sale or leas e of system servers, storage solutions and the sale of semiconductors. The company also offers installation services for its more complex hardware products. Revenue from hardware sales and sales-type leases is recognized when risk of loss has transferred to the client and there are no unfulfilled company obligations that affect the client’s final acceptance of the arrangement. Any cost of standard warranties and remaining obligations that are inconsequential or perfunctory are accrued when the correspondi ng revenue is recognized. Revenue from rentals and operating leases is recognized on a straight-line basis over the term of the rental or lease. |
Software | Software Revenue from perpetual (one-time charge) license software is recognized at the inception of the license term if all revenue recognition criteria have been met. Revenue from term (recurring license charge) license software is recognized on a straight-line basis over the period that the client is entitled to use the license. Revenue from post-contract support, which may include unspecified upgrades on a when-and-if-available basis, is recognized on a straight-line basis over the period such items are delivered. Revenue from software hosting or Software-as-a-Service arrangements is recognized as the serv ice is delivered, generally on a straight-line basis, over the longer of the term of the arrangement or the expected period of the customer relationship. In software hosting arrangements, the rights provided to the customer (e.g., ownership of a license, c ontract termination provisions and the feasibility of the customer to operate the software) are considered in determining whether the arrangement includes a license. In arrangements which include a software license, the associated revenue is recognized ac cording to whether the license is perpetual or term, subject to the guidance above. In multiple-deliverable arrangements that include software that is more than incidental to the products or services as a whole (software multiple-deliverable arrangemen ts), software and software-related elements are accounted for in accordance with software revenue recognition guidance. Software-related elements include software products and services for which a software deliverable is essential to its functionality. Tan gible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are not within the scope of software revenue recognition guidance and are accounted for based on othe r applicable revenue recognition guidance. A software multiple-deliverable arrangement is separated into more than one unit of accounting if all of the following criteria are met: The functionality of the delivered element(s) is not dependent on the undelivered element(s); There is vendor-specific objective evidence (VSOE) of fair value of the undelivered element(s). VSOE of fair value is based on the price charged when the deliverable is sold separately by the comp any on a regular basis and not as part of the multiple-deliverable arrangement; and Delivery of the delivered element(s) represents the culmination of the earnings process for that element(s). If any one of these criteria is not met, t he arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each element and there is VSOE of fair value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative VSOE of fair value. There ma y be cases, however, in which there is VSOE of fair value of the undelivered item(s) but no such evidence for the delivered item(s). In these cases, the residual method is used to allocate the arrangement consideration. Under the residual method, the amoun t of consideration allocated to the delivered item(s) equals the total arrangement consideration less the aggregate VSOE of fair value of the undelivered elements. The company’s multiple-deliverable arrangements may have a stand-alone software deliverabl e that is subject to the existing software revenue recognition guidance. The revenue for these multiple-deliverable arrangements is allocated to the software deliverable and the non-software deliverables based on the relative selling prices of all of the d eliverables in the arrangement using the hierarchy: VSOE, third-party evidence (TPE) or best estimate of selling price (BESP). In circumstances where the company cannot determine VSOE or TPE of the selling price for all of the deliverables in the arrangeme nt, including the software deliverable, BESP is used for the purpose of performing this allocation. |
Financing | Financing Financing income attributable to sales-type leases, direct financing leases and loans is recognized on the accrual basis using the effective interest method. Operating lease income is recognized on a straight-line basis over the term of the lease. |
Best Estimate of Selling Price | Best Estimate of Selling Price In certain instances, the company is not able to establish VSOE for all elements in a multiple-deliverable arrange ment. When VSOE cannot be established, the company attempts to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. When the company is unable to establish s elling price using VSOE or TPE, the company uses BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the company would transact a sale if the product or service were sold on a stand-alone basis. BES P may be used, for example, if a product is not sold on a stand-alone basis or when the company sells a new product, for which VSOE and TPE does not yet exist, in a multiple-deliverable arrangement prior to selling the new product on a stand-alone basis. The company determines BESP by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, competitive positioning, competitor actions, internal costs, profit objectives and pri cing practices. The determination of BESP is a formal process that includes review and approval by the company’s management. In addition, the company regularly reviews VSOE and TPE for its products and services, in addition to BESP. |
Software and Services Costs | Services Costs Recu rring operating costs for services contracts, including costs related to bid and proposal activities, are recognized as incurred. For fixed-price design and build contracts, the costs of external hardware and software accounted for under the POC method are deferred and recognized based on the labor costs incurred to date, as a percentage of the total estimated labor costs to fulfill the contract. Certain eligible, nonrecurring costs incurred in the initial phases of outsourcing contracts are deferred and su bsequently amortized. These costs consist of transition and setup costs related to the installation of systems and processes and are amortized on a straight-line basis over the expected period of benefit, not to exceed the term of the contract. Additionall y, fixed assets associated with outsourcing contracts are capitalized and depreciated on a straight-line basis over the expected useful life of the asset. If an asset is contract specific, then the depreciation period is the shorter of the useful life of t he asset or the contract term. Amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements are deferred and amortized on a straight-line basis as a reduction of revenue over the expected period of benefit not to exceed the term of the contract. The company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. This review is done by comparing the estimated minimum remaining undiscounted cash flows of a contract to t he unamortized contract costs. If such minimum undiscounted cash flows are not sufficient to recover the unamortized costs, an impairment loss is recognized. Deferred services transition and setup costs were $ 2,144 million and $ 2,230 million at December 31, 2015 and 2014, respectively. Amortization of deferred services transition and setup costs was estimated at December 31, 2015 to be $ 653 million in 2016, $ 522 million in 2017, $ 366 million in 2018, $ 254 million in 2019 and $ 349 million thereafter. Def erred amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements were $ 184 million and $ 64 million at December 31, 2015 and 2014, respectively. Amortization of deferred amounts paid to clients in excess of the f air value of acquired assets is recorded as an offset of revenue and was estimated at December 31, 2015 to be $ 53 million in 2016, $ 41 million in 2017, $ 39 million in 2018, $ 21 million in 2019 and $ 30 million thereafter. In situations in which an outsourci ng contract is terminated, the terms of the contract may require the client to reimburse the company for the recovery of unbilled accounts receivable, unamortized deferred costs incurred to purchase specific assets utilized in the delivery of services and to pay any additional costs incurred by the company to transition the services. Software Costs Costs that are related to the conceptual formulation and design of licensed software programs are expensed as incurred to research, development and engineeri ng expense; costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Capitalized amounts are amortized on a straight-line basis over periods ranging up to three yea rs and are recorded in software cost within cost of sales. The company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. Costs to support or service licensed programs are charged to software cost wit hin cost of sales as incurred. The company capitalizes certain costs that are incurred to purchase or to create and implement internal-use software programs, including software coding, installation, testing and certain data conversions. These capitalized costs are amortized on a straight-line basis over periods ranging up to two years and are recorded in selling, general and administrative expense. |
Product Warranties | Product Warranties The company offers warranties for its hardware products that generally range up to three years, with the majority being either one or three years. Estimated costs for warranty terms standard to the deliverable are recognized when revenue is recorded for the related deliverable. The company estimates its warranty costs standard to the del iverable based on historical warranty claim experience and estimates of future spending, and applies this estimate to the revenue stream for products under warranty. Estimated future costs for warranties applicable to revenue recognized in the current peri od are charged to cost of sales. The warranty liability is reviewed quarterly to verify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period. Adjustments are made when actual war ranty claim experience differs from estimates. Costs from fixed-price support or maintenance contracts, including extended warranty contracts, are recognized as incurred. Revenue from extended warranty contracts is initially recorded as deferred income a nd subsequently recognized on a straight-line basis over the delivery period. Changes in deferred income for extended warranty contracts, and in the warranty liability for standard warranties, which are included in other accrued expenses and liabilities an d other liabilities in the Consolidated Statement of Financial Position, are presented in the following tables: Standard Warranty Liability ($ in millions) 2015 2014 Balance at January 1 $ 197 $ 376 Current period accruals 173 240 Accrual adjustments to reflect experience* 7 (120) Changes incurred (196) (298) Balance at December 31 $ 181 $ 197 * Includes an adjustment of $(125 million) in 2014 related to the System x business divestiture. Extended Warranty Liability (Deferred Income) ($ in millions) 2015 2014 Balance at January 1 $ 536 $ 579 Revenue deferred for new extended warranty contracts 286 298 Amortization of deferred revenue* (253) (316) Other** (31) (24) Balance at December 31 $ 538 $ 536 Current portion $ 238 $ 254 Noncurrent portion 300 282 * Includes an adjustment of $(21 million) in 2014 related to the System x business divestiture. ** Other consists primarily of foreign currency translation adjustments. |
Shipping and Handling | Shipping and Handling Costs related to shipping and handling are recognized as incurred and included in cost in the Consolidated Statement of Earnings. |
Selling, General and Administrative | Expense and Other Income Selling, General and Administrative Selling, general and administrative (SG&A) expense is charged to income as incurred. Expenses of promoting and selling products and services are classified as selling expense and include such items as compensation, advertising, sales commissions and travel. General and administrative expens e includes such items as compensation, legal costs, office supplies, non-income taxes, insurance and office rental. In addition, general and administrative expense includes other operating items such as an allowance for credit losses, workforce rebalancing charges for contractually obligated payments to employees terminated in the ongoing course of business, acquisition costs related to business combinations, amortization of certain intangible assets and environmental remediation costs. |
Advertising and Promotional Expense | Advertising and Pr omotional Expense The company expenses advertising and promotional costs as incurred. Cooperative advertising reimbursements from vendors are recorded net of advertising and promotional expense in the period in which the related advertising and promotion al expense is incurred. Advertising and promotional expense, which includes media, agency and promotional expense, was $ 1,290 million, $ 1,307 million and $ 1,294 million in 2015, 2014 and 2013, respectively, and is recorded in SG&A expense in the Consolidat ed Statement of Earnings. |
Research, Development and Engineering | Research, Development and Engineering Research, development and engineering (RD&E) costs are expensed as incurred. Software costs that are incurred to produce the finished product after technological feasibility has been estab lished are capitalized as an intangible asset. |
Intellectual Property and Custom Development Income | Intellectual Property and Custom Development Income The company licenses and sells the rights to certain of its intellectual property (IP) including internally developed patents, trade secrets and technol ogical know-how. Certain IP transactions to third parties are licensing/royalty-based and others are transaction-based sales and other transfers. Licensing/royalty-based fees involve transfers in which the company earns the income over time, or the amount of income is not fixed or determinable until the licensee sells future related products (i.e., variable royalty, based upon licensee’s revenue). Sales and other transfers typically include transfers of IP whereby the company has fulfilled its obligations a nd the fee received is fixed or determinable at the transfer date. The company also enters into cross-licensing arrangements of patents, and income from these arrangements is recorded when earned. In addition, the company earns income from certain custom d evelopment projects for strategic technology partners and specific clients. The company records the income from these projects when the fee is realized and earned, is not refundable and is not dependent upon the success of the project. |
Other (Income) and Expense | Other (Income) and Expense Other (income) and expense includes interest income (other than from Global Financing external transactions), gains and losses on certain derivative instruments, gains and losses from securities and other investments, gains and losses from certa in real estate transactions, foreign currency transaction gains and losses, gains and losses from the sale of businesses , other than reported as discontinued operations, and amounts related to accretion of asset retirement obligations. |
Business Combinations and Intangible Assets Including Goodwill | Business Combinations and Intangible Assets Including Goodwill The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are recorded at their acquisition date fair values. Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as a separately identifiable intangible asset. Goodwill recorded in an acquisition is assigned to applicable reporting units b ased on expected revenues. Identifiable intangible assets with finite lives are amortized over their useful lives. Amortization of completed technology is recorded in Cost, and amortization of all other intangible assets is recorded in SG&A expense. Acquis ition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date. |
Impairment | Impairment Long-lived assets, other than goodwill and indefinite-lived intangible assets, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment test is based on undiscounted cash flows and, if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values. Goodwill and indefinite-lived intangible assets are tested annually, in the fourth quarter, for impairment and whenever changes in circumstances indicate an impairment may exist. Goodwill is tested at the reporting unit level which is the operating segment, or a business, which is one level below that operating segment (the “component” level) if discrete financial information is prepared and regularly reviewed by management at the segment level. Components are aggregated as a single reporting unit if they have similar economic characteristics. |
Depreciation and Amortization | Depreciation and Amortization Property, plant and equipment are carried at cost and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of certain depreciable assets are as follows: buildings, 30 to 50 years; building equipment, 1 0 to 20 years; land improvements, 20 years; plant, laboratory and office equipment, 2 to 20 years; and computer equipment, 1.5 to 5 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, rare ly exceeding 25 years. Capitalized software costs incurred or acquired after technological feasibility has been established are amortized over periods ranging up to 3 years. Capitalized costs for internal-use software are amortized on a straight-line bas is over periods ranging up to 2 years. Other intangible assets are amortized over periods between 1 and 7 years. |
Environmental | Environmental The cost of internal environmental protection programs that are preventative in nature are expensed as incurred. When a clean up program becomes likely, and it is probable that the company will incur cleanup costs and those costs can be reasonably estimated, the company accrues remediation costs for known environmental liabilities. The company’s maximum exposure for all environme ntal liabilities cannot be estimated and no amounts are recorded for environmental liabilities that are not probable or estimable. |
Asset Retirement Obligations | Asset Retirement Obligations Asset retirement obligations (ARO) are legal obligations associated with the retirement of long-lived assets. These liabilities are initially recorded at fair value and the related asset retirement costs are capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Asset retirement costs are subsequ ently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the company records period-to-period changes in the ARO liability resulting from the passage of time in interest expense and revisions to either the timing or the amount of the original expected cash flows to the related assets. |
Pension and Nonpension Postretirement Benefit Plans | Defined Benefit Pension and Nonpension Postretirement Benefit Plans The funded status of the company’s defined benefit pension plans and nonpension postretirement benefit plans (ret irement-related benefit plans) is recognized in the Consolidated Statement of Financial Position. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date. For def ined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO), which represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future comp ensation levels. For the nonpension postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation (APBO), which represents the actuarial present value of postretirement benefits attributed to employee services al ready rendered. The fair value of plan assets represents the current market value of assets held in an irrevocable trust fund, held for the sole benefit of participants, which are invested by the trust fund. Overfunded plans, with the fair value of plan as sets exceeding the benefit obligation, are aggregated and recorded as a prepaid pension asset equal to this excess. Underfunded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and nonp ension postretirement benefit obligation equal to this excess. The current portion of the retirement and nonpension postretirement benefit obligations represents the actuarial present value of benefits payable in the next 12 months exceeding the fair val ue of plan assets, measured on a plan-by-plan basis. This obligation is recorded in compensation and benefits in the Consolidated Statement of Financial Position. Net periodic pension and nonpension postretirement benefit cost/(income) is recorded in the Consolidated Statement of Earnings and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs/(credits) and (gains)/losses previously recognized as a component of OCI and amortization of the net transitio n asset remaining in accumulated other comprehensive income/(loss) (AOCI). Service cost represents the actuarial present value of participant benefits earned in the current year. Interest cost represents the time value of money cost associated with the pas sage of time. Certain events, such as changes in the employee base, plan amendments and changes in actuarial assumptions, result in a change in the benefit obligation and the corresponding change in OCI. The result of these events is amortized as a compone nt of net periodic cost/(income) over the service lives or life expectancy of the participants, depending on the plan, provided such amounts exceed thresholds which are based upon the benefit obligation or the value of plan assets. Net periodic cost/(incom e) is recorded in Cost, SG&A and RD&E in the Consolidated Statement of Earnings based on the employees’ respective functions. (Gains)/losses and prior service costs/(credits) not recognized as a component of net periodic cost/(income) in the Consolidated Statement of Earnings as they arise are recognized as a component of OCI in the Consolidated Statement of Comprehensive Income. Those (gains)/losses and prior service costs/(credits) are subsequently recognized as a component of net periodic cost/(income) pursuant to the recognition and amortization provisions of applicable accounting guidance. (Gains)/losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service costs/(c redits) represent the cost of benefit changes attributable to prior service granted in plan amendments. The measurement of benefit obligations and net periodic cost/(income) is based on estimates and assumptions approved by the company’s management. Thes e valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. Defined Contribution Plans The company’s contribution for defined contribution plans is recorded when the employee renders service to the company. The charge is recorded in Cost, SG&A and RD&E i n the Consolidated Statement of Earnings based on the employees’ respective functions. Assumptions Used to Determine Plan Financial Information Underlying both the measurement of benefit obligations and net periodic (income)/cost are actuarial valuations. These valuations use participant-specific information such as salary, age and years of service, as well as certain assumptions, the most significant of which include estimates of discount rates, expected return on pl an assets, rate of compensation increases, interest crediting rates and mortality rates. The company evaluates these assumptions, at a minimum, annually, and makes changes as necessary. Discount Rate The discount rate assumptions used for retirement-related benefit plans accounting reflect the yields available on high-quality, fixed- income debt instruments at the measurement date. For the U.S. and certain non-U.S. countries, a portfolio of high-quality corporate bonds is used to construct a yield curve. The cash flows from the company’s expected benefit obligation payments are then matched to the yield curve to derive the discount rates. In other non-U.S. countries, where the ma rkets for high-quality long-term bonds are not generally as well developed, a portfolio of long-term government bonds is used as a base, to which a credit spread is added to simulate corporate bond yields at these maturities in the jurisdiction of each pla n, as the benchmark for developing the respective discount rates. Expected Long-Term Returns on Plan Assets Expected re turns on plan assets, a component of net periodic (income)/cost, represent the expected long-term returns on plan assets based on the calculated market-related value of plan assets. Expected long-term returns on plan assets take into account long-term expe ctations for future returns and the investment policies and strategies as described on page 1 18 . These rates of return are developed by the company and are tested for reasonableness against historical returns. The use of expected long-term returns on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns, and therefor e result in a pattern of income and cost recognition that more closely matches the pattern of the services provided by the employees. Differences between actual and expected returns are recognized as a component of net loss or gain in AOCI, which is amorti zed as a component of net periodic (income)/cost over the service lives or life expectancy of the plan participants, depending on the plan, provided such amounts exceed certain thresholds provided by accounting standards. The market-related value of plan a ssets recognizes changes in the fair value of plan assets systematically over a five-year period in the expected return on plan assets line in net periodic (income)/cost. Rate of Compensation Increases and Mortality Rate The rate of compensation increases is determined by the company, b ased upon its long-term plans for such increases. Interest Crediting Rate Benefits for certain participants in the PPP are calculated using a cash balance formula. An assumption underlying this formula is an interest crediting rate, which impacts both net periodic (income)/cost and the PBO. This assumption provides a basis for projecting the expected interest rate that participants will earn on the benefits that they are expected to receive in the following year and is based on the average from August to Oc tober of the one-year U.S. Treasury Constant Maturity yield plus one percent. Plan Assets Retirement-related benefit plan assets are recognized and measured at fair value . Because of the inherent uncertainty of valuations, these fair value measurements may not necessarily reflect the amounts the company could real ize in current market transactions. Investment Policies and Strategies The investment objectives of the Qualified PPP portfolio are designed to generate returns that will enable the plan to meet its future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on the current economic environment and other pertinent f actors described on pages 116 through 117 . The Qualified PPP portfolio’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio wi th less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could cause the plan to become underfunded, thereby increasing its dependence on contributions from the company. To mitigate any potential concentration risk, careful consideration is given to balancing the portfolio among industry sectors, companies and geographies, taking into account interest rate sensitivity, dependence on economic growth, curre ncy and other factors that affect investment returns. In 2014, the company changed its investment strategy, modifying the target asset allocation, primarily by reducing equity securities and increasing debt securities. This change was designed to reduce th e potential negative impact that equity markets might have on the funded status of the plan. The Qualified PPP portfolio’s target allocation is 34 percent equity securities, 56 percent fixed-income securities, 5 percent real estate and 5 percent other inve stments. The assets are managed by professional investment firms and investment professionals who are employees of the company. They are bound by investment mandates determined by the company’s management and are measured against specific benchmarks. Am ong these managers, consideration is given, but not limited to, balancing security concentration, issuer concentration, investment style and reliance on particular active and passive investment strategies. Derivatives are used as an effective means to achiev e investment objectives and/or as a component of the plan’s risk management strategy. The primary reasons for the use of derivatives are fixed income management, including duration, interest rate management and credit exposure, cash equitization and to man age currency and commodity strategies. Outside the U.S., the investment objectives are similar to those described above, subject to local regulations. The weighted-average target allocation for the non-U.S. plans is 29 percent equity securities, 58 percent fixed - income securities, 2 percent real estate and 11 percent other investments, which is consistent with the allocation decisions made by the company’s management. The table on page 119 details the actual equity, fixed income, real estate and oth er types of investments for non-U.S. plans. In some countries, a higher percentage allocation to fixed income is required to manage solvency and funding risks. In others, the responsibility for managing the investments typically lies with a board that may include up to 50 percent of members elected by employees and retirees. This can result in slight differences compared with the strategies previously described. Generally, these non-U.S. plans do not invest in illiquid assets and their use of derivatives is consistent with the U.S. plan and mainly for currency hedging, interest rate risk management, credit exposure and alternative investment strategies. The company’s nonpension postretirement benefit plans are underfunded or unfunded. For some plans, the c ompany maintains a nominal, highly liquid trust fund balance to ensure timely benefit payments. Valuation Techniques The following is a description of the valuation techniques used to measure plan assets at fair value. There were no changes in valuation techniques during 2015 and 2014 . Equity securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. IBM common stock is valued at the closing price reported on the New York Stock Exchange. Equity commingled/mutual funds are typically valued using the net asset value (NAV) provi ded by the administrator of the fund and reviewed by the company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of shares or units outstanding. These assets are classified as Level 1, Level 2 or Level 3 depending on availability of quoted market prices. The fair value of fixed - income securities is typically estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are general ly classified as Level 2. If available, they are valued using the closing price reported on the major market on which the individual securities are traded. Cash includes money market accounts that are valued at their cost plus interest on a daily basis, which approximates fair value. Short-term investments represent securities with original maturities of one year or less. These assets are classified as Level 1 or Level 2. Private equity and private real estate partnership valuations require significant judgment due to the absence of quoted market prices, the inherent lack of liquidity and the long-term nature of such assets. These assets are initially valued at cost and are reviewed periodically utilizing available and relevant market data to determine i f the carrying value of these assets should be adjusted. These investments are classified as Level 3. The valuation methodology is applied consistently from period to period. Exchange traded derivatives are valued at the closing price reported on the exc hange on which the individual securities are traded, while forward contracts are valued using a mid-close price. Over-the-counter derivatives are typically valued using pricing models. The models require a variety of inputs, including, for example, yield c urves, credit curves, measures of volatility and foreign exchange rates. These assets are classified as Level 1 or Level 2 depending on availability of quoted market prices. Expected Contributions Defined Benefit Pension Plans It is the company’s gen eral practice to fund amounts for pensions sufficient to meet the minimum requirements set forth in applicable employee benefits laws and local tax laws. From time to time, the company contributes additional amounts as it deems appropriate. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation represents the cost related to stock-based awards granted to employees. The company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost on a straight-line basis (net of estimated forfeitures) over the employee requisite service period. The company grants its employees Restricted Stoc k Units (RSUs), including Retention Restricted Stock Units (RRSUs) and Performance Share Units (PSUs). RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, typically over a one- to five-year perio d. The fair value of the awards is determined and fixed on the grant date based on the company’s stock price, adjusted for the exclusion of dividend equivalents. The company estimates the fair value of stock options using a Black-Scholes valuation model. Stock-based compensation cost is recorded in Cost, SG&A, and RD&E in the Consolidated Statement of Earnings based on the employees’ respective functions The company records deferred tax assets for awards that result in deductions on the company’s income tax returns, based on the amount of compensation cost recognized and the statutory tax rate in the jurisdiction in which it will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the income tax return are recorded in additional paid-in capital (if the tax deduction exceeds the deferred tax asset) or in the Consolidated Statement of Earnings (if the deferred tax asset exceeds the tax deduction and no additiona l paid-in capital exists from previous awards). The fair value of such RSUs is determined and fixed on the grant date based on the company’s stock price adjusted for the exclusion of dividend equivalents. The fair value of each PSU is determined on the grant date , based on the company’s stock price, adjusted for the exclusion of dividend equivalents, and assumes that performance targets will be achieved. Over the performance period, the number of shares of stock that will be issued is adjusted upward or downward b ased upon the probability of achievement of performance targets. The ultimate number of shares issued and the related compensation cost recognized as expense will be based on a comparison of the final performance metrics to the specified targets. . The company estimates the fair value of stock options at the date of grant using the Black-Scholes valuati on model. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the company’s stock, the risk-free rate and the company’s dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the company. |
Income Taxes | Income Taxes Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the tax effect of temporary differences between asset and liability amounts that are recogniz ed for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely than not be realized. In assessing the need for a valuation allowance, management considers all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing ta x planning strategies. When the company changes its determination as to the amount of deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact to income tax expense in the period in which such determination is made. The company recognizes tax liabilities when, despite the company’s belief that its tax return positions are supportable, the company believes that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax pos itions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The current portion of tax liabilities is included in taxes and the noncurrent portion of tax liabilities is included in other li abilities in the Consolidated Statement of Financial Position. To the extent that new information becomes available which causes the company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will imp act income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. |
Translation of Non-U.S. Currency Amounts | Translation of Non-U.S. Currency Amounts Assets a nd liabilities of non-U.S. subsidiaries that have a local functional currency are translated to United States (U.S.) dollars at year-end exchange rates. Translation adjustments are recorded in OCI. Income and expense items are translated at weighted-averag e rates of exchange prevailing during the year. Inventories, property, plant and equipment—net and other non-monetary assets and liabilities of non-U.S. subsidiaries and branches that operate in U.S. dollars are translated at the approximate exchange rat es prevailing when the company acquired the assets or liabilities. All other assets and liabilities denominated in a currency other than U.S. dollars are translated at year-end exchange rates with the transaction gain or loss recognized in other (income) a nd expense. Income and expense items are translated at the weighted-average rates of exchange prevailing during the year. These translation gains and losses are included in net income for the period in which exchange rates change. |
Derivatives Financial Instruments | Derivative Financial In struments Derivatives are recognized in the Consolidated Statement of Financial Position at fair value and are reported in prepaid expenses and other current assets, investments and sundry assets, other accrued expenses and liabilities or other liabiliti es. Classification of each derivative as current or noncurrent is based upon whether the maturity of the instrument is less than or greater than 12 months. To qualify for hedge accounting, the company requires that the instruments be effective in reducing the risk exposure that they are designated to hedge. For instruments that hedge cash flows, hedge designation criteria also require that it be probable that the underlying transaction will occur. Instruments that meet established accounting criteria are fo rmally designated as hedges. These criteria demonstrate that the derivative is expected to be highly effective at offsetting changes in fair value or cash flows of the underlying exposure both at inception of the hedging relationship and on an ongoing basi s. The method of assessing hedge effectiveness and measuring hedge ineffectiveness is formally documented at hedge inception. The company assesses hedge effectiveness and measures hedge ineffectiveness at least quarterly throughout the designated hedge per iod. Where the company applies hedge accounting, the company designates each derivative as a hedge of: (1) the fair value of a recognized financial asset or liability, or of an unrecognized firm commitment (fair value hedge attributable to interest rate or foreign currency risk); (2) the variability of anticipated cash flows of a forecasted transaction, or the cash flows to be received or paid related to a recognized financial asset or liability (cash flow hedge attributable to interest rate or foreign cu rrency risk); or (3) a hedge of a long-term investment (net investment hedge) in a foreign operation. In addition, the company may enter into derivative contracts that economically hedge certain of its risks, even though hedge accounting does not apply or the company elects not to apply hedge accounting. In these cases, there exists a natural hedging relationship in which changes in the fair value of the derivative, which are recognized currently in net income, act as an economic offset to changes in the fa ir value of the underlying hedged item(s). Changes in the fair value of a derivative that is designated as a fair value hedge, along with offse tting changes in the fair value of the underlying hedged exposure, are recorded in earnings each period. For hedges of interest rate risk, the fair value adjustments are recorded as adjustments to interest expense and cost of financing in the Consolidated Statement of Earnings. For hedges of currency risk associated with recorded financial assets or liabilities, derivative fair value adjustments are recognized in other (income) and expense in the Consolidated Statement of Earnings. Changes in the fair value of a derivative that is designated as a cash flow hedge are recorded, net of applicable taxes, in OCI, in the Consolidated Statement of Comprehensive Income. When net income is affected by the variability of the underlying cash flow, the applicable offset ting amount of the gain or loss from the derivative that is deferred in AOCI is released to net income and reported in interest expense, Cost, SG&A expense or other (income) and expense in the Consolidated Statement of Earnings based on the nature of the u nderlying cash flow hedged. Effectiveness for net investment hedging derivatives is measured on a spot-to-spot basis. The effective portion of changes in the fair value of net investment hedging derivatives and other non-derivative financial instruments de signated as net investment hedges are recorded as foreign currency translation adjustments in OCI. Changes in the fair value of the portion of a net investment hedging derivative excluded from the effectiveness assessment are recorded in interest expense. If the underlying hedged item in a fair value hedge ceases to exist, all changes in the fair value of the derivative are included in net income each period until the instrument matures. When the derivative transaction ceases to exist, a hedged asset or lia bility is no longer adjusted for changes in its fair value except as required under other relevant accounting standards. Derivatives that are not designated as hedges, as well as changes in the fair value of derivatives that do not effectively offset cha nges in the fair value of the underlying hedged item throughout the designated hedge period (collectively, “ineffectiveness”), are recorded in net income for each period and are primarily reported in other (income) and expense. When a cash flow hedging rel ationship is discontinued, the net gain or loss in AOCI must generally remain in AOCI until the item that was hedged affects earnings. However, when it is probable that a forecasted transaction will not occur by the end of the originally specified time per iod or within an additional two-month period thereafter, the net gain or loss in AOCI must be reclassified into earnings immediately. The company reports cash flows arising from derivative financial instruments designated as fair value or cash flow hedge s consistent with the classification of cash flows from the underlying hedged items that these derivatives are hedging. Accordingly, the cash flows associated with derivatives designated as fair value or cash flow hedges are classified in cash flows from o perating activities in the Consolidated Statement of Cash Flows. Cash flows from derivatives designated as net investment hedges and derivatives that do not qualify as hedges are reported in cash flows from investing activities in the Consolidated Statemen t of Cash Flows. For currency swaps designated as hedges of foreign currency denominated debt (included in the company’s debt risk management program as addressed in note D, “Financial Instruments,” on pages 84 through 88 ), cash flows directly associated with the settlement of the principal element of these swaps are reported in payments to settle debt in cash flows from financing activities in the Consolidated Statement of Cash Flows. The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity and commodity price changes and client credit risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the company’s lease and other financial asset s and the interest rates associated with its financing debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchange rate flu ctuations. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the company has a policy of only entering into contracts with carefully selected major financial institutions based upon their overall credit profile. The company’s established policies and procedures for mitigating credit risk on principal transactions include reviewing and esta blishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangement to net amounts d ue to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with most of its major derivative counterparties. These arrangements require t he company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings receive d from the major credit agencies. Full collateralization of these agreements would be required in the event that the company’s credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuan t to the terms of the collateral security arrangements. In the Consolidated Statement of Financial Position, the company does not offset derivative assets against liabilities in master netting arran gements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. The company restricts the use of cash collateral received to rehypothecation , and therefore reports it in prepaid expenses and other current assets in the Consolidated Statement of Financial Position. The company may employ derivative instruments to hedge the volatility in stockholders’ equity resulting from changes in currency exchange rates of significant foreign subsidiaries of the company with respect to the U.S. dollar. These instruments, designated as net investment hedges, expose the company to liquidity risk as the derivatives have an immediate cash flow impact upon maturity which is not offset by a cash flow from the translation of the underlying hedged equity. The company monitors this cash loss potential on an ongoing basis, and may disconti nue some of these hedging relationships by de-designating or terminating the derivative instrument in order to manage the liquidity risk. Although not designated as accounting hedges, the company may utilize derivatives to offset the changes in the fair va lue of the de-designated instruments from the date of de-designation until maturity. In its hedging programs, the company uses forward contracts, futures contracts, interest-rate swaps, cross-currency swaps and options depending upon the underlying expos ure. The company is not a party to leveraged derivative instruments. The company issues debt in the global capital markets, principally to fund its financing lease and loan portfolio. Access to cost-effective financing can result in interest rate mismatches with the underlying assets. To manage these mismatches and to reduce overall interest cost, the company uses interest rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). The company is exposed to interest rate volatility on future debt issuances. To manage this risk, the company may use forward-starting interest rate swaps to lock in the rate on the interest payments related to the forecasted deb t issuance. These swaps are accounted for as cash flow hedges. A large portion of the company’s foreign currency denomi nated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with resp ect to the U.S. dollar. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. The company’s operati ons generate significant nonfunctional currency, third-party vendor payments and intercompany payments for royalties and goods and services among the company’s non-U.S. subsidiaries and with the parent company. In anticipation of these foreign currency cas h flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum length of time over wh ich the company is hedging its exposure to the variability in future cash flows is four years. The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps are accounted for as cash flow hedges. The maximum length of time over which the company hedges its exposure to the variability in future cash flows is approximately seven years. The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition , the company uses foreign exchange forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are genera lly less than one year. The changes in the fair values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Statement of Earnings. The company is exposed to market price changes in certain broad market indice s and in the company’s own stock primarily related to certain obligations to employees. Changes in the overall value of these employee compensation obligations are recorded in SG&A expense in the Consolidated Statement of Earnings. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock. They are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Statement of Earnings. The company may hold warrants to purchase shares of common stock in connection with various investments that are deemed derivatives bec ause they contain net share or net cash settlement provisions. The company records the changes in the fair value of these warrants in other (income) and expense in the Consolidated Statement of Earnings. The company is exposed to a potential loss if a client fails to pay amounts due under contractual terms. The company may utilize credit default swaps to economically hedge its credit exposures. These derivatives have terms of one year or less. The swaps are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. The company is exposed to market volatility on certain investment securities. The company may utilize options or forwards to economically hedge its market exposure. The derivatives are recorded at fair val ue with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. |
Financial Instruments | Financial Instruments In determining the fair value of its financi al instruments, the company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. See note D, “Financial Instruments,” on pages 83 to 84 for further information. All methods of assess ing fair value result in a general approximation of value, and such value may never actually be realized. Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Loans and Long-Term Receivables Fair values are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remainin g maturities. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Long-Term Debt Fair value of publicly traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. If measured at fair value in the financial statements, long-term debt (including the current portion) would b e classified as Level 2 in the fair value hierarchy. |
Fair Value Measurement | Fair Value Measurement Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the company is required to classify certain assets and liabilities based on the following fair value hierarchy: Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either direc tly or indirectly; and Level 3—Unobservable inputs for the asset or liability. The guidance requires the use of observable market data if such data is available without undue cost and effort. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuatio n. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount ra tes commensurate with the duration of the instrument. In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the “base valuations” calculated using the methodologies described below for sever al parameters that market participants would consider in determining fair value: Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. Credit risk adjustments are applied to reflect the company’s own credit risk when valuing all liabilities measured at fair value. The methodology is cons istent with that applied in developing counterparty credit risk adjustments, but incorporates the company’s own credit risk as observed in the credit default swap market. As an example, the fair value of derivatives is derived utilizing a discounted cash flow model that uses observable market inputs such as known notional value amounts, yield curves, spot and forward exchange rates as well as discount rates. These inputs relate to liquid, heavily traded currencies with active markets which are available f or the full term of the derivative. Certain financial assets are measured at fair value on a nonrecurring basis. These assets include equity method investments that are recognized at fair value at the measurement date to the extent that they are deemed t o be other-than-temporarily impaired. Certain assets that are measured at fair value on a recurring basis can be subject to nonrecurring fair value measurements. These assets include available-for-sale equity investments that are deemed to be other-than-te mporarily impaired. In the event of an other-than-temporary impairment of a financial instrument, fair value is measured using a model described above. Accounting guidance permits the measurement of eligible financial assets, financial liabilities and fi rm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. This election is irrevocable. The company has not applied the fair value option to any eligible assets or liabilities. |
Cash Equivalents | Cash Equivalents All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents. |
Marketable Securities | Marketable Securities Debt securities included in current assets represent securities that are expected to be realized in cash within one year of the balance sheet date. Long-term debt securities that are not expected to be realized in cash within one year and alliance equity securities are included in investments and s undry assets. Debt and marketable equity securities are considered available for sale and are reported at fair value with unrealized gains and losses, net of applicable taxes, in OCI. The realized gains and losses for available-for-sale securities are incl uded in other (income) and expense in the Consolidated Statement of Earnings. Realized gains and losses are calculated based on the specific identification method. In determining whether an other-than-temporary decline in market value has occurred, the c ompany considers the duration that, and extent to which, the fair value of the investment is below its cost, the financial condition and near-term prospects of the issuer or underlying collateral of a security; and the company’s intent and ability to retai n the security in order to allow for an anticipated recovery in fair value. Other-than-temporary declines in fair value from amortized cost for available-for-sale equity and debt securities that the company intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis are charged to other (income) and expense in the period in which the loss occurs. For debt securities that the company has no intent to sell and believes that it more likely than no t will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in other (income) and expense, while the remaining loss is recognized in OCI. The credit loss component recognized in other (income) and expens e is identified as the amount of the principal cash flows not expected to be received over the remaining term of the debt security as projected using the company’s cash flow projections. |
Inventories | Inventories Raw materials, work in process and finished goods are stated at the lower of average cost or market. Cash flows related to the sale of inventories are reflected in net cash provided by operating activities in the Consolidated Statement of Cash Flows. |
Allowance for Credit Losses | Allowance for Credit Losses Receivables are recorded concurrent with billing and shipment of a product and/or delivery of a service to customers. A reasonable estimate of probable net losses on the value of customer receivables is recognized by establishing an allowance for credit losses. |
Notes and Accounts Receivable-Trade | Notes and Account s Receivable—Trade An allowance for uncollectible trade receivables is estimated based on a combination of write-off history, aging analysis and any specific, known troubled accounts. |
Financing Receivables | Financing Receivables Financing receivables include sales-type lea ses, direct financing leases and loans. Leases are accounted for in accordance with lease accounting standards. Loan receivables are financial assets recorded at amortized cost which approximates fair value. The company determines its allowances for credit losses on financing receivables based on two portfolio segments: lease receivables and loan receivables. The company further segments the portfolio into two classes: major markets and growth markets. When calculating the allowances, the company consider s its ability to mitigate a potential loss by repossessing leased equipment and by considering the current fair market value of any other collateral. The value of the equipment is the net realizable value. The allowance for credit losses for capital leases , installment sales and customer loans includes an assessment of the entire balance of the capital lease or loan, including amounts not yet due. The methodologies that the company uses to calculate its receivables reserves, which are applied consistently t o its different portfolios, are as follows: Individually Evaluated—The company reviews all financing receivables considered at risk on a quarterly basis. The review primarily consists of an analysis based upon current information available about the clie nt, such as financial statements, news reports, published credit ratings, current market-implied credit analysis, as well as the current economic environment, collateral net of repossession cost and prior collection history. For loans that are collateral d ependent, impairment is measured using the fair value of the collateral when foreclosure is probable. Using this information, the company determines the expected cash flow for the receivable and calculates an estimate of the potential loss and the probabil ity of loss. For those accounts in which the loss is probable, the company records a specific reserve. Collectively Evaluated—The company records an unallocated reserve that is calculated by applying a reserve rate to its different portfolios, excluding accounts that have been specifically reserved. This reserve rate is based upon credit rating, probability of default, term, characteristics (lease/loan) and loss history. Factors that could result in actual receivable losses that are materially different f rom the estimated reserve include sharp changes in the economy, or a significant change in the economic health of a particular client that represents a concentration in the company’s receivables portfolio. |
Other Credit-Related Policies | Other Credit-Related Policies Non-Accrual—Cert ain receivables for which the company has recorded a specific reserve may also be placed on non-accrual status. Non-accrual assets are those receivables (impaired loans or nonperforming leases) with specific reserves and other accounts for which it is like ly that the company will be unable to collect all amounts due according to original terms of the lease or loan agreement. Income recognition is discontinued on these receivables. Cash collections are first applied as a reduction to principal outstanding. A ny cash received in excess of principal payments outstanding is recognized as interest income. Receivables may be removed from non-accrual status, if appropriate, based upon changes in client circumstances. Write Off—Receivable losses are charged against the allowance when management believes the uncollectibility of the receivable is confirmed. Subsequent recoveries, if any, are credited to the allowance. Past Due—The company views receivables as past due when payment has not been received after 90 days , measured from the original billing date. Impaired Loans—As stated above, the company evaluates all financing receivables considered at-risk, including loans, for impairment on a quarterly basis. The company considers any loan with an individually evalu ated reserve as an impaired loan. Depending on the level of impairment, loans will also be placed on non-accrual status as appropriate. Client loans are primarily for software and services and are unsecured. These loans are subjected to credit analysis to evaluate the associated risk and, when deemed necessary, actions are taken to mitigate risks in the loan agreements which include covenants to protect against credit deterioration during the life of the obligation. |
Estimated Residual Values of Lease Assets | Estimated Residual Values of Lease Asse ts The recorded residual values of lease assets are estimated at the inception of the lease to be the expected fair value of the assets at the end of the lease term. The company periodically reassesses the realizable value of its lease residual values. A ny anticipated increases in specific future residual values are not recognized before realization through remarketing efforts. Anticipated decreases in specific future residual values that are considered to be other-than-temporary are recognized immediatel y upon identification and are recorded as an adjustment to the residual value estimate. For sales-type and direct-financing leases, this reduction lowers the recorded net investment and is recognized as a loss charged to financing income in the period in w hich the estimate is changed, as well as an adjustment to unearned income to reduce future-period financing income. |
Common Stock | Common Stock Common stock refers to the $.20 par value per share capital stock as designated in the company’s Certificate of Incorporati on. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis. |
Earnings Per Share of Common Stock | Earnings Per Share of Common Stock Earnings per share (EPS) is computed using the two-class m ethod. The two-class method determines EPS for each class of common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings. Basic EPS of common stock is compute d by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS of common stock is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock awards, convertible notes and stock options. |
Debt and Marketable Equity Securities | The company’s cash equivalents and current debt securities are considered available-for-sale and recorded at fair value, which is not materially different from c arrying value, in the Consolidated Statement of Financial Position. |
Financing Receivables, Allowance for Credit Losses | The company determines its allowance for credit losses based on two portfolio segments: lease receivables and loan receivables, and further segments the portfo lio into two classes: major markets and growth markets. When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For individually evaluated receivables, the company determines the expected cash flow for the receivable and calculates an estimate of the potential loss and the probability of loss. For those accounts in which the loss is probable, the company records a specific reserve. In addition, the company records an unallocated reserve that is calculated by applying a reserve rate to its different portfolios, excluding accounts that have been specifically reserved. This reserve rate is based upon credit rating, probability of default, term, characteristics (lease/loan) and loss history. |
Impaired Loans and Credit Quality Indicators | The company considers any loan with an individually evaluated reserve as an impaired loan. Depending on the level of impairment, loans will also be placed on a non-accrual status. The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit rating . Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators do not reflect mitigation actions that the company may take to transfer credit risk to third parties. |
Commitments and Contingencies | The company records a provision with r espect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In accordance with the relevant accounting guidance, the company provides disclosures of matters for which the likelihood of material loss is at least reas onably possible. In addition, the company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer and employee relations considerations. With respect to certain of the claims, suits, investigations and proceedings discussed herein, the company believes at this time that the likelihood of any material loss is remote, given, for example, the procedural status, court rulings, and/or the str ength of the company’s defenses in those matters. With respect to the remaining claims, suits, investigations and proceedings discussed in this Note, except as specifically discussed herein, the company is unable to provide estimates of reasonably possible losses or range of losses, including losses in excess of amounts accrued, if any, for the following reasons. Claims, suits, investigations and proceedings are inherently uncertain, and it is not possible to predict the ultimate outcome of these matters. I t is the company’s experience that damage amounts claimed in litigation against it are unreliable and unrelated to possible outcomes, and as such are not meaningful indicators of the company’s potential liability. Further, the company is unable to provide such an estimate due to a number of other factors with respect to these claims, suits, investigations and proceedings, including considerations of the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. The company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasona bly possible losses or range of losses (individually or in the aggregate), to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter. The company has applied the guidance requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the company is the guaran tor. |
Segment Reporting | The company continues to have five reportable segments as follows: The Cognitive Solutions segment includes solutions units that address many of the company’s strategic areas, including analytics, c ommerce and security, several of the new initiatives around Watson, Watson Health, Watson Internet of Things and Transaction Processing Software. The Technology Services & Cloud Platforms segment includes the company’s cloud infrastructure and platform cap abilities, the previously reported Global Technology Services business and Integration Software. Operating Systems Software has been aligned with the underlying hardware platforms in the Systems segment. The Global Business Services and Global Financing se gments remain unchanged. The segments represent com ponents of the company for which separate financial information is available that is utilized on a regular basis by the chief executive officer in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Segment revenue and pre-tax income include transactions between the segments that are intended to reflect an arm’s-length, market- based transfer price. Systems that are used by Technology Services & Cloud Platforms in outsourcing engagements are primarily sourced internally from the Systems segment and software is sourced from various segments. Software used by Technology Services & Cloud Platforms on external engagements is sourced internally through Cognitive Solutions and the Systems segments. For providing IT services that are used internally, Technology Services & Cloud Platforms and Global Business Services recover cost, as well as a reasonable fee, that is intended to reflect the arm’s-length value of providing the services. They enter into arm’s-length loans at prices equivalent to market rates with Global Financing to facilitate the acquisition of equipment used in services en gagements. All internal transaction prices are reviewed annually, and reset if appropriate. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the company’s management system, e.g., adve rtising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associated with the elimination of internal transactions and other miscellaneous items. To ensure the efficient use of the company’s space and equipment, several segments may share plant, property and equipment assets. Where assets are shared, landlord ownership of the assets is assigned to one segment and is not allocated to each user segment. This is consistent with the company’s management sys tem and is reflected accordingly in the table on page 127. In those cases, there will not be a precise correlation between segment pre-tax income and segment assets. Similarly, the depreciation amounts reported by each segment are based on the assigned l andlord ownership and may not be consistent with the amounts that are included in the segments’ pre-tax income. The amounts that are included in pre-tax income reflect occupancy charges from the landlord segment and are not specifically identified by the m anagement reporting system. Capital expenditures that are reported by each segment also are consistent with the landlord ownership basis of asset assignment. Global Financing amounts for interest income and interest expense reflect the interest income an d interest expense associated with the Global Financing business, including the intercompany financing activities discussed on page 11 , as well as the income from investment in cash and marketable securities. The explanation of the difference between cost of financing and interest expense for segment presentation versus presentation in the Consolidated Statement of Earnings is included on page 56 of the Management Discussion. Client solutions often include IBM software and systems and other suppliers’ products if the client solution requires it. For each of the segments that include services; software-as-a-service, consulting, education, training and other product-related services are included as services. For each of these segments, software includes product license charges and ongoing subscriptions . |
Significant Accounting Polici31
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Significant Accounting Policies | |
Changes in warranty liabilities | Standard Warranty Liability ($ in millions) 2015 2014 Balance at January 1 $ 197 $ 376 Current period accruals 173 240 Accrual adjustments to reflect experience* 7 (120) Changes incurred (196) (298) Balance at December 31 $ 181 $ 197 * Includes an adjustment of $(125 million) in 2014 related to the System x business divestiture. Extended Warranty Liability (Deferred Income) ($ in millions) 2015 2014 Balance at January 1 $ 536 $ 579 Revenue deferred for new extended warranty contracts 286 298 Amortization of deferred revenue* (253) (316) Other** (31) (24) Balance at December 31 $ 538 $ 536 Current portion $ 238 $ 254 Noncurrent portion 300 282 * Includes an adjustment of $(21 million) in 2014 related to the System x business divestiture. ** Other consists primarily of foreign currency translation adjustments. |
Acquisitions_Divestitures (Tabl
Acquisitions/Divestitures (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Acquisitions/Divestitures | |
Business acquisition, purchase price allocation | 2015 Acquisitions Amortization Other ($ in millions) Life (in Years) Merge Cleversafe Acquisitions Current assets $ 94 $ 23 $ 60 Fixed assets/noncurrent assets 128 63 82 Intangible assets Goodwill N/A 695 1,000 895 Completed technology 5 - 7 133 364 163 Client relationships 5 - 7 145 23 95 Patents/trademarks 2 - 7 54 11 23 Total assets acquired 1,248 1,484 1,318 Current liabilities (73) (15) (34) Noncurrent liabilities (139) (160) (73) Total liabilities assumed (212) (175) (107) Total purchase price $ 1,036 $ 1,309 $ 1,210 N/A - not applicable 2014 Acquisitions Amortization Total ($ in millions) Life (in Years) Acquisitions Current assets $ 56 Fixed assets/noncurrent assets 39 Intangible assets Goodwill N/A 442 Completed technology 5-7 68 Client relationships 7 77 Patents/trademarks 1-7 18 Total assets acquired 701 Current liabilities (26) Noncurrent liabilities (67) Total liabilities assumed (93) Total purchase price $ 608 N/A - Not applicable 2013 Acquisitions Amortization Other ($ in millions) Life (in Years) SoftLayer Acquisitions Current assets $ 80 $ 97 Fixed assets/noncurrent assets 300 41 Intangible assets Goodwill N/A 1,285 961 Completed technology 5-7 290 181 Client relationships 6-7 245 97 In-process R&D N/A 2 — Patents/trademarks 2-7 75 32 Total assets acquired 2,277 1,408 Current liabilities (56) (61) Noncurrent liabilities (244) (105) Total liabilities assumed (300) (166) Total purchase price $ 1,977 $ 1,242 N/A - not applicable |
Discontinued operation, summarized financial information | ($ in millions) For the year ended December 31: 2015 2014 2013 Total revenue $ 720 $ 1,335 $ 1,384 Loss from discontinued operations, before tax (175) (619) (720) Loss on disposal, before tax (116) (4,726) — Total loss from discontinued operations, before income taxes (291) (5,346) (720) Provision/(benefit) for income taxes (117) (1,617) (322) Loss from discontinued operations, net of tax $ (174) $ (3,729) $ (398) The assets and liabilities at December 31, 2014 presented below were classified as held for sale. ($ in millions) At December 31: 2015 2014 Assets: Accounts receivable $ — $ 245 Inventory — 380 Property, plant & equipment, net — — Other assets — 92 Total assets $ — $ 717 Liabilities: Accounts payable $ — $ 177 Deferred income — 87 Other liabilities — 163 Total liabilities $ — $ 427 |
Financial Instruments (Tables)
Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Financial Instruments | |
Financial assets and financial liabilities measured at fair value on a recurring basis | ($ in millions) At December 31, 2015: Level 1 Level 2 Level 3 Total Assets Cash equivalents(1) Time deposits and certificates of deposit $ — $ 2,856 $ — $ 2,856 Money market funds 2,069 — — 2,069 Other securities — 18 — 18 Total 2,069 2,874 — 4,943 (6) Debt securities — current (2) — 506 — 506 (6) Debt securities — noncurrent (3) 1 6 — 8 Trading security investments (3) 28 — — 28 Available-for-sale equity investments (3) 192 — — 192 Derivative assets (4) Interest rate contracts — 656 — 656 Foreign exchange contracts — 332 — 332 Equity contracts — 6 — 6 Total — 994 — 994 (7) Total assets $ 2,290 $ 4,381 $ — $ 6,671 (7) Liabilities Derivative liabilities (5) Foreign exchange contracts $ — $ 164 $ — $ 164 Equity contracts — 19 — 19 Interest rate contracts — 3 — 3 Total liabilities $ — $ 186 $ — $ 186 (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Commercial paper and certificates of deposit reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statemen t of Financial Position at December 31, 2015 were $292 million and $702 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2015 were $164 million and $22 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $139 million each. ($ in millions) At December 31, 2014: Level 1 Level 2 Level 3 Total Assets Cash equivalents(1) Time deposits and certificates of deposit $ — $ 3,517 $ — $ 3,517 Commercial paper — 764 — 764 Money market funds 662 — — 662 U.S. government securities — 410 — 410 Other securities — 6 — 6 Total 662 4,697 — 5,359 (5) Debt securities — noncurrent (2) 1 8 — 9 Trading security investments (2) 74 — — 74 Available-for-sale equity investments (2) 243 — — 243 Derivative assets (3) Interest rate contracts — 633 — 633 Foreign exchange contracts — 775 — 775 Equity contracts — 24 — 24 Total — 1,432 — 1,432 (6) Total assets $ 980 $ 6,138 $ — $ 7,118 (6) Liabilities Derivative liabilities (4) Foreign exchange contracts $ — $ 177 $ — $ 177 Equity contracts — 19 — 19 Total liabilities $ — $ 196 $ — $ 196 (6) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (3) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2014 were $751 million and $681 million, respectivel y. (4) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2014 were $165 million and $31 million, respectively . (5) Available-for-sale securities with carrying values that approximate fair value. (6) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative as set and liability positions would have been reduced by $ 97 million each. |
Noncurrent debt and marketable equity securities available-for-sale and recorded at fair value | ($ in millions) Gross Gross Adjusted Unrealized Unrealized Fair At December 31, 2015: Cost Gains Losses Value Debt securities – noncurrent(1) $ 5 $ 3 $ — $ 8 Available-for-sale equity investments (1) $ 186 $ 6 $ 0 $ 192 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. ($ in millions) Gross Gross Adjusted Unrealized Unrealized Fair At December 31, 2014: Cost Gains Losses Value Debt securities – noncurrent (1) $ 7 $ 3 $ — $ 9 Available-for-sale equity investments (1) $ 272 $ 2 $ 31 $ 243 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. |
Sales of debt and available-for-sale equity investments | ($ in millions) For the year ended December 31: 2015 2014 2013 Proceeds $ 8 $ 21 $ 41 Gross realized gains (before taxes) 1 0 13 Gross realized losses (before taxes) 1 5 5 |
Unrealized gains/(losses) on available-for-sale debt and equity securities | ($ in millions) For the year ended December 31: 2015 2014 Net unrealized gains/(losses) arising during the period $ (33) $ (18) Net unrealized (gains)/losses reclassified to net income * 53 3 * Includes pre-tax writedowns of $86 million in 2015. There were no writedowns in 2014. |
Fair Value of Derivative Instruments in the Consolidated Statement of Financial Position | Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position ($ in millions) Fair Value of Derivative Assets Fair Value of Derivative Liabilities Balance Sheet Balance Sheet At December 31: Classification 2015 2014 Classification 2015 2014 Designated as hedging instruments Interest rate contracts Prepaid expenses and Other accrued other current assets $ — $ 5 expenses and liabilities $ — $ 0 Investments and sundry assets 656 628 Other liabilities 3 — Foreign exchange Prepaid expenses and Other accrued contracts other current assets 197 632 expenses and liabilities 70 50 Investments and sundry assets 5 17 Other liabilities 19 21 Fair value of derivative Fair value of derivative assets $ 858 $ 1,281 liabilities $ 92 $ 72 Not designated as hedging instruments Foreign exchange Prepaid expenses and Other accrued contracts other current assets $ 90 $ 90 expenses and liabilities $ 75 $ 101 Investments and sundry assets 40 37 Other liabilities — 4 Equity contracts Prepaid expenses and Other accrued other current assets 6 24 expenses and liabilities 19 14 Investments and sundry assets — 0 Other liabilities — 5 Fair value of derivative Fair value of derivative assets $ 136 $ 151 liabilities $ 94 $ 125 Total debt designated as hedging instruments Short-term debt N/A N/A $ — $ 0 Long-term debt N/A N/A $ 7,945 $ 7,747 * Total $ 994 $ 1,432 $ 8,131 $ 7,944 * * Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to Note B, "Accounting Changes," for additional information. N/A-not applicable |
Effect of Derivative Instruments in the Consolidated Statement of Earnings | The Effect of Derivative Instruments in the Consolidated Statement of Earnings ($ in millions) Gain/(Loss) Recognized in Earnings Consolidated Statement of Earnings Recognized on Attributable to Risk Line Item Derivatives(1) Being Hedged(2) For the year ended December 31: 2015 2014 2013 2015 2014 2013 Derivative instruments in fair value hedges(5) Interest rate contracts Cost of financing $ 108 $ 231 $ (109) $ (1) $ (127) $ 202 Interest expense 94 206 (74) (1) (114) 138 Derivative instruments not designated as hedging instruments(1) Foreign exchange contracts Other (income) and expense 127 (776) (328) N/A N/A N/A Interest rate contracts Other (income) and expense (1) 34 — N/A N/A N/A Equity contracts SG&A expense (27) 51 164 N/A N/A N/A Other (income) and expense (9) (9) — N/A N/A N/A Total $ 291 $ (263) $ (347) $ (1) $ (241) $ 340 ($ in millions) Gain/(Loss) Recognized in Earnings and Other Comprehensive Income Consolidated Statement of Ineffectiveness and Effective Portion Earnings Effective Portion Amounts Excluded from For the year Recognized in OCI Line Item Reclassified from AOCI Effectiveness Testing(3) ended December 31: 2015 2014 2013 2015 2014 2013 2015 2014 2013 Derivative instruments in cash flow hedges Interest rate contracts $ — $ — $ — Interest expense $ 0 $ (1) $ — $ — $ — $ — Foreign exchange Other (income) contracts 618 958 43 and expense 731 98 162 5 (1) 0 Cost of sales 192 (15) (34) — — — SG&A expense 149 15 39 — — — Instruments in net investment hedges(4) Foreign exchange contracts 889 1,136 173 Interest expense — — — 13 0 3 Total $ 1,507 $ 2,095 $ 216 $ 1,072 $ 97 $ 167 $ 18 $ (1) $ 3 (1) The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts. (2) The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period. (3) The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships. (4) Instruments in net investment hedges include derivative and non-derivative instruments. (5) For the years ended December 31, 2015 and December 31, 2014 , fair value hedges resulted in a loss of $ 2 million and a gain of $ 4 million in ineffectiveness, respectively. There were no amounts recorded as ineffectiveness on fair value hedges for the year ended December 31, 2013 . N/A—Not applicable |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventories | |
Inventories | ($ in millions) At December 31: 2015 2014 Finished goods $ 352 $ 430 Work in process and raw materials 1,199 1,674 Total $ 1,551 $ 2,103 |
Financing Receivables (Tables)
Financing Receivables (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Financing Receivables | |
Schedule of financing receivables, net of allowances for credit losses, including residual values | ($ in millions) At December 31: 2015 2014 Current Net investment in sales-type and direct financing leases $ 3,057 $ 3,781 Commercial financing receivables 8,948 8,423 Client loan and installment payment receivables (loans) 7,015 7,631 Total $ 19,020 $ 19,835 Noncurrent Net investment in sales-type and direct financing leases $ 4,501 $ 4,449 Client loan and installment payment receivables (loans) 5,512 6,660 Total $ 10,013 $ 11,109 |
Schedule of financing receivables and allowance for credit losses by portfolio segment | ($ in millions) Major Growth At December 31, 2015: Markets Markets Total Financing receivables Lease receivables $ 5,517 $ 1,524 $ 7,041 Loan receivables 9,739 3,165 12,904 Ending balance $ 15,256 $ 4,689 $ 19,945 Collectively evaluated for impairment $ 15,180 $ 4,227 $ 19,406 Individually evaluated for impairment $ 76 $ 462 $ 539 Allowance for credit losses Beginning balance at January 1, 2015 Lease receivables $ 32 $ 133 $ 165 Loan receivables 79 317 396 Total $ 111 $ 450 $ 561 Write-offs (14) (48) (62) Provision 20 122 141 Other (8) (43) (51) Ending balance at December 31, 2015 $ 109 $ 481 $ 590 Lease receivables $ 25 $ 188 $ 213 Loan receivables $ 83 $ 293 $ 377 Collectively evaluated for impairment $ 43 $ 36 $ 79 Individually evaluated for impairment $ 65 $ 445 $ 511 ($ in millions) Major Growth At December 31, 2014: Markets Markets Total Financing receivables Lease receivables $ 5,702 $ 1,943 $ 7,645 Loan receivables 10,049 4,639 14,687 Ending balance $ 15,751 $ 6,581 $ 22,332 Collectively evaluated for impairment $ 15,665 $ 6,156 $ 21,821 Individually evaluated for impairment $ 86 $ 425 $ 511 Allowance for credit losses Beginning balance at January 1, 2014 Lease receivables $ 42 $ 80 $ 123 Loan receivables 95 147 242 Total $ 137 $ 228 $ 365 Write-offs (18) (6) (24) Provision 3 240 243 Other (12) (11) (23) Ending balance at December 31, 2014 $ 111 $ 450 $ 561 Lease receivables $ 32 $ 133 $ 165 Loan receivables $ 79 $ 317 $ 396 Collectively evaluated for impairment $ 42 $ 39 $ 81 Individually evaluated for impairment $ 69 $ 411 $ 480 |
Schedule of recorded investment in financing receivables which are on Non-Accrual Status | ($ in millions) At December 31: 2015 2014 Major markets $ 2 $ 13 Growth markets 63 40 Total lease receivables $ 65 $ 53 Major markets $ 13 $ 27 Growth markets 91 151 Total loan receivables $ 104 $ 178 Total receivables $ 168 $ 231 |
Schedule of impaired client loan receivables | ($ in millions) Recorded Related At December 31, 2015: Investment Allowance Major markets $ 50 $ 47 Growth markets 297 284 Total $ 347 $ 331 ($ in millions) Recorded Related At December 31, 2014: Investment Allowance Major markets $ 54 $ 47 Growth markets 299 293 Total $ 353 $ 340 ($ in millions) Interest Average Interest Income Recorded Income Recognized on For the year ended December 31, 2015: Investment Recognized Cash Basis Major markets $ 51 $ 0 $ — Growth markets 315 0 — Total $ 367 $ 0 $ — ($ in millions) Interest Average Interest Income Recorded Income Recognized on For the year ended December 31, 2014: Investment Recognized Cash Basis Major markets $ 68 $ 0 $ — Growth markets 208 0 — Total $ 276 $ 0 $ — |
Schedule of gross recorded investment by credit quality indicator | Lease Receivables ($ in millions) Major Growth At December 31, 2015: Markets Markets Credit Rating Aaa – Aa3 $ 538 $ 39 A1 – A3 1,324 162 Baa1 – Baa3 1,493 392 Ba1 – Ba2 1,214 352 Ba3 – B1 513 277 B2 – B3 403 215 Caa – D 33 87 Total $ 5,517 $ 1,524 Loan Receivables ($ in millions) Major Growth At December 31, 2015: Markets Markets Credit Rating Aaa – Aa3 $ 949 $ 80 A1 – A3 2,338 336 Baa1 – Baa3 2,635 813 Ba1 – Ba2 2,143 732 Ba3 – B1 905 576 B2 – B3 711 447 Caa – D 59 181 Total $ 9,739 $ 3,165 Lease Receivables ($ in millions) Major Growth At December 31, 2014: Markets Markets Credit Rating Aaa – Aa3 $ 563 $ 46 A1 – A3 1,384 178 Baa1 – Baa3 1,704 900 Ba1 – Ba2 1,154 272 Ba3 – B1 470 286 B2 – B3 372 176 Caa – D 55 85 Total $ 5,702 $ 1,943 Loan Receivables ($ in millions) Major Growth At December 31, 2014: Markets Markets Credit Rating Aaa – Aa3 $ 993 $ 110 A1 – A3 2,438 425 Baa1 – Baa3 3,003 2,148 Ba1 – Ba2 2,034 649 Ba3 – B1 827 683 B2 – B3 655 420 Caa – D 98 203 Total $ 10,049 $ 4,639 |
Schedule of past due financing receivables | ($ in millions) Recorded Total Total Investment Past Due Financing > 90 Days At December 31, 2015: > 90 days* Current Receivables and Accruing Major markets $ 5 $ 5,512 $ 5,517 $ 5 Growth markets 30 1,494 1,524 13 Total lease receivables $ 35 $ 7,006 $ 7,041 $ 19 Major markets $ 7 $ 9,732 $ 9,739 $ 7 Growth markets 31 3,134 3,165 14 Total loan receivables $ 38 $ 12,866 $ 12,904 $ 22 Total $ 73 $ 19,872 $ 19,945 $ 40 * Does not include accounts that are fully reserved. ($ in millions) Recorded Total Total Investment Past Due Financing > 90 Days At December 31, 2014: > 90 days* Current Receivables and Accruing Major markets $ 6 $ 5,696 $ 5,702 $ 6 Growth markets 32 1,911 1,943 14 Total lease receivables $ 38 $ 7,607 $ 7,645 $ 20 Major markets $ 9 $ 10,040 $ 10,049 $ 9 Growth markets 35 4,603 4,639 18 Total loan receivables $ 44 $ 14,643 $ 14,687 $ 27 Total $ 82 $ 22,250 $ 22,332 $ 47 * Does not include accounts that are fully reserved. |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | ($ in millions) At December 31: 2015 2014 Land and land improvements $ 558 $ 667 Buildings and building improvements 6,552 9,524 Plant, laboratory and office equipment 21,116 27,388 Plant and other property—gross 28,226 37,578 Less: Accumulated depreciation 18,051 27,500 Plant and other property—net 10,176 10,078 Rental machines 1,115 1,456 Less: Accumulated depreciation 565 763 Rental machines—net 551 693 Total—net $ 10,727 $ 10,771 |
Investments and Sundry Assets (
Investments and Sundry Assets (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Investments and Sundry Assets | |
Investments and Sundry Assets | ($ in millions) At December 31: 2015 2014 Deferred transition and setup costs and other deferred arrangements* $ 1,624 $ 1,527 Derivatives—noncurrent 702 681 Alliance investments Equity method 82 98 Non-equity method 393 496 Prepaid software 273 332 Long-term deposits 256 300 Other receivables 516 509 Employee benefit-related 273 356 Prepaid income taxes 496 518 Other assets 571 705 ** Total $ 5,187 $ 5,520 ** * Deferred transition and setup costs and other deferred arra ngements are related to s ervices client arrangements. Refer to note A, “Significant Accounting Policies,” on page 68 for additional information . ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information . |
Intangible Assets Including G38
Intangible Assets Including Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets Including Goodwill | |
Intangible asset balances by major asset class | ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2015: Amount Amortization Amount Intangible asset class Capitalized software $ 1,348 $ (581) $ 767 Client relationships 1,856 (927) 929 Completed technology 2,960 (1,397) 1,563 Patents/trademarks 335 (142) 193 Other* 44 (10) 35 Total $ 6,543 $ (3,057) $ 3,487 * Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2014: Amount Amortization Amount Intangible asset class Capitalized software $ 1,375 $ (679) $ 696 Client relationships 2,208 (1,271) 937 Completed technology 2,831 (1,533) 1,298 Patents/trademarks 374 (214) 161 Other* 18 (6) 12 Total $ 6,806 $ (3,702) $ 3,104 * Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems . |
Intangible assets, future amortization expense | The amortization expense for each of the five succeeding years relating to intangible assets currently recorded in the Consolidated Statement of Financial Position is estimated to be the following at December 31, 2015 : ($ in millions) Capitalized Acquired Software Intangibles Total 2016 $ 426 $ 760 $ 1,185 2017 256 650 906 2018 85 492 577 2019 — 338 338 2020 — 240 240 |
Changes in goodwill balances by reportable segment | ($ in millions) Foreign Currency Balance Purchase Translation Balance January 1, Goodwill Price And Other December 31, Segment 2015 Additions Adjustments Divestitures Adjustments* 2015 Cognitive Solutions $ 15,156 $ 1,020 $ (2) $ (18) $ (535) $ 15,621 Global Business Services 4,555 74 0 (1) (232) 4,396 Technology Services & Cloud Platforms 9,373 1,087 (1) (7) (296) 10,156 Systems 1,472 410 0 — (33) 1,848 Total $ 30,556 $ 2,590 $ (3) $ (26) $ (1,096) $ 32,021 *Primarily driven by foreign currency translation. ($ in millions) Foreign Currency Balance Purchase Translation Balance January 1, Goodwill Price And Other December 31, Segment 2014 Additions Adjustments Divestitures Adjustments* 2014 Cognitive Solutions $ 15,244 $ 311 $ (12) $ (14) $ (372) $ 15,156 Global Business Services 4,855 — 0 (52) (248) 4,555 Technology Services & Cloud Platforms 9,485 131 16 (8) (252) 9,373 Systems 1,601 — — (110) (19) 1,472 Total $ 31,184 $ 442 $ 4 $ (183) $ (891) $ 30,556 *Primarily driven by foreign currency translation. |
Borrowings (Tables)
Borrowings (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Borrowings | |
Short-Term Debt | ($ in millions) At December 31: 2015 2014 Commercial paper $ 600 $ 650 Short-term loans 590 480 Long-term debt—current maturities 5,271 4,601 * Total $ 6,461 $ 5,731 * * Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Pre-Swap Borrowings (Long-Term Debt) | ($ in millions) At December 31: Maturities 2015 2014 U.S. dollar notes and debentures (average interest rate at December 31, 2015): 2.80% 2016–2017 $ 9,351 $ 9,254 ** 3.34% 2018–2019 7,591 6,835 1.46% 2020–2021 3,717 6,555 2.35% 2022 1,900 1,000 3.38% 2023 1,500 1,500 3.63% 2024 2,000 2,000 7.00% 2025 600 600 6.22% 2027 469 469 6.50% 2028 313 313 5.88% 2032 600 600 8.00% 2038 83 83 5.60% 2039 745 745 4.00% 2042 1,107 1,107 7.00% 2045 27 27 7.13% 2096 316 316 30,319 31,404 Other currencies (average interest rate at December 31, 2015, in parentheses): Euros (1.8%) 2016–2025 4,892 5,463 Pound sterling (2.7%) 2017–2022 1,555 1,176 Japanese yen (0.4%) 2017–2022 1,180 733 Swiss francs (6.3%) 2020 9 162 Canadian (2.2%) 2017 360 432 Other (13.8%) 2016–2020 506 367 38,820 39,737 Less: net unamortized discount 838 853 Less: net unamortized debt issuance costs 74 83 ** Add: fair value adjustment* 790 792 38,699 39,593 ** Less: current maturities 5,271 4,601 ** Total $ 33,428 $ 34,991 ** * The portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Statement of Financial Position as an amount equal to the sum of the debt’s carrying value plus a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information. |
Post-Swap Borrowing (Long-Term Debt, Including Current Portion) | ($ in millions) 2015 2014** For the year ended December 31: Amount Average Rate Amount Average Rate Fixed-rate debt $ 25,499 3.41 % $ 27,180 3.09 % Floating-rate debt* 13,199 0.96 % 12,412 0.82 % Total $ 38,699 $ 39,593 * Includes $ 7,338 million in 2015 and $ 5,839 million in 2014 of notional interest rate swaps that effectively convert fixed-rate long-term debt into floating-rate debt. ( See note D, “Financial Instruments,” on pages 84 through 88 ). ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information . |
Pre-swap annual contractual maturities of long-term debt outstanding | ($ in millions) Total 2016 $ 5,273 2017 5,674 2018 4,691 2019 4,003 2020 4,505 2021 and beyond 14,675 Total $ 38,820 |
Interest on Debt | ($ in millions) For the year ended December 31: 2015 2014 2013 Cost of financing $ 540 $ 542 $ 587 Interest expense 481 484 405 Net investment derivative activity (13) 0 (3) Interest capitalized 0 4 22 Total interest paid and accrued $ 1,008 $ 1,030 $ 1,011 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Other Liabilities | |
Other Liabilities | ($ in millions) At December 31: 2015 2014 Income tax reserves $ 3,150 $ 3,146 Excess 401(k) Plus Plan 1,445 1,658 Disability benefits 590 675 Derivative liabilities 22 31 Special restructuring actions 362 431 Workforce reductions 407 469 Deferred taxes 253 129 ** Other taxes payable 89 17 Environmental accruals 270 240 Warranty accruals 83 91 Asset retirement obligations 134 136 Acquisition related 200 50 Divestiture related* 575 1,124 Other 519 536 Total $ 8,099 $ 8,733 ** * Primarily related to the divestiture of the Microelectronics business. ** Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Equity Activity (Tables)
Equity Activity (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Equity Activity | |
Schedule of Reclassifications and Taxes Related to items of Other Comprehensive Income | Reclassifications and Taxes Related to Items of Other Comprehensive Income ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2015: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,379) $ (342) $ (1,721) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (54) $ 21 $ (33) Reclassification of (gains)/losses to other (income) and expense 86 (33) 53 Total net changes related to available-for-sale securities $ 32 $ (12) $ 20 Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 618 $ (218) $ 399 Reclassification of (gains)/losses to: Cost of sales (192) 57 (135) SG&A expense (149) 43 (105) Other (income) and expense (731) 281 (451) Interest expense 0 0 0 Total unrealized gains/(losses) on cash flow hedges $ (454) $ 162 $ (292) Retirement-related benefit plans(1) Prior service costs/(credits) $ 6 $ (2) $ 4 Net (losses)/gains arising during the period (2,963) 1,039 (1,925) Curtailments and settlements 33 (9) 24 Amortization of prior service (credits)/costs (100) 36 (65) Amortization of net (gains)/losses 3,304 (1,080) 2,223 Total retirement-related benefit plans $ 279 $ (17) $ 262 Other comprehensive income/(loss) $ (1,523) $ (208) $ (1,731) (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2014: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,636) $ (438) $ (2,074) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (29) $ 11 $ (18) Reclassification of (gains)/losses to other (income) and expense 5 (2) 3 Total net changes related to available-for-sale securities $ (24) $ 9 $ (15) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 958 $ (341) $ 618 Reclassification of (gains)/losses to: Cost of sales 15 (7) 9 SG&A expense (15) 6 (9) Other (income) and expense (98) 38 (60) Interest expense 1 0 0 Total unrealized gains/(losses) on cash flow hedges $ 861 $ (304) $ 557 Retirement-related benefit plans(1) Prior service costs/(credits) $ 1 $ 0 $ 1 Net (losses)/gains arising during the period (9,799) 3,433 (6,366) Curtailments and settlements 24 (7) 17 Amortization of prior service (credits)/costs (114) 41 (73) Amortization of net (gains)/losses 2,531 (852) 1,678 Total retirement-related benefit plans $ (7,357) $ 2,615 $ (4,742) Other comprehensive income/(loss) $ (8,156) $ 1,883 $ (6,274) (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2013: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,335) $ (66) $ (1,401) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (4) $ 2 $ (3) Reclassification of (gains)/losses to other (income) and expense (8) 2 (5) Subsequent changes in previously impaired securities arising during the period 4 (1) 3 Total net changes related to available-for-sale securities $ (8) $ 3 $ (5) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ 43 $ (15) $ 28 Reclassification of (gains)/losses to: Cost of sales 34 (14) 21 SG&A expense (39) 14 (25) Other (income) and expense (162) 62 (99) Interest expense 0 0 0 Total unrealized gains/(losses) on cash flow hedges $ (123) $ 47 $ (76) Retirement-related benefit plans(1) Prior service costs/(credits) $ 16 $ 0 $ 16 Net (losses)/gains arising during the period 5,369 (1,974) 3,395 Curtailments and settlements (3) 1 (2) Amortization of prior service (credits)/costs (114) 40 (75) Amortization of net (gains)/losses 3,499 (1,195) 2,304 Total retirement-related benefit plans $ 8,767 $ (3,128) $ 5,639 Other comprehensive income/(loss) $ 7,301 $ (3,144) $ 4,157 (1) These AOCI components are included in the computation of net periodic pension cost. (See note S, "Retirement-Related Benefits," for additional information.) |
Accumulated Other Comprehensive Income/(Loss) (net of tax) | Accumulated Other Comprehensive Income/(Loss) (net of tax) ($ in millions) Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive Hedges Adjustments* Plans Securities Income/(Loss) December 31, 2012 $ (90) $ 1,733 $ (27,406) $ 4 $ (25,759) Other comprehensive income before reclassifications 28 (1,401) 3,409 0 2,036 Amount reclassified from accumulated other comprehensive income (103) 0 2,229 (5) 2,121 Total change for the period (76) (1,401) 5,639 (5) 4,157 December 31, 2013 (165) 332 (21,767) (1) (21,602) Other comprehensive income before reclassifications 618 (2,074) (6,348) (18) (7,822) Amount reclassified from accumulated other comprehensive income (60) 0 1,605 3 1,548 Total change for the period 557 (2,074) (4,742) (15) (6,274) December 31, 2014 392 (1,742) (26,509) (15) (27,875) Other comprehensive income before reclassifications 399 (1,721) (1,897) (33) (3,252) Amount reclassified from accumulated other comprehensive income (691) 0 2,158 53 1,520 Total change for the period (292) (1,721) 262 20 (1,731) December 31, 2015 $ 100 $ (3,463) $ (26,248) $ 5 $ (29,607) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. |
Taxes (Tables)
Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Taxes | |
Income before income taxes | ($ in millions) For the year ended December 31: 2015 2014 2013 Income from continuing operations before income taxes U.S. operations $ 5,915 $ 7,509 $ 7,577 Non-U.S. operations 10,030 12,477 12,667 Total income from continuing operations before income taxes $ 15,945 $ 19,986 $ 20,244 |
Provision for income taxes by geographic operations | The income from continuing operations provision for income taxes by geographic operations is as follows: ($ in millions) For the year ended December 31: 2015 2014 2013 U.S. operations $ 849 $ 2,093 $ 1,315 Non-U.S. operations 1,732 2,141 2,048 Total continuing operations provision for income taxes $ 2,581 $ 4,234 $ 3,363 |
Components of the provision for income taxes by taxing jurisdiction | The components of the income from continuing operations provision for income taxes by taxing jurisdiction are as follows: ($ in millions) For the year ended December 31: 2015 2014 2013 U.S. federal Current $ (321) $ 1,134 $ 1,694 Deferred 553 105 (708) 232 1,239 986 U.S. state and local Current 128 541 277 Deferred 116 (105) (330) 244 436 (53) Non-U.S. Current 2,101 2,825 3,067 Deferred 4 (266) (637) 2,105 2,559 2,430 Total continuing operations provision for income taxes 2,581 4,234 3,363 Discontinued operations provision for income taxes (117) (1,617) (322) Provision for social security, real estate, personal property and other taxes 3,497 4,068 4,198 Total taxes included in net income $ 5,961 $ 6,685 $ 7,238 |
Effective income tax rate reconciliation | A reconciliation of the statutory U.S. federal tax rate to the company’s effective tax rate from continuing operations is as follows: For the year ended December 31: 2015 2014 2013 Statutory rate 35 % 35 % 35 % Foreign tax differential (17) (14) (13) State and local 1 1 0 Domestic incentives (2) (2) (3) Other (1) 1 (2) Effective rate 16 % 21 % 17 % |
Components of deferred tax assets/liabilities | Deferred Tax Assets ($ in millions) At December 31: 2015 2014 Retirement benefits $ 4,621 $ 4,795 Share-based and other compensation 963 1,328 Domestic tax loss/credit carryforwards 1,066 858 Deferred income 762 957 Foreign tax loss/credit carryforwards 825 686 Bad debt, inventory and warranty reserves 528 529 Depreciation 329 329 Accruals 904 1,176 Other 931 1,306 Gross deferred tax assets 10,929 11,964 Less: valuation allowance 740 646 Net deferred tax assets $ 10,189 $ 11,318 Deferred Tax Liabilities ($ in millions) At December 31: 2015 2014 Depreciation $ 919 $ 487 Retirement benefits 252 205 Goodwill and intangible assets 1,407 1,263 Leases 916 912 Software development costs 554 421 Deferred transition costs 395 374 Other 1,177 1,111 Gross deferred tax liabilities $ 5,620 $ 4,773 |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ($ in millions) 2015 2014 2013 Balance at January 1 $ 5,104 $ 4,458 $ 5,672 Additions based on tax positions related to the current year 464 697 829 Additions for tax positions of prior years 569 586 417 Reductions for tax positions of prior years (including impacts due to a lapse in statute) (1,348) (579) (2,201) Settlements (215) (58) (259) Balance at December 31 $ 4,574 $ 5,104 $ 4,458 |
Earnings Per Share of Common 43
Earnings Per Share of Common Stock (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share of Common Stock | |
Computation of Earnings per share | The following table presents the computation of basic and diluted earnings per share of common stock. ($ in millions except per share amounts) For the year ended December 31: 2015 2014 2013 Weighted-average number of shares on which earnings per share calculations are based Basic 978,744,523 1,004,272,584 1,094,486,604 Add—incremental shares under stock-based compensation plans 3,037,001 4,332,155 6,751,240 Add—incremental shares associated with contingently issuable shares 918,744 1,395,741 1,804,313 Assuming dilution 982,700,267 1,010,000,480 1,103,042,156 Income from continuing operations $ 13,364 $ 15,751 $ 16,881 Loss from discontinued operations, net of tax (174) (3,729) (398) Net income on which basic earnings per share is calculated $ 13,190 $ 12,022 $ 16,483 Income from continuing operations $ 13,364 $ 15,751 $ 16,881 Net income applicable to contingently issuable shares (1) (3) (1) Income from continuing operations on which diluted earnings per share is calculated $ 13,363 $ 15,749 $ 16,880 Loss from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (174) (3,729) (398) Net income on which diluted earnings per share is calculated $ 13,189 $ 12,020 $ 16,483 Earnings/(loss) per share of common stock Assuming dilution Continuing operations $ 13.60 $ 15.59 $ 15.30 Discontinued operations (0.18) (3.69) (0.36) Total $ 13.42 $ 11.90 $ 14.94 Basic Continuing operations $ 13.66 $ 15.68 $ 15.42 Discontinued operations (0.18) (3.71) (0.36) Total $ 13.48 $ 11.97 $ 15.06 |
Rental Expense and Lease Comm44
Rental Expense and Lease Commitments (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Rental Expense and Lease Commitments | |
Lease Commitments | ($ in millions) 2016 2017 2018 2019 2020 Beyond 2020 Operating lease commitments Gross minimum rental commitments (including vacant space below) $ 1,347 $ 1,231 $ 1,107 $ 985 $ 776 $ 988 Vacant space $ 14 $ 4 $ 1 $ — $ — $ — Sublease income commitments $ 11 $ 7 $ 5 $ 4 $ 1 $ 1 Capital lease commitments $ 7 $ 2 $ 2 $ 2 $ 1 $ — |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Stock-Based Compensation | |
Stock-based compensation cost included in income from continuing operations | ($ in millions) For the year ended December 31: 2015 2014 2013 Cost $ 100 $ 121 $ 122 Selling, general and administrative 322 350 435 Research, development and engineering 51 54 57 Other (income) and expense* (6) (13) — Pre-tax stock-based compensation cost 468 512 614 Income tax benefits (156) (174) (213) Net stock-based compensation cost $ 312 $ 338 $ 402 * Reflects the one-time effects related to divestitures. |
Summary of Restricted Stock Units activity | 2015 2014 2013 Weighted- Weighted- Weighted- Average Number Average Number Average Number Grant Price of Units Grant Price of Units Grant Price of Units Balance at January 1 $ 171 7,734,277 $ 166 8,635,317 $ 148 9,841,461 RSUs granted 143 4,230,186 172 2,525,947 189 2,541,081 RSUs released 164 (3,567,495) 157 (2,401,761) 131 (2,952,363) RSUs canceled/forfeited 167 (869,627) 167 (1,025,226) 154 (794,862) Balance at December 31 $ 159 7,527,341 $ 171 7,734,277 $ 166 8,635,317 |
Summary of Performance Share Units activity | PSUs 2015 2014 2013 Weighted- Weighted- Weighted- Average Number Average Number Average Number Grant Price of Units Grant Price of Units Grant Price of Units Balance at January 1 $ 185 3,140,707 $ 178 2,824,294 $ 151 3,172,201 PSUs granted at target 153 1,137,242 180 1,430,098 195 869,875 Performance adjustments* 185 (168,055) 157 29,960 118 152,069 PSUs released 185 (840,552) 157 (1,027,181) 118 (1,321,784) PSUs canceled/forfeited 184 (340,410) 187 (116,464) 170 (48,067) Balance at December 31 ** $ 173 2,928,932 $ 185 3,140,707 $ 178 2,824,294 * Represents the change in shares issued to employees after vesting of PSUs because final performance metrics were above or below specified targets. ** Represents the number of shares expected to be issued based on achievement of grant date performance targets. The actual number of shares issued will depend on final performance against specified targets over the vesting period. |
Summary of option activity | 2015 2014 2013 Weighted- Number of Weighted- Number of Weighted- Number of Average Shares Average Shares Average Shares Exercise Price Under Option Exercise Price Under Option Exercise Price Under Option Balance at January 1 $ 97 1,750,949 $ 97 5,622,951 $ 94 11,389,721 Options exercised 98 (1,214,109) 97 (3,740,252) 90 (5,585,127) Options canceled/expired 100 (57,066) 95 (131,750) 86 (181,643) Balance at December 31 $ 94 479,774 $ 97 1,750,949 $ 97 5,622,951 Exercisable at December 31 $ 94 479,774 $ 97 1,750,949 $ 97 5,622,951 |
Options outstanding and exercisable with exercise price ranges | Options Outstanding and Exercisable Weighted-Average Weighted- Number of Aggregate Remaining Average Shares Intrinsic Contractual Life Exercise Price Range Exercise Price Under Option Value (in Years) $85 and under $ 83 192,959 $ 10,597,402 0.3 $86 and over 101 286,815 10,376,342 1.2 $ 94 479,774 $ 20,973,745 0.9 |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Defined Benefit Plans and Other Postretirement Benefit Plans | |
Retirement-related benefits net periodic (income)/cost in the Consolidated Statement of Earnings | ($ in millions) U.S. Plans Non-U.S. Plans Total For the year ended December 31: 2015 2014 2013 2015 2014 2013 2015 2014 2013 Defined benefit pension plans $ (284) $ (833) $ (223) $ 1,421 $ 1,267 $ 1,396 $ 1,137 $ 434 $ 1,173 Retention Plan 23 15 21 — — — 23 15 21 Total defined benefit pension plans (income)/cost $ (261) $ (818) $ (202) $ 1,421 $ 1,267 $ 1,396 $ 1,160 $ 449 $ 1,195 IBM 401(k) Plus Plan and non-U.S. plans $ 676 $ 713 $ 785 $ 442 $ 526 $ 575 $ 1,117 $ 1,239 $ 1,361 Excess 401(k) 21 14 24 — — — 21 14 24 Total defined contribution plans cost $ 697 $ 727 $ 809 $ 442 $ 526 $ 575 $ 1,138 $ 1,253 $ 1,384 Nonpension postretirement benefit plans cost $ 218 $ 206 $ 218 $ 55 $ 66 $ 79 $ 273 $ 272 $ 298 Total retirement-related benefits net periodic cost $ 654 $ 115 $ 826 $ 1,918 $ 1,859 $ 2,051 $ 2,572 $ 1,974 $ 2,876 |
Summary of the total projected benefit obligation (PBO) for defined benefit plans, accumulated postretirement benefit obligation (APBO) for nonpension postretirement benefit plans (benefit obligations), fair value of plan assets and the associated funded status | ($ in millions) Benefit Obligations Fair Value of Plan Assets Funded Status* At December 31: 2015 2014 2015 2014 2015 2014 U.S. Plans Overfunded plans Qualified PPP $ 51,287 $ 54,708 $ 51,716 $ 55,772 $ 429 $ 1,065 Underfunded plans Excess PPP $ 1,522 $ 1,602 $ — $ — $ (1,522) $ (1,602) Retention Plan 312 334 — — (312) (334) Nonpension postretirement benefit plan 4,652 5,053 71 16 (4,582) (5,037) Total underfunded U.S. plans $ 6,486 $ 6,989 $ 71 $ 16 $ (6,415) $ (6,973) Non-U.S. Plans Overfunded plans Qualified defined benefit pension plans $ 16,766 $ 16,794 $ 18,070 $ 17,888 $ 1,304 $ 1,094 Nonpension postretirement benefit plans 0 11 0 11 0 0 Total overfunded non-U.S. plans $ 16,766 $ 16,804 $ 18,070 $ 17,898 $ 1,304 $ 1,094 Underfunded plans Qualified defined benefit pension plans $ 22,039 $ 26,278 $ 17,677 $ 21,655 $ (4,362) $ (4,623) Nonqualified defined benefit pension plans 5,911 6,762 — — (5,911) (6,762) Nonpension postretirement benefit plans 618 806 59 73 (558) (733) Total underfunded non-U.S. plans $ 28,568 $ 33,846 $ 17,737 $ 21,729 $ (10,832) $ (12,118) Total overfunded plans $ 68,053 $ 71,512 $ 69,786 $ 73,671 $ 1,734 $ 2,159 Total underfunded plans $ 35,054 $ 40,836 $ 17,807 $ 21,745 $ (17,247) $ (19,091) * Funded status is recognized in the Consolidated Statement of Financial Position as follows: Asset amounts as prepaid pension assets; (Liability) amounts as compensation and benefits (current liability) and retirement and nonpension postretirement benefit obligations (noncurrent liability). |
Changes in benefit obligations and plan assets | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2015 2014 2015 2014 2015 2014 2015 2014 Change in benefit obligation Benefit obligation at January 1 $ 56,643 $ 51,034 $ 49,834 $ 48,620 $ 5,053 $ 4,633 $ 817 $ 832 Service cost — — 454 449 24 26 7 7 Interest cost 2,028 2,211 1,075 1,533 163 187 50 63 Plan participants’ contributions — — 34 37 52 61 — — Acquisitions/divestitures, net — — 39 (90) (8) 0 0 0 Actuarial losses/(gains) (1,920) 6,968 (861) 6,662 (204) 548 (52) 38 Benefits paid from trust (3,514) (3,455) (1,784) (1,985) (406) (388) (5) (5) Direct benefit payments (117) (114) (402) (465) (23) (37) (26) (26) Foreign exchange impact — — (3,907) (5,073) — — (174) (91) Medicare/Government subsidies — — — — 1 23 — — Amendments/curtailments/ settlements/other — — 235 146 0 0 0 (1) Benefit obligation at December 31 $ 53,120 $ 56,643 $ 44,717 $ 49,834 $ 4,652 $ 5,053 $ 618 $ 817 Change in plan assets Fair value of plan assets at January 1 $ 55,772 $ 53,954 $ 39,543 $ 39,464 $ 16 $ 177 $ 84 $ 92 Actual return on plan assets (542) 5,274 417 5,579 0 0 7 9 Employer contributions — — 474 465 409 166 0 0 Acquisitions/divestitures, net — — 53 (59) 0 0 0 0 Plan participants’ contributions — — 34 37 52 61 — — Benefits paid from trust (3,514) (3,455) (1,784) (1,985) (406) (388) (5) (5) Foreign exchange impact — — (3,004) (4,049) — — (26) (11) Amendments/curtailments/ settlements/other — — 14 * 93 * — — (1) 0 Fair value of plan assets at December 31 $ 51,716 $ 55,772 $ 35,748 $ 39,543 $ 71 $ 16 $ 59 $ 84 Funded status at December 31 $ (1,405) $ (871) $ (8,969) $ (10,291) $ (4,582) $ (5,037) $ (558) $ (733) Accumulated benefit obligation** $ 53,120 $ 56,643 $ 44,071 $ 47,516 N/A N/A N/A N/A * Includes the reinstatement of certain plan assets in Brazil due to government ruling s in 2011 and 2013 allowing certain previously restricted plan assets to be returned to IBM. Return of assets to IBM over a three - year period began June 2011 and September 2013 respectively, with approximately $ 33 million returned in 2015 and $ 122 million returned during 201 4 . The remaining surplus in Brazil at December 31, 201 5 is excluded from total plan assets due to continued restrictions impose d by the government on the use of those plan assets. ** Represents the benefit obligation assuming no future participant compensation increases. N/A—Not applicable |
Net funded status | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans At December 31: 2015 2014 2015 2014 2015 2014 2015 2014 Prepaid pension assets $ 429 $ 1,065 $ 1,304 $ 1,095 $ 0 $ 0 $ 0 $ 0 Current liabilities— compensation and benefits (116) (111) (297) (326) (320) (381) (11) (13) Noncurrent liabilities—retirement and nonpension postretirement benefit obligations (1,718) (1,825) (9,976) (11,060) (4,262) (4,656) (547) (720) Funded status—net $ (1,405) $ (871) $ (8,969) $ (10,291) $ (4,582) $ (5,037) $ (558) $ (733) |
Pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in other comprehensive income/(loss) and the changes in pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in accumulated other comprehensive income/(loss) | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2015 2014 2015 2014 2015 2014 2015 2014 Net loss at January 1 $ 18,442 $ 13,709 $ 21,676 $ 19,777 $ 852 $ 304 $ 189 $ 161 Current period loss/(gain) 2,576 5,789 661 3,324 (204) 548 (51) 38 Curtailments and settlements — — (33) (25) — — 0 1 Amortization of net loss included in net periodic (income)/cost (1,654) (1,056) (1,581) (1,400) (39) 0 (10) (11) Net loss at December 31 $ 19,363 $ 18,442 $ 20,724 $ 21,676 $ 609 $ 852 $ 128 $ 189 Prior service costs/(credits) at January 1 $ 110 $ 120 $ (386) $ (496) $ 23 $ 15 $ (26) $ (32) Current period prior service costs/(credits) — — (6) (1) — — 0 0 Amortization of prior service (costs)/ credits included in net periodic (income)/cost (10) (10) 98 111 7 7 5 5 Prior service costs/(credits) at December 31 $ 101 $ 110 $ (294) $ (386) $ 30 $ 23 $ (21) $ (26) Transition (assets)/liabilities at January 1 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Amortization of transition assets/ (liabilities) included in net periodic (income)/cost — — 0 0 — — 0 0 Transition (assets)/liabilities at December 31 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Total loss recognized in accumulated other comprehensive income/(loss)* $ 19,464 $ 18,552 $ 20,429 $ 21,290 $ 639 $ 875 $ 106 $ 163 * See note L, “Equity Activity,” for the total change in AOCI, and the Consolidated Statement of Comprehensive Income for the components of net periodic (income)/cost, including the related tax effects, recognized in OCI for the retirement-related benefit plans. |
Pre-tax estimated net loss, estimated prior service costs/(credits) and estimated transition (assets)/liabilities of the retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost and recorded in the Consolidated Statement of Earnings in next year | ($ in millions) Defined Benefit Nonpension Postretirement Pension Plans Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans Net loss $ 1,331 $ 1,361 $ 19 $ 8 Prior service costs/(credits) 10 (96) (7) (4) Transition (assets)/liabilities – – – – |
Defined benefit pension plans' major asset classes and their associated fair value | The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2015 . The U.S. Plan consist s of the Qualified PPP and the n on-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities(1) $ 11,210 $ 1 $ — $ 11,211 $ 4,631 $ 0 $ — $ 4,631 Equity commingled/mutual funds(2)(3) 99 2,036 — 2,134 90 6,200 — 6,290 Fixed income Government and related(4) — 9,854 — 9,854 — 7,482 16 7,499 Corporate bonds(5) — 17,088 2 17,090 — 1,896 4 1,899 Mortgage and asset-backed securities — 633 10 643 — 219 — 219 Fixed income commingled/ mutual funds(2)(6) 313 192 401 907 38 9,082 — 9,120 Insurance contracts — — — — — 1,079 — 1,079 Cash and short-term investments(7) 244 2,305 — 2,549 142 467 — 610 Hedge funds — 1,419 912 2,331 — 659 — 659 Private equity(8) — — 2,790 2,790 — — 582 582 Private real estate(8) — — 2,429 2,429 — — 661 661 Derivatives(9) (82) 2 — (80) (1) 481 — 480 Other commingled/mutual funds(2)(10) — — — — 115 1,637 317 2,069 Subtotal 11,784 33,531 6,544 51,859 5,016 29,202 1,580 35,798 Other(11) — — — (143) — — — (50) Fair value of plan assets $ 11,784 $ 33,531 $ 6,544 $ 51,716 $ 5,016 $ 29,202 $ 1,580 $ 35,748 Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $ 34 million, representing 0.1 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $ 14 million, representing 0. 04 percent of the non-U.S. Plans assets. Commingled funds represent pooled institutional investments. Invests in predominantly equity securities. Includes debt issued by national, state and local governments and agencies. The U.S. Plan includes IBM corporate bonds of $ 23 million, representing 0.0 4 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $ 1 million representing 0.004 percent of the non-U.S. Plan assets. Invests in predominantly fixed - income securities. Includes cash and c ash equivalents and short-term marketable securities. Primarily includes limited partnerships. I ncludes interest rate derivatives, forwards, exchange traded and other over-the-counter derivatives. Invests in both equity and fixed-income securities. Represe nts net unsettled transactions, relating primarily to purchases and sales of plan assets. The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2014 . The U.S. Plan consist s of the Qualified PPP and the n on-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities(1) $ 11,527 $ 1 $ — $ 11,528 $ 5,652 $ — $ — $ 5,652 Equity commingled/mutual funds(2)(3) 85 2,277 — 2,362 126 7,415 — 7,540 Fixed income Government and related(4) — 7,883 — 7,883 — 8,159 32 8,191 Corporate bonds (5) — 18,828 4 18,832 — 2,063 1 2,063 Mortgage and asset-backed securities — 567 20 587 — 238 — 238 Fixed income commingled/ mutual funds(2)(6) 312 3,118 295 3,725 87 9,715 — 9,802 Insurance contracts — — — — — 1,053 — 1,053 Cash and short-term investments(7) 345 2,304 — 2,650 158 393 — 551 Hedge funds — 1,474 889 2,362 — 745 — 745 Private equity(8) — — 3,287 3,287 — — 513 513 Private real estate(8) — — 2,942 2,942 — — 664 664 Derivatives(9) (55) 3 — (53) 2 846 — 848 Other commingled/mutual funds(2)(10) — — — — 33 1,513 220 1,766 Subtotal 12,214 36,455 7,437 56,106 6,056 32,139 1,429 39,625 Other(11) — — — (333) — — — (82) Fair value of plan assets $ 12,214 $ 36,455 $ 7,437 $ 55,772 $ 6,056 $ 32,139 $ 1,429 $ 39,543 Represents U.S. and international securities. The U.S. Plan includes IBM common stock of $ 55 million, representing 0. 1 percent of the U.S. Plan assets. Non-U.S. Plans include IBM common stock of $ 21 million, representing 0.1 percent of the non-U.S. Plans assets. Commingled funds represent pooled institutional investments. Invests in predominantly equity securities. Includes debt issued by national, state and local governments and agencies. The U.S. P lan includes IBM corporate bonds of $ 10 million, represe nting 0.0 2 percent of the U.S. Plan assets. Non-U.S. plans include IBM corporate bonds of $ 4 million representing 0.01 percent of the non-U.S. Plan assets. Invests in predominantly fixed - income securities. Includes cash and cash equivalents and short-term marketable securities. Primarily i ncludes limited partnerships . I ncludes interest rate derivatives , forwards, exchange traded and other over-the-counter derivatives. Invests in both equity and fixed - income securities. Represents net unsettled transacti ons, relating primarily to purchases and sales of plan assets. |
Defined benefit pension plans with accumulated benefit obligations (ABO) in excess of plan assets | ($ in millions) 2015 2014 Benefit Plan Benefit Plan At December 31: Obligation Assets Obligation Assets Plans with PBO in excess of plan assets $ 29,784 $ 17,677 $ 34,976 $ 21,655 Plans with ABO in excess of plan assets 29,135 17,492 33,148 20,680 Plans with assets in excess of PBO 68,053 69,786 71,501 73,660 |
Defined Benefit Pension Plans | |
Defined Benefit Plans and Other Postretirement Benefit Plans | |
Components of net periodic (income)/cost of the company's retirement-related benefit plans | ($ in millions) Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans For the year ended December 31: 2015 2014 2013 2015 2014 2013 Service cost $ — $ — $ — $ 454 $ 449 $ 501 Interest cost 2,028 2,211 1,980 1,075 1,533 1,524 Expected return on plan assets (3,953) (4,096) (3,981) (1,919) (2,247) (2,195) Amortization of transition assets — — — 0 0 0 Amortization of prior service costs/(credits) 10 10 10 (98) (111) (119) Recognized actuarial losses 1,654 1,056 1,790 1,581 1,400 1,600 Curtailments and settlements — — — 35 26 0 Multi-employer plans/other costs* — — — 293 217 85 Total net periodic (income)/cost $ (261) $ (818) $ (202) $ 1,421 $ 1,267 $ 1,396 |
Assumptions used to measure the net periodic (income)/cost and benefit obligations | Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans 2015 2014 2013 2015 2014 2013 Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 Discount rate 3.70 % 4.50 % 3.60 % 2.34 % 3.32 % 3.23 % Expected long-term returns on plan assets 7.50 % 8.00 % 8.00 % 5.67 % 6.08 % 6.21 % Rate of compensation increase N/A N/A N/A 2.49 % 2.52 % 2.51 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 4.00 % 3.70 % 4.50 % 2.40 % 2.34 % 3.32 % Rate of compensation increase N/A N/A N/A 2.40 % 2.49 % 2.52 % N/A—Not applicable |
Total expected benefit payments | ($ in millions) Qualified Nonqualified Qualified Nonqualified Total Expected U.S. Plan U.S. Plans Non-U.S. Plans Non-U.S. Plans Benefit Payments Payments Payments Payments Payments 2016 $ 3,513 118 1,756 311 5,698 2017 3,501 118 1,751 306 5,675 2018 3,501 120 1,780 313 5,714 2019 3,496 121 1,814 326 5,757 2020 3,548 122 1,857 341 5,868 2021–2025 17,279 604 9,855 1,888 29,625 |
Nonpension Postretirement Plans | |
Defined Benefit Plans and Other Postretirement Benefit Plans | |
Components of net periodic (income)/cost of the company's retirement-related benefit plans | ($ in millions) Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans For the year ended December 31: 2015 2014 2013 2015 2014 2013 Service cost $ 24 $ 26 $ 35 $ 7 $ 7 $ 10 Interest cost 163 187 164 50 63 60 Expected return on plan assets 0 0 (1) (7) (9) (9) Amortization of transition assets — — — 0 0 0 Amortization of prior service costs/(credits) (7) (7) — (5) (5) (5) Recognized actuarial losses 39 0 21 10 11 23 Curtailments and settlements — — — 0 0 0 Total net periodic cost $ 218 $ 206 $ 218 $ 55 $ 66 $ 79 * The n on-U.S. plans amount includes $ 233 million and $148 million related to the IBM Spain pension litigation for 2015 and 2014 , respectively. See page 115 for additional information. |
Assumptions used to measure the net periodic (income)/cost and benefit obligations | Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans 2015 2014 2013 2015 2014 2013 Weighted-average assumptions used to measure net periodic cost for the year ended December 31 Discount rate 3.40 % 4.10 % 3.30 % 7.51 % 7.78 % 6.43 % Expected long-term returns on plan assets N/A N/A 0.35 % 10.17 % 10.22 % 9.01 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 3.70 % 3.40 % 4.10 % 7.06 % 7.51 % 7.78 % N/A—Not applicable |
Total expected benefit payments | ($ in millions) Total Qualified Nonqualified Expected U.S. Plan Non-U.S. Plans Non-U.S. Plans Benefit Payments Payments Payments Payments 2016 $ 393 $ 5 $ 26 $ 424 2017 399 6 30 434 2018 401 6 33 439 2019 406 7 35 448 2020 401 7 39 447 2021–2025 1,797 49 240 2,087 |
U.S. Defined Benefit Pension Plans | |
Defined Benefit Plans and Other Postretirement Benefit Plans | |
Reconciliation of the beginning and ending balances of Level 3 assets | ($ in millions) Mortgage and Asset- Fixed Income Government Corporate Backed Commingled/ Hedge Private Private and Related Bonds Securities Mutual Funds Funds Equity Real Estate Total Balance at January 1, 2015 $ — $ 4 $ 20 $ 295 $ 889 $ 3,287 $ 2,942 $ 7,437 Return on assets held at end of year — 0 0 9 23 (199) (210) (377) Return on assets sold during the year — 1 0 0 — 429 460 889 Purchases, sales and settlements, net — (5) (2) 98 — (727) (763) (1,399) Transfers, net — 2 (8) — — 0 — (6) Balance at December 31, 2015 $ — $ 2 $ 10 $ 401 $ 912 $ 2,790 $ 2,429 $ 6,544 ($ in millions) Mortgage and Asset- Fixed Income Government Corporate Backed Commingled/ Hedge Private Private and Related Bonds Securities Mutual Funds Funds Equity Real Estate Total Balance at January 1, 2014 $ 1 $ 5 $ 19 $ 274 $ 860 $ 3,771 $ 3,038 $ 7,968 Return on assets held at end of year — 0 0 21 28 (10) 197 238 Return on assets sold during the year — 0 0 — — 332 199 531 Purchases, sales and settlements, net — 0 (3) — — (807) (492) (1,302) Transfers, net (1) (1) 4 — — — — 2 Balance at December 31, 2014 $ — $ 4 $ 20 $ 295 $ 889 $ 3,287 $ 2,942 $ 7,437 |
Non-U.S. Defined Benefit Pension Plans | |
Defined Benefit Plans and Other Postretirement Benefit Plans | |
Reconciliation of the beginning and ending balances of Level 3 assets | ($ in millions) Other Government Corporate Private Private Commingled/ and Related Bonds Equity Real Estate Mutual Funds Total Balance at January 1, 2015 $ 32 $ 1 $ 513 $ 664 $ 220 $ 1,429 Return on assets held at end of year (2) 0 (25) 45 28 47 Return on assets sold during the year 0 0 62 46 — 107 Purchases, sales and settlements, net (10) 3 73 (62) 84 88 Transfers, net — — — — — — Foreign exchange impact (3) 0 (42) (31) (15) (91) Balance at December 31, 2015 $ 16 $ 4 $ 582 $ 661 $ 317 $ 1,580 ($ in millions) Other Government Corporate Private Private Commingled/ and Related Bonds Equity Real Estate Mutual Funds Total Balance at January 1, 2014 $ 42 $ 4 $ 410 $ 655 $ — $ 1,110 Return on assets held at end of year 3 0 26 83 26 138 Return on assets sold during the year 0 0 46 (12) — 34 Purchases, sales and settlements, net (8) (3) 75 (13) 104 155 Transfers, net — — 0 — 102 102 Foreign exchange impact (5) 0 (45) (49) (12) (110) Balance at December 31, 2014 $ 32 $ 1 $ 513 $ 664 $ 220 1,429 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment Information | |
Revenue and Pre-tax Income by Segment | Management System Segment View ($ in millions) Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total For the year ended December 31: Solutions Services Platforms Systems Financing Segments 2015 External revenue $ 17,841 $ 17,166 $ 35,142 $ 9,547 $ 1,840 $ 81,535 Internal revenue 2,215 499 698 778 2,637 6,826 Total revenue $ 20,055 $ 17,664 $ 35,840 $ 10,325 $ 4,477 $ 88,361 Pre-tax income from continuing operations $ 7,245 $ 2,602 $ 5,669 $ 1,722 $ 2,364 $ 19,602 Revenue year-to-year change (8.4) % (11.9) % (9.8) % (22.4) % (1.0) % (11.2) % Pre-tax income year-to-year change (11.8) % (22.3) % (20.0) % 24.4 % 8.0 % (11.8) % Pre-tax income margin 36.1 % 14.7 % 15.8 % 16.7 % 52.8 % 22.2 % 2014 External revenue $ 19,689 $ 19,512 $ 38,889 $ 12,294 $ 2,034 $ 92,418 Internal revenue 2,216 543 840 1,006 2,488 7,093 Total revenue $ 21,906 $ 20,055 $ 39,729 $ 13,300 $ 4,522 $ 99,512 Pre-tax income from continuing operations $ 8,215 $ 3,347 $ 7,084 $ 1,384 $ 2,189 $ 22,219 Revenue year-to-year change (0.1) % (8.5) % (0.9) % (19.8) % 5.1 % (5.1) % Pre-tax income year-to-year change (5.2) % (2.9) % (7.3) % (21.5) % 0.8 % (6.2) % Pre-tax income margin 37.5 % 16.7 % 17.8 % 10.4 % 48.4 % 22.3 % 2013 External revenue $ 19,887 $ 21,210 $ 39,139 $ 15,630 $ 2,022 $ 97,889 Internal revenue 2,032 714 965 949 2,282 6,941 Total revenue $ 21,919 $ 21,924 $ 40,104 $ 16,579 $ 4,304 $ 104,830 Pre-tax income from continuing operations $ 8,663 $ 3,447 $ 7,645 $ 1,764 $ 2,171 $ 23,690 Pre-tax income margin 39.5 % 15.7 % 19.1 % 10.6 % 50.4 % 22.6 % |
Revenue and pre-tax income reconciliations to IBM as Reported | Reconciliations of IBM as Reported ($ in millions) For the year ended December 31: 2015 2014 2013 Revenue Total reportable segments $ 88,361 $ 99,512 $ 104,830 Other revenue 206 374 478 Elimination of internal transactions (6,826) (7,093) (6,941) Total IBM consolidated revenue $ 81,741 $ 92,793 $ 98,367 ($ in millions) For the year ended December 31: 2015 2014 2013 Pre-tax income from continuing operations: Total reportable segments $ 19,602 $ 22,219 $ 23,690 Amortization of acquired intangible assets (677) (791) (758) Acquisition-related charges (26) (12) (46) Non-operating retirement- related (costs)/income (1,050) (353) (1,062) Elimination of internal transactions (1,791) (1,872) (1,483) Unallocated corporate amounts* (114) 795 (98) Total pre-tax income from continuing operations $ 15,945 $ 19,986 $ 20,244 * The 2014 and 2013 amounts include the gain related to the Retail Store Solutions divestiture. The 2014 amount also includes the net gain related to the System x business divestiture. |
Assets and Other Items by segment | Management System Segment View ($ in millions) Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total For the year ended December 31: Solutions Services Platforms Systems Financing Segments 2015 Assets $ 20,017 $ 8,327 $ 23,530 $ 3,967 $ 36,157 $ 91,999 Depreciation/amortization of intangibles* 921 81 1,944 321 343 3,610 Capital expenditures/investments in intangibles 448 86 2,619 321 356 3,830 Interest income — — — — 1,720 1,720 Interest expense — — — — 469 469 2014 Assets $ 19,525 $ 8,831 $ 22,512 $ 4,219 $ 38,845 $ 93,933 Depreciation/amortization of intangibles* 1,040 98 1,982 734 455 4,308 Capital expenditures/investments in intangibles 413 79 2,321 627 482 3,921 Interest income — — — — 1,951 1,951 Interest expense — — — — 518 518 2013 Assets $ 20,705 $ 9,701 $ 22,981 $ 4,974 $ 40,138 $ 98,499 Depreciation/amortization of intangibles* 1,037 117 1,774 462 574 3,963 Capital expenditures/investments in intangibles 410 118 1,990 424 467 3,410 Interest income — — — — 1,904 1,904 Interest expense — — — — 405 405 * Segment pre-tax income from continuing operations does not include the amortization of intangible assets . |
Asset reconciliation to IBM as reported | Reconciliations of IBM as Reported ($ in millions) At December 31: 2015 2014 2013 Assets Total reportable segments $ 91,999 $ 93,933 $ 98,499 Elimination of internal transactions (4,709) (5,193) (4,740) Unallocated amounts Cash and marketable securities 6,634 7,182 9,697 Notes and accounts receivable 2,333 4,253 2,907 Deferred tax assets 4,693 6,465 * 4,030 * Plant, other property and equipment 2,650 2,169 4,827 Pension assets 1,734 2,160 5,551 Other 5,161 6,303 ** 4,869 ** Total IBM consolidated assets $ 110,495 $ 117,271 * ** $ 125,641 * ** * Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. ** Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, “Accounting Changes,” for additional information. |
Geographic Information | Revenue* ($ in millions) For the year ended December 31: 2015 2014 2013 United States $ 30,514 $ 32,021 $ 33,427 Other countries 51,227 60,772 64,941 Total IBM consolidated revenue $ 81,741 $ 92,793 $ 98,367 * Revenues are attributed to countries based on the location of the client . Plant and Other Property — Net ($ in millions) At December 31: 2015 2014 2013 United States $ 4,644 $ 4,388 $ 6,723 Other countries 5,532 5,690 6,257 Total $ 10,176 $ 10,078 $ 12,979 |
Revenue by Classes of Similar Products or Services | ($ in millions) For the year ended December 31: 2015 2014 2013 Cognitive Solutions Software $ 14,557 $ 16,502 $ 16,897 Services 3,175 3,143 2,978 Systems 108 44 12 Global Business Services Services $ 16,851 $ 19,202 $ 20,874 Software 164 186 227 Systems 151 124 109 Technology Services & Cloud Platforms Services $ 23,947 $ 26,462 $ 26,483 Maintenance 6,085 6,790 7,038 Software 3,907 4,332 4,296 Systems 1,203 1,304 1,322 Systems Servers $ 5,032 $ 7,177 $ 9,795 Storage 2,325 2,641 3,006 Software 1,749 2,053 2,386 Services 442 423 443 Global Financing Financing $ 1,386 $ 1,543 $ 1,493 Used equipment sales 454 491 529 |
Significant Accounting Polici48
Significant Accounting Policies (Narratives) (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Significant Accounting Policies | |||
Deferred services transition and setup costs | $ 2,144 | $ 2,230 | |
Estimated amortization of deferred services transition and setup costs for 2016 | 653 | ||
Estimated amortization of deferred services transition and setup costs for 2017 | 522 | ||
Estimated amortization of deferred services transition and setup costs for 2018 | 366 | ||
Estimated amortization of deferred services transition and setup costs for 2019 | 254 | ||
Estimated amortization of deferred services transition and setup costs thereafter | 349 | ||
Deferred amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements | 184 | 64 | |
Estimated amortization of deferred amounts paid to clients in excess of the fair value of acquired assets for 2016 | 53 | ||
Estimated amortization of deferred amounts paid to clients in excess of the fair value of acquired assets for 2017 | 41 | ||
Estimated amortization of deferred amounts paid to clients in excess of the fair value of acquired assets for 2018 | 39 | ||
Estimated amortization of deferred amounts paid to clients in excess of the fair value of acquired assets for 2019 | 21 | ||
Estimated amortization of deferred amounts paid to clients in excess of the fair value of acquired assets thereafter | $ 30 | ||
Period after which the net gain or loss in AOCI must be reclassified into earnings immediately | 2 months | ||
Marketing and advertising expense: | |||
Advertising and promotional expense | $ 1,290 | 1,307 | $ 1,294 |
Other (income) and expense | |||
Noncontrolling interest | |||
Noncontrolling interest amounts, net of tax | $ 8 | $ 6 | $ 7 |
Minimum | |||
Standard Product Warranty | |||
Product warranty term | 1 year | ||
Maximum | |||
Standard Product Warranty | |||
Product warranty term | 3 years |
Significant Accounting Polici49
Significant Accounting Policies (Details 2) - Services - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Services | ||
Aggregate deferred revenue | $ 6,039 | $ 6,352 |
Unbilled services accounts receivable included in notes and accounts receivable trade | $ 1,630 | $ 1,833 |
Unbilled services accounts receivable, length of time expected to be billed | 4 months | |
Minimum | ||
Services | ||
Services contract terms range | 1 year | |
Maximum | ||
Services | ||
Services contract terms range | 10 years |
Significant Accounting Polici50
Significant Accounting Policies (Standard Warranty and Extended Warranty Tables) (Details 3) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Standard Warranty Liability | ||
Balance at January 1 | $ 197 | $ 376 |
Current period accruals | 173 | 240 |
Accrual adjustments to reflect actual experience | 7 | (120) |
Charges incurred | (196) | (298) |
Balance at December 31 | 181 | 197 |
Extended Warranty Liability (Deferred Income) | ||
Current portion | 11,021 | 11,877 |
Noncurrent portion | 3,771 | 3,691 |
Industry Standard x86 Server Portfolio | ||
Standard Warranty Liability | ||
Accrual adjustments to reflect actual experience | (125) | |
Extended Warranty Liability (Deferred Income) | ||
Extended Warranty Liability (Deferred Income) | ||
Balance at January 1 | 536 | 579 |
Revenue deferred for new extended warranty contracts | 286 | 298 |
Amortization of deferred revenue | (253) | (316) |
Other | (31) | (24) |
Balance at December 31 | 538 | 536 |
Current portion | 238 | 254 |
Noncurrent portion | $ 300 | 282 |
Extended Warranty Liability (Deferred Income) | Industry Standard x86 Server Portfolio | ||
Extended Warranty Liability (Deferred Income) | ||
Amortization of deferred revenue | $ (21) |
Significant Accounting Polici51
Significant Accounting Policies (Standard Warranty and Extended Warranty Tables) (Details 4) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred revenue: | ||
Current portion | $ 11,021 | $ 11,877 |
Noncurrent portion | $ 3,771 | $ 3,691 |
Significant Accounting Polici52
Significant Accounting Policies (Details 5) | 12 Months Ended | |
Dec. 31, 2015PortfolioSegmentClassOfFinancingReceivable$ / shares | Dec. 31, 2014$ / shares | |
Significant Accounting Policies | ||
Minimum percentage of likelihood of being realized upon settlement for benefits from tax positions (as a percent) | 50.00% | |
Maturity tenure of derivative used in classifying it as current or noncurrent | 12 months | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.2 | $ 0.2 |
Expected realization period for debt securities included in current assets | 1 year | |
Number of days after which receivables are past-due | 90 days | |
Number of portfolio segments | PortfolioSegment | 2 | |
Number of classes of financing receivable | ClassOfFinancingReceivable | 2 | |
Minimum | Restricted Stock Units | ||
Stock-Based Compensation | ||
Vesting period | 1 year | |
Maximum | Restricted Stock Units | ||
Stock-Based Compensation | ||
Vesting period | 5 years | |
Capitalized software | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of intangible assets | 3 years | |
Capitalized costs for internal-use software | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of intangible assets | 2 years | |
Other intangible assets | Minimum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of intangible assets | 1 year | |
Other intangible assets | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of intangible assets | 7 years | |
Buildings | Minimum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 30 years | |
Buildings | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 50 years | |
Building equipment | Minimum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 10 years | |
Building equipment | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 20 years | |
Land improvements | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 20 years | |
Plant, laboratory and office equipment | Minimum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 2 years | |
Plant, laboratory and office equipment | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 20 years | |
Computer equipment | Minimum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 1 year 6 months | |
Computer equipment | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 5 years | |
Leasehold improvements | Maximum | ||
Property, Plant and Equipment and Finite-Lived Intangible Assets | ||
Estimated useful lives of plant, rental machines and other property | 25 years |
Accounting Changes (Details)
Accounting Changes (Details) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Debt issuance costs | $ 74 | $ 83 | |
Deferred tax assets, noncurrent | 4,822 | 6,675 | [1] |
Accounting Standard Update 2015-03 - Interest - Imputation of Interest | |||
Debt issuance costs | $ 74 | 83 | |
Deferred tax asstes | Accounting Standard Update 2015-17 - Balance Sheet Classification of Deferred Taxes | |||
Current deferred tax assets | 2,000 | ||
Other liabilities | Accounting Standard Update 2015-17 - Balance Sheet Classification of Deferred Taxes | |||
Current deferred tax liabilities | 19 | ||
Deferred tax assets, noncurrent | $ 178 | ||
[1] | Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Acquisitions_Divestitures (Deta
Acquisitions/Divestitures (Details 1) $ in Millions | Jan. 29, 2016USD ($) | Nov. 06, 2015USD ($) | Oct. 13, 2015USD ($) | Jul. 03, 2013USD ($) | Feb. 18, 2016USD ($) | Dec. 31, 2015USD ($)Acquisition | Sep. 30, 2013Acquisition | Jun. 30, 2013Acquisition | Dec. 31, 2015USD ($)Acquisition | Dec. 31, 2014USD ($)Acquisition | Dec. 31, 2013USD ($)Acquisition |
Acquisitions: | |||||||||||
Businesses acquired, number (in entities) | Acquisition | 14 | 6 | 10 | ||||||||
Businesses acquired, aggregate cost | $ 3,555 | $ 608 | $ 3,219 | ||||||||
Goodwill | $ 32,021 | 32,021 | 30,556 | 31,184 | |||||||
Cognitive Solutions | |||||||||||
Acquisitions: | |||||||||||
Goodwill | 15,621 | 15,621 | 15,156 | 15,244 | |||||||
GBS | |||||||||||
Acquisitions: | |||||||||||
Goodwill | 4,396 | 4,396 | 4,555 | 4,855 | |||||||
Technology Services & Cloud Platforms | |||||||||||
Acquisitions: | |||||||||||
Goodwill | 10,156 | 10,156 | 9,373 | 9,485 | |||||||
Systems | |||||||||||
Acquisitions: | |||||||||||
Goodwill | 1,848 | 1,848 | $ 1,472 | 1,601 | |||||||
SoftLayer | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | ||||||||||
Businesses acquired, cash consideration | $ 1,977 | ||||||||||
Goodwill | $ 1,285 | $ 1,285 | |||||||||
Expected percent of goodwill deductible for tax purposes | 0.00% | ||||||||||
Acquired intangible asset, weighted average useful life | 7 years | ||||||||||
SoftLayer | Cognitive Solutions | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 28 | ||||||||||
SoftLayer | Technology Services & Cloud Platforms | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 1,257 | ||||||||||
Merge | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | ||||||||||
Businesses acquired, cash consideration | $ 1,036 | ||||||||||
Goodwill | $ 695 | 695 | $ 695 | ||||||||
Expected percent of goodwill deductible for tax purposes | 0.00% | ||||||||||
Acquired intangible asset, weighted average useful life | 7 years | ||||||||||
Merge | Cognitive Solutions | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 502 | ||||||||||
Merge | Technology Services & Cloud Platforms | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 193 | ||||||||||
Cleversafe | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | ||||||||||
Businesses acquired, cash consideration | $ 1,309 | ||||||||||
Goodwill | $ 1,000 | 1,000 | $ 1,000 | ||||||||
Expected percent of goodwill deductible for tax purposes | 0.00% | ||||||||||
Acquired intangible asset, weighted average useful life | 6 years 11 months | ||||||||||
Cleversafe | Technology Services & Cloud Platforms | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 590 | ||||||||||
Cleversafe | Systems | |||||||||||
Acquisitions: | |||||||||||
Goodwill | $ 410 | ||||||||||
The Weather Company | Subsequent event | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, cash consideration | $ 2,000 | ||||||||||
Truven | Subsequent event | Estimated | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, cash consideration | $ 2,600 | ||||||||||
Other Acquisitions | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Goodwill | 895 | $ 895 | $ 442 | $ 961 | |||||||
Expected percent of goodwill deductible for tax purposes | 7.00% | 1.00% | 2.00% | ||||||||
Acquired intangible asset, weighted average useful life | 6 years 5 months | 6 years 10 months | 6 years 7 months | ||||||||
Other Acquisitions | Cognitive Solutions | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, number (in entities) | Acquisition | 6 | 4 | 7 | ||||||||
Goodwill | $ 518 | $ 518 | $ 311 | $ 684 | |||||||
Other Acquisitions | GBS | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, number (in entities) | Acquisition | 2 | ||||||||||
Goodwill | $ 74 | $ 74 | |||||||||
Other Acquisitions | Technology Services & Cloud Platforms | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, number (in entities) | Acquisition | 1 | 4 | 2 | ||||||||
Goodwill | $ 303 | $ 303 | $ 131 | 264 | |||||||
Other Acquisitions | Systems | |||||||||||
Acquisitions: | |||||||||||
Businesses acquired, number (in entities) | Acquisition | 1 | ||||||||||
Goodwill | $ 13 | ||||||||||
AlchemyAPI | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Blekko | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Explorys | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Phytel | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Compose | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
StrongLoop | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Clearleap | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
IRIS Analytics | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Blue Box | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Gravitant | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% | |||||||||
Meteorix | |||||||||||
Acquisitions: | |||||||||||
Percentage of business acquired | 100.00% | 100.00% |
Acquisitions_Divestitures (Purc
Acquisitions/Divestitures (Purchase Price Allocation) (Details 2) - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Nov. 06, 2015 | Oct. 13, 2015 | Jul. 03, 2013 | |
Acquisitions: | ||||||
Goodwill | $ 32,021 | $ 30,556 | $ 31,184 | |||
Completed technology | Minimum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 5 years | 5 years | ||||
Completed technology | Maximum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 7 years | 7 years | ||||
Client relationships | Minimum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 5 years | 6 years | ||||
Client relationships | Maximum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 7 years | 7 years | ||||
Patents/trademarks | Minimum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 2 years | 2 years | ||||
Patents/trademarks | Maximum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 7 years | 7 years | ||||
SoftLayer | ||||||
Acquisitions: | ||||||
Current assets | $ 80 | |||||
Fixed assets/noncurrent assets | 300 | |||||
Goodwill | 1,285 | $ 1,285 | ||||
Total assets acquired | 2,277 | |||||
Current liabilities | (56) | |||||
Noncurrent liabilities | (244) | |||||
Total liabilities assumed | (300) | |||||
Total purchase price | $ 1,977 | |||||
Amortization Life (in Years) | 7 years | |||||
SoftLayer | Completed technology | ||||||
Acquisitions: | ||||||
Intangible assets | $ 290 | |||||
SoftLayer | Client relationships | ||||||
Acquisitions: | ||||||
Intangible assets | 245 | |||||
SoftLayer | In-process R&D | ||||||
Acquisitions: | ||||||
Intangible assets | 2 | |||||
SoftLayer | Patents/trademarks | ||||||
Acquisitions: | ||||||
Intangible assets | 75 | |||||
Merge | ||||||
Acquisitions: | ||||||
Current assets | $ 94 | |||||
Fixed assets/noncurrent assets | 128 | |||||
Goodwill | 695 | $ 695 | ||||
Total assets acquired | 1,248 | |||||
Current liabilities | (73) | |||||
Noncurrent liabilities | (139) | |||||
Total liabilities assumed | (212) | |||||
Total purchase price | $ 1,036 | |||||
Amortization Life (in Years) | 7 years | |||||
Merge | Completed technology | ||||||
Acquisitions: | ||||||
Intangible assets | $ 133 | |||||
Merge | Client relationships | ||||||
Acquisitions: | ||||||
Intangible assets | 145 | |||||
Merge | Patents/trademarks | ||||||
Acquisitions: | ||||||
Intangible assets | 54 | |||||
Cleversafe | ||||||
Acquisitions: | ||||||
Current assets | 23 | |||||
Fixed assets/noncurrent assets | 63 | |||||
Goodwill | 1,000 | $ 1,000 | ||||
Total assets acquired | 1,484 | |||||
Current liabilities | (15) | |||||
Noncurrent liabilities | (160) | |||||
Total liabilities assumed | (175) | |||||
Total purchase price | $ 1,309 | |||||
Amortization Life (in Years) | 6 years 11 months | |||||
Cleversafe | Completed technology | ||||||
Acquisitions: | ||||||
Intangible assets | $ 364 | |||||
Cleversafe | Client relationships | ||||||
Acquisitions: | ||||||
Intangible assets | 23 | |||||
Cleversafe | Patents/trademarks | ||||||
Acquisitions: | ||||||
Intangible assets | 11 | |||||
Other Acquisitions | ||||||
Acquisitions: | ||||||
Current assets | 60 | 56 | 97 | |||
Fixed assets/noncurrent assets | 82 | 39 | 41 | |||
Goodwill | 895 | 442 | 961 | |||
Total assets acquired | 1,318 | 701 | 1,408 | |||
Current liabilities | (34) | (26) | (61) | |||
Noncurrent liabilities | (73) | (67) | (105) | |||
Total liabilities assumed | (107) | (93) | (166) | |||
Total purchase price | $ 1,210 | $ 608 | $ 1,242 | |||
Amortization Life (in Years) | 6 years 5 months | 6 years 10 months | 6 years 7 months | |||
Other Acquisitions | Completed technology | ||||||
Acquisitions: | ||||||
Intangible assets | $ 163 | $ 68 | $ 181 | |||
Other Acquisitions | Completed technology | Minimum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 5 years | |||||
Other Acquisitions | Completed technology | Maximum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 7 years | |||||
Other Acquisitions | Client relationships | ||||||
Acquisitions: | ||||||
Intangible assets | 95 | $ 77 | 97 | |||
Amortization Life (in Years) | 7 years | |||||
Other Acquisitions | Patents/trademarks | ||||||
Acquisitions: | ||||||
Intangible assets | $ 23 | $ 18 | $ 32 | |||
Other Acquisitions | Patents/trademarks | Minimum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 1 year | |||||
Other Acquisitions | Patents/trademarks | Maximum | ||||||
Acquisitions: | ||||||
Amortization Life (in Years) | 7 years |
Acquisitions_Divestitures (Dive
Acquisitions/Divestitures (Divestiture) (Details 3) - Microelectronics business - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Discontinued Operations | ||||
Description of continuing involvement after transaction | The transaction included a 10-year exclusive manufacturing sourcing agreement in which GLOBALFOUNDRIES will provide server processor semiconductor technology for use in IBM Systems. The agreement provides the company with capacity and market-based pricing for current semiconductor nodes in production and progression to nodes in the future for both development and production needs. As part of the transaction, the company provides GLOBALFOUNDRIES with certain transition services, including IT, supply chain, packaging and test services and lab services. The initial term for these transition services is one to three years, with GLOBALFOUNDRIES having the ability to renew. | |||
Period of time over which cash consideration is expected to be transferred | 2 years | |||
Discontinued operations | ||||
Discontinued Operations | ||||
Discontinued operation, period of exclusive manufacturing agreement after disposal | 10 years | |||
Pre-tax charge related to sale | $ 4,700 | $ 116 | $ 4,726 | |
Impairment of long-lived assets | 2,400 | |||
Total cash consideration expected to be transferred to acquiring company | 1,500 | |||
Other related costs | $ 800 | |||
Cumulative pre-tax gain/(loss) on sale of business | $ 4,800 | |||
Net cash transferred | $ 515 | |||
Cash consideration payable at closing date | $ 750 | |||
Discontinued operations | Minimum | ||||
Discontinued Operations | ||||
Discontinued operation, period of continuing involvement after disposal | 1 year | |||
Discontinued operations | Maximum | ||||
Discontinued Operations | ||||
Discontinued operation, period of continuing involvement after disposal | 3 years |
Acquisitions_Divestitures (Di57
Acquisitions/Divestitures (Divestiture) (Details 4) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement Disclosures | ||||
Provision/(benefit) for income taxes | $ (117) | $ (1,617) | $ (322) | |
Loss from discontinued operations, net of tax | (174) | (3,729) | (398) | |
Microelectronics business | Discontinued operations | ||||
Income Statement Disclosures | ||||
Total revenue | 720 | 1,335 | 1,384 | |
Loss from discontinued operations, before tax | (175) | (619) | (720) | |
Loss on disposal, before tax | $ (4,700) | (116) | (4,726) | |
Total loss from discontinued operations, before income taxes | (291) | (5,346) | (720) | |
Provision/(benefit) for income taxes | (117) | (1,617) | (322) | |
Loss from discontinued operations, net of tax | $ (174) | (3,729) | $ (398) | |
Assets: | ||||
Accounts receivable | 245 | |||
Inventory | 380 | |||
Other assets | 92 | |||
Total assets | 717 | |||
Liabilities: | ||||
Accounts payable | 177 | |||
Deferred income | 87 | |||
Other liabilities | 163 | |||
Total liabilities | $ 427 |
Acquisitions_Divestitures (Di58
Acquisitions/Divestitures (Divestiture) (Details 5) $ in Millions | Jan. 23, 2014USD ($) | Dec. 31, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2013Divestiture | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) |
Industry Standard x86 Server Portfolio | Disposal group disposed of by sale, not discontinued operations | ||||||||
Divestitures | ||||||||
Disposal group, not discontinued operation, period of renewal of continuing involvement after transition services completed | 1 year | |||||||
Transaction price for sale of business | $ 2,100 | |||||||
Approximate amount of transaction price received in cash | $ 1,800 | |||||||
Pre-tax gain on sale of business | $ 11 | $ 36 | $ 16 | $ 63 | ||||
Pre-tax gain on sale of business, net of transition and performance-based costs | $ 1,100 | |||||||
Industry Standard x86 Server Portfolio | Maximum | Disposal group disposed of by sale, not discontinued operations | ||||||||
Divestitures | ||||||||
Disposal group, not discontinued operation, period of continuing involvement after disposal | 3 years | |||||||
Equity Ownership percent acquired | 5.00% | |||||||
Industry Standard x86 Server Portfolio | Estimated | Disposal group disposed of by sale, not discontinued operations | ||||||||
Divestitures | ||||||||
Pre-tax gain on sale of business | $ 1,600 | |||||||
Pre-tax gain on sale of business, net of transition and performance-based costs | 1,200 | |||||||
Others | ||||||||
Divestitures | ||||||||
Pre-tax gain on sale of business | $ 81 | $ 132 | ||||||
Number of divestitures | Divestiture | 2 |
Acquisitions_Divestitures (Di59
Acquisitions/Divestitures (Divestiture) (Details 6) - Disposal group disposed of by sale, not discontinued operations - USD ($) $ in Millions | Sep. 10, 2013 | Apr. 17, 2012 | Dec. 31, 2015 | Dec. 31, 2014 |
Retail Stores Solutions business | ||||
Divestitures | ||||
Pre-tax gain on sale of business | $ 8 | |||
Cumulative pre-tax gain/(loss) on sale of business | 519 | |||
Ownership retention period | 3 years | |||
Customer Care Business Process Outsourcing Services | ||||
Divestitures | ||||
Transaction price for sale of business | $ 501 | |||
Approximate amount of transaction price received in cash | 430 | |||
Noncash consideration received on sale of business | $ 71 | |||
Pre-tax gain on sale of business | 7 | $ 202 | ||
Cumulative pre-tax gain/(loss) on sale of business | $ 209 | |||
Customer Care Business Process Outsourcing Services | Maximum | ||||
Divestitures | ||||
Equity Ownership percent acquired | 5.00% |
Financial Instruments (Assets a
Financial Instruments (Assets and Liabilities Measured on Recurring Basis Table) (Details 1) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - noncurrent | $ 8 | $ 9 |
Available-for-sale equity investments | 192 | 243 |
Derivative assets | 994 | 1,432 |
Potential reduction in net position of total derivative liabilities | 139 | 97 |
Fair value assets, Level 2 to Level 1 transfer | 0 | |
Fair value assets, Level 1 to Level 2 transfer | 0 | |
Trading securitiy investments | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Fair value assets, Level 2 to Level 1 transfer | 74 | |
Recurring | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 4,943 | 5,359 |
Debt securities - current | 506 | |
Debt securities - noncurrent | 8 | 9 |
Trading security investments | 28 | 74 |
Available-for-sale equity investments | 192 | 243 |
Derivative assets | 994 | 1,432 |
Total Assets | 6,671 | 7,118 |
Total Liabilities | 186 | 196 |
Potential reduction in net position of total derivative assets | 139 | 97 |
Potential reduction in net position of total derivative liabilities | 139 | 97 |
Recurring | Prepaid expenses and other current assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 292 | 751 |
Recurring | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 702 | 681 |
Recurring | Other accrued expenses and liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 164 | 165 |
Recurring | Other liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 22 | 31 |
Recurring | Interest rate contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 656 | 633 |
Derivative liabilities | 3 | |
Recurring | Foreign exchange contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 332 | 775 |
Derivative liabilities | 164 | 177 |
Recurring | Equity contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 6 | 24 |
Derivative liabilities | 19 | 19 |
Recurring | Time deposits and certificates of deposit | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,856 | 3,517 |
Recurring | Commercial paper | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 764 | |
Recurring | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,069 | 662 |
Recurring | U.S. government securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 410 | |
Recurring | Other securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 18 | 6 |
Recurring | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,069 | 662 |
Debt securities - noncurrent | 1 | 1 |
Trading security investments | 28 | 74 |
Available-for-sale equity investments | 192 | 243 |
Total Assets | 2,290 | 980 |
Recurring | Level 1 | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,069 | 662 |
Recurring | Level 2 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,874 | 4,697 |
Debt securities - current | 506 | |
Debt securities - noncurrent | 6 | 8 |
Derivative assets | 994 | 1,432 |
Total Assets | 4,381 | 6,138 |
Total Liabilities | 186 | 196 |
Recurring | Level 2 | Interest rate contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 656 | 633 |
Derivative liabilities | 3 | |
Recurring | Level 2 | Foreign exchange contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 332 | 775 |
Derivative liabilities | 164 | 177 |
Recurring | Level 2 | Equity contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 6 | 24 |
Derivative liabilities | 19 | 19 |
Recurring | Level 2 | Time deposits and certificates of deposit | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 2,856 | 3,517 |
Recurring | Level 2 | Commercial paper | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 764 | |
Recurring | Level 2 | U.S. government securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 410 | |
Recurring | Level 2 | Other securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | $ 18 | $ 6 |
Financial Instruments (Debt and
Financial Instruments (Debt and Marketable Equity Securities Table) (Details 2) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
Fair value of financial instruments, details: | ||||
Carrying amount of long-term debt | $ 33,428 | $ 34,991 | [1] | |
Fair value of long-term debt | 35,220 | 37,524 | ||
Debt and Marketable Equity Securities. | ||||
Debt securities - noncurrent, Adjusted Cost | 5 | 7 | ||
Debt securities - noncurrent, Gross Unrealized Gains | 3 | 3 | ||
Debt securities - noncurrent | 8 | 9 | ||
Available-for-sale equity investments, Adjusted Cost | 186 | 272 | ||
Available-for-sale equity investments, Gross Unrealized Gains | 6 | 2 | ||
Available-for-sale equity investments, Gross Unrealized Losses | 0 | 31 | ||
Available-for-sale equity investments | 192 | 243 | ||
Gross unrealized gains (losses) related to available for sale securities | (54) | (29) | $ (4) | |
Sales of debt and available-for-sale equity investments | ||||
Proceeds | 8 | 21 | 41 | |
Gross realized gains (before taxes) | 1 | 0 | 13 | |
Gross realized losses (before taxes) | 1 | 5 | 5 | |
Unrealized holding gains/(losses) on available-for-sale debt and equity securities | ||||
Net unrealized gains/(losses) arising during the period | (33) | (18) | (3) | |
Net unrealized (gains)/losses reclassified to net income | 53 | 3 | $ (5) | |
Pretax writedowns | $ 86 | $ 0 | ||
Maximum contractual maturities of substantially all available-for-sale debt securities | 1 year | |||
Lenovo's common stock | ||||
Debt and Marketable Equity Securities. | ||||
Available-for-sale equity investments, Adjusted Cost | $ 185 | |||
The impairment charge | $ 86 | |||
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Financial Instruments (Fair Val
Financial Instruments (Fair Value of Derivative Instruments Table) (Details 3) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Financial Instruments | ||
Fair value of derivative instruments under collateralized arrangements in a liability position | $ 28 | $ 21 |
Collateral posted on derivative instruments | 0 | 0 |
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 994 | 1,432 |
Fair value of total derivative liabilities and debt | $ 8,131 | 7,944 |
Maximum spread on credit default swap agreements before full collateralization is required (in percent) | 2.50% | |
Liabilities included in master netting arrangements | $ 139 | 97 |
Obligation to return cash collateral | 90 | 487 |
Net exposure related to derivative assets recorded in the Statement of Financial Position | 726 | 817 |
Net exposure related to derivative liabilities recorded in the Statement of Financial Position | 47 | 99 |
Cash collateral rehypothecated | 0 | 0 |
U.S. Treasury securities | ||
Fair Values of Derivative Instruments | ||
Non-cash collateral received | 40 | 31 |
Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 858 | 1,281 |
Fair value of total derivative instruments, Liabilities | 92 | 72 |
Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 136 | 151 |
Fair value of total derivative instruments, Liabilities | 94 | 125 |
Other receivables | ||
Fair Values of Derivative Instruments | ||
Cash collateral issued, derivatives | 0 | 0 |
Accounts payable | ||
Fair Values of Derivative Instruments | ||
Obligation to return cash collateral | 90 | 487 |
Prepaid expenses and other current assets | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 5 | |
Prepaid expenses and other current assets | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 197 | 632 |
Prepaid expenses and other current assets | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 90 | 90 |
Prepaid expenses and other current assets | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 6 | 24 |
Investments and sundry assets | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 656 | 628 |
Investments and sundry assets | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 5 | 17 |
Investments and sundry assets | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 40 | 37 |
Investments and sundry assets | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 0 | |
Other accrued expenses and liabilities | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 0 | |
Other accrued expenses and liabilities | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 70 | 50 |
Other accrued expenses and liabilities | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 75 | 101 |
Other accrued expenses and liabilities | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 19 | 14 |
Other liabilities | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 3 | |
Other liabilities | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 19 | 21 |
Other liabilities | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 4 | |
Other liabilities | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 5 | |
Long term debt | Designated as hedging instruments | Net investment hedge | ||
Fair Values of Derivative Instruments | ||
Debt designated as hedging instrument | $ 7,945 | 7,747 |
Short term debt | Designated as hedging instruments | Net investment hedge | ||
Fair Values of Derivative Instruments | ||
Debt designated as hedging instrument | $ 0 |
Financial Instruments (Narrativ
Financial Instruments (Narratives) (Details 4) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Financial Instruments | ||
Fair value of derivative instruments in net asset position | $ 994 | $ 1,432 |
Warrants | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | 0 | 0 |
Derivative instruments in fair value hedging relationships | Interest rate swaps | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 7,338 | $ 5,839 |
Average remaining maturity | 7 years 2 months | 8 years 8 months |
Derivative instruments in cash flow hedging relationships | Interest rate swaps | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 0 | $ 0 |
Derivative instruments in cash flow hedging relationships | Interest rate swaps | Maximum | ||
Derivative Instruments, Gain (Loss) | ||
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges of borrowings | 1 | 1 |
Gains (losses) expected to be reclassified to net income within the next 12 months | 1 | 1 |
Derivative instruments in cash flow hedging relationships | Foreign exchange forward contracts | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 8,200 | $ 9,300 |
Average remaining maturity | 8 months 12 days | 8 months 12 days |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges of borrowings | $ 147 | $ 602 |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 121 | 572 |
Maximum length of time hedged | 4 years | |
Derivative instruments in cash flow hedging relationships | Currency swaps | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 0 | 0 |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges of borrowings | $ (2) | (2) |
Maximum length of time hedged | 7 years | |
Derivative instruments in cash flow hedging relationships | Currency swaps | Maximum | ||
Derivative Instruments, Gain (Loss) | ||
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (1) | (1) |
Derivative instruments in net investment hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 5,500 | $ 2,200 |
Average remaining maturity | 2 months 12 days | 2 months 12 days |
Derivative instruments not designated as hedging instruments | Foreign exchange forward and swap contracts | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 11,700 | $ 13,100 |
Maximum length of time hedged | 1 year | |
Derivative instruments not designated as hedging instruments | Equity options | Maximum | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 100 | 100 |
Derivative instruments not designated as hedging instruments | Equity contracts | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | 1,200 | 1,300 |
Derivative instruments not designated as hedging instruments | Credit default swaps | ||
Derivative Instruments, Gain (Loss) | ||
Notional amount | $ 0 | $ 0 |
Maximum length of time hedged | 1 year |
Financial Instruments (Effect o
Financial Instruments (Effect of Derivative Instruments Table) (Details 5) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income on derivatives | $ 291 | $ (263) | $ (347) |
Gain (loss) recognized in earnings attributable to risk being hedged | (1) | (241) | 340 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | 1,507 | 2,095 | 216 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 1,072 | 97 | 167 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 18 | (1) | 3 |
Gains and (Losses) excluded from the assessment of hedge effectiveness for fair value hedges | 0 | 0 | 0 |
Gains and (Losses) associated with underlying exposure that did not occur or was not expected to occur for cash flow hedges | 0 | 0 | 0 |
Gain or (Loss) on fair value hedges ineffectiveness | (2) | 4 | |
Foreign exchange Contracts | Derivative instruments in cash flow hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | 618 | 958 | 43 |
Foreign exchange Contracts | Derivative instruments in net investment hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | 889 | 1,136 | 173 |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income, recognized on derivative instruments in fair value hedges | 108 | 231 | (109) |
Gain (loss) recognized in earnings attributable to risk being hedged | (1) | (127) | 202 |
Interest expense | Interest rate contracts | Derivative instruments in fair value hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income, recognized on derivative instruments in fair value hedges | 94 | 206 | (74) |
Gain (loss) recognized in earnings attributable to risk being hedged | (1) | (114) | 138 |
Interest expense | Interest rate contracts | Derivative instruments in cash flow hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 0 | (1) | |
Interest expense | Foreign exchange Contracts | Derivative instruments in net investment hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 13 | 0 | 3 |
Other (income) and expense | Interest rate contracts | Derivative instruments not designated as hedging instruments | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income on derivatives | (1) | 34 | |
Other (income) and expense | Foreign exchange Contracts | Derivative instruments in cash flow hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 731 | 98 | 162 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 5 | (1) | 0 |
Other (income) and expense | Foreign exchange Contracts | Derivative instruments not designated as hedging instruments | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income on derivatives | 127 | (776) | (328) |
Other (income) and expense | Equity contracts | Derivative instruments not designated as hedging instruments | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income on derivatives | (9) | (9) | |
Cost of sales | Foreign exchange Contracts | Derivative instruments in cash flow hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 192 | (15) | (34) |
SG&A expense | Foreign exchange Contracts | Derivative instruments in cash flow hedging relationships | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 149 | 15 | 39 |
SG&A expense | Equity contracts | Derivative instruments not designated as hedging instruments | |||
Derivative Instruments, Gain (Loss) | |||
Amount of gain (loss) recognized in income on derivatives | $ (27) | $ 51 | $ 164 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Inventories | ||
Finished goods | $ 352 | $ 430 |
Work in process and raw materials | 1,199 | 1,674 |
Total | $ 1,551 | $ 2,103 |
Financing Receivables (Details
Financing Receivables (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Financing receivables: | |||
Financing receivables used as collateral for non-recourse borrowings | $ 545 | $ 642 | |
Financing receivables held for sale | 0 | 0 | |
Financing receivables, current | |||
Financing receivables, net, current | 19,020 | 19,835 | |
Financing receivables, noncurrent | |||
Financing receivables, net, noncurrent | 10,013 | 11,109 | |
Financing receivables | |||
Allowance for credit losses | 590 | 561 | $ 365 |
Net investment in sales-type and direct financing leases | |||
Financing receivables, current | |||
Financing receivables, net, current | 3,057 | 3,781 | |
Financing receivables, noncurrent | |||
Financing receivables, net, noncurrent | 4,501 | 4,449 | |
Financing receivables | |||
Sales-type and direct financing leases, unguaranteed residual value | 645 | 671 | |
Sales-type and direct financing leases, unearned income | 536 | 517 | |
Allowance for credit losses | $ 213 | 165 | |
Scheduled maturities of minimum lease payments outstanding as a percentage of the total, 2016 | 44.00% | ||
Scheduled maturities of minimum lease payments outstanding as a percentage of the total, 2017 | 27.00% | ||
Scheduled maturities of minimum lease payments outstanding as a percentage of the total, 2018 | 18.00% | ||
Scheduled maturities of minimum lease payments outstanding as a percentage of the total, 2019 | 8.00% | ||
Scheduled maturities of minimum lease payments outstanding as a percentage of the total, 2020 and beyond | 3.00% | ||
Net investment in sales-type and direct financing leases | Minimum | |||
Financing receivables | |||
Financing receivable, payment terms | 2 years | ||
Net investment in sales-type and direct financing leases | Maximum | |||
Financing receivables | |||
Financing receivable, payment terms | 6 years | ||
Commercial financing receivables | |||
Financing receivables, current | |||
Financing receivables, net, current | $ 8,948 | 8,423 | |
Financing receivables | |||
Allowance for credit losses | $ 19 | 17 | |
Commercial financing receivables | Minimum | |||
Financing receivables | |||
Financing receivable, payment terms | 30 days | ||
Commercial financing receivables | Maximum | |||
Financing receivables | |||
Financing receivable, payment terms | 90 days | ||
Client loan and installment payment receivables (loans) | |||
Financing receivables, current | |||
Financing receivables, net, current | $ 7,015 | 7,631 | |
Financing receivables, noncurrent | |||
Financing receivables, net, noncurrent | 5,512 | 6,660 | |
Financing receivables | |||
Allowance for credit losses | $ 377 | $ 396 | |
Client loan and installment payment receivables (loans) | Maximum | |||
Financing receivables | |||
Financing receivable, payment terms | 7 years |
Financing Receivables (Detail67
Financing Receivables (Details 2) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Financing Receivables | ||
Total Financing Receivables | $ 19,945 | $ 22,332 |
Collectively evaluated for impairment | 19,406 | 21,821 |
Individually evaluated for impairment | 539 | 511 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 561 | 365 |
Write-offs | (62) | (24) |
Provision | 141 | 243 |
Other | (51) | (23) |
Allowance for credit losses, ending balance | 590 | 561 |
Collectively evaluated for impairment | 79 | 81 |
Individually evaluated for impairment | 511 | 480 |
Major Markets | ||
Financing Receivables | ||
Total Financing Receivables | 15,256 | 15,751 |
Collectively evaluated for impairment | 15,180 | 15,665 |
Individually evaluated for impairment | 76 | 86 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 111 | 137 |
Write-offs | (14) | (18) |
Provision | 20 | 3 |
Other | (8) | (12) |
Allowance for credit losses, ending balance | 109 | 111 |
Collectively evaluated for impairment | 43 | 42 |
Individually evaluated for impairment | 65 | 69 |
Growth Markets | ||
Financing Receivables | ||
Total Financing Receivables | 4,689 | 6,581 |
Collectively evaluated for impairment | 4,227 | 6,156 |
Individually evaluated for impairment | 462 | 425 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 450 | 228 |
Write-offs | (48) | (6) |
Provision | 122 | 240 |
Other | (43) | (11) |
Allowance for credit losses, ending balance | 481 | 450 |
Collectively evaluated for impairment | 36 | 39 |
Individually evaluated for impairment | 445 | 411 |
Lease receivables | ||
Financing Receivables | ||
Total Financing Receivables | 7,041 | 7,645 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 165 | 123 |
Allowance for credit losses, ending balance | 213 | 165 |
Lease receivables | Major Markets | ||
Financing Receivables | ||
Total Financing Receivables | 5,517 | 5,702 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 32 | 42 |
Allowance for credit losses, ending balance | 25 | 32 |
Lease receivables | Growth Markets | ||
Financing Receivables | ||
Total Financing Receivables | 1,524 | 1,943 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 133 | 80 |
Allowance for credit losses, ending balance | 188 | 133 |
Loan receivables | ||
Financing Receivables | ||
Total Financing Receivables | 12,904 | 14,687 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 396 | 242 |
Allowance for credit losses, ending balance | 377 | 396 |
Loan receivables | Major Markets | ||
Financing Receivables | ||
Total Financing Receivables | 9,739 | 10,049 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 79 | 95 |
Allowance for credit losses, ending balance | 83 | 79 |
Loan receivables | Growth Markets | ||
Financing Receivables | ||
Total Financing Receivables | 3,165 | 4,639 |
Allowance for Credit Losses | ||
Allowance for credit losses, beginning balance | 317 | 147 |
Allowance for credit losses, ending balance | $ 293 | $ 317 |
Financing Receivables (Detail68
Financing Receivables (Details 3) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Financing Receivables on Non-accrual Status | ||
Total Receivables | $ 168 | $ 231 |
Lease receivables | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 65 | 53 |
Lease receivables | Major Markets | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 2 | 13 |
Lease receivables | Growth Markets | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 63 | 40 |
Loan receivables | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 104 | 178 |
Loan receivables | Major Markets | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 13 | 27 |
Loan receivables | Growth Markets | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | $ 91 | $ 151 |
Financing Receivables (Detail69
Financing Receivables (Details 4) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Impaired client loan receivables | ||
Recorded Investment | $ 347 | $ 353 |
Related Allowance | 331 | 340 |
Average Recorded Investment | 367 | 276 |
Interest Income Recognized | 0 | 0 |
Major Markets | ||
Impaired client loan receivables | ||
Recorded Investment | 50 | 54 |
Related Allowance | 47 | 47 |
Average Recorded Investment | 51 | 68 |
Interest Income Recognized | 0 | 0 |
Growth Markets | ||
Impaired client loan receivables | ||
Recorded Investment | 297 | 299 |
Related Allowance | 284 | 293 |
Average Recorded Investment | 315 | 208 |
Interest Income Recognized | $ 0 | $ 0 |
Financing Receivables (Detail70
Financing Receivables (Details 5) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | $ 19,945 | $ 22,332 |
Major Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 15,256 | 15,751 |
Growth Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 4,689 | 6,581 |
Lease receivables | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 7,041 | 7,645 |
Lease receivables | Major Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 5,517 | 5,702 |
Lease receivables | Major Markets | Aaa - Aa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 538 | 563 |
Lease receivables | Major Markets | A1 - A3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 1,324 | 1,384 |
Lease receivables | Major Markets | Baa1 - Baa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 1,493 | 1,704 |
Lease receivables | Major Markets | Ba1 - Ba2 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 1,214 | 1,154 |
Lease receivables | Major Markets | Ba3 - B1 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 513 | 470 |
Lease receivables | Major Markets | B2 - B3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 403 | 372 |
Lease receivables | Major Markets | Caa - D | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 33 | 55 |
Lease receivables | Growth Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 1,524 | 1,943 |
Lease receivables | Growth Markets | Aaa - Aa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 39 | 46 |
Lease receivables | Growth Markets | A1 - A3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 162 | 178 |
Lease receivables | Growth Markets | Baa1 - Baa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 392 | 900 |
Lease receivables | Growth Markets | Ba1 - Ba2 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 352 | 272 |
Lease receivables | Growth Markets | Ba3 - B1 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 277 | 286 |
Lease receivables | Growth Markets | B2 - B3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 215 | 176 |
Lease receivables | Growth Markets | Caa - D | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 87 | 85 |
Loan receivables | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 12,904 | 14,687 |
Loan receivables | Major Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 9,739 | 10,049 |
Loan receivables | Major Markets | Aaa - Aa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 949 | 993 |
Loan receivables | Major Markets | A1 - A3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 2,338 | 2,438 |
Loan receivables | Major Markets | Baa1 - Baa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 2,635 | 3,003 |
Loan receivables | Major Markets | Ba1 - Ba2 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 2,143 | 2,034 |
Loan receivables | Major Markets | Ba3 - B1 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 905 | 827 |
Loan receivables | Major Markets | B2 - B3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 711 | 655 |
Loan receivables | Major Markets | Caa - D | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 59 | 98 |
Loan receivables | Growth Markets | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 3,165 | 4,639 |
Loan receivables | Growth Markets | Aaa - Aa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 80 | 110 |
Loan receivables | Growth Markets | A1 - A3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 336 | 425 |
Loan receivables | Growth Markets | Baa1 - Baa3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 813 | 2,148 |
Loan receivables | Growth Markets | Ba1 - Ba2 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 732 | 649 |
Loan receivables | Growth Markets | Ba3 - B1 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 576 | 683 |
Loan receivables | Growth Markets | B2 - B3 | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | 447 | 420 |
Loan receivables | Growth Markets | Caa - D | ||
Gross recorded investment for each class of receivables, by credit quality indicator | ||
Total | $ 181 | $ 203 |
Financing Receivables (Detail71
Financing Receivables (Details 6) - Global Financing - Financing Receivable Portfolio | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Financial Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 36.00% | 40.00% |
Government Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 11.00% | 13.00% |
Manufacturing Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 14.00% | 14.00% |
Retail Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 9.00% | 8.00% |
Services Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 11.00% | 9.00% |
Healthcare Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 6.00% | 5.00% |
Communications Industry | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 7.00% | 6.00% |
Other industries | ||
Financing Receivables by Portfolio Segment | ||
Financing receivables (as a percent) | 6.00% | 5.00% |
Financing Receivables (Detail72
Financing Receivables (Details 7) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Past Due Financing Receivable | ||
Current | $ 19,872 | $ 22,250 |
Total Financing Receivables | 19,945 | 22,332 |
Recorded Investment > 90 Days and Accruing | 40 | 47 |
Troubled debt restructurings of financing receivables | 0 | 0 |
Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 73 | 82 |
Major Markets | ||
Past Due Financing Receivable | ||
Total Financing Receivables | 15,256 | 15,751 |
Growth Markets | ||
Past Due Financing Receivable | ||
Total Financing Receivables | 4,689 | 6,581 |
Lease receivables | ||
Past Due Financing Receivable | ||
Current | 7,006 | 7,607 |
Total Financing Receivables | 7,041 | 7,645 |
Recorded Investment > 90 Days and Accruing | 19 | 20 |
Lease receivables | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 35 | 38 |
Lease receivables | Major Markets | ||
Past Due Financing Receivable | ||
Current | 5,512 | 5,696 |
Total Financing Receivables | 5,517 | 5,702 |
Recorded Investment > 90 Days and Accruing | 5 | 6 |
Lease receivables | Major Markets | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 5 | 6 |
Lease receivables | Growth Markets | ||
Past Due Financing Receivable | ||
Current | 1,494 | 1,911 |
Total Financing Receivables | 1,524 | 1,943 |
Recorded Investment > 90 Days and Accruing | 13 | 14 |
Lease receivables | Growth Markets | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 30 | 32 |
Loan receivables | ||
Past Due Financing Receivable | ||
Current | 12,866 | 14,643 |
Total Financing Receivables | 12,904 | 14,687 |
Recorded Investment > 90 Days and Accruing | 22 | 27 |
Loan receivables | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 38 | 44 |
Loan receivables | Major Markets | ||
Past Due Financing Receivable | ||
Current | 9,732 | 10,040 |
Total Financing Receivables | 9,739 | 10,049 |
Recorded Investment > 90 Days and Accruing | 7 | 9 |
Loan receivables | Major Markets | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | 7 | 9 |
Loan receivables | Growth Markets | ||
Past Due Financing Receivable | ||
Current | 3,134 | 4,603 |
Total Financing Receivables | 3,165 | 4,639 |
Recorded Investment > 90 Days and Accruing | 14 | 18 |
Loan receivables | Growth Markets | Total Past Due >90 days | ||
Past Due Financing Receivable | ||
Total Past Due | $ 31 | $ 35 |
Property, Plant and Equipment73
Property, Plant and Equipment (Details) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment | ||
Property, plant and equipment | $ 29,342 | $ 39,034 |
Less: Accumulated depreciation | 18,615 | 28,263 |
Net Plant, Property and Equipment | 10,727 | 10,771 |
Plant and other property | ||
Property, Plant and Equipment | ||
Property, plant and equipment | 28,226 | 37,578 |
Less: Accumulated depreciation | 18,051 | 27,500 |
Net Plant, Property and Equipment | 10,176 | 10,078 |
Land and land improvements | ||
Property, Plant and Equipment | ||
Property, plant and equipment | 558 | 667 |
Buildings and building improvements | ||
Property, Plant and Equipment | ||
Property, plant and equipment | 6,552 | 9,524 |
Plant, laboratory and office equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment | 21,116 | 27,388 |
Rental machines | ||
Property, Plant and Equipment | ||
Property, plant and equipment | 1,115 | 1,456 |
Less: Accumulated depreciation | 565 | 763 |
Net Plant, Property and Equipment | $ 551 | $ 693 |
Investments and Sundry Assets74
Investments and Sundry Assets (Details) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Investments and Sundry Assets | |||
Deferred transition and setup costs and other deferred arrangements | $ 1,624 | $ 1,527 | |
Derivatives-noncurrent | 702 | 681 | |
Alliance investments - equity method | 82 | 98 | |
Alliance investments - non-equity method | 393 | 496 | |
Prepaid software | 273 | 332 | |
Long-term deposits | 256 | 300 | |
Other receivables | 516 | 509 | |
Employee benefit-related | 273 | 356 | |
Prepaid income taxes | 496 | 518 | |
Other assets | 571 | 705 | |
Total | $ 5,187 | $ 5,520 | [1] |
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Intangible Assets Including G75
Intangible Assets Including Goodwill (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | $ 6,543 | $ 6,806 | |
Accumulated Amortization | (3,057) | (3,702) | |
Net Carrying Amount | 3,487 | 3,104 | |
Net carrying amount increase/(decrease) | 383 | ||
Intangible asset amortization expense | 1,193 | 1,347 | $ 1,351 |
Intangible assets retired and fully amortized | 1,809 | 724 | |
Impairment Of Intangible Assets Excluding Goodwill | 0 | 0 | |
Capitalized software | |||
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | 1,348 | 1,375 | |
Accumulated Amortization | (581) | (679) | |
Net Carrying Amount | 767 | 696 | |
Client relationships | |||
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | 1,856 | 2,208 | |
Accumulated Amortization | (927) | (1,271) | |
Net Carrying Amount | 929 | 937 | |
Completed technology | |||
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | 2,960 | 2,831 | |
Accumulated Amortization | (1,397) | (1,533) | |
Net Carrying Amount | 1,563 | 1,298 | |
Patents/trademarks | |||
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | 335 | 374 | |
Accumulated Amortization | (142) | (214) | |
Net Carrying Amount | 193 | 161 | |
Other | |||
Intangible asset balances by major asset class: | |||
Gross Carrying Amount | 44 | 18 | |
Accumulated Amortization | (10) | (6) | |
Net Carrying Amount | $ 35 | $ 12 |
Intangible Assets Including G76
Intangible Assets Including Goodwill (Details 2) $ in Millions | Dec. 31, 2015USD ($) |
Future amortization expense, by year | |
2,016 | $ 1,185 |
2,017 | 906 |
2,018 | 577 |
2,019 | 338 |
2,020 | 240 |
Capitalized Software | |
Future amortization expense, by year | |
2,016 | 426 |
2,017 | 256 |
2,018 | 85 |
Acquired Intangibles | |
Future amortization expense, by year | |
2,016 | 760 |
2,017 | 650 |
2,018 | 492 |
2,019 | 338 |
2,020 | $ 240 |
Intangible Assets Including G77
Intangible Assets Including Goodwill (Details 3) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 30,556 | $ 31,184 |
Goodwill Additions | 2,590 | 442 |
Purchase Price Adjustments | (3) | 4 |
Divestitures | (26) | (183) |
Foreign Currency Translation and Other Adjustments | (1,096) | (891) |
Ending Balance | 32,021 | 30,556 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Cognitive Solutions | ||
Changes in Goodwill Balances | ||
Beginning Balance | 15,156 | 15,244 |
Goodwill Additions | 1,020 | 311 |
Purchase Price Adjustments | (2) | (12) |
Divestitures | (18) | (14) |
Foreign Currency Translation and Other Adjustments | (535) | (372) |
Ending Balance | 15,621 | 15,156 |
Global Business Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 4,555 | 4,855 |
Goodwill Additions | 74 | |
Purchase Price Adjustments | 0 | 0 |
Divestitures | (1) | (52) |
Foreign Currency Translation and Other Adjustments | (232) | (248) |
Ending Balance | 4,396 | 4,555 |
Technology Services & Cloud Platforms | ||
Changes in Goodwill Balances | ||
Beginning Balance | 9,373 | 9,485 |
Goodwill Additions | 1,087 | 131 |
Purchase Price Adjustments | (1) | 16 |
Divestitures | (7) | (8) |
Foreign Currency Translation and Other Adjustments | (296) | (252) |
Ending Balance | 10,156 | 9,373 |
Systems | ||
Changes in Goodwill Balances | ||
Beginning Balance | 1,472 | 1,601 |
Goodwill Additions | 410 | |
Purchase Price Adjustments | 0 | |
Divestitures | (110) | |
Foreign Currency Translation and Other Adjustments | (33) | (19) |
Ending Balance | $ 1,848 | $ 1,472 |
Borrowings (Short Term Debt Tab
Borrowings (Short Term Debt Table) (Details 1) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | ||
Borrowings | |||
Commercial paper | $ 600 | $ 650 | |
Short-term loans | 590 | 480 | |
Long-term debt - current maturities | 5,271 | 4,601 | |
Total | 6,461 | $ 5,731 | [1] |
Default provision on credit facility | $ 500 | ||
Debt Disclosure | |||
Limit based on Net Tangible Assets | 10.00% | ||
Net interest expense ratio | 2.2 | ||
Commercial paper | |||
Debt Disclosure | |||
Weighted-average interest rates for short-term loans (as a percent) | 0.40% | 0.10% | |
Short-term loans | |||
Debt Disclosure | |||
Weighted-average interest rates for short-term loans (as a percent) | 5.20% | 4.00% | |
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Borrowings (Pre Swap Borrowing
Borrowings (Pre Swap Borrowing Table) (Details2) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 38,820 | $ 39,737 | |
Less: net unamortized discount | 838 | 853 | |
Less: net unamortized debt issuance costs | 74 | 83 | |
Add: fair value adjustment | 790 | 792 | |
Long-Term Debt, including current portion | 38,699 | 39,593 | |
Less: current maturities | 5,271 | 4,601 | |
Total long-term debt (excluding current portion) | 33,428 | 34,991 | [1] |
U.S. dollar notes and debentures | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | 30,319 | 31,404 | |
2.80% Notes and Debentures, maturing in 2016-2017 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 9,351 | 9,254 | |
Debt instrument, stated interest rate percentage (as a percent) | 2.80% | ||
3.34% Notes and Debentures, maturing in 2018-2019 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 7,591 | 6,835 | |
Debt instrument, stated interest rate percentage (as a percent) | 3.34% | ||
1.46% Notes and Debentures, maturing in 2020-2021 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 3,717 | 6,555 | |
Debt instrument, stated interest rate percentage (as a percent) | 1.46% | ||
2.35% Notes and debentures, maturing in 2022 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 1,900 | 1,000 | |
Debt instrument, stated interest rate percentage (as a percent) | 2.35% | ||
3.38% Notes and debentures, maturing in 2023 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 1,500 | 1,500 | |
Debt instrument, stated interest rate percentage (as a percent) | 3.38% | ||
3.63% Notes and debentures, maturing in 2024 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 2,000 | 2,000 | |
Debt instrument, stated interest rate percentage (as a percent) | 3.63% | ||
7.00% Notes and Debentures, maturing in 2025 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 600 | 600 | |
Debt instrument, stated interest rate percentage (as a percent) | 7.00% | ||
6.22% Notes and Debentures, maturing in 2027 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 469 | 469 | |
Debt instrument, stated interest rate percentage (as a percent) | 6.22% | ||
6.50% Notes and Debentures, maturing in 2028 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 313 | 313 | |
Debt instrument, stated interest rate percentage (as a percent) | 6.50% | ||
5.88% Notes and Debentures, maturing in 2032 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 600 | 600 | |
Debt instrument, stated interest rate percentage (as a percent) | 5.88% | ||
8.00% Notes and Debentures, maturing in 2038 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 83 | 83 | |
Debt instrument, stated interest rate percentage (as a percent) | 8.00% | ||
5.60% Notes and Debentures, maturing in 2039 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 745 | 745 | |
Debt instrument, stated interest rate percentage (as a percent) | 5.60% | ||
4.00% Notes and Debentures, maturing in 2042 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 1,107 | 1,107 | |
Debt instrument, stated interest rate percentage (as a percent) | 4.00% | ||
7.00% Notes and Debentures, maturing in 2045 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 27 | 27 | |
Debt instrument, stated interest rate percentage (as a percent) | 7.00% | ||
7.13% Notes and Debentures, maturing in 2096 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 316 | 316 | |
Debt instrument, stated interest rate percentage (as a percent) | 7.13% | ||
1.8% Euros maturing in 2016 - 2025 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 4,892 | 5,463 | |
Debt instrument, stated interest rate percentage (as a percent) | 1.80% | ||
2.7% Pound sterling maturing in 2017 - 2022 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 1,555 | 1,176 | |
Debt instrument, stated interest rate percentage (as a percent) | 2.70% | ||
0.4% Japanese yen maturing in 2017-2022 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 1,180 | 733 | |
Debt instrument, stated interest rate percentage (as a percent) | 0.40% | ||
6.3% Swiss francs maturing in 2020 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 9 | 162 | |
Debt instrument, stated interest rate percentage (as a percent) | 6.30% | ||
2.2% Canadian Maturing 2017 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 360 | 432 | |
Debt instrument, stated interest rate percentage (as a percent) | 2.20% | ||
13.8% Other maturing in 2016-2020 | |||
Debt Disclosure | |||
Aggregate carrying amount of long-term borrowings before adjusting for unamortized discount, unamortized debt issuance cost, and fair value adjustment | $ 506 | $ 367 | |
Debt instrument, stated interest rate percentage (as a percent) | 13.80% | ||
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Borrowings (Pre Swap Borrowin80
Borrowings (Pre Swap Borrowing Table Calculation) (Details 3) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Borrowings | |||
Long-Term Debt, including current portion | $ 38,699 | $ 39,593 | |
Less: current maturities | 5,271 | 4,601 | |
Total long-term debt (excluding current portion) | $ 33,428 | $ 34,991 | [1] |
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Borrowings (Post Swap Borrowing
Borrowings (Post Swap Borrowing Tables) (Details 4) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Borrowings | ||
Fixed-rate debt | $ 25,499 | $ 27,180 |
Floating-rate debt | 13,199 | 12,412 |
Long-Term Debt, including current portion | $ 38,699 | $ 39,593 |
Fixed-rate debt, Average Rate (as a percent) | 3.41% | 3.09% |
Floating-rate debt, Average Rate (as a percent) | 0.96% | 0.82% |
Interest rate swaps | Derivative instruments in fair value hedging relationships | ||
Derivative | ||
Notional amount | $ 7,338 | $ 5,839 |
Borrowings (Pre-Swap annual con
Borrowings (Pre-Swap annual contractual maturities) (Details 5) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Pre-swap annual contractual maturities of long-term debt outstanding | ||
2,016 | $ 5,273 | |
2,017 | 5,674 | |
2,018 | 4,691 | |
2,019 | 4,003 | |
2,020 | 4,505 | |
2021 and beyond | 14,675 | |
Total | $ 38,820 | $ 39,737 |
Borrowings (Interest on Debt) (
Borrowings (Interest on Debt) (Details 6) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Interest on Debt | |||
Cost of financing | $ 540 | $ 542 | $ 587 |
Interest expense | 481 | 484 | 405 |
Net investment derivative activity | (13) | 0 | (3) |
Interest capitalized | 0 | 4 | 22 |
Total interest paid and accrued | $ 1,008 | 1,030 | 1,011 |
Credit Agreement | |||
Line of Credit | |||
Revolving lines of credit, term | 5 years | ||
Revolving lines of credit, amount | $ 10,000 | ||
Revolving lines or credit, extended term | 1 year | ||
Revolving line of credit, expiration date | Nov. 10, 2020 | ||
Lines of credit, expenses | $ 5.3 | $ 5.4 | $ 5.4 |
Revolving lines of credit, additional amount | 2,000 | ||
Revolving line of credit, borrowings outstanding | $ 0 |
Other Liabilities (Narratives)
Other Liabilities (Narratives) (Details 1) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Non-ARO environmental liabilities | ||
Environmental Loss | ||
Accrual for environmental loss contingencies | $ 283 | $ 254 |
ARO liabilities | ||
Environmental Loss | ||
Accrual for environmental loss contingencies | $ 166 | $ 180 |
Other Liabilities (Other Liabil
Other Liabilities (Other Liabilities Reconciliation) (Details 2) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Noncurrent liabilities- | |||
Income tax reserves | $ 3,150 | $ 3,146 | |
Excess 401(k) Plus Plan | 1,445 | 1,658 | |
Disability benefits | 590 | 675 | |
Derivative liabilities | 22 | 31 | |
Special restructuring actions | 362 | 431 | |
Workforce reductions | 407 | 469 | |
Deferred taxes | 253 | 129 | |
Other taxes payable | 89 | 17 | |
Environmental accruals | 270 | 240 | |
Warranty accruals | 83 | 91 | |
Asset retirement obligations | 134 | 136 | |
Aquistition-related | 200 | 50 | |
Divestiture-related | 575 | 1,124 | |
Other | 519 | 536 | |
Total | $ 8,099 | $ 8,733 | [1] |
[1] | Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Equity Activity (Narratives) (D
Equity Activity (Narratives) (Detail 1) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Equity Activity | |||
Common stock, Shares authorized (in shares) | 4,687,500,000 | 4,687,500,000 | |
Common stock, par value (in dollars per share) | $ 0.2 | $ 0.2 | |
Common stock, outstanding (in shares) | 965,728,725 | ||
Preferred stock, shares authorized (in shares) | 150,000,000 | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | ||
Preferred stock, shares outstanding (in shares) | 0 | ||
Common stock repurchased (in shares) | 30,338,647 | 71,504,867 | 73,121,942 |
Common stock repurchased, value | $ 4,701 | $ 13,395 | $ 13,993 |
Common stock repurchase authorization available, value | $ 5,563 | ||
Common stock issued under employee plans (in shares) | 6,013,875 | 7,687,026 | 9,961,389 |
Issue of treasury shares as a result of RSU releases and stock options exercises (in shares) | 1,155,558 | 1,264,232 | 1,849,883 |
Common stock remitted by employees in order to satisfy tax withholding requirements included in Treasury Stock balance (in shares) | 1,625,820 | 1,313,569 | 1,666,069 |
Value of common shares remitted by employees in order to satisfy tax withholding requirements | $ 248 | $ 236 | $ 336 |
Equity Activity (Reclassificati
Equity Activity (Reclassification and Taxes Related Tables) (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Other comprehensive income/(loss), before tax | |||
Foreign currency translation adjustments, before tax | $ (1,379) | $ (1,636) | $ (1,335) |
Net changes related to available-for-sale securities, before tax | |||
Unrealized gains/(losses) arising during the period, before tax | (54) | (29) | (4) |
Reclassification of (gains)/losses to other (income) and expense, before tax | 86 | 5 | (8) |
Subsequent changes in previously impaired securities arising during the period, before tax | 4 | ||
Total net changes related to available-for-sale securities, before tax | 32 | (24) | (8) |
Unrealized gains/(losses) on cash flow hedges, before tax | |||
Unrealized gains/(losses) arising during the period, before tax | 618 | 958 | 43 |
Reclassification of (gains)/losses to net income, before tax | (1,072) | (97) | (166) |
Total unrealized gains/(losses) on cash flow hedges, before tax | (454) | 861 | (123) |
Retirement-related benefit plans, before tax | |||
Prior service costs/(credits), before tax | 6 | 1 | 16 |
Net (losses)/gains arising during the period, before tax | (2,963) | (9,799) | 5,369 |
Curtailments and settlements, before tax | 33 | 24 | (3) |
Amortization of prior service (credits)/costs, before tax | (100) | (114) | (114) |
Amortization of net (gains)/losses, before tax | 3,304 | 2,531 | 3,499 |
Total retirement-related benefit plans, before tax | 279 | (7,357) | 8,767 |
Other Comprehensive Income (Loss), before Tax | (1,523) | (8,156) | 7,301 |
Other comprehensive income/(loss), tax | |||
Foreign currency translation adjustments, tax | (342) | (438) | (66) |
Net changes related to available-for-sale securities, tax | |||
Unrealized gains/(losses) arising during the period, tax | 21 | 11 | 2 |
Subsequent changes in previously impaired securities arising during the period, tax | (1) | ||
Total net changes related to available-for-sale securities, tax | (12) | 9 | 3 |
Unrealized gains/(losses) on cash flow hedges, tax | |||
Unrealized gains/(losses) arising during the period, tax | (218) | (341) | (15) |
Total unrealized gains/(losses) on cash flow hedges, tax | 162 | (304) | 47 |
Retirement-related benefit plans, tax | |||
Prior service costs/(credits), tax | (2) | 0 | 0 |
Net (losses)/gains arising during the period, tax | 1,039 | 3,433 | (1,974) |
Curtailments and settlements, tax | (9) | (7) | 1 |
Amortization of prior service (credits)/costs, tax | 36 | 41 | 40 |
Amortization of net (gains)/losses, tax | (1,080) | (852) | (1,195) |
Total retirement-related benefit plans, tax | (17) | 2,615 | (3,128) |
Other comprehensive income/(loss), tax | (208) | 1,883 | (3,144) |
Other comprehensive income/(loss), net of tax | |||
Foreign currency translation adjustments, net of tax | (1,721) | (2,074) | (1,401) |
Net changes related to available-for-sale securities, net of tax | |||
Unrealized gains/(losses) arising during the period, net of tax | (33) | (18) | (3) |
Reclassification of (gains)/losses to other (income) and expense, net of tax | 53 | 3 | (5) |
Subsequent changes in previously impaired securities arising during the period, net of tax | 3 | ||
Total net changes related to available-for-sale securities, net of tax | 20 | (15) | (5) |
Unrealized gains/(losses) on cash flow hedges, net of tax | |||
Unrealized gains/(losses) arising during the period, net of tax | 399 | 618 | 28 |
Total unrealized gains/(losses) on cash flow hedges, net of tax | (292) | 557 | (76) |
Retirement-related benefit plans, net of tax | |||
Prior service costs/(credits), net of tax | 4 | 1 | 16 |
Net (losses)/gains arising during the period, net of tax | (1,925) | (6,366) | 3,395 |
Curtailments and settlements, net of tax | 24 | 17 | (2) |
Amortization of prior service (credits)/costs, net of tax | (65) | (73) | (75) |
Amortization of net (gains)/losses, net of tax | 2,223 | 1,678 | 2,304 |
Total retirement-related benefit plans, net of tax | 262 | (4,742) | 5,639 |
Other comprehensive income/(loss) (Note L) | (1,731) | (6,274) | 4,157 |
Cost of sales | |||
Unrealized gains/(losses) on cash flow hedges, before tax | |||
Reclassification of (gains)/losses to net income, before tax | (192) | 15 | 34 |
Unrealized gains/(losses) on cash flow hedges, tax | |||
Reclassification of (gains)/losses to net income, tax | 57 | (7) | (14) |
Unrealized gains/(losses) on cash flow hedges, net of tax | |||
Reclassification of (gains)/losses to net income, net of tax | (135) | 9 | 21 |
SG&A expense | |||
Unrealized gains/(losses) on cash flow hedges, before tax | |||
Reclassification of (gains)/losses to net income, before tax | (149) | (15) | (39) |
Unrealized gains/(losses) on cash flow hedges, tax | |||
Reclassification of (gains)/losses to net income, tax | 43 | 6 | 14 |
Unrealized gains/(losses) on cash flow hedges, net of tax | |||
Reclassification of (gains)/losses to net income, net of tax | (105) | (9) | (25) |
Other (income) and expense | |||
Net changes related to available-for-sale securities, before tax | |||
Reclassification of (gains)/losses to other (income) and expense, before tax | 86 | 5 | (8) |
Unrealized gains/(losses) on cash flow hedges, before tax | |||
Reclassification of (gains)/losses to net income, before tax | (731) | (98) | (162) |
Net changes related to available-for-sale securities, tax | |||
Reclassification of (gains)/losses to other (income) and expense, tax | (33) | (2) | 2 |
Unrealized gains/(losses) on cash flow hedges, tax | |||
Reclassification of (gains)/losses to net income, tax | 281 | 38 | 62 |
Net changes related to available-for-sale securities, net of tax | |||
Reclassification of (gains)/losses to other (income) and expense, net of tax | 53 | 3 | (5) |
Unrealized gains/(losses) on cash flow hedges, net of tax | |||
Reclassification of (gains)/losses to net income, net of tax | (451) | (60) | (99) |
Interest expense | |||
Unrealized gains/(losses) on cash flow hedges, before tax | |||
Reclassification of (gains)/losses to net income, before tax | 0 | 1 | 0 |
Unrealized gains/(losses) on cash flow hedges, tax | |||
Reclassification of (gains)/losses to net income, tax | 0 | 0 | 0 |
Unrealized gains/(losses) on cash flow hedges, net of tax | |||
Reclassification of (gains)/losses to net income, net of tax | $ 0 | $ 0 | $ 0 |
Equity Activity (Reclassifica88
Equity Activity (Reclassification and Taxes Related Tables Calculations) (Details 3) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Other comprehensive income: | |||
Total net changes related to available-for-sale securities, before tax | $ 32 | $ (24) | $ (8) |
Total unrealized gains/(losses) on cash flow hedges, before tax | (454) | 861 | (123) |
Total retirement-related benefit plans, before tax | 279 | (7,357) | 8,767 |
Total net changes related to available-for-sale securities, tax | (12) | 9 | 3 |
Total unrealized gains/(losses) on cash flow hedges, tax | 162 | (304) | 47 |
Total retirement-related benefit plans, tax | (17) | 2,615 | (3,128) |
Total net changes related to available-for-sale securities, net of tax | 20 | (15) | (5) |
Total unrealized gains/(losses) on cash flow hedges, net of tax | (292) | 557 | (76) |
Total retirement-related benefit plans, net of tax | $ 262 | $ (4,742) | $ 5,639 |
Equity Activity (AOCI Table) (D
Equity Activity (AOCI Table) (Details 4) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
AOCI | |||
Balance at the Beginning of the Period | $ (27,875) | $ (21,602) | $ (25,759) |
Other comprehensive income before reclassifications | (3,252) | (7,822) | 2,036 |
Amount reclassified from accumulated other comprehensive income | 1,520 | 1,548 | 2,121 |
Total change for the period | (1,731) | (6,274) | 4,157 |
Balance at the End of the Period | (29,607) | (27,875) | (21,602) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | |||
AOCI | |||
Balance at the Beginning of the Period | 392 | (165) | (90) |
Other comprehensive income before reclassifications | 399 | 618 | 28 |
Amount reclassified from accumulated other comprehensive income | (691) | (60) | (103) |
Total change for the period | (292) | 557 | (76) |
Balance at the End of the Period | 100 | 392 | (165) |
Foreign Currency Translation Adjustments | |||
AOCI | |||
Balance at the Beginning of the Period | (1,742) | 332 | 1,733 |
Other comprehensive income before reclassifications | (1,721) | (2,074) | (1,401) |
Amount reclassified from accumulated other comprehensive income | 0 | 0 | 0 |
Total change for the period | (1,721) | (2,074) | (1,401) |
Balance at the End of the Period | (3,463) | (1,742) | 332 |
Net Change Retirement-Related Benefit Plans | |||
AOCI | |||
Balance at the Beginning of the Period | (26,509) | (21,767) | (27,406) |
Other comprehensive income before reclassifications | (1,897) | (6,348) | 3,409 |
Amount reclassified from accumulated other comprehensive income | 2,158 | 1,605 | 2,229 |
Total change for the period | 262 | (4,742) | 5,639 |
Balance at the End of the Period | (26,248) | (26,509) | (21,767) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | |||
AOCI | |||
Balance at the Beginning of the Period | (15) | (1) | 4 |
Other comprehensive income before reclassifications | (33) | (18) | 0 |
Amount reclassified from accumulated other comprehensive income | 53 | 3 | (5) |
Total change for the period | 20 | (15) | (5) |
Balance at the End of the Period | $ 5 | $ (15) | $ (1) |
Contingencies and Commitments (
Contingencies and Commitments (Contingencies) (Details 1) $ in Millions | Jul. 25, 2013 | Jul. 18, 2012USD ($) | Feb. 13, 2014USD ($) | Dec. 31, 2015USD ($)CountryClaimDefendant |
Loss Contingencies | ||||
Clients presence in number of countries | Country | 175 | |||
Foreign Tax Authority | Brazil | ||||
Loss Contingencies | ||||
Loss contingency, estimate of possible loss | $ | $ 460 | |||
Litigation Case In United States District Court regarding divesting Microelectronics business | ||||
Loss Contingencies | ||||
Number of defendants | Defendant | 3 | |||
Litigation Case In United States District Court regarding divesting Microelectronics business, alleging violations of the Employee Retirement Income Security Act | ||||
Loss Contingencies | ||||
Number of defendants | Defendant | 3 | |||
IBM United Kingdom Limited | Litigation in United Kingdom regarding defined benefit plans | ||||
Loss Contingencies | ||||
Loss contingency, estimate of possible loss | $ | $ 250 | |||
Number of representative beneficiaries of the UK Trust membership | Defendant | 2 | |||
IBM UK Defined Benefit Plan Participants | IBM United Kingdom Limited | ||||
Loss Contingencies | ||||
Claims pending | Claim | 290 | |||
Civil enforcement action with the SEC | ||||
Loss Contingencies | ||||
Period for which reports are to be submitted to SEC and court on certain matters, including those relating to compliance with the FCPA | 2 years | |||
State of Indiana | Pending Litigation | ||||
Loss Contingencies | ||||
Amount of settlement to be (paid)/received | $ | $ 52 | $ 50 | ||
Duration of trial | 42 days |
Contingencies and Commitments91
Contingencies and Commitments (Commitments) (Details 2) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Extended lines of credit | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 5,477 | $ 5,365 |
Financing for client purchase agreements | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | 2,097 | 1,816 |
Financial guarantees | ||
Commitments, guarantees: | ||
Guarantor obligations, maximum exposure | $ 34 | $ 46 |
Taxes (Narratives) (Details 1)
Taxes (Narratives) (Details 1) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Taxes | ||||
Offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments benefit | $ 850 | |||
Net unrecognized tax benefit amount that, if recognized, would favorably affect the company's effective tax rate | 3,724 | $ 4,229 | $ 3,902 | |
Recognized interest expense and penalties | 141 | 216 | ||
Recognized benefit in interest and penalties | 93 | |||
Interest and penalties accrued | 613 | 593 | ||
Decrease in Unrecognized Tax Benefits Reasonably Possible | 413 | |||
Undistributed earnings of non-U.S. subsidiaries | 68,100 | |||
Increase (decrease) in amount of unrecognized tax benefits | (530) | |||
Unrecognized Tax Benefits | 4,574 | 5,104 | 4,458 | $ 5,672 |
Income tax examination | ||||
Prepaid taxes | 496 | $ 518 | ||
Foreign and Domestic Tax Loss/Credit Carryforward | ||||
Tax effect of foreign and domestic loss carryforwards | 742 | |||
Tax effect of foreign and domestic tax credit carryforwards | $ 1,149 | |||
Minimum | ||||
Foreign and Domestic Tax Loss/Credit Carryforward | ||||
Number of years for which substantially all of tax credits and carryforwards are available | 2 years | |||
Number of years for which the majority of loss and tax credit carryforwards are available | 10 years | |||
Indian Tax Authorities | ||||
Income tax examination | ||||
Tax assessment notice amount | $ 810 | $ 866 | ||
Income Tax Examination, Likelihood of Unfavorable Settlement | The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. | |||
Income Tax Examination, Year under Examination | 2,009 | |||
Prepaid taxes | $ 526 |
Taxes (Income before Income Tax
Taxes (Income before Income Taxes) (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income from continuing operations before income taxes | |||
U.S. operations | $ 5,915 | $ 7,509 | $ 7,577 |
Non-U.S. operations | 10,030 | 12,477 | 12,667 |
Income from continuing operations before income taxes | 15,945 | $ 19,986 | $ 20,244 |
Japan Tax Authorities | |||
Income tax contingencies | |||
Unrecognized tax benefit on certain foreign tax losses under appeal | $ 997 |
Taxes (Provision for Income Tax
Taxes (Provision for Income Taxes) (Details 3) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income from continuing operations provision for income taxes by geographic operations | |||
Total continuing operations provision for income taxes | $ 2,581 | $ 4,234 | $ 3,363 |
U.S. Operations | |||
Income from continuing operations provision for income taxes by geographic operations | |||
Total continuing operations provision for income taxes | 849 | 2,093 | 1,315 |
Non-U.S. Operations | |||
Income from continuing operations provision for income taxes by geographic operations | |||
Total continuing operations provision for income taxes | $ 1,732 | $ 2,141 | $ 2,048 |
Taxes (Component of Income Tax
Taxes (Component of Income Tax Provision) (Details 4) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
U.S. federal | |||
Current | $ (321) | $ 1,134 | $ 1,694 |
Deferred | 553 | 105 | (708) |
Total | 232 | 1,239 | 986 |
U.S. state and local | |||
Current | 128 | 541 | 277 |
Deferred | 116 | (105) | (330) |
Total | 244 | 436 | (53) |
Non-U.S. | |||
Current | 2,101 | 2,825 | 3,067 |
Deferred | 4 | (266) | (637) |
Total | 2,105 | 2,559 | 2,430 |
Total continuing operations provision for income taxes | 2,581 | 4,234 | 3,363 |
Discontinued operations provision for income taxes | (117) | (1,617) | (322) |
Provision for social security, real estate, personal property and other taxes | 3,497 | 4,068 | 4,198 |
Total taxes included in net income | $ 5,961 | $ 6,685 | $ 7,238 |
Taxes (Reconciliation of Tax Ra
Taxes (Reconciliation of Tax Rates) (Details 5) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Reconciliation of the statutory U.S. federal tax rate to the company's effective tax rate from continuing operations | |||
Statutory rate | 35.00% | 35.00% | 35.00% |
Foreign tax differential | (17.00%) | (14.00%) | (13.00%) |
State and local | 1.00% | 1.00% | 0.00% |
Domestic incentives | (2.00%) | (2.00%) | (3.00%) |
Other | (1.00%) | 1.00% | (2.00%) |
Effective rate | 16.00% | 21.00% | 17.00% |
Taxes (Reconciliation of Tax 97
Taxes (Reconciliation of Tax Rates Narratives) (Details 6) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Effective income tax rate reconciliation, additional disclosures | ||
Increase (decrease) in effective income tax rate | (5.00%) | |
Completion of the 2011-2012 domestic tax audit, including reserve redeterminations | (3.90%) | |
Favorable geographic mix of pre-tax income | (3.50%) | |
Tax charge related to the divestiture of the System x business | 0.00% | 0.90% |
Year to year reduction in utilization of foreign tax credits | 2.50% | |
Year-to-year increase in tax charges related to intercompany payments made by foreign subsidiaries and the intercompany licensing of certain IP | 0.80% |
Taxes (Deferred Taxes) (Details
Taxes (Deferred Taxes) (Details 7) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred Tax Assets | |||
Retirement benefits | $ 4,621 | $ 4,795 | |
Share-based and other compensation | 963 | 1,328 | |
Domestic tax loss/credit carryforwards | 1,066 | 858 | |
Deferred income | 762 | 957 | |
Foreign tax loss/credit carryforwards | 825 | 686 | |
Bad debt, inventory and warranty reserves | 528 | 529 | |
Depreciation | 329 | 329 | |
Accruals | 904 | 1,176 | |
Other | 931 | 1,306 | |
Gross deferred tax assets | 10,929 | 11,964 | |
Less: valuation allowance | 740 | 646 | $ 734 |
Net deferred tax assets | 10,189 | 11,318 | |
Deferred Tax Liabilities | |||
Depreciation | 919 | 487 | |
Retirement benefits | 252 | 205 | |
Goodwill and intangible assets | 1,407 | 1,263 | |
Leases | 916 | 912 | |
Software development costs | 554 | 421 | |
Deferred transition costs | 395 | 374 | |
Other | 1,177 | 1,111 | |
Gross deferred tax liabilities | $ 5,620 | $ 4,773 |
Taxes (Unrecognized Tax Benefit
Taxes (Unrecognized Tax Benefit) (Details 8) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
A reconciliation of the beginning and ending amount of unrecognized tax benefits | |||
Balance at January 1 | $ 5,104 | $ 4,458 | $ 5,672 |
Additions based on tax positions related to the current year | 464 | 697 | 829 |
Additions for tax positions of prior years | 569 | 586 | 417 |
Reductions for tax positions of prior years (including impacts due to a lapse in statute) | (1,348) | (579) | (2,201) |
Settlements | (215) | (58) | (259) |
Balance at December 31 | $ 4,574 | $ 5,104 | $ 4,458 |
Research, Development and En100
Research, Development and Engineering (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Research, Development and Engineering | |||
Scientific research, application of scientific advances, services and application | $ 5,178 | $ 5,595 | $ 5,959 |
Software-related expenses | 3,064 | 3,064 | 3,077 |
Product-related engineering expenses | 267 | 211 | 267 |
Research and Development Expense | |||
RD&E expense | 5,247 | 5,437 | 5,743 |
Discontinued operations | |||
Research and Development Expense | |||
RD&E expense | $ 197 | $ 368 | $ 483 |
Earnings Per Share of Common101
Earnings Per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Weighted-average number of shares on which earnings per share calculations are based | |||
Basic (in shares) | 978,744,523 | 1,004,272,584 | 1,094,486,604 |
Add - incremental shares under stock-based compensation plans (in shares) | 3,037,001 | 4,332,155 | 6,751,240 |
Add - incremental shares associated with contingently issuable shares (in shares) | 918,744 | 1,395,741 | 1,804,313 |
Assuming dilution (in shares) | 982,700,267 | 1,010,000,480 | 1,103,042,156 |
Net income on which basic earnings per share calculations are based | |||
Income from continuing operations | $ 13,364 | $ 15,751 | $ 16,881 |
Loss from discontinued operations, net of tax | (174) | (3,729) | (398) |
Net income on which basic earnings per share is calculated | 13,190 | 12,022 | 16,483 |
Net income on which diluted earnings per share calculations are based | |||
Income from continuing operations | 13,364 | 15,751 | 16,881 |
Net income applicable to contingently issuable shares | (1) | (3) | (1) |
Income from continuing operations on which diluted earnings per share is calculated | 13,363 | 15,749 | 16,880 |
Loss from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated | (174) | (3,729) | (398) |
Net income on which diluted earnings per share is calculated | $ 13,189 | $ 12,020 | $ 16,483 |
Assuming dilution | |||
Continuing operations (in dollars per share) | $ 13.6 | $ 15.59 | $ 15.3 |
Discontinued operations (in dollars per share) | (0.18) | (3.69) | (0.36) |
Total (in dollars per share) | 13.42 | 11.9 | 14.94 |
Basic | |||
Continuing operations (in dollars per share) | 13.66 | 15.68 | 15.42 |
Discontinued operations (in dollars per share) | (0.18) | (3.71) | (0.36) |
Total (in dollars per share) | $ 13.48 | $ 11.97 | $ 15.06 |
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 41,380 | 17,420 | 8,797 |
Rental Expense and Lease Com102
Rental Expense and Lease Commitments (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Rental expense | $ 1,474 | $ 1,592 | $ 1,759 |
Operating lease commitments | |||
Gross minimum rental commitments (including vacant space below) for 2016 | 1,347 | ||
Gross minimum rental commitments (including vacant space below) for 2017 | 1,231 | ||
Gross minimum rental commitments (including vacant space below) for 2018 | 1,107 | ||
Gross minimum rental commitments (including vacant space below) for 2019 | 985 | ||
Gross minimum rental commitments (including vacant space below) for 2020 | 776 | ||
Gross minimum rental commitments (including vacant space below) beyond 2020 | 988 | ||
Vacant space for 2016 | 14 | ||
Vacant space for 2017 | 4 | ||
Vacant space for 2018 | 1 | ||
Sublease income commitments for 2016 | 11 | ||
Sublease income commitments for 2017 | 7 | ||
Sublease income commitments for 2018 | 5 | ||
Sublease income commitments for 2019 | 4 | ||
Sublease income commitments for 2020 | 1 | ||
Sublease income commitments beyond 2020 | 1 | ||
Capital lease commitments | |||
Capital lease commitments for 2016 | 7 | ||
Capital lease commitments for 2017 | 2 | ||
Capital lease commitments for 2018 | 2 | ||
Capital lease commitments for 2019 | 2 | ||
Capital lease commitments for 2020 | 1 | ||
Discontinued operations | |||
Rental expense | $ 29 | $ 95 | $ 115 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narratives) (Details 1) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Jul. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Shares authorized under existing stock based compensation plans (in shares) | 274,000,000 | |||
Additional shares considered authorized under previous stock based compensation plans (in shares) | 66,200,000 | |||
Unused shares available to be granted (in shares) | 111,600,000 | |||
Fair value assumptions used in estimating pricing of options | ||||
Stock-based compensation cost, unrecognized, related to non-vested awards | $ 871,000,000 | $ 874,000,000 | ||
Stock-based compensation cost, unrecognized, related to non-vested awards, weighted average period of recognition | 2 years 8 months | |||
Capitalized stock-based compensation cost | $ 0 | $ 0 | $ 0 | |
Additional stock options and RSU outstanding in connection with acquisitions (in shares) | 400,000 | |||
Additional options outstanding, weighted-average exercise price (in dollars per share) | $ 50 | |||
Treasury stock, Shares (in shares) | 1,255,494,724 | 1,224,685,815 | ||
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period | 4 years | |||
Contractual term | 10 years | |||
Fair value assumptions used in estimating pricing of options | ||||
Total intrinsic value of options exercised | $ 74,000,000 | $ 323,000,000 | 614,000,000 | |
Cash received from exercises of stock-based awards | 119,000,000 | 364,000,000 | 505,000,000 | |
Tax benefit from exercise of stock based awards | $ 26,000,000 | $ 107,000,000 | $ 199,000,000 | |
Stock options, grants in period | 0 | 0 | 0 | |
Stock options | Annual tranche | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Percentage of awards vested per year (as a percent) | 25.00% | |||
Restricted Stock Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Remaining weighted-average contractual term | 3 years | |||
Fair value assumptions used in estimating pricing of options | ||||
Fair value of stock units granted | $ 606,000,000 | $ 434,000,000 | $ 481,000,000 | |
Fair value of stock units vested and released | 583,000,000 | 378,000,000 | 386,000,000 | |
Stock-based compensation cost, unrecognized, related to non-vested awards | 800,000,000 | 754,000,000 | 871,000,000 | |
Cash received from exercises of stock-based awards | $ 0 | 0 | 0 | |
Restricted Stock Units | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period | 1 year | |||
Restricted Stock Units | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period | 5 years | |||
Performance Share Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Vesting period | 3 years | |||
Fair value assumptions used in estimating pricing of options | ||||
Fair value of stock units granted | $ 174,000,000 | 257,000,000 | 170,000,000 | |
Fair value of stock units vested and released | 156,000,000 | 161,000,000 | 156,000,000 | |
RSUs and PSUs | ||||
Fair value assumptions used in estimating pricing of options | ||||
Income tax benefits | $ 228,000,000 | $ 222,000,000 | $ 312,000,000 | |
Employee Stock Purchase Plan | ||||
Fair value assumptions used in estimating pricing of options | ||||
Discount on purchase of common stock (as a percent) | 5.00% | |||
Maximum percentage of payroll deductions on eligible compensation (as a percent) | 10.00% | |||
Maximum stock purchases by employees, value | $ 25,000 | |||
Maximum stock purchases by employees (in shares) | 1,000 | |||
Employees purchased shares under the ESPP (in shares) | 1,300,000 | 1,300,000 | 1,500,000 | |
Shares available for purchase under the ESPP (in shares) | 23,100,000 | 24,400,000 | 2,300,000 | |
Employee Stock Purchase Plan | 2014 ESPP Reserve | ||||
Fair value assumptions used in estimating pricing of options | ||||
Additional shares of authorized common stock that was reserved and approved for issuance under the ESPP (in shares) | 25,000,000 |
Stock-Based Compensation (Stock
Stock-Based Compensation (Stock-based Compensation Table) (Details 2) - Continuing Operations - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | $ 468 | $ 512 | $ 614 |
Income tax benefits | (156) | (174) | (213) |
Net stock-based compensation cost | 312 | 338 | 402 |
Cost | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | 100 | 121 | 122 |
Selling, general and administrative expense | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | 322 | 350 | 435 |
Research, development and engineering | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | 51 | 54 | $ 57 |
Other (income) and expense | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost (income) | $ (6) | $ (13) |
Stock-Based Compensation (RSU,P
Stock-Based Compensation (RSU,PSU) (Details 3) - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
RSUs | |||
Weighted Average Grant Price | |||
Weighted Average grant price, beginning balance (in dollars per share) | $ 171 | $ 166 | $ 148 |
Granted (in dollars per share) | 143 | 172 | 189 |
Released (in dollars per share) | 164 | 157 | 131 |
Canceled/forfeited (in dollars per share) | 167 | 167 | 154 |
Weighted Average grant price, ending balance (in dollars per share) | $ 159 | $ 171 | $ 166 |
Number of units | |||
Beginning balance (in shares) | 7,734,277 | 8,635,317 | 9,841,461 |
Granted (in shares) | 4,230,186 | 2,525,947 | 2,541,081 |
Released (in shares) | (3,567,495) | (2,401,761) | (2,952,363) |
Canceled/forfeited (in shares) | (869,627) | (1,025,226) | (794,862) |
Ending balance (in shares) | 7,527,341 | 7,734,277 | 8,635,317 |
PSUs | |||
Weighted Average Grant Price | |||
Weighted Average grant price, beginning balance (in dollars per share) | $ 185 | $ 178 | $ 151 |
Granted (in dollars per share) | 153 | 180 | 195 |
Performance adjustments | 185 | 157 | 118 |
Released (in dollars per share) | 185 | 157 | 118 |
Canceled/forfeited (in dollars per share) | 184 | 187 | 170 |
Weighted Average grant price, ending balance (in dollars per share) | $ 173 | $ 185 | $ 178 |
Number of units | |||
Beginning balance (in shares) | 3,140,707 | 2,824,294 | 3,172,201 |
Granted (in shares) | 1,137,242 | 1,430,098 | 869,875 |
Performance adjustments (in shares) | (168,055) | 29,960 | 152,069 |
Released (in shares) | (840,552) | (1,027,181) | (1,321,784) |
Canceled/forfeited (in shares) | (340,410) | (116,464) | (48,067) |
Ending balance (in shares) | 2,928,932 | 3,140,707 | 2,824,294 |
Stock-Based Compensation (Optio
Stock-Based Compensation (Option Activity Summary) (Details 4) - Stock options - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Weighted Average Exercise Price | |||
Outstanding, beginning balance (in dollars per share) | $ 97 | $ 97 | $ 94 |
Options exercised (in dollars per share) | 98 | 97 | 90 |
Options canceled/expired (in dollars per share) | 100 | 95 | 86 |
Outstanding, ending balance (in dollars per share) | 94 | 97 | 97 |
Exercisable at end of period (in dollars per share) | $ 94 | $ 97 | $ 97 |
Number of Shares under Option | |||
Outstanding, beginning balance (in shares) | 1,750,949 | 5,622,951 | 11,389,721 |
Options exercised (in shares) | (1,214,109) | (3,740,252) | (5,585,127) |
Options canceled/expired (in shares) | (57,066) | (131,750) | (181,643) |
Outstanding, ending balance (in shares) | 479,774 | 1,750,949 | 5,622,951 |
Exercisable at end of period (in shares) | 479,774 | 1,750,949 | 5,622,951 |
Stock-Based Compensation (Exerc
Stock-Based Compensation (Exercise Price Range) (Details 5) - USD ($) | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Stock option activity by exercise price ranges | ||||
Options Outstanding, Weighted Average Exercise Price (in dollars per share) | $ 94 | $ 97 | $ 97 | $ 94 |
Options Outstanding, Number of Shares under Option (in shares) | 479,774 | 1,750,949 | 5,622,951 | 11,389,721 |
Options Outstanding and Exercisable, Aggregate Intrinsic Value | $ 20,973,745 | |||
Options Outstanding, Weighted Average Remaining Contractual Life | 11 months | |||
Options Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 94 | $ 97 | $ 97 | |
Options Exercisable, Number of Shares under Option (in shares) | 479,774 | 1,750,949 | 5,622,951 | |
Options Exercisable, Weighted Average Remaining Contractual Life | 11 months | |||
Exercise price range $85 and under | ||||
Stock option activity by exercise price ranges | ||||
Exercise price, upper range limit (in dollars per share) | $ 85 | |||
Options Outstanding, Weighted Average Exercise Price (in dollars per share) | $ 83 | |||
Options Outstanding, Number of Shares under Option (in shares) | 192,959 | |||
Options Outstanding and Exercisable, Aggregate Intrinsic Value | $ 10,597,402 | |||
Options Outstanding, Weighted Average Remaining Contractual Life | 4 months | |||
Options Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 83 | |||
Options Exercisable, Number of Shares under Option (in shares) | 192,959 | |||
Options Exercisable, Weighted Average Remaining Contractual Life | 4 months | |||
Exercise price range $86 and over | ||||
Stock option activity by exercise price ranges | ||||
Exercise price, lower range limit (in dollars per share) | $ 86 | |||
Options Outstanding, Weighted Average Exercise Price (in dollars per share) | $ 101 | |||
Options Outstanding, Number of Shares under Option (in shares) | 286,815 | |||
Options Outstanding and Exercisable, Aggregate Intrinsic Value | $ 10,376,342 | |||
Options Outstanding, Weighted Average Remaining Contractual Life | 1 year 2 months | |||
Options Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 101 | |||
Options Exercisable, Number of Shares under Option (in shares) | 286,815 | |||
Options Exercisable, Weighted Average Remaining Contractual Life | 1 year 2 months |
Retirement-Related Benefits (De
Retirement-Related Benefits (Details 1) $ in Millions | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Personal Pension Plan (PPP) | |
Retirement-related Benefits Disclosures | |
Number of years used in final pay formula that determines benefits | 5 years |
IBM 401(k) Plus Plan | |
Retirement-related Benefits Disclosures | |
Maximum percentage, dollar-for-dollar match by entity to employee contribution of eligible compensation for employees hired prior to January 1, 2005 | 6.00% |
Maximum percentage, dollar-for-dollar match by entity to employee contribution of eligible compensation for employees hired after January 1, 2005 | 5.00% |
Employer's automatic contribution as a percentage of eligible compensation, lowest level defined | 1.00% |
Employer's automatic contribution as a percentage of eligible compensation, second level defined | 2.00% |
Employer's automatic contribution as a percentage of eligible compensation, highest level defined | 4.00% |
Service period after which employees receive automatic and matching contributions | 1 year |
Minimum amounts that must be invested in company stock | $ 0 |
IBM Excess 401(k) Plus Plan | |
Retirement-related Benefits Disclosures | |
Service period after which employees receive automatic and matching contributions | 1 year |
U.S. Nonpension Postretirement Benefit Plans | |
Retirement-related Benefits Disclosures | |
Minimum years of service remaining from retirement eligibility to participate in Future Health Account (FHA) benefits | 5 years |
Service period for retirement within which employees are covered under the entity's prior health benefits arrangements | 5 years |
Retirement-Related Benefits (Ne
Retirement-Related Benefits (Net Periodic Income Cost) (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | $ 1,138 | $ 1,253 | $ 1,384 |
Total retirement-related benefits net periodic cost | 2,572 | 1,974 | 2,876 |
Defined Benefit Pension Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 1,160 | 449 | 1,195 |
U.S. Defined Benefit Pension Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | (261) | (818) | (202) |
Personal Pension Plan (PPP) | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | (284) | (833) | (223) |
Retention Plan | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 23 | 15 | 21 |
Non-U.S. Defined Benefit Pension Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 1,421 | 1,267 | 1,396 |
PPP and Non-U.S. Defined Benefit Pension Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 1,137 | 434 | 1,173 |
U.S. Defined Contribution Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | 697 | 727 | 809 |
IBM 401(k) Plus Plan | |||
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | 676 | 713 | 785 |
IBM Excess 401(k) Plus Plan | |||
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | 21 | 14 | 24 |
Non-U.S. Defined Contribution Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | 442 | 526 | 575 |
IBM 401(k) Plus Plan and Non-U.S. Defined Contribution Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined contribution plans cost | 1,117 | 1,239 | 1,361 |
Nonpension Postretirement Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 273 | 272 | 298 |
U.S. Nonpension Postretirement Benefit Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 218 | 206 | 218 |
Non-U.S. Nonpension Postretirement Plans | |||
Retirement-related Benefits Disclosures | |||
Total defined benefit plans (income)/cost | 55 | 66 | 79 |
U.S. Plans | |||
Retirement-related Benefits Disclosures | |||
Total retirement-related benefits net periodic cost | 654 | 115 | 826 |
Non-U.S. Plans | |||
Retirement-related Benefits Disclosures | |||
Total retirement-related benefits net periodic cost | $ 1,918 | $ 1,859 | $ 2,051 |
Retirement-Related Benefits (PB
Retirement-Related Benefits (PBO, APBO, FV of Plan Assets, and Funded Status) (Details 3) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Funded status of plan | ||
Underfunded plan benefit obligation | $ 35,054 | $ 40,836 |
Underfunded plan fair value of plan assets | 17,807 | 21,745 |
Underfunded plan funded status | (17,247) | (19,091) |
Overfunded plan benefit obligation | 68,053 | 71,512 |
Overfunded plan fair value of plan assets | 69,786 | 73,671 |
Overfunded plan funded status | 1,734 | 2,159 |
U.S. Nonpension Postretirement Benefit Plans | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 4,652 | 5,053 |
Underfunded plan fair value of plan assets | 71 | 16 |
Underfunded plan funded status | (4,582) | (5,037) |
Non-U.S. Nonpension Postretirement Plans | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 618 | 806 |
Underfunded plan fair value of plan assets | 59 | 73 |
Underfunded plan funded status | (558) | (733) |
Overfunded plan benefit obligation | 0 | 11 |
Overfunded plan fair value of plan assets | 0 | 11 |
Overfunded plan funded status | 0 | 0 |
U.S. Defined Benefit Plans | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 6,486 | 6,989 |
Underfunded plan fair value of plan assets | 71 | 16 |
Underfunded plan funded status | (6,415) | (6,973) |
Qualified PPP | ||
Funded status of plan | ||
Overfunded plan benefit obligation | 51,287 | 54,708 |
Overfunded plan fair value of plan assets | 51,716 | 55,772 |
Overfunded plan funded status | $ 429 | 1,065 |
Percentage of plan funded | 101.00% | |
Excess PPP | ||
Funded status of plan | ||
Underfunded plan benefit obligation | $ 1,522 | 1,602 |
Underfunded plan funded status | (1,522) | (1,602) |
Retention Plan | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 312 | 334 |
Underfunded plan funded status | (312) | (334) |
Non-U.S. Defined Benefit Plans | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 28,568 | 33,846 |
Underfunded plan fair value of plan assets | 17,737 | 21,729 |
Underfunded plan funded status | (10,832) | (12,118) |
Overfunded plan benefit obligation | 16,766 | 16,804 |
Overfunded plan fair value of plan assets | 18,070 | 17,898 |
Overfunded plan funded status | 1,304 | 1,094 |
Qualified Non-U.S. Defined Benefit Pension Plans | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 22,039 | 26,278 |
Underfunded plan fair value of plan assets | 17,677 | 21,655 |
Underfunded plan funded status | (4,362) | (4,623) |
Overfunded plan benefit obligation | 16,766 | 16,794 |
Overfunded plan fair value of plan assets | 18,070 | 17,888 |
Overfunded plan funded status | 1,304 | 1,094 |
Nonqualified Non-U.S. Defined Benefit Pension Plan | ||
Funded status of plan | ||
Underfunded plan benefit obligation | 5,911 | 6,762 |
Underfunded plan funded status | $ (5,911) | $ (6,762) |
Defined Benefit Pension Plans | ||
Funded status of plan | ||
Percentage of plan funded | 89.00% | |
Qualified Defined Benefit Pension Plans | ||
Funded status of plan | ||
Percentage of plan funded | 97.00% |
Retirement-Related Benefits (Co
Retirement-Related Benefits (Components of Net Period Income Cost) (Details 4) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
U.S. Defined Benefit Pension Plans | |||
Retirement-related plans cost | |||
Interest cost | $ 2,028 | $ 2,211 | $ 1,980 |
Expected return on plan assets | (3,953) | (4,096) | (3,981) |
Amortization of prior service costs/(credits) | 10 | 10 | 10 |
Recognized actuarial losses | 1,654 | 1,056 | 1,790 |
Total net periodic pension/nonpension (income)/cost of defined benefit plans | (261) | (818) | (202) |
Non-U.S. Defined Benefit Pension Plans | |||
Retirement-related plans cost | |||
Service cost | 454 | 449 | 501 |
Interest cost | 1,075 | 1,533 | 1,524 |
Expected return on plan assets | (1,919) | (2,247) | (2,195) |
Amortization of transition assets | 0 | 0 | 0 |
Amortization of prior service costs/(credits) | (98) | (111) | (119) |
Recognized actuarial losses | 1,581 | 1,400 | 1,600 |
Curtailments and settlements | 35 | 26 | 0 |
Multi-employer plan/other costs | 293 | 217 | 85 |
Total net periodic pension/nonpension (income)/cost of defined benefit plans | 1,421 | 1,267 | 1,396 |
U.S. Nonpension Postretirement Benefit Plans | |||
Retirement-related plans cost | |||
Service cost | 24 | 26 | 35 |
Interest cost | 163 | 187 | 164 |
Expected return on plan assets | 0 | 0 | (1) |
Amortization of prior service costs/(credits) | (7) | (7) | |
Recognized actuarial losses | 39 | 0 | 21 |
Total net periodic pension/nonpension (income)/cost of defined benefit plans | 218 | 206 | 218 |
Non-U.S. Nonpension Postretirement Plans | |||
Retirement-related plans cost | |||
Service cost | 7 | 7 | 10 |
Interest cost | 50 | 63 | 60 |
Expected return on plan assets | (7) | (9) | (9) |
Amortization of transition assets | 0 | 0 | 0 |
Amortization of prior service costs/(credits) | (5) | (5) | (5) |
Recognized actuarial losses | 10 | 11 | 23 |
Curtailments and settlements | 0 | 0 | 0 |
Total net periodic pension/nonpension (income)/cost of defined benefit plans | 55 | 66 | $ 79 |
Litigation in Spain regarding defined benefit and defined contribution plans | Selling, general and administrative expense | Non-U.S. Defined Benefit Pension Plans | |||
Retirement-related plans cost | |||
Multi-employer plan/other costs | $ 233 | $ 148 |
Retirement-Related Benefits (Ch
Retirement-Related Benefits (Changes in Benefit Obliation and Plan Assets, and Funded Status) (Details 5) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
U.S. Defined Benefit Pension Plans | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | $ 56,643 | $ 51,034 | |
Interest cost | 2,028 | 2,211 | $ 1,980 |
Actuarial losses/(gains) | (1,920) | 6,968 | |
Benefits paid from trust | (3,514) | (3,455) | |
Direct benefit payments | (117) | (114) | |
Benefit obligation, balance at end of period | 53,120 | 56,643 | 51,034 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 55,772 | 53,954 | |
Actual return on plan assets | (542) | 5,274 | |
Benefits paid from trust | (3,514) | (3,455) | |
Fair value of plan assets, balance at end of period | 51,716 | 55,772 | 53,954 |
Funded status | (1,405) | (871) | |
Accumulated benefit obligation | 53,120 | 56,643 | |
Non-U.S. Defined Benefit Pension Plans | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | 49,834 | 48,620 | |
Service cost | 454 | 449 | 501 |
Interest cost | 1,075 | 1,533 | 1,524 |
Plan participants' contributions | 34 | 37 | |
Acquisitions/divestitures, net | 39 | (90) | |
Actuarial losses/(gains) | (861) | 6,662 | |
Benefits paid from trust | (1,784) | (1,985) | |
Direct benefit payments | (402) | (465) | |
Foreign exchange impact | (3,907) | (5,073) | |
Amendments/curtailments/settlements/other | 235 | 146 | |
Benefit obligation, balance at end of period | 44,717 | 49,834 | 48,620 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 39,543 | 39,464 | |
Actual return on plan assets | 417 | 5,579 | |
Employer contributions | 474 | 465 | |
Acquisitions/divestitures, net | 53 | (59) | |
Plan participants' contributions | 34 | 37 | |
Benefits paid from trust | (1,784) | (1,985) | |
Foreign exchange impact | (3,004) | (4,049) | |
Amendments/curtailments/settlements/other | 14 | 93 | |
Fair value of plan assets, balance at end of period | 35,748 | 39,543 | 39,464 |
Funded status | (8,969) | (10,291) | |
Accumulated benefit obligation | 44,071 | 47,516 | |
Non-U.S. Defined Benefit Pension Plans | Brazil | |||
Change in plan assets | |||
Return of Brazil plan assets during 2015 and 2014 resulting from 2011 and 2013 government rulings | $ 33 | 122 | |
Period for return of plan assets to entity | 3 years | ||
U.S. Nonpension Postretirement Benefit Plans | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | $ 5,053 | 4,633 | |
Service cost | 24 | 26 | 35 |
Interest cost | 163 | 187 | 164 |
Plan participants' contributions | 52 | 61 | |
Acquisitions/divestitures, net | (8) | 0 | |
Actuarial losses/(gains) | (204) | 548 | |
Benefits paid from trust | (406) | (388) | |
Direct benefit payments | (23) | (37) | |
Medicare/Government subsidies | 1 | 23 | |
Amendments/curtailments/settlements/other | 0 | 0 | |
Benefit obligation, balance at end of period | 4,652 | 5,053 | 4,633 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 16 | 177 | |
Actual return on plan assets | 0 | 0 | |
Employer contributions | 409 | 166 | |
Acquisitions/divestitures, net | 0 | 0 | |
Plan participants' contributions | 52 | 61 | |
Benefits paid from trust | (406) | (388) | |
Fair value of plan assets, balance at end of period | 71 | 16 | 177 |
Funded status | (4,582) | (5,037) | |
Non-U.S. Nonpension Postretirement Plans | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | 817 | 832 | |
Service cost | 7 | 7 | 10 |
Interest cost | 50 | 63 | 60 |
Acquisitions/divestitures, net | 0 | 0 | |
Actuarial losses/(gains) | (52) | 38 | |
Benefits paid from trust | (5) | (5) | |
Direct benefit payments | (26) | (26) | |
Foreign exchange impact | (174) | (91) | |
Amendments/curtailments/settlements/other | 0 | (1) | |
Benefit obligation, balance at end of period | 618 | 817 | 832 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 84 | 92 | |
Actual return on plan assets | 7 | 9 | |
Employer contributions | 0 | 0 | |
Acquisitions/divestitures, net | 0 | 0 | |
Benefits paid from trust | (5) | (5) | |
Foreign exchange impact | (26) | (11) | |
Amendments/curtailments/settlements/other | (1) | 0 | |
Fair value of plan assets, balance at end of period | 59 | 84 | $ 92 |
Funded status | $ (558) | $ (733) |
Retirement-Related Benefits (Fu
Retirement-Related Benefits (Funded Status) (Details 6) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Net funded status recognized in the consolidated statement of financial position | ||
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | $ (16,504) | $ (18,261) |
U.S. Defined Benefit Pension Plans | ||
Net funded status recognized in the consolidated statement of financial position | ||
Prepaid pension assets | 429 | 1,065 |
Current liabilities - compensation and benefits | (116) | (111) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (1,718) | (1,825) |
Funded status | (1,405) | (871) |
Non-U.S. Defined Benefit Pension Plans | ||
Net funded status recognized in the consolidated statement of financial position | ||
Prepaid pension assets | 1,304 | 1,095 |
Current liabilities - compensation and benefits | (297) | (326) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (9,976) | (11,060) |
Funded status | (8,969) | (10,291) |
U.S. Nonpension Postretirement Benefit Plans | ||
Net funded status recognized in the consolidated statement of financial position | ||
Prepaid pension assets | 0 | 0 |
Current liabilities - compensation and benefits | (320) | (381) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (4,262) | (4,656) |
Funded status | (4,582) | (5,037) |
Non-U.S. Nonpension Postretirement Plans | ||
Net funded status recognized in the consolidated statement of financial position | ||
Prepaid pension assets | 0 | 0 |
Current liabilities - compensation and benefits | (11) | (13) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (547) | (720) |
Funded status | $ (558) | $ (733) |
Retirement-Related Benefits (OC
Retirement-Related Benefits (OCI and AOCI) (Details 7) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Changes in AOCI for retirement-related benefits | |||
Current period loss/(gain) | $ 2,963 | $ 9,799 | $ (5,369) |
Curtailments and settlements | (33) | (24) | 3 |
Amortization of net loss included in net periodic (income)/cost | (3,304) | (2,531) | (3,499) |
Current period prior service costs/(credits) | (6) | (1) | (16) |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 100 | 114 | 114 |
U.S. Defined Benefit Pension Plans | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 18,442 | 13,709 | |
Current period loss/(gain) | 2,576 | 5,789 | |
Amortization of net loss included in net periodic (income)/cost | (1,654) | (1,056) | |
Net loss at end of period | 19,363 | 18,442 | 13,709 |
Prior service costs/(credits) at beginning of period | 110 | 120 | |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | (10) | (10) | |
Prior service costs/(credits) at end of period | 101 | 110 | 120 |
Total loss recognized in accumulated other comprehensive income/(loss) | 19,464 | 18,552 | |
Amounts of retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost | |||
Estimated net loss that will be amortized from AOCI into net periodic cost | 1,331 | ||
Estimated prior service costs/(credits) that will be amortized from AOCI into net periodic (income)/cost | 10 | ||
Non-U.S. Defined Benefit Pension Plans | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 21,676 | 19,777 | |
Current period loss/(gain) | 661 | 3,324 | |
Curtailments and settlements | (33) | (25) | |
Amortization of net loss included in net periodic (income)/cost | (1,581) | (1,400) | |
Net loss at end of period | 20,724 | 21,676 | 19,777 |
Prior service costs/(credits) at beginning of period | (386) | (496) | |
Current period prior service costs/(credits) | (6) | (1) | |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 98 | 111 | |
Prior service costs/(credits) at end of period | (294) | (386) | (496) |
Transition (assets)/liabilities at beginning of period | 0 | 0 | |
Amortization of transition assets/(liabilities) included in net periodic (income)/cost | 0 | 0 | |
Transition (assets)/liabilities at end of period | 0 | 0 | 0 |
Total loss recognized in accumulated other comprehensive income/(loss) | 20,429 | 21,290 | |
Amounts of retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost | |||
Estimated net loss that will be amortized from AOCI into net periodic cost | 1,361 | ||
Estimated prior service costs/(credits) that will be amortized from AOCI into net periodic (income)/cost | (96) | ||
U.S. Nonpension Postretirement Benefit Plans | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 852 | 304 | |
Current period loss/(gain) | (204) | 548 | |
Amortization of net loss included in net periodic (income)/cost | (39) | 0 | |
Net loss at end of period | 609 | 852 | 304 |
Prior service costs/(credits) at beginning of period | 23 | 15 | |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 7 | 7 | |
Prior service costs/(credits) at end of period | 30 | 23 | 15 |
Total loss recognized in accumulated other comprehensive income/(loss) | 639 | 875 | |
Amounts of retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost | |||
Estimated net loss that will be amortized from AOCI into net periodic cost | 19 | ||
Estimated prior service costs/(credits) that will be amortized from AOCI into net periodic (income)/cost | (7) | ||
Non-U.S. Nonpension Postretirement Plans | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 189 | 161 | |
Current period loss/(gain) | (51) | 38 | |
Curtailments and settlements | 0 | 1 | |
Amortization of net loss included in net periodic (income)/cost | (10) | (11) | |
Net loss at end of period | 128 | 189 | 161 |
Prior service costs/(credits) at beginning of period | (26) | (32) | |
Current period prior service costs/(credits) | 0 | 0 | |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 5 | 5 | |
Prior service costs/(credits) at end of period | (21) | (26) | (32) |
Transition (assets)/liabilities at beginning of period | 0 | 0 | |
Amortization of transition assets/(liabilities) included in net periodic (income)/cost | 0 | 0 | |
Transition (assets)/liabilities at end of period | 0 | 0 | $ 0 |
Total loss recognized in accumulated other comprehensive income/(loss) | 106 | $ 163 | |
Amounts of retirement-related benefit plans that will be amortized from accumulated other comprehensive income/(loss) into net periodic (income)/cost | |||
Estimated net loss that will be amortized from AOCI into net periodic cost | 8 | ||
Estimated prior service costs/(credits) that will be amortized from AOCI into net periodic (income)/cost | $ (4) |
Retirement-Related Benefits (As
Retirement-Related Benefits (Assumptions) (Details 8) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Defined Benefit Pension Plans | ||||
Expected Long-Term Returns on Plan Assets | ||||
Period over which changes in fair value of plan assets recognized | 5 years | |||
U.S. Defined Benefit Pension Plans | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 3.70% | 4.50% | 3.60% | |
Expected long-term returns on plan assets | 7.50% | 8.00% | 8.00% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 4.00% | 3.70% | 4.50% | |
Discount Rate | ||||
Increase (decrease) in net periodic income from change in discount rate | $ (286) | $ 275 | $ (162) | |
Increase (decrease) in retirement related benefit plan obligation due to change in discount rate | (1,621) | 4,437 | ||
Expected Long-Term Returns on Plan Assets | ||||
Increase (decrease) in net periodic income due to change in expected long-term rate of return on plan assets | (264) | |||
Investment Policies And Strategies | ||||
Fair Value of plan assets | $ 51,716 | $ 55,772 | $ 53,954 | |
Personal Pension Plan (PPP) | ||||
Interest Crediting Rate | ||||
Percentage interest rate added to average interest from August to October of the one-year U.S Treasury Constant Maturity yield for computation of interest crediting rate (as a percent) | 1.00% | |||
Interest crediting rate | 1.10% | 1.10% | 1.20% | 1.10% |
Increase (decrease) in net periodic income from change in interest crediting rate | $ 0 | $ 8 | $ (6) | |
Qualified PPP | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Expected long-term returns on plan assets | 7.50% | 8.00% | 8.00% | |
Projected long-term rate of return on plan assets for the next fiscal year | 7.00% | |||
Investment Policies And Strategies | ||||
Fair Value of plan assets | $ 51,716 | $ 55,772 | ||
Qualified PPP | Equity securities | ||||
Investment Policies And Strategies | ||||
Target allocation | 34.00% | |||
Qualified PPP | Fixed income | ||||
Investment Policies And Strategies | ||||
Target allocation | 56.00% | |||
Qualified PPP | Real estate | ||||
Investment Policies And Strategies | ||||
Target allocation | 5.00% | |||
Qualified PPP | Other investments | ||||
Investment Policies And Strategies | ||||
Target allocation | 5.00% | |||
Qualified PPP | Private equities and private real estate investments | ||||
Investment Policies And Strategies | ||||
Commitments for future investments in private markets | $ 2,547 | |||
Fair Value of plan assets | $ 5,219 | |||
Non-U.S. Defined Benefit Pension Plans | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 2.34% | 3.32% | 3.23% | |
Expected long-term returns on plan assets | 5.67% | 6.08% | 6.21% | |
Rate of compensation increase | 2.49% | 2.52% | 2.51% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 2.40% | 2.34% | 3.32% | |
Rate of compensation increase | 2.40% | 2.49% | 2.52% | |
Investment Policies And Strategies | ||||
Fair Value of plan assets | $ 35,748 | $ 39,543 | $ 39,464 | |
Non-U.S. Defined Benefit Pension Plans | Maximum | ||||
Investment Policies And Strategies | ||||
Percentage of board members, elected by employees and retirees for managing investments (as a percent) | 50.00% | |||
Non-U.S. Defined Benefit Pension Plans | Equity securities | ||||
Investment Policies And Strategies | ||||
Target allocation | 29.00% | |||
Non-U.S. Defined Benefit Pension Plans | Fixed income | ||||
Investment Policies And Strategies | ||||
Target allocation | 58.00% | |||
Non-U.S. Defined Benefit Pension Plans | Real estate | ||||
Investment Policies And Strategies | ||||
Target allocation | 2.00% | |||
Non-U.S. Defined Benefit Pension Plans | Other investments | ||||
Investment Policies And Strategies | ||||
Target allocation | 11.00% | |||
Nonpension Postretirement Plans | ||||
Healthcare Cost Trend Rate | ||||
Health care cost trend rate assumed for next fiscal year | 7.00% | |||
Ultimate healthcare cost trend rate | 5.00% | |||
Year that rate reaches ultimate trend rate | 2,024 | |||
Effect of one percentage point increase on net periodic cost | $ 0 | 0 | 0 | |
Effect of one percentage point decrease on net periodic cost | 0 | 0 | $ 0 | |
Effect of one percentage point increase on benefit obligation | 0 | 0 | ||
Effect of one percentage point decrease on benefit obligation | $ 0 | $ 0 | ||
U.S. Nonpension Postretirement Benefit Plans | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 3.40% | 4.10% | 3.30% | |
Expected long-term returns on plan assets | 0.35% | |||
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 3.70% | 3.40% | 4.10% | |
Discount Rate | ||||
Increase (decrease) in net periodic cost from change in discount rate | $ 0 | $ 0 | $ 0 | |
Increase (decrease) in APBO due to changes in discount rate | (109) | 256 | ||
Investment Policies And Strategies | ||||
Fair Value of plan assets | $ 71 | $ 16 | $ 177 | |
Non-U.S. Nonpension Postretirement Plans | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 7.51% | 7.78% | 6.43% | |
Expected long-term returns on plan assets | 10.17% | 10.22% | 9.01% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 7.06% | 7.51% | 7.78% | |
Investment Policies And Strategies | ||||
Fair Value of plan assets | $ 59 | $ 84 | $ 92 | |
Retirement-related benefit plans | ||||
Discount Rate | ||||
Increase (decrease) in retirement related benefit plan obligation due to change in discount rate | (2,000) | 11,000 | ||
U.S. Retirement-related benefit plans | ||||
Discount Rate | ||||
Increase (decrease) in benefit obligations due to change in mortality rate assumptions | $ (700) | $ 2,600 |
Retirement-Related Benefits (Pe
Retirement-Related Benefits (Pension Plan Assets) (Details 9) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Pension Contributions | |||
Cash contribution by employer to defined contribution plans | $ 1,117 | $ 1,239 | |
Estimated future employer contributions to defined contribution plans in next fiscal year | 1,100 | ||
Multi-employer Plans - Non-U.S. Plans | |||
Pension Contributions | |||
Cash contribution by employer to non-U.S. multi-employer plans | 40 | 54 | |
U.S. Defined Benefit Pension Plans | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 51,716 | 55,772 | $ 53,954 |
Pension Contributions | |||
Employer mandatory contributions required for mext fiscal year | 0 | ||
U.S. Defined Benefit Pension Plans | Level 3 | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 6,544 | 7,437 | 7,968 |
U.S. Defined Benefit Pension Plans | Level 3 | Government and related | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 1 | ||
U.S. Defined Benefit Pension Plans | Level 3 | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 2 | 4 | 5 |
U.S. Defined Benefit Pension Plans | Level 3 | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 10 | 20 | 19 |
U.S. Defined Benefit Pension Plans | Level 3 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 401 | 295 | 274 |
U.S. Defined Benefit Pension Plans | Level 3 | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 912 | 889 | 860 |
U.S. Defined Benefit Pension Plans | Level 3 | Private equity | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 2,790 | 3,287 | 3,771 |
U.S. Defined Benefit Pension Plans | Level 3 | Private real estate | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 2,429 | 2,942 | 3,038 |
Qualified PPP | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 51,859 | 56,106 | |
Other | (143) | (333) | |
Fair value of plan assets | 51,716 | 55,772 | |
Qualified PPP | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 11,211 | 11,528 | |
Value of IBM securities included in plan assets | $ 34 | $ 55 | |
Percentage of IBM securities included in plan assets | 0.10% | 0.10% | |
Qualified PPP | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | $ 2,134 | $ 2,362 | |
Qualified PPP | Government and related | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 9,854 | 7,883 | |
Qualified PPP | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 17,090 | 18,832 | |
Value of IBM securities included in plan assets | $ 23 | $ 10 | |
Percentage of IBM securities included in plan assets | 0.04% | 0.02% | |
Qualified PPP | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | $ 643 | $ 587 | |
Qualified PPP | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 907 | 3,725 | |
Qualified PPP | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,549 | 2,650 | |
Qualified PPP | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,331 | 2,362 | |
Qualified PPP | Private equity | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,790 | 3,287 | |
Qualified PPP | Private real estate | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,429 | 2,942 | |
Qualified PPP | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | (80) | (53) | |
Qualified PPP | Level 1 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 11,784 | 12,214 | |
Fair value of plan assets | 11,784 | 12,214 | |
Qualified PPP | Level 1 | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 11,210 | 11,527 | |
Qualified PPP | Level 1 | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 99 | 85 | |
Qualified PPP | Level 1 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 313 | 312 | |
Qualified PPP | Level 1 | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 244 | 345 | |
Qualified PPP | Level 1 | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | (82) | (55) | |
Qualified PPP | Level 2 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 33,531 | 36,455 | |
Fair value of plan assets | 33,531 | 36,455 | |
Qualified PPP | Level 2 | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1 | 1 | |
Qualified PPP | Level 2 | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,036 | 2,277 | |
Qualified PPP | Level 2 | Government and related | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 9,854 | 7,883 | |
Qualified PPP | Level 2 | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 17,088 | 18,828 | |
Qualified PPP | Level 2 | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 633 | 567 | |
Qualified PPP | Level 2 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 192 | 3,118 | |
Qualified PPP | Level 2 | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,305 | 2,304 | |
Qualified PPP | Level 2 | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,419 | 1,474 | |
Qualified PPP | Level 2 | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2 | 3 | |
Qualified PPP | Level 3 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 6,544 | 7,437 | |
Fair value of plan assets | 6,544 | 7,437 | |
Qualified PPP | Level 3 | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2 | 4 | |
Qualified PPP | Level 3 | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 10 | 20 | |
Qualified PPP | Level 3 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 401 | 295 | |
Qualified PPP | Level 3 | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 912 | 889 | |
Qualified PPP | Level 3 | Private equity | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,790 | 3,287 | |
Qualified PPP | Level 3 | Private real estate | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,429 | 2,942 | |
Non-U.S. Defined Benefit Pension Plans | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 35,798 | 39,625 | |
Other | (50) | (82) | |
Fair value of plan assets | 35,748 | 39,543 | 39,464 |
Pension Contributions | |||
Cash contribution by employer to non-U.S. defined benefit plans | 474 | 465 | |
Non-U.S. Defined Benefit Pension Plans | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 4,631 | 5,652 | |
Value of IBM securities included in plan assets | $ 14 | $ 21 | |
Percentage of IBM securities included in plan assets | 0.04% | 0.10% | |
Non-U.S. Defined Benefit Pension Plans | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | $ 6,290 | $ 7,540 | |
Non-U.S. Defined Benefit Pension Plans | Government and related | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 7,499 | 8,191 | |
Non-U.S. Defined Benefit Pension Plans | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,899 | 2,063 | |
Value of IBM securities included in plan assets | $ 1 | $ 4 | |
Percentage of IBM securities included in plan assets | 0.004% | 0.01% | |
Non-U.S. Defined Benefit Pension Plans | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | $ 219 | $ 238 | |
Non-U.S. Defined Benefit Pension Plans | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 9,120 | 9,802 | |
Non-U.S. Defined Benefit Pension Plans | Insurance contracts | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,079 | 1,053 | |
Non-U.S. Defined Benefit Pension Plans | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 610 | 551 | |
Non-U.S. Defined Benefit Pension Plans | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 659 | 745 | |
Non-U.S. Defined Benefit Pension Plans | Private equity | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 582 | 513 | |
Non-U.S. Defined Benefit Pension Plans | Private real estate | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 661 | 664 | |
Non-U.S. Defined Benefit Pension Plans | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 480 | 848 | |
Non-U.S. Defined Benefit Pension Plans | Other commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 2,069 | 1,766 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 5,016 | 6,056 | |
Fair value of plan assets | 5,016 | 6,056 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 4,631 | 5,652 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 90 | 126 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 38 | 87 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 142 | 158 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | (1) | 2 | |
Non-U.S. Defined Benefit Pension Plans | Level 1 | Other commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 115 | 33 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 29,202 | 32,139 | |
Fair value of plan assets | 29,202 | 32,139 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Equity securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 0 | ||
Non-U.S. Defined Benefit Pension Plans | Level 2 | Equity commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 6,200 | 7,415 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Government and related | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 7,482 | 8,159 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,896 | 2,063 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Mortgage and asset-backed securities | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 219 | 238 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Fixed income commingled/ mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 9,082 | 9,715 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Insurance contracts | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,079 | 1,053 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Cash and short-term investments | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 467 | 393 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Hedge funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 659 | 745 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Derivatives | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 481 | 846 | |
Non-U.S. Defined Benefit Pension Plans | Level 2 | Other commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,637 | 1,513 | |
Non-U.S. Defined Benefit Pension Plans | Level 3 | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 1,580 | 1,429 | |
Fair value of plan assets | 1,580 | 1,429 | 1,110 |
Non-U.S. Defined Benefit Pension Plans | Level 3 | Government and related | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 16 | 32 | |
Fair value of plan assets | 16 | 32 | 42 |
Non-U.S. Defined Benefit Pension Plans | Level 3 | Corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 4 | 1 | |
Fair value of plan assets | 4 | 1 | 4 |
Non-U.S. Defined Benefit Pension Plans | Level 3 | Private equity | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 582 | 513 | |
Fair value of plan assets | 582 | 513 | 410 |
Non-U.S. Defined Benefit Pension Plans | Level 3 | Private real estate | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 661 | 664 | |
Fair value of plan assets | 661 | 664 | 655 |
Non-U.S. Defined Benefit Pension Plans | Level 3 | Other commingled/mutual funds | |||
Defined Benefit Plan Disclosures | |||
Subtotal | 317 | 220 | |
Fair value of plan assets | 317 | 220 | |
Nonpension Postretirement Plans | |||
Pension Contributions | |||
Employer contributions, excluding the Medicare-related subsidy | 408 | 144 | |
Nonpension Postretirement Plans | U.S. Treasury securities | |||
Pension Contributions | |||
Employer contributions, excluding the Medicare-related subsidy | 80 | ||
Nonpension Postretirement Plans | Cash | |||
Pension Contributions | |||
Employer contributions, excluding the Medicare-related subsidy | 328 | ||
U.S. Nonpension Postretirement Benefit Plans | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 71 | 16 | 177 |
U.S. Nonpension Postretirement Benefit Plans | Level 1 | Cash | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 71 | 16 | |
Non-U.S. Nonpension Postretirement Plans | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 59 | 84 | $ 92 |
Non-U.S. Nonpension Postretirement Plans | Level 2 | Government and related fixed income securities and corporate bonds | |||
Defined Benefit Plan Disclosures | |||
Fair value of plan assets | 59 | $ 84 | |
Non-U.S. Defined Benefit and Multi-Employer Plans | |||
Pension Contributions | |||
Estimated cash contributions to the defined benefit plans in next fiscal year | $ 500 |
Retirement-Related Benefits (Re
Retirement-Related Benefits (Reconciliation of Level 3 Assets) (Details 10) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
U.S. Defined Benefit Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | $ 55,772 | $ 53,954 |
Fair value of plan assets, balance at end of period | 51,716 | 55,772 |
Non-U.S. Defined Benefit Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 39,543 | 39,464 |
Foreign exchange impact | (3,004) | (4,049) |
Fair value of plan assets, balance at end of period | 35,748 | 39,543 |
Level 3 | U.S. Defined Benefit Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 7,437 | 7,968 |
Return on assets held at end of year | (377) | 238 |
Return on assets sold during the year | 889 | 531 |
Purchases, sales and settlements, net | (1,399) | (1,302) |
Transfers, net | (6) | 2 |
Fair value of plan assets, balance at end of period | 6,544 | 7,437 |
Level 3 | U.S. Defined Benefit Pension Plans | Government and Related | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 1 | |
Transfers, net | (1) | |
Level 3 | U.S. Defined Benefit Pension Plans | Corporate Bonds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 4 | 5 |
Return on assets held at end of year | 0 | 0 |
Return on assets sold during the year | 1 | 0 |
Purchases, sales and settlements, net | (5) | 0 |
Transfers, net | 2 | (1) |
Fair value of plan assets, balance at end of period | 2 | 4 |
Level 3 | U.S. Defined Benefit Pension Plans | Mortgage and Asset-Backed Securities | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 20 | 19 |
Return on assets held at end of year | 0 | 0 |
Return on assets sold during the year | 0 | 0 |
Purchases, sales and settlements, net | (2) | (3) |
Transfers, net | (8) | 4 |
Fair value of plan assets, balance at end of period | 10 | 20 |
Level 3 | U.S. Defined Benefit Pension Plans | Fixed Income Commingled/Mutual Funds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 295 | 274 |
Return on assets held at end of year | 9 | 21 |
Return on assets sold during the year | 0 | |
Purchases, sales and settlements, net | 98 | |
Fair value of plan assets, balance at end of period | 401 | 295 |
Level 3 | U.S. Defined Benefit Pension Plans | Hedge Funds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 889 | 860 |
Return on assets held at end of year | 23 | 28 |
Fair value of plan assets, balance at end of period | 912 | 889 |
Level 3 | U.S. Defined Benefit Pension Plans | Private Equity | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 3,287 | 3,771 |
Return on assets held at end of year | (199) | (10) |
Return on assets sold during the year | 429 | 332 |
Purchases, sales and settlements, net | (727) | (807) |
Transfers, net | 0 | |
Fair value of plan assets, balance at end of period | 2,790 | 3,287 |
Level 3 | U.S. Defined Benefit Pension Plans | Private Real Estate | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 2,942 | 3,038 |
Return on assets held at end of year | (210) | 197 |
Return on assets sold during the year | 460 | 199 |
Purchases, sales and settlements, net | (763) | (492) |
Fair value of plan assets, balance at end of period | 2,429 | 2,942 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 1,429 | 1,110 |
Return on assets held at end of year | 47 | 138 |
Return on assets sold during the year | 107 | 34 |
Purchases, sales and settlements, net | 88 | 155 |
Transfers, net | 102 | |
Foreign exchange impact | (91) | (110) |
Fair value of plan assets, balance at end of period | 1,580 | 1,429 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | Government and Related | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 32 | 42 |
Return on assets held at end of year | (2) | 3 |
Return on assets sold during the year | 0 | 0 |
Purchases, sales and settlements, net | (10) | (8) |
Foreign exchange impact | (3) | (5) |
Fair value of plan assets, balance at end of period | 16 | 32 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | Corporate Bonds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 1 | 4 |
Return on assets held at end of year | 0 | 0 |
Return on assets sold during the year | 0 | 0 |
Purchases, sales and settlements, net | 3 | (3) |
Foreign exchange impact | 0 | 0 |
Fair value of plan assets, balance at end of period | 4 | 1 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | Private Equity | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 513 | 410 |
Return on assets held at end of year | (25) | 26 |
Return on assets sold during the year | 62 | 46 |
Purchases, sales and settlements, net | 73 | 75 |
Transfers, net | 0 | |
Foreign exchange impact | (42) | (45) |
Fair value of plan assets, balance at end of period | 582 | 513 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | Private Real Estate | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 664 | 655 |
Return on assets held at end of year | 45 | 83 |
Return on assets sold during the year | 46 | (12) |
Purchases, sales and settlements, net | (62) | (13) |
Foreign exchange impact | (31) | (49) |
Fair value of plan assets, balance at end of period | 661 | 664 |
Level 3 | Non-U.S. Defined Benefit Pension Plans | Other Commingled/Mutual Funds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 220 | |
Return on assets held at end of year | 28 | 26 |
Purchases, sales and settlements, net | 84 | 104 |
Transfers, net | 102 | |
Foreign exchange impact | (15) | (12) |
Fair value of plan assets, balance at end of period | $ 317 | $ 220 |
Retirement-Related Benefits 118
Retirement-Related Benefits (Pensions Expected Payments) (Details 11) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Total Expected Benefit Payments, Defined Benefit Pension Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | $ 5,698 | |
Expected benefit payments, 2017 | 5,675 | |
Expected benefit payments, 2018 | 5,714 | |
Expected benefit payments, 2019 | 5,757 | |
Expected benefit payments, 2020 | 5,868 | |
Expected benefit payments, 2021-2025 | 29,625 | |
Qualified U.S. Plan Payments, Defined Benefit Pension Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 3,513 | |
Expected benefit payments, 2017 | 3,501 | |
Expected benefit payments, 2018 | 3,501 | |
Expected benefit payments, 2019 | 3,496 | |
Expected benefit payments, 2020 | 3,548 | |
Expected benefit payments, 2021-2025 | 17,279 | |
Nonqualified U.S. Plans Payments, Defined Benefit Pension Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 118 | |
Expected benefit payments, 2017 | 118 | |
Expected benefit payments, 2018 | 120 | |
Expected benefit payments, 2019 | 121 | |
Expected benefit payments, 2020 | 122 | |
Expected benefit payments, 2021-2025 | 604 | |
Qualified Non-U.S. Plans Payments, Defined Benefit Pension Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 1,756 | |
Expected benefit payments, 2017 | 1,751 | |
Expected benefit payments, 2018 | 1,780 | |
Expected benefit payments, 2019 | 1,814 | |
Expected benefit payments, 2020 | 1,857 | |
Expected benefit payments, 2021-2025 | 9,855 | |
Nonqualified Non-U.S. Plans Payments, Defined Benefit Pension Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 311 | |
Expected benefit payments, 2017 | 306 | |
Expected benefit payments, 2018 | 313 | |
Expected benefit payments, 2019 | 326 | |
Expected benefit payments, 2020 | 341 | |
Expected benefit payments, 2021-2025 | 1,888 | |
Total Expected Benefit Payments, Nonpension Postretirement Benefit Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 424 | |
Expected benefit payments, 2017 | 434 | |
Expected benefit payments, 2018 | 439 | |
Expected benefit payments, 2019 | 448 | |
Expected benefit payments, 2020 | 447 | |
Expected benefit payments, 2021-2025 | 2,087 | |
U.S. Plan Payments, Nonpension Postretirement Benefit Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 393 | |
Expected benefit payments, 2017 | 399 | |
Expected benefit payments, 2018 | 401 | |
Expected benefit payments, 2019 | 406 | |
Expected benefit payments, 2020 | 401 | |
Expected benefit payments, 2021-2025 | 1,797 | |
Postretirement Medical Plans with Prescription Drug Benefits | ||
Total Subsidy received by the company under Medicare Prescription Drug Improvement and Modernization Act of 2003 | 1 | $ 23 |
Qualified Non-U.S. Plans Payments, Nonpension Postretirement Benefit Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 5 | |
Expected benefit payments, 2017 | 6 | |
Expected benefit payments, 2018 | 6 | |
Expected benefit payments, 2019 | 7 | |
Expected benefit payments, 2020 | 7 | |
Expected benefit payments, 2021-2025 | 49 | |
Nonqualified Non-U.S. Plans Payments, Nonpension Postretirement Benefit Plan | ||
Expected Benefit Payments | ||
Expected benefit payments, 2016 | 26 | |
Expected benefit payments, 2017 | 30 | |
Expected benefit payments, 2018 | 33 | |
Expected benefit payments, 2019 | 35 | |
Expected benefit payments, 2020 | 39 | |
Expected benefit payments, 2021-2025 | $ 240 |
Retirement-Related Benefits (Pl
Retirement-Related Benefits (Plans with ABO in Excess of Plan Assets) (Details 12) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
Defined Benefit Plan, Pension and Non-Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets | ||
Plans with PBO in excess of plan assets, Benefit Obligation | $ 35,054 | $ 40,836 |
Plans with PBO in excess of plan assets, Plan Assets | 17,807 | 21,745 |
Plans with assets in excess of PBO, Benefit Obligation | 68,053 | 71,512 |
Plans with assets in excess of PBO, Plan Assets | 69,786 | 73,671 |
Defined Benefit Pension Plans | ||
Defined Benefit Plan, Pension and Non-Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets | ||
Plans with PBO in excess of plan assets, Benefit Obligation | 29,784 | 34,976 |
Plans with PBO in excess of plan assets, Plan Assets | 17,677 | 21,655 |
Plans with ABO in excess of plan assets, Benefit Obligation | 29,135 | 33,148 |
Plans with ABO in excess of plan assets, Plan Assets | 17,492 | 20,680 |
Plans with assets in excess of PBO, Benefit Obligation | 68,053 | 71,501 |
Plans with assets in excess of PBO, Plan Assets | $ 69,786 | $ 73,660 |
Segments (Segment Table) (Detai
Segments (Segment Table) (Details 1) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015USD ($)BusinessSegment | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | |
Segment Information | |||
Revenue | $ 81,741 | $ 92,793 | $ 98,367 |
Pre-tax income from continuing operations | $ 15,945 | 19,986 | 20,244 |
Number of business segments | BusinessSegment | 5 | ||
Number of business segments to which assets are assigned when ownership is shared between several segments | BusinessSegment | 1 | ||
Total Segments | |||
Segment Information | |||
Revenue | $ 81,535 | 92,418 | 97,889 |
Cognitive Solutions | |||
Segment Information | |||
Revenue | 17,841 | 19,689 | 19,887 |
Global Business Services | |||
Segment Information | |||
Revenue | 17,166 | 19,512 | 21,210 |
Technology Services & Cloud Platforms | |||
Segment Information | |||
Revenue | 35,142 | 38,889 | 39,139 |
Systems | |||
Segment Information | |||
Revenue | 9,547 | 12,294 | 15,630 |
Global Financing | |||
Segment Information | |||
Revenue | 1,840 | 2,034 | 2,022 |
Business Segments | |||
Segment Information | |||
Revenue | 88,361 | 99,512 | 104,830 |
Pre-tax income from continuing operations | 19,602 | 22,219 | 23,690 |
Business Segments | Total Segments | |||
Segment Information | |||
Revenue | 88,361 | 99,512 | 104,830 |
Pre-tax income from continuing operations | $ 19,602 | $ 22,219 | $ 23,690 |
Revenue year-to-year change (as a percent) | (11.20%) | (5.10%) | |
Pre-tax income year-to-year change (as a percent) | (11.80%) | (6.20%) | |
Pre-tax income margin (as a percent) | 22.20% | 22.30% | 22.60% |
Business Segments | Cognitive Solutions | |||
Segment Information | |||
Revenue | $ 20,055 | $ 21,906 | $ 21,919 |
Pre-tax income from continuing operations | $ 7,245 | $ 8,215 | $ 8,663 |
Revenue year-to-year change (as a percent) | (8.40%) | (0.10%) | |
Pre-tax income year-to-year change (as a percent) | (11.80%) | (5.20%) | |
Pre-tax income margin (as a percent) | 36.10% | 37.50% | 39.50% |
Business Segments | Global Business Services | |||
Segment Information | |||
Revenue | $ 17,664 | $ 20,055 | $ 21,924 |
Pre-tax income from continuing operations | $ 2,602 | $ 3,347 | $ 3,447 |
Revenue year-to-year change (as a percent) | (11.90%) | (8.50%) | |
Pre-tax income year-to-year change (as a percent) | (22.30%) | (2.90%) | |
Pre-tax income margin (as a percent) | 14.70% | 16.70% | 15.70% |
Business Segments | Technology Services & Cloud Platforms | |||
Segment Information | |||
Revenue | $ 35,840 | $ 39,729 | $ 40,104 |
Pre-tax income from continuing operations | $ 5,669 | $ 7,084 | $ 7,645 |
Revenue year-to-year change (as a percent) | (9.80%) | (0.90%) | |
Pre-tax income year-to-year change (as a percent) | (20.00%) | (7.30%) | |
Pre-tax income margin (as a percent) | 15.80% | 17.80% | 19.10% |
Business Segments | Systems | |||
Segment Information | |||
Revenue | $ 10,325 | $ 13,300 | $ 16,579 |
Pre-tax income from continuing operations | $ 1,722 | $ 1,384 | $ 1,764 |
Revenue year-to-year change (as a percent) | (22.40%) | (19.80%) | |
Pre-tax income year-to-year change (as a percent) | 24.40% | (21.50%) | |
Pre-tax income margin (as a percent) | 16.70% | 10.40% | 10.60% |
Business Segments | Global Financing | |||
Segment Information | |||
Revenue | $ 4,477 | $ 4,522 | $ 4,304 |
Pre-tax income from continuing operations | $ 2,364 | $ 2,189 | $ 2,171 |
Revenue year-to-year change (as a percent) | (1.00%) | 5.10% | |
Pre-tax income year-to-year change (as a percent) | 8.00% | 0.80% | |
Pre-tax income margin (as a percent) | 52.80% | 48.40% | 50.40% |
Internal transactions | |||
Segment Information | |||
Revenue | $ (6,826) | $ (7,093) | $ (6,941) |
Pre-tax income from continuing operations | (1,791) | (1,872) | (1,483) |
Internal transactions | Total Segments | |||
Segment Information | |||
Revenue | (6,826) | (7,093) | (6,941) |
Internal transactions | Cognitive Solutions | |||
Segment Information | |||
Revenue | (2,215) | (2,216) | (2,032) |
Internal transactions | Global Business Services | |||
Segment Information | |||
Revenue | (499) | (543) | (714) |
Internal transactions | Technology Services & Cloud Platforms | |||
Segment Information | |||
Revenue | (698) | (840) | (965) |
Internal transactions | Systems | |||
Segment Information | |||
Revenue | (778) | (1,006) | (949) |
Internal transactions | Global Financing | |||
Segment Information | |||
Revenue | $ (2,637) | $ (2,488) | $ (2,282) |
Segments (Revenue Reconciliatio
Segments (Revenue Reconciliation) (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Revenue | |||
Revenue | $ 81,741 | $ 92,793 | $ 98,367 |
Total reportable segments | |||
Revenue | |||
Revenue | 88,361 | 99,512 | 104,830 |
Other revenue | |||
Revenue | |||
Revenue | 206 | 374 | 478 |
Elimination of internal transactions | |||
Revenue | |||
Revenue | $ (6,826) | $ (7,093) | $ (6,941) |
Segments (Operating Profit Reco
Segments (Operating Profit Reconciliation) (Details 3) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Pre-tax Income from continuing operations | |||
Income from continuing operations before income taxes | $ 15,945 | $ 19,986 | $ 20,244 |
Total reportable segments | |||
Pre-tax Income from continuing operations | |||
Income from continuing operations before income taxes | 19,602 | 22,219 | 23,690 |
Pre-tax reconciliations items | |||
Pre-tax Income from continuing operations | |||
Amortization of acquired intangible assets | (677) | (791) | (758) |
Acquisition-related charges | (26) | (12) | (46) |
Non-operating retirement-related (costs)/income | (1,050) | (353) | (1,062) |
Elimination of internal transactions | |||
Pre-tax Income from continuing operations | |||
Income from continuing operations before income taxes | (1,791) | (1,872) | (1,483) |
Unallocated corporate amounts | |||
Pre-tax Income from continuing operations | |||
Income from continuing operations before income taxes | $ (114) | $ 795 | $ (98) |
Segments (Management System Seg
Segments (Management System Segment View) (Details 4) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
Segment Information | ||||
Assets | $ 110,495 | $ 117,271 | [1],[2] | $ 125,641 |
Interest expense (Note D&J) | 468 | 484 | 402 | |
Cognitive Solutions | ||||
Segment Information | ||||
Assets | 20,017 | 19,525 | 20,705 | |
Depreciation/amortization of intangibles | 921 | 1,040 | 1,037 | |
Capital expenditures/investments in intangibles | 448 | 413 | 410 | |
Global Business Services | ||||
Segment Information | ||||
Assets | 8,327 | 8,831 | 9,701 | |
Depreciation/amortization of intangibles | 81 | 98 | 117 | |
Capital expenditures/investments in intangibles | 86 | 79 | 118 | |
Technology Services & Cloud Platforms | ||||
Segment Information | ||||
Assets | 23,530 | 22,512 | 22,981 | |
Depreciation/amortization of intangibles | 1,944 | 1,982 | 1,774 | |
Capital expenditures/investments in intangibles | 2,619 | 2,321 | 1,990 | |
Systems | ||||
Segment Information | ||||
Assets | 3,967 | 4,219 | 4,974 | |
Depreciation/amortization of intangibles | 321 | 734 | 462 | |
Capital expenditures/investments in intangibles | 321 | 627 | 424 | |
Global Financing | ||||
Segment Information | ||||
Assets | 36,157 | 38,845 | 40,138 | |
Depreciation/amortization of intangibles | 343 | 455 | 574 | |
Capital expenditures/investments in intangibles | 356 | 482 | 467 | |
Interest income | 1,720 | 1,951 | 1,904 | |
Interest expense (Note D&J) | 469 | 518 | 405 | |
Business Segments | ||||
Segment Information | ||||
Assets | 91,999 | 93,933 | 98,499 | |
Depreciation/amortization of intangibles | 3,610 | 4,308 | 3,963 | |
Capital expenditures/investments in intangibles | 3,830 | 3,921 | 3,410 | |
Interest income | 1,720 | 1,951 | 1,904 | |
Interest expense (Note D&J) | $ 469 | $ 518 | $ 405 | |
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. | |||
[2] | Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Segments (Asset Reconciliation)
Segments (Asset Reconciliation) (Details 5) - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Segment Reporting, Asset Reconciling Item | ||||
Assets | $ 110,495 | $ 117,271 | [1],[2] | $ 125,641 |
Deferred tax assets | 10,189 | 11,318 | ||
Plant, other property and equipment | 10,727 | 10,771 | ||
Pension assets | 1,734 | 2,160 | ||
Total reportable segments | ||||
Segment Reporting, Asset Reconciling Item | ||||
Assets | 91,999 | 93,933 | 98,499 | |
Elimination of internal transactions | ||||
Segment Reporting, Asset Reconciling Item | ||||
Assets | (4,709) | (5,193) | (4,740) | |
Unallocated amounts | ||||
Segment Reporting, Asset Reconciling Item | ||||
Cash and marketable securities | 6,634 | 7,182 | 9,697 | |
Notes and accounts receivable | 2,333 | 4,253 | 2,907 | |
Deferred tax assets | 4,693 | 6,465 | 4,030 | |
Plant, other property and equipment | 2,650 | 2,169 | 4,827 | |
Pension assets | 1,734 | 2,160 | 5,551 | |
Other | $ 5,161 | $ 6,303 | $ 4,869 | |
[1] | Reclassified to reflect adoption of the FASB guidance on debt issuance costs in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. | |||
[2] | Reclassified to reflect adoption of the FASB guidance on deferred taxes in consolidated financial statements. Refer to note B, "Accounting Changes," for additional information. |
Segments (Revenue and Plant Pro
Segments (Revenue and Plant Property Equipment by Countries) (Details 6) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015USD ($)Customer | Dec. 31, 2014USD ($)Customer | Dec. 31, 2013USD ($)Customer | |
Segment Information | |||
Revenue | $ 81,741 | $ 92,793 | $ 98,367 |
Net Plant, Property and Equipment | $ 10,727 | $ 10,771 | |
Revenue | Major Client | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | ||
Number of clients represented 10% or more of the company's total revenue | Customer | 0 | 0 | 0 |
Revenue | Geographic Information | |||
Segment Information | |||
Revenue | $ 81,741 | $ 92,793 | $ 98,367 |
Concentration Risk, Percentage | 10.00% | ||
Plant and Other Property - Net | Geographic Information | |||
Segment Information | |||
Net Plant, Property and Equipment | $ 10,176 | 10,078 | 12,979 |
Concentration Risk, Percentage | 10.00% | ||
UNITED STATES | Revenue | Geographic Information | |||
Segment Information | |||
Revenue | $ 30,514 | 32,021 | 33,427 |
UNITED STATES | Plant and Other Property - Net | Geographic Information | |||
Segment Information | |||
Net Plant, Property and Equipment | 4,644 | 4,388 | 6,723 |
Other countries | Revenue | Geographic Information | |||
Segment Information | |||
Revenue | 51,227 | 60,772 | 64,941 |
Other countries | Plant and Other Property - Net | Geographic Information | |||
Segment Information | |||
Net Plant, Property and Equipment | $ 5,532 | $ 5,690 | $ 6,257 |
Segments (External Revenue by S
Segments (External Revenue by Segments) (Details 7) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Segment Information | |||
External revenue | $ 81,741 | $ 92,793 | $ 98,367 |
Cognitive Solutions | |||
Segment Information | |||
External revenue | 17,841 | 19,689 | 19,887 |
Cognitive Solutions | Software | |||
Segment Information | |||
External revenue | 14,557 | 16,502 | 16,897 |
Cognitive Solutions | Services | |||
Segment Information | |||
External revenue | 3,175 | 3,143 | 2,978 |
Cognitive Solutions | Systems | |||
Segment Information | |||
External revenue | 108 | 44 | 12 |
Global Business Services | |||
Segment Information | |||
External revenue | 17,166 | 19,512 | 21,210 |
Global Business Services | Software | |||
Segment Information | |||
External revenue | 164 | 186 | 227 |
Global Business Services | Services | |||
Segment Information | |||
External revenue | 16,851 | 19,202 | 20,874 |
Global Business Services | Systems | |||
Segment Information | |||
External revenue | 151 | 124 | 109 |
Technology Services & Cloud Platforms | |||
Segment Information | |||
External revenue | 35,142 | 38,889 | 39,139 |
Technology Services & Cloud Platforms | Software | |||
Segment Information | |||
External revenue | 3,907 | 4,332 | 4,296 |
Technology Services & Cloud Platforms | Services | |||
Segment Information | |||
External revenue | 23,947 | 26,462 | 26,483 |
Technology Services & Cloud Platforms | Maintenance | |||
Segment Information | |||
External revenue | 6,085 | 6,790 | 7,038 |
Technology Services & Cloud Platforms | Systems | |||
Segment Information | |||
External revenue | 1,203 | 1,304 | 1,322 |
Systems | |||
Segment Information | |||
External revenue | 9,547 | 12,294 | 15,630 |
Systems | Servers | |||
Segment Information | |||
External revenue | 5,032 | 7,177 | 9,795 |
Systems | Software | |||
Segment Information | |||
External revenue | 1,749 | 2,053 | 2,386 |
Systems | Services | |||
Segment Information | |||
External revenue | 442 | 423 | 443 |
Systems | Storage | |||
Segment Information | |||
External revenue | 2,325 | 2,641 | 3,006 |
Global Financing | |||
Segment Information | |||
External revenue | 1,840 | 2,034 | 2,022 |
Global Financing | Financing | |||
Segment Information | |||
External revenue | 1,386 | 1,543 | 1,493 |
Global Financing | Used Equipment Sales | |||
Segment Information | |||
External revenue | $ 454 | $ 491 | $ 529 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 12 Months Ended | |
Feb. 16, 2016 | Jan. 26, 2016 | Dec. 31, 2015 | |
Subsequent events: | |||
Dividend declared, date | Jan. 26, 2016 | ||
Dividend payable, date | Mar. 10, 2016 | ||
Shareholders of record, date | Feb. 10, 2016 | ||
Subsequent event | |||
Subsequent events: | |||
Dividend declared (in dollars per share) | $ 1.3 | ||
Subsequent event | Bond | |||
Subsequent events: | |||
Bonds issued | $ 5,000 | ||
Subsequent event | 18-month floating rate bonds | |||
Subsequent events: | |||
Bonds issued | $ 900 | ||
Maturity term | 18 months | ||
Subsequent event | 18-month floating rate bonds | LIBOR | |||
Subsequent events: | |||
Interest rate margin (as a percent) | 0.45% | ||
Subsequent event | Three-year fixed rate bonds with 1.8 percent coupon rate | |||
Subsequent events: | |||
Bonds issued | $ 1,200 | ||
Maturity term | 3 years | ||
Debt instrument, interest rate (as a percent) | 1.80% | ||
Subsequent event | 5-year fixed-rate bonds with 2.25 percent coupon rate | |||
Subsequent events: | |||
Bonds issued | $ 900 | ||
Maturity term | 5 years | ||
Debt instrument, interest rate (as a percent) | 2.25% | ||
Subsequent event | Ten-year fixed rate bonds with 3.45% coupon rate | |||
Subsequent events: | |||
Bonds issued | $ 1,350 | ||
Maturity term | 10 years | ||
Debt instrument, interest rate (as a percent) | 3.45% | ||
Subsequent event | 30-year fixed-rate bonds with 4.7 percent coupon | |||
Subsequent events: | |||
Bonds issued | $ 650 | ||
Maturity term | 30 years | ||
Debt instrument, interest rate (as a percent) | 4.70% |