Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2020shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Sep. 30, 2020 |
Entity File Number | 1-2360 |
Entity Registrant Name | INTERNATIONAL BUSINESS MACHINES CORPORATION |
Entity Incorporation, State or Country Code | NY |
Entity Tax Identification Number | 13-0871985 |
Entity Address, Address Line One | One New Orchard Road |
Entity Address, City or Town | Armonk |
Entity Address, State or Province | NY |
Entity Address, Postal Zip Code | 10504 |
City Area Code | 914 |
Local Phone Number | 499-1900 |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Central Index Key | 0000051143 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 891,057,116 |
Document Fiscal Year Focus | 2020 |
Document Fiscal Period Focus | Q3 |
New York Stock Exchange | Common Stock | |
Document Information [Line Items] | |
Title of 12(b) Security | Capital stock, par value $.20 per share |
Trading Symbol | IBM |
Security Exchange Name | NYSE |
New York Stock Exchange | 2.750% Notes due 2020 | |
Document Information [Line Items] | |
Title of 12(b) Security | 2.750% Notes due 2020 |
Trading Symbol | IBM 20B |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.875% Notes due 2020 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.875% Notes due 2020 |
Trading Symbol | IBM 20A |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.500% Notes due 2021 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.500% Notes due 2021 |
Trading Symbol | IBM 21B |
Security Exchange Name | NYSE |
New York Stock Exchange | 2.625% Notes due 2022 | |
Document Information [Line Items] | |
Title of 12(b) Security | 2.625% Notes due 2022 |
Trading Symbol | IBM 22A |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.25% Notes due 2023 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.250% Notes due 2023 |
Trading Symbol | IBM 23A |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.375% Notes due 2023 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.375% Notes due 2023 |
Trading Symbol | IBM 23B |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.125% Notes due 2024 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.125% Notes due 2024 |
Trading Symbol | IBM 24A |
Security Exchange Name | NYSE |
New York Stock Exchange | 2.875% Notes due 2025 | |
Document Information [Line Items] | |
Title of 12(b) Security | 2.875% Notes due 2025 |
Trading Symbol | IBM 25A |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.950% Notes due 2025 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.950% Notes due 2025 |
Trading Symbol | IBM 25B |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.875% Notes due 2025 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.875% Notes due 2025 |
Trading Symbol | IBM 25C |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.300% Notes due 2026 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.300% Notes due 2026 |
Trading Symbol | IBM 26B |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.250% Notes due 2027 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.250% Notes due 2027 |
Trading Symbol | IBM 27B |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.300% Notes due 2028 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.300% Notes due 2028 |
Trading Symbol | IBM 28B |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.750% Notes due 2028 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.750% Notes due 2028 |
Trading Symbol | IBM 28A |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.500% Notes due 2029 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.500% Notes due 2029 |
Trading Symbol | IBM 29 |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.750% Notes due 2031 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.750% Notes due 2031 |
Trading Symbol | IBM 31 |
Security Exchange Name | NYSE |
New York Stock Exchange | 0.650% Notes due 2032 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.650% Notes due 2032 |
Trading Symbol | IBM 32A |
Security Exchange Name | NYSE |
New York Stock Exchange | 1.200% Notes due 2040 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.200% Notes due 2040 |
Trading Symbol | IBM 40 |
Security Exchange Name | NYSE |
New York Stock Exchange | 7.00% Debentures due 2025 | |
Document Information [Line Items] | |
Title of 12(b) Security | 7.00% Debentures due 2025 |
Trading Symbol | IBM 25 |
Security Exchange Name | NYSE |
New York Stock Exchange | 6.22% Debentures due 2027 | |
Document Information [Line Items] | |
Title of 12(b) Security | 6.22% Debentures due 2027 |
Trading Symbol | IBM 27 |
Security Exchange Name | NYSE |
New York Stock Exchange | 6.50% Debentures due 2028 | |
Document Information [Line Items] | |
Title of 12(b) Security | 6.50% Debentures due 2028 |
Trading Symbol | IBM 28 |
Security Exchange Name | NYSE |
New York Stock Exchange | 7.00% Debentures due 2045 | |
Document Information [Line Items] | |
Title of 12(b) Security | 7.00% Debentures due 2045 |
Trading Symbol | IBM 45 |
Security Exchange Name | NYSE |
New York Stock Exchange | 7.125% Debentures due 2096 | |
Document Information [Line Items] | |
Title of 12(b) Security | 7.125% Debentures due 2096 |
Trading Symbol | IBM 96 |
Security Exchange Name | NYSE |
Chicago Stock Exchange | Common Stock | |
Document Information [Line Items] | |
Title of 12(b) Security | Capital stock, par value $.20 per share |
Trading Symbol | IBM |
Security Exchange Name | CHX |
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue | $ 17,560 | $ 18,028 | $ 53,253 | $ 55,370 |
Cost | 9,130 | 9,692 | 28,202 | 29,982 |
Gross profit | 8,430 | 8,336 | 25,052 | 25,388 |
Expense and other (income): | ||||
Selling, general and administrative | 4,647 | 5,024 | 15,849 | 15,171 |
Research, development and engineering | 1,515 | 1,553 | 4,722 | 4,393 |
Intellectual property and custom development income | (134) | (166) | (453) | (489) |
Other (income) and expense | 253 | (31) | 614 | (850) |
Interest expense | 323 | 432 | 971 | 990 |
Total expense and other (income) | 6,603 | 6,813 | 21,704 | 19,215 |
Income from continuing operations before income taxes | 1,827 | 1,522 | 3,348 | 6,173 |
Provision for/(benefit from) income taxes | 128 | (151) | (888) | 407 |
Income from continuing operations | 1,698 | 1,673 | 4,237 | 5,766 |
Income/(loss) from discontinued operations, net of tax | (1) | (1) | (2) | (5) |
Net income | $ 1,698 | $ 1,672 | $ 4,234 | $ 5,761 |
Assuming dilution: | ||||
Continuing operations (in dollars per share) | $ 1.89 | $ 1.87 | $ 4.72 | $ 6.46 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Total (in dollars per share) | 1.89 | 1.87 | 4.72 | 6.45 |
Basic: | ||||
Continuing operations (in dollars per share) | 1.90 | 1.89 | 4.76 | 6.50 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Total (in dollars per share) | $ 1.90 | $ 1.89 | $ 4.76 | $ 6.49 |
Weighted-average number of common shares outstanding: | ||||
Assuming dilution (in shares) | 897,292,233 | 892,839,745 | 895,756,850 | 892,527,357 |
Basic (in shares) | 891,381,032 | 886,018,372 | 889,595,181 | 887,291,199 |
Services | ||||
Revenue | $ 11,180 | $ 11,703 | $ 33,490 | $ 35,454 |
Cost | 7,357 | 7,840 | 22,720 | 24,293 |
Sales | ||||
Revenue | 6,106 | 5,981 | 18,918 | 18,817 |
Cost | 1,601 | 1,635 | 4,964 | 4,979 |
Financing | ||||
Revenue | 275 | 343 | 845 | 1,099 |
Cost | $ 172 | $ 217 | $ 517 | $ 710 |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
Net income | $ 1,698 | $ 1,672 | $ 4,234 | $ 5,761 |
Other comprehensive income/(loss), before tax: | ||||
Foreign currency translation adjustments | (439) | (509) | (1,354) | (333) |
Net changes related to available-for-sale securities: | ||||
Unrealized gains/(losses) arising during the period | (1) | 3 | 0 | 1 |
Total net changes related to available-for-sale securities | (1) | 3 | 0 | 1 |
Unrealized gains/(losses) on cash flow hedges: | ||||
Unrealized gains/(losses) arising during the period | (32) | (439) | (249) | (798) |
Reclassification of (gains)/losses to net income | (69) | 488 | (37) | 418 |
Total unrealized gains/(losses) on cash flow hedges | (101) | 49 | (285) | (380) |
Retirement-related benefit plans: | ||||
Prior service costs/(credits) | (1) | (5) | ||
Net (losses)/gains arising during the period | 0 | 0 | 65 | 113 |
Curtailments and settlements | 21 | 3 | 42 | 7 |
Amortization of prior service (credits)/costs | 0 | (3) | 1 | (9) |
Amortization of net (gains)/losses | 586 | 461 | 1,722 | 1,385 |
Total retirement-related benefit plans | 607 | 461 | 1,826 | 1,496 |
Other comprehensive income/(loss), before tax | 66 | 4 | 187 | 784 |
Income tax (expense)/benefit related to items of other comprehensive income | 106 | (249) | (175) | (380) |
Other comprehensive income/(loss), net of tax | 172 | (245) | 12 | 404 |
Total comprehensive income/(loss) | $ 1,870 | $ 1,427 | $ 4,247 | $ 6,165 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 14,393 | $ 8,172 |
Restricted cash | 160 | 141 |
Marketable securities | 1,200 | 696 |
Notes and accounts receivable - trade (net of allowances of $354 in 2020 and $299 in 2019) | 6,099 | 7,870 |
Short-term financing receivables (net of allowances of $205 in 2020 and $188 in 2019) | 10,848 | 14,192 |
Other accounts receivable (net of allowances of $32 in 2020 and $33 in 2019) | 923 | 1,733 |
Inventories, at lower of average cost or net realizable value: | ||
Finished goods | 287 | 220 |
Work in process and raw materials | 1,662 | 1,399 |
Total | 1,949 | 1,619 |
Deferred costs | 2,084 | 1,896 |
Prepaid expenses and other current assets | 2,188 | 2,101 |
Total current assets | 39,845 | 38,420 |
Property, plant and equipment | 32,432 | 32,028 |
Less: Accumulated depreciation | 22,474 | 22,018 |
Property, plant and equipment - net | 9,958 | 10,010 |
Operating right-of-use assets - net | 4,715 | 4,996 |
Long-term financing receivables (net of allowances of $59 in 2020 and $33 in 2019) | 6,423 | 8,712 |
Prepaid pension assets | 7,636 | 6,865 |
Deferred costs | 2,438 | 2,472 |
Deferred taxes | 8,852 | 5,182 |
Goodwill | 58,355 | 58,222 |
Intangible assets - net | 13,962 | 15,235 |
Investments and sundry assets | 1,944 | 2,074 |
Total assets | 154,128 | 152,186 |
Current liabilities: | ||
Taxes | 2,375 | 2,839 |
Short-term debt | 10,285 | 8,797 |
Accounts payable | 3,985 | 4,896 |
Compensation and benefits | 3,602 | 3,406 |
Deferred income | 11,681 | 12,026 |
Operating lease liabilities | 1,336 | 1,380 |
Other accrued expenses and liabilities | 4,730 | 4,357 |
Total current liabilities | 37,993 | 37,701 |
Long-term debt | 55,129 | 54,102 |
Retirement and nonpension postretirement benefit obligations | 16,732 | 17,142 |
Deferred income | 3,820 | 3,851 |
Operating lease liabilities | 3,635 | 3,879 |
Other liabilities | 15,484 | 14,526 |
Total liabilities | 132,794 | 131,202 |
IBM stockholders' equity: | ||
Common stock, par value $.20 per share, and additional paid-in capital; Shares authorized: 4,687,500,000; Shares issued: 2020-2,241,658,034; 2019-2,237,996,975 | 56,366 | 55,895 |
Retained earnings | 162,806 | 162,954 |
Treasury stock, at cost; Shares: 2020-1,350,600,918; 2019-1,350,886,521 | (169,380) | (169,413) |
Accumulated other comprehensive income/(loss) | (28,584) | (28,597) |
Total IBM stockholders' equity | 21,208 | 20,841 |
Noncontrolling interests | 126 | 144 |
Total equity | 21,334 | 20,985 |
Total liabilities and equity | $ 154,128 | $ 152,186 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEET | ||
Notes and accounts receivable - trade, allowances | $ 354 | $ 299 |
Short-term financing receivables, allowances | 205 | 188 |
Other accounts receivable, allowances | 32 | 33 |
Long-term financing receivables, allowances | $ 59 | $ 33 |
Common stock, Par value (in dollars per share) | $ 0.20 | $ 0.20 |
Common stock, Shares authorized (in shares) | 4,687,500,000 | 4,687,500,000 |
Common stock, Shares issued (in shares) | 2,241,658,034 | 2,237,996,975 |
Treasury stock, Shares (in shares) | 1,350,600,918 | 1,350,886,521 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 4,234 | $ 5,761 |
Adjustments to reconcile net income to cash provided by operating activities | ||
Depreciation | 3,138 | 3,188 |
Amortization of intangibles | 1,858 | 1,221 |
Stock-based compensation | 658 | 468 |
Net (gain)/loss on asset sales and other | 80 | (828) |
Changes in operating assets and liabilities, net of acquisitions/divestitures | 2,370 | 1,509 |
Net cash provided by operating activities | 12,337 | 11,319 |
Cash flows from investing activities: | ||
Payments for property, plant and equipment | (1,940) | (1,710) |
Proceeds from disposition of property, plant and equipment | 147 | 452 |
Investment in software | (469) | (468) |
Acquisition of businesses, net of cash acquired | (37) | (32,630) |
Divestiture of businesses, net of cash transferred | 510 | 927 |
Non-operating finance receivables - net | 29 | 6,096 |
Purchases of marketable securities and other investments | (5,012) | (2,813) |
Proceeds from disposition of marketable securities and other investments | 4,302 | 3,081 |
Net cash provided by/(used in) investing activities | (2,470) | (27,064) |
Cash flows from financing activities: | ||
Proceeds from new debt | 10,337 | 31,496 |
Payments to settle debt | (8,802) | (8,891) |
Short-term borrowings/(repayments) less than 90 days - net | (467) | (2,140) |
Common stock repurchases | (1,361) | |
Common stock repurchases for tax withholdings | (225) | (186) |
Financing - other | 72 | 68 |
Cash dividends paid | (4,343) | (4,269) |
Net cash provided by/(used in) financing activities | (3,428) | 14,717 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (200) | (352) |
Net change in cash, cash equivalents and restricted cash | 6,239 | (1,379) |
Cash, cash equivalents and restricted cash at beginning of period | 8,314 | 11,604 |
Cash, cash equivalents and restricted cash at end of period | $ 14,553 | $ 10,225 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total IBM Stockholders' EquityCumulative Effect, Period of Adoption, Adjustment | [1] | Total IBM Stockholders' Equity | Common Stock and Additional Paid-in Capital | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | [1] | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income/(Loss) | Non-Controlling Interests | Cumulative Effect, Period of Adoption, Adjustment | [1] | Total |
Balance at the Beginning of the Period at Dec. 31, 2018 | $ 16,796 | $ 55,151 | $ 159,206 | $ (168,071) | $ (29,490) | $ 134 | $ 16,929 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 5,761 | 5,761 | 5,761 | ||||||||||
Other comprehensive income/(loss) | 404 | 404 | 404 | ||||||||||
Total comprehensive income/(loss) | 6,165 | 6,165 | |||||||||||
Cash dividends paid - common stock | (4,269) | (4,269) | (4,269) | ||||||||||
Common stock issued under employee plans | 657 | 657 | 657 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | (56) | 16 | (72) | (56) | |||||||||
Other treasury shares purchased, not retired | (1,331) | (1,331) | (1,331) | ||||||||||
Changes in other equity | (5) | (5) | (5) | ||||||||||
Changes in noncontrolling interests | 6 | 6 | |||||||||||
Balance at the End of the Period at Sep. 30, 2019 | 17,956 | 55,808 | 160,709 | (169,474) | (29,086) | 139 | 18,096 | ||||||
Balance at the Beginning of the Period at Jun. 30, 2019 | 17,645 | 55,404 | 160,467 | (169,385) | (28,841) | 131 | 17,776 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 1,672 | 1,672 | 1,672 | ||||||||||
Other comprehensive income/(loss) | (245) | (245) | (245) | ||||||||||
Total comprehensive income/(loss) | 1,427 | 1,427 | |||||||||||
Cash dividends paid - common stock | (1,436) | (1,436) | (1,436) | ||||||||||
Common stock issued under employee plans | 404 | 404 | 404 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 32 | 6 | 27 | 32 | |||||||||
Other treasury shares purchased, not retired | (115) | (115) | (115) | ||||||||||
Changes in noncontrolling interests | 8 | 8 | |||||||||||
Balance at the End of the Period at Sep. 30, 2019 | 17,956 | 55,808 | 160,709 | (169,474) | (29,086) | 139 | 18,096 | ||||||
Balance at the Beginning of the Period at Dec. 31, 2019 | $ (66) | 20,841 | 55,895 | $ (66) | 162,954 | (169,413) | (28,597) | 144 | $ (66) | 20,985 | |||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 4,234 | 4,234 | 4,234 | ||||||||||
Other comprehensive income/(loss) | 12 | 12 | 12 | ||||||||||
Total comprehensive income/(loss) | 4,247 | 4,247 | |||||||||||
Cash dividends paid - common stock | (4,343) | (4,343) | (4,343) | ||||||||||
Common stock issued under employee plans | 471 | 471 | 471 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 59 | 26 | 33 | 59 | |||||||||
Changes in noncontrolling interests | (18) | (18) | |||||||||||
Balance at the End of the Period at Sep. 30, 2020 | 21,208 | 56,366 | 162,806 | (169,380) | (28,584) | 126 | 21,334 | ||||||
Balance at the Beginning of the Period at Jun. 30, 2020 | 20,551 | 56,135 | 162,559 | (169,386) | (28,757) | 137 | 20,688 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 1,698 | 1,698 | 1,698 | ||||||||||
Other comprehensive income/(loss) | 172 | 172 | 172 | ||||||||||
Total comprehensive income/(loss) | 1,870 | 1,870 | |||||||||||
Cash dividends paid - common stock | (1,453) | (1,453) | (1,453) | ||||||||||
Common stock issued under employee plans | 232 | 232 | 232 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 9 | 2 | 7 | 9 | |||||||||
Changes in noncontrolling interests | (11) | (11) | |||||||||||
Balance at the End of the Period at Sep. 30, 2020 | $ 21,208 | $ 56,366 | $ 162,806 | $ (169,380) | $ (28,584) | $ 126 | $ 21,334 | ||||||
[1] | Reflects the adoption of the FASB guidance on current expected credit losses. Refer to note 2, “Accounting Changes.” |
CONSOLIDATED STATEMENT OF EQU_2
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENT OF EQUITY | ||||
Cash dividend per common share | $ 1.63 | $ 1.62 | $ 4.88 | $ 4.81 |
Common stock issued under employee plans (in shares) | 429,304 | 353,035 | 3,661,059 | 3,628,250 |
Purchases of treasury stock under employee plans (in shares) | 110,415 | 241,779 | 1,731,915 | 1,377,598 |
Sales of treasury stock under employee plans (in shares) | 159,479 | 473,196 | 2,017,518 | 886,907 |
Other treasury shares purchased, not retired (in shares) | 822,159 | 9,979,516 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis o f 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). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. 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. On October 8, 2020, the company announced that it will separate its managed infrastructure services unit of its Global Technology Services (GTS) segment into a new public company (NewCo). The separation is expected to be achieved through a U.S. federal tax-free spin-off to IBM shareholders and completed by the end of 2021. It will be subject to customary market, regulatory and other closing conditions, including final IBM Board of Directors’ approval. The announcement did not have any classification impact to the company’s consolidated financial statements or segment reporting. The company expects the managed infrastructure services unit to meet the criteria to be classified as discontinued operations upon separation. In the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. These changes impacted a few of the company’s reportable segments, but did not impact the Consolidated Financial Statements. Refer to note 4, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Form 10-Q are reported on a comparable basis. For the three months ended September 30, 2020, the company reported a provision for income taxes of $128 million. For the nine months ended September 30, 2020, the company reported a benefit from income taxes of $888 million. The tax benefit was primarily related to the tax impacts of an intra-entity sale of certain of the company’s intellectual property in the first quarter, which required the recognition of a $3,442 million deferred tax asset. The recognition of this deferred tax asset and the related impacts resulted in a net one-time benefit in the first quarter of $939 million. For the three and nine months ended September 30, 2019, the company reported a benefit from income taxes of $151 million and a provision for income taxes of $407 million, respectively. On July 9, 2019, the company completed the acquisition of all of the outstanding shares of Red Hat, Inc. (Red Hat). Refer to note 5, “Acquisitions & Divestitures,” and note 10, “Intangible Assets Including Goodwill,” for additional information. Noncontrolling interest amounts of $3.4 million and $7.1 million, net of tax, for the three months ended September 30, 2020 and 2019, respectively, and $14.7 million and $19.0 million, net of tax, for the nine months ended September 30, 2020 and 2019, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2019 Annual Report. 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 calculated from the underlying whole-dollar amounts. Certain prior period amounts have been reclassified to conform to the current period presentation. This is annotated where applicable. |
Accounting Changes
Accounting Changes | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Changes | |
Accounting Changes | 2. Accounting Changes: New Standards to be Implemented Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Reference Rate Reform Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Simplifying the Test for Goodwill Impairment Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Financial Instruments–Credit Losses Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Leases Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters For all other standards that the company adopted in 2019, there was no material impact in the consolidated financial results. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Recognition | |
Revenue Recognition | 3. Revenue Recognition: Disaggregation of Revenue The following tables provide details of revenue by major products/service offerings and by geography. Revenue by Major Products/Service Offerings Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Cloud & Data Platforms $ 2,775 $ 2,308 $ 8,108 $ 6,398 Cognitive Applications 1,317 1,305 * 3,745 3,914 * Transaction Processing Platforms 1,461 1,589 4,687 5,419 Total Cloud & Cognitive Software $ 5,553 $ 5,201 * $ 16,540 $ 15,731 * Consulting 1,966 2,016 * 5,973 6,037 * Application Management 1,758 1,897 5,332 5,724 Global Process Services 240 247 687 752 Total Global Business Services $ 3,965 $ 4,160 * $ 11,992 $ 12,513 * Infrastructure & Cloud Services 4,933 5,071 14,663 15,454 Technology Support Services 1,528 1,629 4,582 4,958 Total Global Technology Services $ 6,462 $ 6,700 $ 19,245 $ 20,412 Systems Hardware 919 1,117 3,404 3,358 Operating Systems Software 338 364 1,074 1,204 Total Systems $ 1,257 $ 1,481 $ 4,477 $ 4,562 Global Financing** 273 343 837 1,100 Other 50 142 * 163 1,053 * Total revenue $ 17,560 $ 18,028 $ 53,253 $ 55,370 * Recast to conform to current period presentation. Refer to note 4, “Segments,” for additional information. ** Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. Revenue by Geography Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Americas $ 8,139 $ 8,514 $ 24,755 $ 25,813 Europe/Middle East/Africa 5,564 5,477 16,775 17,354 Asia Pacific 3,857 4,036 11,723 12,203 Total $ 17,560 $ 18,028 $ 53,253 $ 55,370 Remaining Performance Obligations The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed, such as certain as-a-Service, governmental, term software license and services offerings. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency. At September 30, 2020, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $117 billion. Approximately 60 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 35 percent in the subsequent three Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods For the three and nine months ended September 30, 2020, revenue was increased by $12 million and reduced by $45 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods mainly due to changes in estimates on percentage-of-completion based contracts. Contract Balances The following table provides information about notes and accounts receivable – trade, contract assets and deferred income balances: At September 30, At December 31, (Dollars in millions) 2020 2019 Notes and accounts receivable — trade (net of allowances of $354 in 2020 and $299 in 2019) $ 6,099 $ 7,870 Contract assets (1) 528 492 Deferred income (current) 11,681 12,026 Deferred income (noncurrent) 3,820 3,851 (1) Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. The amount of revenue recognized during the three and nine months ended September 30, 2020 that was included within the deferred income balance at June 30, 2020 and December 31, 2019 was $4.2 billion and $8.6 billion, respectively, and was primarily related to services and software. The following table provides roll forwards of the notes and accounts receivable – trade allowance for credit losses for the nine months ended September 30, 2020 and the year ended December 31, 2019: (Dollars in millions) January 1, 2020* Additions / (Releases) Write-offs Other** September 30, 2020 $ 316 $ 79 $ (39) $ (2) $ 354 January 1, 2019 Additions / (Releases) Write-offs Other** December 31, 2019 $ 309 $ 98 $ (113) $ 5 $ 299 * Opening balance does not equal the allowance at December 31, 2019 due to the adoption of the guidance for current expected credit losses. Refer to note 2, “Accounting Changes,” for additional information . ** Primarily represents translation adjustments . The contract assets allowance for credit losses was not material in any of the periods presented. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2020 | |
Segments | |
Segments | 4. Segments: During the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. Accordingly, the company updated its Cloud & Cognitive Software segment, Global Business Services segment and the Other – divested businesses category in the first quarter of 2020 and recast the related historical information for consistency with the go-forward performance. Total recast revenue for full-year 2019 was approximately $0.3 billion of IBM’s total $77 billion. There was no change to the Global Technology Services, Systems or Global Financing segments, and there was no impact to IBM’s consolidated results. The following table displays the segment updates: Management System Change Resulting Segment Implications Divestitures of IBM's Risk Analytics and Regulatory Offerings and Sales Performance Management Offerings - Cloud & Cognitive Software (Cognitive Applications) + Other – divested businesses Realignment of certain industry-related consulting offerings to the Global Business Services segment - Cloud & Cognitive Software (Cognitive Applications) + Global Business Services (Consulting) SEGMENT INFORMATION Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the three months ended September 30, 2020: External revenue $ 5,553 $ 3,965 $ 6,462 $ 1,257 $ 273 $ 17,510 Internal revenue 875 49 312 240 208 1,683 Total revenue $ 6,428 $ 4,014 $ 6,774 $ 1,497 $ 480 $ 19,193 Pre-tax income/(loss) from continuing operations $ 1,834 $ 570 $ 399 $ (37) $ 196 $ 2,962 Revenue year-to-year change 9.2 % (5.1) % (3.1) % (10.6) % (25.6) % (1.2) % Pre-tax income/(loss) year-to-year change 42.2 % 0.6 % (18.7) % nm (28.9) % 11.3 % Pre-tax income/(loss) margin 28.5 % 14.2 % 5.9 % (2.5) % 40.7 % 15.4 % For the three months ended September 30, 2019: External revenue $ 5,201 * $ 4,160 * $ 6,700 $ 1,481 $ 343 $ 17,886 * Internal revenue 686 70 287 195 302 1,541 Total revenue $ 5,888 * $ 4,230 * $ 6,988 $ 1,676 $ 645 $ 19,427 * Pre-tax income from continuing operations $ 1,290 * $ 567 * $ 490 $ 39 $ 275 $ 2,661 * Pre-tax income margin 21.9 %* 13.4 %* 7.0 % 2.3 % 42.6 % 13.7 %* nm - not meaningful Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended September 30: 2020 2019 Revenue: Total reportable segments $ 19,193 $ 19,427 * Other — divested businesses 4 83 * Other revenue 46 59 Eliminations of internal transactions (1,683) (1,541) Total consolidated revenue $ 17,560 $ 18,028 Pre-tax income from continuing operations: Total reportable segments $ 2,962 $ 2,661 * Amortization of acquired intangible assets (459) (473) Acquisition-related (charges)/income (1) (255) Non-operating retirement-related (costs)/income (291) (145) Eliminations of internal transactions (158) (84) Other — divested businesses (20) (25) * Unallocated corporate amounts (206) (157) Total pre-tax income from continuing operations $ 1,827 $ 1,522 * Recast to conform to current period presentation. SEGMENT INFORMATION Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the nine months ended September 30, 2020: External revenue $ 16,540 $ 11,992 $ 19,245 $ 4,477 $ 837 $ 53,090 Internal revenue 2,431 150 911 628 660 4,780 Total revenue $ 18,971 $ 12,142 $ 20,155 $ 5,106 $ 1,497 $ 57,870 Pre-tax income/(loss) from continuing operations $ 4,475 $ 1,203 $ 471 $ (7) $ 566 $ 6,708 Revenue year-to-year change 6.2 % (4.6) % (5.3) % 0.3 % (24.5) % (1.8) % Pre-tax income/(loss) year-to-year change (11.9) % 4.2 % (53.0) % (93.6) % (29.5) % (15.5) % Pre-tax income/(loss) margin 23.6 % 9.9 % 2.3 % (0.1) % 37.8 % 11.6 % For the nine months ended September 30, 2019: External revenue $ 15,731 * $ 12,513 * $ 20,412 $ 4,562 $ 1,100 $ 54,317 * Internal revenue 2,135 213 879 528 884 4,638 Total revenue $ 17,865 * $ 12,726 * $ 21,291 $ 5,091 $ 1,983 $ 58,956 * Pre-tax income/(loss) from continuing operations $ 5,082 * $ 1,154 * $ 1,000 $ (101) $ 803 $ 7,938 * Pre-tax income/(loss) margin 28.4 %* 9.1 %* 4.7 % (2.0) % 40.5 % 13.5 %* Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2020 2019 Revenue: Total reportable segments $ 57,870 $ 58,956 * Other — divested businesses 36 863 * Other revenue 127 190 Eliminations of internal transactions (4,780) (4,638) Total consolidated revenue $ 53,253 $ 55,370 Pre-tax income from continuing operations: Total reportable segments $ 6,708 $ 7,938 * Amortization of acquired intangible assets (1,404) (816) Acquisition-related (charges)/income (3) (396) Non-operating retirement-related (costs)/income (829) (419) Eliminations of internal transactions (334) (233) Other — divested businesses (17) 480 * Unallocated corporate amounts (773) (380) Total pre-tax income from continuing operations $ 3,348 $ 6,173 * Recast to conform to current period presentation. |
Acquisitions_Divestitures
Acquisitions/Divestitures | 9 Months Ended |
Sep. 30, 2020 | |
Acquisitions/Divestitures | |
Acquisitions/Divestitures | 5. Acquisitions & Divestitures: Acquisitions Purchase price consideration for all acquisitions was paid primarily in cash. All acquisitions, except otherwise stated were for 100 percent of the acquired business and are reported in the Consolidated Statement of Cash Flows, net of acquired cash and cash equivalents. During the nine months ended September 30, 2020, the company completed three acquisitions in the Cloud & Cognitive Software segment with one acquisition closing in each of the first three quarters of 2020. These acquisitions did not have a material impact in the Consolidated Financial Statements. On July 9, 2019, the company completed the acquisition of all On the acquisition date, Red Hat shareholders received $190 per share in cash, representing a total equity value of approximately $34 billion. The company funded the transaction through a combination of cash on hand and proceeds from debt issuances. The following table reflects the purchase price and the resulting purchase price allocation as of September 30, 2020. Amortization Allocated (Dollars in millions) Life (in years) Amount Current assets* $ 3,186 Property, plant and equipment/noncurrent assets 948 Intangible assets: Goodwill N/A 22,985 Client relationships 10 7,215 Completed technology 9 4,571 Trademarks 20 1,686 Total assets acquired $ 40,592 Current liabilities** 1,395 Noncurrent liabilities 4,117 Total liabilities assumed $ 5,512 Total purchase price $ 35,080 * Includes $2.2 billion of cash and cash equivalents. ** Includes $485 million of short-term debt related to the convertible notes acquired from Red Hat that were recognized at their fair value on the acquisition date, which was fully settled as of October 1, 2019. N/A – not applicable The goodwill generated is primarily attributable to the assembled workforce of Red Hat and the increased synergies expected to be achieved from the integration of Red Hat products into the company’s various integrated solutions neither of which qualify as an amortizable intangible asset. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 10.9 years. These identified intangible assets will be amortized on a straight-line basis over their useful lives, which approximates the pattern that the assets’ economic benefits are expected to be consumed over time. The following table presents the goodwill allocated to the segments as of September 30, 2020. (Dollars in billions) Goodwill Segment Allocated* Cloud & Cognitive Software $ 18.4 Global Technology Services 3.1 Global Business Services 1.1 Systems 0.4 Total $ 23.0 * It is expected that approximately six percent of the goodwill will be deductible for tax purposes. The following table presents the supplemental consolidated financial results of the company for the three and nine months ended September 30, 2019 on an unaudited pro forma basis, as if the acquisition had been consummated on January 1, 2018 through the periods shown below. The primary adjustments reflected in the pro forma results relate to: (1) the debt used to fund the acquisition, (2) changes driven by acquisition accounting, including amortization of intangible assets and the deferred revenue fair value adjustment, (3) employee retention plans, (4) elimination of intercompany transactions between IBM and Red Hat, and (5) the presentation of acquisition-related costs. The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that IBM and Red Hat would have achieved had the companies been combined during the periods presented, and was not intended to project the future results of operations that the combined company could achieve after the acquisition. Historical fiscal periods are not aligned under this presentation. The unaudited pro forma financial information did not reflect any potential cost savings, operating efficiencies, long-term debt pay down estimates, suspension of IBM’s share repurchase program, financial synergies or other strategic benefits as a result of the acquisition or any restructuring costs to achieve those benefits. (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2019 2019 Revenue $ 18,567 $ 57,424 Net income $ 2,249 $ 5,664 Divestitures Select IBM Software Products The company received cash of $812 million at closing and $812 million in the second quarter of 2020. The company also received $90 million of contingent consideration as of the third quarter of 2020. Any earned outstanding contingent consideration is expected to be paid to IBM within 27 months of the closing. In addition, IBM remits payment to HCL predominantly for servicing certain customer contracts until such contracts are terminated or entitlements are assumed by HCL, related to deferred revenue that existed prior to closing. IBM made cash payments to HCL of $51 million and $270 million during the three and nine months ended September 30, 2020, respectively, for such contracts. Select IBM Marketing Platform and Commerce Offerings IBM is providing Centerbridge with IT transition services. All other contracted transition services have concluded as of June 30, 2020. closing completed for the U.S. on June 30, 2019. The company received a net cash payment of $240 million and expects to receive an additional $150 million of cash within 36 months of the U.S. closing. A subsequent closing occurred in most other countries on March 31, 2020. The closing of all remaining countries occurred as of June 30, 2020. The pre-tax gain recognized on this transaction as of September 30, 2020 was $80 million, and was not material to the consolidated financial results in any quarter. The pre-tax gain is subject to adjustment in the future due to changes in transaction-related estimates which are not expected to be material. IBM Risk Analytics and Regulatory Offerings – Sales Performance Management Offerings – The above divested businesses are reported in Other–divested businesses as described in note 4, "Segments." The pre-tax gains recognized on the divestitures above were recorded in other (income) and expense in the Consolidated Income Statement. |
Earnings Per Share of Common St
Earnings Per Share of Common Stock | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share of Common Stock | |
Earnings Per Share of Common Stock | 6. Earnings Per Share of Common Stock The following tables provide the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2020 and 2019. For the Three Months Ended (Dollars in millions except per share amounts) September 30, 2020 September 30, 2019 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 891,381,032 886,018,372 Add — Incremental shares under stock-based compensation plans 4,595,327 5,368,268 Add — Incremental shares associated with contingently issuable shares 1,315,874 1,453,105 Number of shares on which diluted earnings per share is calculated 897,292,233 892,839,745 Income from continuing operations $ 1,698 $ 1,673 Income/(loss) from discontinued operations, net of tax (1) (1) Net income on which basic earnings per share is calculated $ 1,698 $ 1,672 Income from continuing operations $ 1,698 $ 1,673 Net income applicable to contingently issuable shares — — Income from continuing operations on which diluted earnings per share is calculated $ 1,698 $ 1,673 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (1) (1) Net income on which diluted earnings per share is calculated $ 1,698 $ 1,672 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 1.89 $ 1.87 Discontinued operations 0.00 0.00 Total $ 1.89 $ 1.87 Basic Continuing operations $ 1.90 $ 1.89 Discontinued operations 0.00 0.00 Total $ 1.90 $ 1.89 Stock options to purchase 1,510,886 shares and 761,659 shares were outstanding as of September 30, 2020 and 2019, respectively, but were not included in the computation of diluted earnings per share because the options' exercise price during the respective period was greater than the average market price of the common shares, and, therefore, the effect would have been antidilutive. For the Nine Months Ended (Dollars in millions except per share amounts) September 30, 2020 September 30, 2019 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 889,595,181 887,291,199 Add — Incremental shares under stock-based compensation plans 4,875,369 4,007,433 Add — Incremental shares associated with contingently issuable shares 1,286,300 1,228,726 Number of shares on which diluted earnings per share is calculated 895,756,850 892,527,357 Income from continuing operations $ 4,237 $ 5,766 Income/(loss) from discontinued operations, net of tax (2) (5) Net income on which basic earnings per share is calculated $ 4,234 $ 5,761 Income from continuing operations $ 4,237 $ 5,766 Net income applicable to contingently issuable shares (2) 0 Income from continuing operations on which diluted earnings per share is calculated $ 4,234 $ 5,766 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (2) (5) Net income on which diluted earnings per share is calculated $ 4,232 $ 5,762 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 4.72 $ 6.46 Discontinued operations 0.00 (0.01) Total $ 4.72 $ 6.45 Basic Continuing operations $ 4.76 $ 6.50 Discontinued operations 0.00 (0.01) Total $ 4.76 $ 6.49 Stock options to purchase 1,386,591 shares and 886,899 shares (average of first, second and third quarter share amounts) were outstanding as of September 30, 2020 and 2019, respectively, but were not included in the computation of diluted earnings per share because the options' exercise price during the respective period was greater than the average market price of the common shares, and, therefore, the effect would have been antidilutive. |
Financial Assets & Liabilities
Financial Assets & Liabilities | 9 Months Ended |
Sep. 30, 2020 | |
Financial Assets & Liabilities | |
Financial Assets & Liabilities | 7. Financial Assets & Liabilities : Fair Value Measurements Fair value is defined 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. The company classifies 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 directly or indirectly; and ● Level 3—Unobservable inputs for the asset or liability. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as 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 valuation. 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 rates 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 several 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 consistent 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. The company holds investments primarily in time deposits, certificates of deposit, and U.S. government debt that are designated as available-for-sale. The primary objective of the company’s cash and debt investment portfolio is to maintain principal by investing in very liquid and highly rated investment grade securities. Available-for-sale securities are measured for impairment on a recurring basis by comparing the security’s fair value with its amortized cost basis. Effective January 1, 2020 with the adoption of the new standard on credit losses, if the fair value of the security falls below its amortized cost basis, the change in fair value is recognized in the period the impairment is identified when the loss is due to credit factors. The change in fair value due to non-credit factors is recorded in other comprehensive income when the company does not intend to sell and has the ability to hold the investment. The company’s standard practice is to hold all of its debt security investments classified as available-for-sale until maturity. There were no impairments for credit losses or non-credit impairments for the three and nine months ended September 30, 2020. Prior to the adoption of the new standard, available-for-sale securities were measured for impairment using an other-than-temporary impairment model. No impairment was recorded for the three and nine months ended September 30, 2019. Certain nonfinancial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset. There were no material impairments of nonfinancial assets for the nine months ended September 30, 2020 and 2019, respectively. The following table presents the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019. Fair Value Hierarchy At September 30, 2020 At December 31, 2019 (Dollars in millions) Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents (1) Time deposits and certificates of deposit (2) 2 $ 9,880 $ N/A $ 4,392 $ N/A Money market funds 1 658 N/A 427 N/A U.S. government securities (2) 2 100 N/A — N/A Total cash equivalents $ 10,638 $ N/A $ 4,819 $ N/A Equity investments (3) 1 1 N/A 0 N/A Debt securities-current (2)(4) 2 1,200 N/A 696 N/A Debt securities-noncurrent (2)(5) 2 — N/A 65 N/A Derivatives designated as hedging instruments Interest rate contracts 2 98 — 56 — Foreign exchange contracts 2 93 566 175 635 Derivatives not designated as hedging instruments Foreign exchange contracts 2 9 11 10 33 Equity contracts (6) 1,2 4 7 1 4 Total $ 12,043 $ 583 $ 5,823 $ 673 (1) Included within cash and cash equivalents in the Consolidated Balance Sheet. (2) Available-for-sale securities with an amortized cost basis that approximates fair value. (3) Included within investments and sundry assets in the Consolidated Balance Sheet. (4) Primarily includes time deposits and U.S. treasury bills that are reported within marketable securities in the Consolidated Balance Sheet. (5) Primarily includes corporate debt securities with maturities of less than two years that are reported within investments and sundry assets in the Consolidated Balance Sheet. (6) Level 1 includes immaterial amounts related to equity futures contracts. (7) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Balance Sheet at September 30, 2020 were $83 million and $121 million, respectively, and at December 31, 2019 were $149 million and $94 million, respectively. (8) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2020 were $480 million and $103 million, respectively, and at December 31, 2019 were $167 million and $506 million , respectively. N/A – not applicable 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 and including short-term finance lease liabilities) 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, except for short-term debt which would be classified as Level 2. 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 remaining maturities. At September 30, 2020 and December 31, 2019, 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 (including long-term finance lease liabilities) 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 was $55,129 million and $54,102 million, and the estimated fair value was $61,783 million and $58,431 million at September 30, 2020 and December 31, 2019, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Financing Receivables
Financing Receivables | 9 Months Ended |
Sep. 30, 2020 | |
Financing Receivables | |
Financing Receivables | 8. Financing Receivables: Financing receivables primarily consist of client loan and installment payment receivables (loans) and investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans 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. Investment in sales-type and direct financing leases relate principally to the company’s Systems products and are for terms ranging generally from two 30 Effective January 1, 2020, the company adopted the new accounting standard related to credit losses, using the transition methodology whereby prior comparative periods were not retrospectively presented in the Consolidated Financial Statements. Refer to note 2, “Accounting Changes,” for additional information. Under this new guidance, the amortized cost basis of a financial asset represents the original amount of the financing receivable (including residual value) adjusted for unearned income, deferred initial direct costs, cash collected, write-offs and any foreign exchange adjustments. The allowance for credit losses represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations. Prior to the effective date, financing receivables were measured at recorded investment, which does not include residual value. As a result, all prior periods are presented at recorded investment, while current period information is presented at amortized cost. Additionally, current period information reflects updates to the portfolio segments, and other presentation changes within the following tables, as a result of the adoption of this new guidance. A summary of the components of the company’s financing receivables is presented as follows: Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At September 30, 2020: (Loans) Leases Receivables Total Financing receivables, gross $ 11,599 $ 4,124 $ 2,127 $ 17,849 Unearned income (479) (339) (3) (822) Residual value* — 507 — 507 Amortized cost $ 11,119 $ 4,292 $ 2,124 $ 17,534 Allowance for credit losses (162) (92) (9) (264) Total financing receivables, net $ 10,957 $ 4,200 $ 2,114 $ 17,271 Current portion $ 6,921 $ 1,813 $ 2,114 $ 10,848 Noncurrent portion $ 4,036 $ 2,387 $ — $ 6,423 * Includes guaranteed and unguaranteed residual value. Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At December 31, 2019: (Loans) Leases Receivables Total Financing receivables, gross $ 13,592 $ 6,077 $ 3,836 $ 23,504 Unearned income (570) (509) (4) (1,083) Recorded investment $ 13,022 $ 5,567 $ 3,831 $ 22,421 Allowance for credit losses (138) (72) (11) (221) Unguaranteed residual value — 652 — 652 Guaranteed residual value — 53 — 53 Total financing receivables, net $ 12,884 $ 6,199 $ 3,820 $ 22,904 Current portion $ 8,037 $ 2,334 $ 3,820 $ 14,192 Noncurrent portion $ 4,847 $ 3,865 $ — $ 8,712 The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties, with enhanced focus in this unprecedented environment of the COVID-19 pandemic. These actions may include credit insurance, financial guarantees, nonrecourse borrowings, transfers of receivables recorded as true sales in accordance with accounting guidance or sales of equipment under operating lease. Sales of receivables arrangements are also utilized in the normal course of business as part of the company’s cash and liquidity management. During the three months ended September 30, 2020, the company sold $899 million of financing receivables, consisting of lease and loan receivables of $435 million and $464 million, respectively. At the time of sale, more than half The company did not have any material financing receivables held for sale as of September 30, 2020 and December 31, 2019. Financing receivables pledged as collateral for borrowings were $596 million and $1,062 million at September 30, 2020 and December 31, 2019, respectively. Allowance for Credit Losses – Financing Receivables Refer to note A, “Significant Accounting Policies,” in the company’s 2019 Annual Report for a full description of its accounting policies for trade and financing receivables, contract assets and related allowances. The descriptions below include any changes to those policies due to the new standard. Effective with the adoption of the new credit losses standard, the company’s estimates of its allowances for expected credit losses include consideration of: past events, including any historical default, historical concessions and resulting troubled debt restructurings, current economic conditions, taking into account any non-freestanding mitigating credit enhancements and certain forward-looking information, including reasonable and supportable forecasts. Collectively Evaluated Financing Receivables The company determines its allowance for credit losses based on two portfolio segments: client financing receivables and commercial financing receivables, and further segments the portfolio into three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. For client financing receivables, the company uses a credit loss model to calculate allowances based on its internal loss experience and current conditions and forecasts, by class of financing receivable. The company records an unallocated reserve that is calculated by applying a reserve rate to its portfolio, excluding accounts that have been individually evaluated and specifically reserved. This reserve rate is based upon credit rating, probability of default, term and loss history. The allowance is adjusted quarterly for expected recoveries of amounts that were previously written off or are expected to be written off. Recoveries cannot exceed the aggregated amount of the previous write-off or expected write-off. Macroeconomic variables attributed to the expected credit losses for client financing receivables may vary by class of financing receivables based on historical experiences, portfolio composition and current environment. In addition to a qualitative review of credit risk factors across the portfolio, the company considers forward-looking macroeconomic variables such as gross domestic product, unemployment rates, equity prices and corporate profits when quantifying the impact of economic forecasts on its client financing receivables allowance for expected credit losses. The company also considers the impact of current conditions and economic forecasts relating to specific industries, geographical areas, and client-credit ratings on the portfolio. Under this approach, forecasts of these variables over two years are considered reasonable and supportable. Beyond two years, the company reverts to long-term average loss experience. Forward-looking estimates require the use of judgment, particularly in times of economic uncertainty. Consistent with the first half of 2020, the company continues to monitor the evolving global impacts from the COVID-19 pandemic as well as its impact on external economic models, which have been revised with increased frequency throughout the year. The company’s allowances at September 30, 2020, reflect the qualitative process described above. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. The allowance for commercial financing receivables is estimated based on a combination of write-off history and current economic conditions, excluding any individually evaluated accounts. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material. At January 1, 2020, upon adoption of the new standard, the company recorded an additional allowance for client and commercial financing receivables (including related off-balance sheet commitments) of $64 million. This was primarily driven by an increase in the client financing receivables allowance. Refer to note 12, “Commitments,” for additional information regarding off-balance sheet commitments. Client Financing Receivables The following tables present the amortized cost basis or recorded investment for client financing receivables at September 30, 2020 and December 31, 2019, further segmented by three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. (Dollars in millions) At September 30, 2020: Americas EMEA Asia Pacific Total Amortized cost $ 7,631 $ 4,813 $ 2,968 $ 15,411 Allowance for credit losses Beginning balance at December 31, 2019 $ 120 $ 54 $ 36 $ 210 Adjustment for adoption of new standard 21 15 5 41 Beginning balance at January 1, 2020 $ 142 $ 69 $ 41 $ 252 Write-offs $ (27) $ (1) $ (3) $ (31) Recoveries 0 0 2 2 Additions/(releases) 33 8 (1) 40 Other* (11) 2 0 (9) Ending balance at September 30, 2020 $ 137 $ 78 $ 39 $ 254 * Primarily represents translation adjustments. (Dollars in millions) At December 31, 2019: Americas EMEA Asia Pacific Total Recorded investment Lease receivables $ 3,419 $ 1,186 $ 963 $ 5,567 Loan receivables 6,726 3,901 2,395 13,022 Ending balance $ 10,144 $ 5,087 $ 3,359 $ 18,590 Recorded investment collectively evaluated for impairment $ 10,032 $ 5,040 $ 3,326 $ 18,399 Recorded investment individually evaluated for impairment $ 112 $ 47 $ 32 $ 191 Allowance for credit losses Beginning balance at January 1, 2019 Lease receivables $ 53 $ 22 $ 24 $ 99 Loan receivables 105 43 32 179 Total $ 158 $ 65 $ 56 $ 279 Write-offs $ (42) $ (3) $ (18) $ (63) Recoveries 1 0 1 2 Additions/(releases) 5 (7) (3) (5) Other* (1) 0 (1) (2) Ending balance at December 31, 2019 $ 120 $ 54 $ 36 $ 210 Lease receivables $ 33 $ 23 $ 16 $ 72 Loan receivables $ 88 $ 31 $ 20 $ 138 Related allowance, collectively evaluated for impairment $ 25 $ 11 $ 4 $ 39 Related allowance, individually evaluated for impairment $ 96 $ 43 $ 32 $ 171 * Primarily represents translation adjustments. Write-offs of lease receivables and loan receivables were $16 million and $47 million, respectively, for the year ended December 31, 2019. Provisions for credit losses recorded for lease receivables and loan receivables were a release of $6 million and an addition of $2 million, respectively, for the year ended December 31, 2019. Past Due Financing Receivables The company considers a client’s financing receivable balance past due when any installment is aged over 90 days. The following tables summarize information about the amortized cost basis or recorded investment in client financing receivables, including amortized cost or recorded investment aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost or recorded investment not accruing. Amortized Billed Total Amortized Cost Invoices Amortized (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Cost Not At September 30, 2020: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 7,631 $ 257 $ 166 $ 31 $ 102 EMEA 4,813 99 13 5 93 Asia Pacific 2,968 60 27 6 34 Total client financing receivables $ 15,411 $ 416 $ 206 $ 41 $ 229 (1) At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. (2) Of the amortized cost not accruing, there is a related allowance of $170 million. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2020, respectively. Recorded Billed Recorded Total Recorded Investment Invoices Investment (Dollars in millions) Recorded Investment > 90 Days and > 90 Days and Not At December 31, 2019: Investment > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 3,419 $ 187 $ 147 $ 11 $ 41 EMEA 1,186 28 13 2 17 Asia Pacific 963 19 7 1 11 Total lease receivables $ 5,567 $ 234 $ 168 $ 14 $ 69 Americas $ 6,726 $ 127 $ 71 $ 11 $ 72 EMEA 3,901 77 8 3 72 Asia Pacific 2,395 26 6 2 21 Total loan receivables $ 13,022 $ 231 $ 85 $ 15 $ 166 Total $ 18,590 $ 465 $ 253 $ 29 $ 235 (1) At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. (2) Of the recorded investment not accruing, $191 million is individually evaluated for impairment with a related allowance of $171 million. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2019, respectively. 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 ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan. The following tables present the amortized cost basis or recorded investment for client financing receivables by credit quality indicator at September 30, 2020 and December 31, 2019, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. Effective January 1, 2020, under the new guidance for credit losses, the company discloses its credit quality by year of origination. Additionally, under the new guidance, the amortized cost is presented on a gross basis, whereas under the prior guidance, the company presented the recorded investment net of the allowance for credit losses. At September 30, 2020, the credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduces the risk to IBM. (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2020: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2020 $ 1,786 $ 1,301 $ 1,038 $ 1,352 $ 710 $ 287 2019 1,334 763 745 614 609 170 2018 1,002 489 372 296 448 188 2017 422 194 92 147 225 66 2016 108 78 44 55 142 40 2015 and prior 41 112 33 25 58 23 Total $ 4,694 $ 2,937 $ 2,324 $ 2,489 $ 2,193 $ 775 (Dollars in millions) Lease Receivables Loan Receivables At December 31, 2019: Americas EMEA Asia Pacific Americas EMEA Asia Pacific Credit rating: Aaa – Aa3 $ 465 $ 54 $ 43 $ 1,028 $ 193 $ 189 A1 – A3 750 181 454 1,186 395 892 Baa1 – Baa3 955 409 147 1,882 1,527 619 Ba1 – Ba2 746 326 154 1,513 921 388 Ba3 – B1 215 140 101 471 564 205 B2 – B3 242 50 47 522 253 72 Caa – D 13 2 2 36 18 10 Total $ 3,385 $ 1,162 $ 947 $ 6,638 $ 3,871 $ 2,376 Troubled Debt Restructurings The company did not have any significant troubled debt restructurings during the nine months ended September 30, 2020 or for the year ended December 31, 2019. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases | |
Leases | 9. Leases: Accounting for leases as a lessor The following table presents amounts included in the Consolidated Income Statement related to lessor activity: Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Lease income – sales-type and direct financing leases Sales-type lease selling price $ 154 $ 188 $ 733 $ 516 Less: Carrying value of underlying assets* 64 75 258 204 Gross profit $ 90 $ 113 $ 475 $ 312 Interest income on lease receivables 56 71 195 222 Total sales-type and direct financing lease income $ 145 $ 184 $ 670 $ 534 Lease income – operating leases 65 80 204 252 Variable lease income 25 12 82 38 Total lease income $ 235 $ 276 $ 956 $ 824 * Excludes unguaranteed residual value. |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets Including Goodwill | |
Intangible Assets Including Goodwill | 10. Intangible Assets Including Goodwill: Intangible Assets The following table presents the company's intangible asset balances by major asset class: At September 30, 2020 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class Capitalized software $ 1,769 $ (785) $ 984 Client relationships 8,698 (1,852) 6,847 Completed technology 5,900 (1,531) 4,369 Patents/trademarks 2,210 (467) 1,743 Other** 56 (37) 18 Total $ 18,634 $ (4,672) $ 13,962 At December 31, 2019 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class Capitalized software $ 1,749 $ (743) $ 1,006 Client relationships 8,921 (1,433) 7,488 Completed technology 6,261 (1,400) 4,861 Patents/trademarks 2,301 (445) 1,856 Other** 56 (31) 24 Total $ 19,287 $ (4,052) $ 15,235 * Amounts as of September 30, 2020 and December 31, 2019 include an increase in net intangible asset balances of $133 million and a decrease of $42 million, respectively, due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems . The net carrying amount of intangible assets decreased $1,273 million during the first nine months of 2020, primarily due to intangible asset amortization, partially offset by additions of capitalized software. The aggregate intangible asset amortization expense was $613 million and $1,858 million for the third quarter and first nine months of 2020, respectively, versus $614 million and $1,224 million for the third quarter and first nine months of 2019, respectively. The increase in intangible amortization expense for the first nine months of 2020 was primarily due to an increase in the gross carrying amount of intangible assets from the Red Hat acquisition which closed in the third quarter of 2019. In addition, in the first nine months of 2020, the company retired $1,258 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet is estimated to be the following at September 30, 2020: Capitalized Acquired (Dollars in millions) Software Intangibles Total Remainder of 2020 $ 154 $ 454 $ 608 2021 501 1,766 2,267 2022 261 1,704 1,964 2023 68 1,390 1,458 2024 0 1,340 1,340 Thereafter — 6,324 6,324 Goodwill The changes in the goodwill balances by segment for the nine months ended September 30, 2020 and for the year ended December 31, 2019 are as follows: Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 1/1/2020 Additions Adjustments Divestitures Adjustments** 9/30/2020 Cloud & Cognitive Software $ 43,037 $ 25 $ (139) $ — $ 186 $ 43,109 Global Business Services 5,775 — — — 47 5,822 Global Technology Services 7,141 — — — 13 7,154 Systems 2,270 — — — 1 2,270 Other—divested businesses — — — — — — Total $ 58,222 $ 25 $ (139) $ — $ 248 $ 58,355 Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 1/1/2019 Additions Adjustments Divestitures Adjustments** 12/31/2019 Cloud & Cognitive Software* $ 24,463 $ 18,399 $ 133 $ — $ 41 $ 43,037 Global Business Services 4,711 1,059 1 (1) 5 5,775 Global Technology Services 3,988 3,119 — — 34 7,141 Systems 1,847 525 (110) — 7 2,270 Other—divested businesses* 1,256 — — (1,256) — — Total $ 36,265 $ 23,102 $ 24 $ (1,257) $ 87 $ 58,222 * Recast to conform to 2020 presentation. ** Primarily driven by foreign currency translation. There were no goodwill impairment losses recorded during the first nine months of 2020 or full year 2019 and the company has no accumulated impairment losses. Purchase price adjustments recorded in the first nine months of 2020 and full year 2019 were related to acquisitions that were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. During the first nine months of 2020, net purchase price adjustments recorded to noncurrent tax assets and liabilities were related to the Red Hat acquisition. Net purchase price adjustments recorded in full-year 2019 were not material. |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2020 | |
Borrowings | |
Borrowings | 11. Borrowings: Short-Term Debt At September 30, At December 31, (Dollars in millions) 2020 2019 Commercial paper $ 25 $ 304 Short-term loans 584 971 Long-term debt—current maturities 9,677 7,522 Total $ 10,285 $ 8,797 The weighted-average interest rate for commercial paper at September 30, 2020 and December 31, 2019 was 1.4 percent and 1.6 percent, respectively. The weighted-average interest rate for short-term loans was 5.4 percent and 6.1 percent at September 30, 2020 and December 31, 2019, respectively. Long-Term Debt Pre-Swap Borrowing Balance Balance (Dollars in millions) Maturities 9/30/2020 12/31/2019 U.S. dollar debt (weighted-average interest rate at September 30, 2020):* 2.1% 2020 $ 1,500 $ 4,326 1.4% 2021 5,516 8,498 2.6% 2022 6,245 6,289 3.3% 2023 2,406 2,388 3.3% 2024 5,035 5,045 6.7% 2025 635 636 3.3% 2026 4,373 4,350 3.0% 2027 2,219 969 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 — 5.9% 2032 600 600 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 — 4.0% 2042 1,107 1,107 7.0% 2045 27 27 4.7% 2046 650 650 4.3% 2049 3,000 3,000 3.0% 2050 750 — 7.1% 2096 316 316 $ 42,771 $ 44,594 Other currencies (weighted-average interest rate at September 30, 2020, in parentheses):* Euro (1.1%) 2020–2040 $ 19,354 $ 14,306 Pound sterling (2.7%) 2020–2022 1,360 1,390 Japanese yen (0.3%) 2022–2026 1,379 1,339 Other (3.1%) 2021–2024 242 375 $ 65,106 $ 62,003 Finance lease obligations (1.9%) 2021–2030 291 204 $ 65,397 $ 62,207 Less: net unamortized discount 884 881 Less: net unamortized debt issuance costs 161 142 Add: fair value adjustment** 453 440 $ 64,805 $ 61,624 Less: current maturities 9,677 7,522 Total $ 55,129 $ 54,102 * Includes notes, debentures, bank loans and secured borrowings. ** The portion of the company’s fixed-rate debt obligations that was hedged was reflected in the Consolidated Balance Sheet as an amount equal to the sum of the debt’s carrying value and a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. The company’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 facilities 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 its 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. In the first half of 2019, the company issued an aggregate of $20 billion of U.S. dollar fixed- and floating-rate notes and $5.7 billion of Euro fixed-rate notes. The proceeds were primarily used for the acquisition of Red Hat. For additional information on this transaction, refer to note 5, “Acquisitions & Divestitures.” In the first half of 2020, the company issued an aggregate of $4.1 billion of Euro fixed-rate notes and $4.0 billion of U.S. dollar fixed-rate notes. The proceeds from the Euro issuance were primarily used to early redeem outstanding fixed-rate notes which were due in 2021 in the aggregate amount of $2.9 billion. The company incurred a loss of $49 million in the first quarter of 2020 upon redemption, which was recorded in other (income) and expense in the Consolidated Income Statement. Pre-swap annual contractual obligations of long-term debt outstanding at September 30, 2020, are as follows: (Dollars in millions) Total Remainder of 2020 $ 4,343 2021 7,003 2022 7,276 2023 5,564 2024 6,454 Thereafter 34,757 Total $ 65,397 Interest on Debt (Dollars in millions) For the nine months ended September 30: 2020 2019 Cost of financing $ 346 $ 483 Interest expense 971 990 Interest capitalized 6 5 Total interest paid and accrued $ 1,323 $ 1,478 Lines of Credit On July 2, 2020, the company and IBM Credit LLC entered into a new $2.5 billion 364-day Credit Agreement to replace the existing $2.5 billion 364-day Credit Agreement, and also extended the maturity date of the existing $2.5 billion Three-Year Credit Agreement. The new maturity dates for the 364-day and Three-Year Credit Agreements are July 1, 2021 and July 20, 2023, respectively. The company also amended its $10.25 billion Five-Year Credit Agreement to include an option exercisable in 2021 to extend the current maturity date of July 20, 2024 by an additional two years. At September 30, 2020, there were no borrowings by the company, or its subsidiaries, under these credit facilities. |
Commitments
Commitments | 9 Months Ended |
Sep. 30, 2020 | |
Commitments | |
Commitments | 12. Commitments: The company’s extended lines of credit to third-party entities include unused amounts of $1.9 billion and $1.8 billion at September 30, 2020 and December 31, 2019, 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 clients in connection with client purchase agreements for $5.3 billion and $6.3 billion at September 30, 2020 and December 31, 2019, respectively. Effective January 1, 2020, the company adopted the new standard on credit losses, which resulted in the recognition of a related allowance for non-cancellable off-balance sheet commitments. Refer to note 2, “Accounting Changes,” for additional information. The allowance for these commitments is recorded in other liabilities in the Consolidated Balance Sheet and was not material at September 30, 2020. The company collectively evaluates the allowance for these arrangements using a provision methodology consistent with the portfolio of the commitments. Refer to note 8, “Financing Receivables,” for additional information. 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 guarantor. 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 which the company customarily agrees to hold the party harmless against losses arising from a breach of representations and covenants related to such matters as title to the assets sold, certain intellectual property rights, specified environmental matters, third-party performance 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 procedures 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 agreements 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 and the fair value of these guarantees recognized in the Consolidated Balance Sheet at September 30, 2020 and December 31, 2019 was not material. Changes in the company’s warranty liability for standard warranties, which are included in other accrued expenses and liabilities and other liabilities in the Consolidated Balance Sheet, and for extended warranty contracts, which are included in deferred income in the Consolidated Balance Sheet, are presented in the following tables. Standard Warranty Liability (Dollars in millions) 2020 2019 Balance at January 1 $ 113 $ 118 Current period accruals 56 66 Accrual adjustments to reflect actual experience (15) (1) Charges incurred (73) (86) Balance at September 30 $ 80 $ 98 Extended Warranty Liability (Dollars in millions) 2020 2019 Balance at January 1 $ 477 $ 533 Revenue deferred for new extended warranty contracts 115 124 Amortization of deferred revenue (169) (194) Other* (3) (8) Balance at September 30 $ 419 $ 455 Current portion $ 196 $ 226 Noncurrent portion $ 223 $ 230 * Other primarily consists of foreign currency translation adjustments. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Contingencies | |
Contingencies | 13. 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, lawsuits 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 employment 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 matters. 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. Some 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 respect 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 quarter ended September 30, 2020 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 reasonably 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 strength 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. It 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 reasonably 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 number 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 facts 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 could 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 court 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, interference 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 proceedings 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 Federal Court in Utah granted SCO’s motion to reopen the SCO v. IBM case. In February 2016, the Federal Court ruled in favor of IBM on all of SCO’s remaining claims, and SCO appealed. On October 30, 2017, the Tenth Circuit Court of Appeals affirmed the dismissal of all but one of SCO’s remaining claims, which was remanded to the Federal Court in Utah. On March 9, 2017, the Commonwealth of Pennsylvania’s Department of Labor and Industry sued IBM in Pennsylvania state court regarding a 2006 contract for the development of a custom software system to manage the Commonwealth’s unemployment insurance benefits programs. The matter is pending in a Pennsylvania court. In December 2017, CIS General Insurance Limited (CISGIL) sued IBM UK regarding a contract entered into by IBM UK and CISGIL in 2015 to implement and operate an IT insurance platform. The contract was terminated by IBM UK in July 2017 for non-payment by CISGIL. CISGIL alleges wrongful termination, breach of contract and breach of warranty. The matter is pending in the London High Court with trial beginning in January 2020. In May 2015, a putative class action was commenced in the United States District Court for the Southern District of New York related to the company’s October 2014 announcement that it was divesting its global commercial semiconductor technology business, alleging violations of the Employee Retirement Income Security Act (ERISA). Management’s Retirement Plans Committee and three former IBM executives are named as defendants. On September 29, 2017, the Court granted the defendants’ motion to dismiss the first amended complaint. On December 10, 2018, the Second Circuit Court of Appeals reversed the District Court order. On January 14, 2020, the Supreme Court of the United States vacated the decision and remanded the case to the Second Circuit. On June 22, 2020, the Second Circuit reinstated its prior decision and remanded the case to the District Court. The company is party to, or otherwise involved in, proceedings brought by U.S. federal or state environmental agencies under the Comprehensive Environmental Response, Compensation 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 environmental 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 involved 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, the 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 all these matters for all applicable years is approximately $700 million. The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. |
Equity Activity
Equity Activity | 9 Months Ended |
Sep. 30, 2020 | |
Equity Activity | |
Equity Activity | 14. Equity Activity: Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (439) $ 247 $ (192) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ (1) $ 0 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ (1) Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (32) $ 8 $ (24) Reclassification of (gains)/losses to: Cost of services (10) 2 (7) Cost of sales 4 (1) 3 Cost of financing 6 (2) 5 SG&A expense 5 (1) 4 Other (income) and expense (93) 23 (70) Interest expense 19 (5) 14 Total unrealized gains/(losses) on cash flow hedges $ (101) $ 26 $ (75) Retirement-related benefit plans (1): Prior service costs/(credits) $ (1) $ 0 $ 0 Net (losses)/gains arising during the period 0 0 0 Curtailments and settlements 21 (6) 14 Amortization of prior service (credits)/costs 0 1 1 Amortization of net (gains)/losses 586 (161) 425 Total retirement-related benefit plans $ 607 $ (167) $ 440 Other comprehensive income/(loss) $ 66 $ 106 $ 172 (1) These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2019: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (509) $ (109) $ (618) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 3 $ (1) $ 2 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 3 $ (1) $ 2 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (439) $ 110 $ (329) Reclassification of (gains)/losses to: Cost of services (22) 6 (17) Cost of sales (10) 3 (7) Cost of financing 21 (5) 15 SG&A expense (11) 3 (8) Other (income) and expense 447 (112) 334 Interest expense 64 (16) 48 Total unrealized gains/(losses) on cash flow hedges $ 49 $ (12) $ 36 Retirement-related benefit plans (1): Net (losses)/gains arising during the period $ 0 $ 0 $ 0 Curtailments and settlements 3 (1) 2 Amortization of prior service (credits)/costs (3) 3 (1) Amortization of net (gains)/losses 461 (128) 333 Total retirement-related benefit plans $ 461 $ (127) $ 335 Other comprehensive income/(loss) $ 4 $ (249) $ (245) (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (1,354) $ 260 $ (1,094) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (249) $ 63 $ (186) Reclassification of (gains)/losses to: Cost of services (18) 5 (14) Cost of sales (14) 4 (10) Cost of financing 21 (5) 16 SG&A expense (12) 3 (9) Other (income) and expense (74) 19 (55) Interest expense 60 (15) 45 Total unrealized gains/(losses) on cash flow hedges $ (285) $ 73 $ (212) Retirement-related benefit plans (1): Prior service costs/(credits) $ (5) $ 1 $ (3) Net (losses)/gains arising during the period 65 (24) 41 Curtailments and settlements 42 (12) 30 Amortization of prior service (credits)/costs 1 2 3 Amortization of net (gains)/losses 1,722 (473) 1,249 Total retirement-related benefit plans $ 1,826 $ (507) $ 1,319 Other comprehensive income/(loss) $ 187 $ (175) $ 12 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2019: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (333) $ (72) $ (405) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 1 $ 0 $ 1 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 1 $ 0 $ 1 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (798) $ 196 $ (601) Reclassification of (gains)/losses to: Cost of services (52) 13 (38) Cost of sales (40) 11 (29) Cost of financing 73 (18) 55 SG&A expense (45) 12 (33) Other (income) and expense 331 (83) 248 Interest expense 150 (38) 112 Total unrealized gains/(losses) on cash flow hedges $ (380) $ 93 $ (287) Retirement-related benefit plans (1): Net (losses)/gains arising during the period $ 113 $ (23) $ 90 Curtailments and settlements 7 (1) 6 Amortization of prior service (credits)/costs (9) 4 (5) Amortization of net (gains)/losses 1,385 (380) 1,005 Total retirement-related benefit plans $ 1,496 $ (401) $ 1,095 Other comprehensive income/(loss) $ 784 $ (380) $ 404 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Accumulated Other Comprehensive Income/(Loss) (net of tax) 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 (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2020 $ (179) $ (3,700) $ (24,718) $ 0 $ (28,597) Other comprehensive income before reclassifications (186) (1,094) 37 0 (1,242) Amount reclassified from accumulated other comprehensive income (27) — 1,281 — 1,255 Total change for the period $ (212) $ (1,094) $ 1,319 $ 0 $ 12 September 30, 2020 $ (391) $ (4,794) $ (23,399) $ 0 $ (28,584) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. 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 (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2019 $ 284 $ (3,690) $ (26,083) $ 0 $ (29,490) Other comprehensive income before reclassifications (601) (405) 89 1 (916) Amount reclassified from accumulated other comprehensive income 315 — 1,005 — 1,320 Total change for the period $ (287) $ (405) $ 1,095 $ 1 $ 404 September 30, 2019 $ (3) $ (4,095) $ (24,988) $ 0 $ (29,086) * |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 15. 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 assets 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 fluctuations. In the Consolidated Balance Sheet, the company does not offset derivative assets against liabilities in master netting arrangements 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 amounts were recognized for the right to reclaim or the obligation to return cash collateral at September 30, 2020 and $26 million was recognized in other accounts receivable for the right to reclaim cash collateral at December 31, 2019. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in restricted cash in the Consolidated Balance Sheet. No amount was rehypothecated at September 30, 2020 and December 31, 2019. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at September 30, 2020 December 31, 2019 In its hedging programs, the company may use forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, equity swaps, and options depending upon the underlying exposure. 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 to fund its operations and financing business. 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 may use 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 September 30, 2020 and December 31, 2019, the total notional amount of the company’s interest- rate swaps was $3.0 billion at both periods. The weighted-average remaining maturity of these instruments at September 30, 2020 and December 31, 2019 was approximately 1.4 years and 2.2 years, respectively. These interest-rate contracts were accounted for as fair value hedges. The company did not have any cash flow hedges relating to this program outstanding at September 30, 2020 and December 31, 2019. Forecasted Debt Issuance The company is exposed to interest rate volatility on future debt issuances. To manage this risk, the company may use instruments such as forward starting interest-rate swaps to lock in the rate on the interest payments related to the forecasted debt issuances. In the second quarter of 2019, the company issued an aggregate of $20 billion of indebtedness (refer to note 11, “Borrowings,” for additional information). Following the receipt of the net proceeds from this debt offering, the company terminated $5.5 billion of forward starting interest-rate swaps. There were no instruments outstanding at September 30, 2020 and December 31, 2019. In connection with cash flow hedges of forecasted interest payments related to the company's borrowings, the company recorded net losses of $179 million and net losses of $192 million (before taxes) at September 30, 2020 and December 31, 2019, respectively, in AOCI. The company estimates that $18 million (before taxes) of the deferred net losses on derivatives in AOCI at September 30, 2020 will be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying interest payments. Foreign Exchange Risk Long-Term Investments in Foreign Subsidiaries (Net Investment) A large portion of the company’s foreign currency denominated 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 respect to the U.S. dollar. At September 30, 2020 and December 31, 2019, the carrying value of debt designated as hedging instruments was $17.8 billion and $7.3 billion, respectively. The $10.5 billion increase is part of the company’s risk management strategy and is primarily the result of the designation of new issuances in the first quarter of 2020 and previously hedged Euro denominated debt. The company also uses cross-currency swaps and foreign exchange forward contracts for risk management purposes. At September 30, 2020 and December 31, 2019, the total notional amount of derivative instruments designated as net investment hedges was $8.6 billion and $7.9 billion, respectively. At September 30, 2020 and December 31, 2019, the weighted-average remaining maturity of these instruments was approximately 0.2 years and 0.1 years, respectively. Anticipated Royalties and Cost Transactions The company’s operations 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 company. In anticipation of these foreign currency cash 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 remaining length of time over which the company hedged its exposure is approximately four years. At September 30, 2020 and December 31, 2019, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.9 billion and $9.7 billion, respectively. At September 30, 2020 and December 31, 2019, the weighted-average remaining maturity of these instruments was approximately 0.7 years and 0.8 years, respectively. At September 30, 2020 and December 31, 2019, in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net losses of $72 million and net gains of $145 million (before taxes), respectively, in AOCI. The company estimates that $144 million (before taxes) of deferred net losses on derivatives in AOCI at September 30, 2020 will be reclassified to net income 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. At September 30, 2020, the maximum length of time remaining over which the company hedged its exposure was approximately seven years. At September 30, 2020 and December 31, 2019, the total notional amount of cross-currency swaps designated as cash flow hedges of foreign currency denominated debt was $2.4 billion and $8.2 billion, respectively. The $5.7 billion decrease in cross-currency swaps is part of the company’s risk management strategy and the previously hedged foreign currency denominated debt has been designated as a hedge of net investment in foreign subsidiaries. At September 30, 2020 and December 31, 2019, in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses of $266 million and net losses of $185 million (before taxes), respectively, in AOCI. The company estimates that $24 million (before taxes) of deferred net losses on derivatives in AOCI at September 30, 2020 will 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 generally 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 Income Statement. At September 30, 2020 and December 31, 2019, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $4.2 billion and $7.1 billion, respectively. Equity Risk Management The company is exposed to market price changes in certain broad market indices 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 Income Statement. 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, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Income Statement. At September 30, 2020 and December 31, 2019, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.2 billion and $1.3 billion, respectively. Cumulative Basis Adjustments for Fair Value Hedges At September 30, 2020 and December 31, 2019, the following amounts were recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: September 30, December 31, (Dollars in millions) 2020 2019 Short-term debt: Carrying amount of the hedged item $ (1,308) $ — Cumulative hedging adjustments included in the carrying amount - assets/(liabilities) (8) — Long-term debt: Carrying amount of the hedged item $ (2,117) $ (3,411) Cumulative hedging adjustments included in the carrying amount - assets/(liabilities) (445) (1) (440) (1) (1) Includes ($365) million and ($404) million of hedging adjustments on discontinued hedging relationships at September 30, 2020 and December 31, 2019, respectively. The Effect of Derivative Instruments in the Consolidated Income Statement The total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value hedges, cash flow hedges, net investment hedges and derivatives not designated as hedging instruments are recorded and the total effect of hedge activity on these income and expense line items are as follows: Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the three months ended September 30: 2020 2019 2020 2019 Cost of services $ 7,357 $ 7,840 $ 10 $ 22 Cost of sales 1,601 1,635 (4) 10 Cost of financing 172 217 3 (11) SG&A expense 4,647 5,024 58 20 Other (income) and expense 253 (31) 101 (561) Interest expense 323 432 8 (35) Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the three months ended September 30: Line Item 2020 2019 2020 2019 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 3 $ 7 $ 0 Interest expense 0 9 20 0 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 8 (114) N/A N/A Equity contracts SG&A expense 63 9 N/A N/A Total $ 71 $ (94) $ 27 $ 0 Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the three months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2020 2019 Line Item 2020 2019 2020 2019 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts (32) (439) Cost of services 10 22 — — Cost of sales (4) 10 — — Cost of financing (5) (20) — — SG&A expense (5) 11 — — Other (income) and expense 93 (447) — — Interest expense (15) (61) — — Instruments in net investment hedges (4): Foreign exchange contracts (983) 435 Cost of financing — — 2 7 Interest expense — — 7 20 Total $ (1,015) $ (4) $ 69 $ (488) $ 9 $ 27 (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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. (4) Instruments in net investment hedges include derivative and non-derivative instruments. N/A - not applicable Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the nine months ended September 30: 2020 2019 2020 2019 Cost of services $ 22,720 $ 24,293 $ 18 $ 52 Cost of sales 4,964 4,979 14 40 Cost of financing 517 710 9 (47) SG&A expense 15,849 15,171 24 199 Other (income) and expense 614 (850) 92 (358) Interest expense 971 990 24 (96) Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the nine months ended September 30: Line Item 2020 2019 2020 2019 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 20 $ 51 $ (3) $ (44) Interest expense 57 105 (9) (89) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 18 (27) N/A N/A Equity contracts SG&A expense 12 153 N/A N/A Total $ 108 $ 283 $ (13) $ (133) Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the nine months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2020 2019 Line Item 2020 2019 2020 2019 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ (168) Cost of financing $ (3) $ (2) $ — $ — Interest expense (10) (5) — — Foreign exchange contracts (249) (630) Cost of services 18 52 — — Cost of sales 14 40 — — Cost of financing (18) (71) — — SG&A expense 12 45 — — Other (income) and expense 74 (331) — — Interest expense (50) (146) — — Instruments in net investment hedges (4): Foreign exchange contracts (1,033) 306 Cost of financing — — 13 19 Interest expense — — 37 38 Total $ (1,281) $ (491) $ 37 $ (418) $ 50 $ 57 (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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. (4) Instruments in net investment hedges include derivative and non-derivative instruments. N/A - not applicable For the three and nine months ended September 30, 2020 and 2019, there were no material gains or losses excluded from the assessment of hedge effectiveness (for fair value or cash flow hedges), or associated with an underlying exposure that did not or was not expected to occur (for cash flow hedges); nor are there any anticipated in the normal course of business. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Stock-Based Compensation | |
Stock-Based Compensation | 16. Stock-Based Compensation: Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations. Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Cost $ 42 $ 29 $ 109 $ 71 Selling, general and administrative 129 147 401 313 Research, development and engineering 50 44 147 84 Pre-tax stock-based compensation cost $ 222 $ 220 $ 658 $ 468 Income tax benefits (50) (50) (146) (104) Total net stock-based compensation cost $ 172 $ 170 $ 512 $ 364 Pre-tax stock-based compensation cost for the three months ended September 30, 2020 increased $2 million compared to the corresponding period in the prior year. This was primarily due to increases related to restricted stock units ($49 million), offset by decreases related to performance share units ($27 million) and the conversion of stock-based compensation previously issued by Red Hat ($20 million). Pre-tax stock-based compensation cost for the nine months ended September 30, 2020 increased $189 million compared to the corresponding period in the prior year. This was primarily due to increases related to restricted stock units ($112 million) and the conversion of stock-based compensation previously issued by Red Hat ($107 million), partially offset by decreases in performance share units ($29 million). Total unrecognized compensation cost related to non-vested awards at September 30, 2020 was $1.4 billion and is expected to be recognized over a weighted-average period of approximately 2.5 years. Capitalized stock-based compensation cost was not material at September 30, 2020 and 2019. |
Retirement-Related Benefits
Retirement-Related Benefits | 9 Months Ended |
Sep. 30, 2020 | |
Retirement-Related Benefits | |
Retirement-Related Benefits | 17. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following tables provide the pre-tax cost for all retirement-related plans. Yr. to Yr. (Dollars in millions) Percent For the three months ended September 30: 2020 2019 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ 610 $ 459 32.9 % Nonpension postretirement plans — cost 50 53 (5.9) Total $ 660 $ 512 28.9 % Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2020 2019 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ 1,789 $ 1,337 33.8 % Nonpension postretirement plans — cost 151 160 (5.2) Total $ 1,941 $ 1,497 29.6 % The following tables provide the components of the cost/(income) for the company’s pension plans. Cost/(Income) of Pension Plans (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended September 30: 2020 2019 2020 2019 Service cost $ — $ — $ 99 $ 93 Interest cost (1) 375 470 142 202 Expected return on plan assets (1) (542) (650) (323) (391) Amortization of prior service costs/(credits) (1) 4 4 (5) (7) Recognized actuarial losses (1) 207 140 360 313 Curtailments and settlements (1) — — 21 3 Multi-employer plans — — 7 10 Other costs/(credits) (1) — — 6 11 Total net periodic pension (income)/cost of defined benefit plans $ 44 $ (36) $ 307 $ 235 Cost of defined contribution plans 148 151 111 109 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 192 $ 115 $ 418 $ 344 (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2020 2019 2020 2019 Service cost $ — $ — $ 289 $ 279 Interest cost (1) 1,126 1,411 408 616 Expected return on plan assets (1) (1,627) (1,949) (943) (1,186) Amortization of prior service costs/(credits) (1) 12 12 (14) (20) Recognized actuarial losses (1) 622 419 1,041 939 Curtailments and settlements (1) — — 42 7 Multi-employer plans — — 22 26 Other costs/(credits) (1) — — 20 22 Total net periodic pension (income)/cost of defined benefit plans $ 133 $ (107) $ 865 $ 683 Cost of defined contribution plans 457 440 334 321 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 590 $ 333 $ 1,200 $ 1,004 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. The following tables provide the components of the cost for the company’s nonpension postretirement plans. Cost of Nonpension Postretirement Plans (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended September 30: 2020 2019 2020 2019 Service cost $ 2 $ 3 $ 1 $ 1 Interest cost (1) 26 36 8 12 Expected return on plan assets (1) — — (1) (1) Amortization of prior service costs/(credits) (1) 1 (1) 0 0 Recognized actuarial losses (1) 7 0 5 3 Curtailments and settlements (1) — — — — Total nonpension postretirement plans cost recognized in Consolidated Income Statement $ 36 $ 38 $ 14 $ 15 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2020 2019 2020 2019 Service cost $ 7 $ 8 $ 4 $ 4 Interest cost (1) 77 109 26 37 Expected return on plan assets (1) — — (3) (4) Amortization of prior service costs/(credits) (1) 3 (2) 0 0 Recognized actuarial losses (1) 22 0 16 8 Curtailments and settlements (1) — — 0 0 Total nonpension postretirement plans cost recognized in Consolidated Income Statement $ 109 $ 115 $ 43 $ 45 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. The table below includes contributions to the following plans: Plan Contributions Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 U.S. nonpension postretirement benefit plan $ 65 $ 35 $ 265 $ 262 Non-U.S. DB and multi-employer plans 16 32 127 159 Total plan contributions $ 80 $ 66 $ 392 $ 421 During the three months ended September 30, 2020 and 2019, $65 million for both periods, was contributed in U.S. Treasury securities (includes the Active Medical Trust). During the nine months ended September 30, 2020 and 2019, $475 million and $421 million, respectively, was contributed in U.S. Treasury securities (includes the Active Medical Trust). The contribution of U.S. Treasury securities is considered a non-cash transaction. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events On October 8, 2020, together with the company's announcement to separate its managed infrastructure services unit of its GTS segment into a new public company by the end of 2021 (refer to note 1, "Basis of Presentation" for additional information), the company announced that it expects to record a charge for structural actions of approximately $2.3 billion in the fourth quarter of 2020. On October 27, 2020, the company announced that the Board of Directors approved a quarterly dividend of $1.63 per common share. The dividend is payable December 10, 2020 to shareholders of record on November 10, 2020. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
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). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. 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. On October 8, 2020, the company announced that it will separate its managed infrastructure services unit of its Global Technology Services (GTS) segment into a new public company (NewCo). The separation is expected to be achieved through a U.S. federal tax-free spin-off to IBM shareholders and completed by the end of 2021. It will be subject to customary market, regulatory and other closing conditions, including final IBM Board of Directors’ approval. The announcement did not have any classification impact to the company’s consolidated financial statements or segment reporting. The company expects the managed infrastructure services unit to meet the criteria to be classified as discontinued operations upon separation. In the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. These changes impacted a few of the company’s reportable segments, but did not impact the Consolidated Financial Statements. Refer to note 4, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Form 10-Q are reported on a comparable basis. For the three months ended September 30, 2020, the company reported a provision for income taxes of $128 million. For the nine months ended September 30, 2020, the company reported a benefit from income taxes of $888 million. The tax benefit was primarily related to the tax impacts of an intra-entity sale of certain of the company’s intellectual property in the first quarter, which required the recognition of a $3,442 million deferred tax asset. The recognition of this deferred tax asset and the related impacts resulted in a net one-time benefit in the first quarter of $939 million. For the three and nine months ended September 30, 2019, the company reported a benefit from income taxes of $151 million and a provision for income taxes of $407 million, respectively. On July 9, 2019, the company completed the acquisition of all of the outstanding shares of Red Hat, Inc. (Red Hat). Refer to note 5, “Acquisitions & Divestitures,” and note 10, “Intangible Assets Including Goodwill,” for additional information. Noncontrolling interest amounts of $3.4 million and $7.1 million, net of tax, for the three months ended September 30, 2020 and 2019, respectively, and $14.7 million and $19.0 million, net of tax, for the nine months ended September 30, 2020 and 2019, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2019 Annual Report. 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 calculated from the underlying whole-dollar amounts. Certain prior period amounts have been reclassified to conform to the current period presentation. This is annotated where applicable. |
Accounting Changes | New Standards to be Implemented Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Reference Rate Reform Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Simplifying the Test for Goodwill Impairment Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Financial Instruments–Credit Losses Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Leases Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters For all other standards that the company adopted in 2019, there was no material impact in the consolidated financial results. |
Revenue Recognition For Remaining Performance Obligations | Remaining Performance Obligations The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed, such as certain as-a-Service, governmental, term software license and services offerings. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency. |
Segments | During the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. Accordingly, the company updated its Cloud & Cognitive Software segment, Global Business Services segment and the Other – divested businesses category in the first quarter of 2020 and recast the related historical information for consistency with the go-forward performance. Total recast revenue for full-year 2019 was approximately $0.3 billion of IBM’s total $77 billion. There was no change to the Global Technology Services, Systems or Global Financing segments, and there was no impact to IBM’s consolidated results. |
Financial Assets and Liabilities Measured At Fair Value | Fair Value Measurements Fair value is defined 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. The company classifies 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 directly or indirectly; and ● Level 3—Unobservable inputs for the asset or liability. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as 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 valuation. 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 rates 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 several 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 consistent 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. The company holds investments primarily in time deposits, certificates of deposit, and U.S. government debt that are designated as available-for-sale. The primary objective of the company’s cash and debt investment portfolio is to maintain principal by investing in very liquid and highly rated investment grade securities. Available-for-sale securities are measured for impairment on a recurring basis by comparing the security’s fair value with its amortized cost basis. Effective January 1, 2020 with the adoption of the new standard on credit losses, if the fair value of the security falls below its amortized cost basis, the change in fair value is recognized in the period the impairment is identified when the loss is due to credit factors. The change in fair value due to non-credit factors is recorded in other comprehensive income when the company does not intend to sell and has the ability to hold the investment. The company’s standard practice is to hold all of its debt security investments classified as available-for-sale until maturity. There were no impairments for credit losses or non-credit impairments for the three and nine months ended September 30, 2020. Prior to the adoption of the new standard, available-for-sale securities were measured for impairment using an other-than-temporary impairment model. No impairment was recorded for the three and nine months ended September 30, 2019. Certain nonfinancial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset. There were no material impairments of nonfinancial assets for the nine months ended September 30, 2020 and 2019, respectively. |
Financial Assets and Liabilities Not Measured At Fair Value | 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 and including short-term finance lease liabilities) 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, except for short-term debt which would be classified as Level 2. 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 remaining maturities. At September 30, 2020 and December 31, 2019, 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 (including long-term finance lease liabilities) 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 was $55,129 million and $54,102 million, and the estimated fair value was $61,783 million and $58,431 million at September 30, 2020 and December 31, 2019, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Financing Receivables | Effective January 1, 2020, the company adopted the new accounting standard related to credit losses, using the transition methodology whereby prior comparative periods were not retrospectively presented in the Consolidated Financial Statements. Refer to note 2, “Accounting Changes,” for additional information. Under this new guidance, the amortized cost basis of a financial asset represents the original amount of the financing receivable (including residual value) adjusted for unearned income, deferred initial direct costs, cash collected, write-offs and any foreign exchange adjustments. The allowance for credit losses represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations. Prior to the effective date, financing receivables were measured at recorded investment, which does not include residual value. As a result, all prior periods are presented at recorded investment, while current period information is presented at amortized cost. Additionally, current period information reflects updates to the portfolio segments, and other presentation changes within the following tables, as a result of the adoption of this new guidance. |
Allowance for Credit Losses - Financing Receivables | Allowance for Credit Losses – Financing Receivables Refer to note A, “Significant Accounting Policies,” in the company’s 2019 Annual Report for a full description of its accounting policies for trade and financing receivables, contract assets and related allowances. The descriptions below include any changes to those policies due to the new standard. Effective with the adoption of the new credit losses standard, the company’s estimates of its allowances for expected credit losses include consideration of: past events, including any historical default, historical concessions and resulting troubled debt restructurings, current economic conditions, taking into account any non-freestanding mitigating credit enhancements and certain forward-looking information, including reasonable and supportable forecasts. |
Collectively Evaluated Financing Receivables | Collectively Evaluated Financing Receivables The company determines its allowance for credit losses based on two portfolio segments: client financing receivables and commercial financing receivables, and further segments the portfolio into three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. For client financing receivables, the company uses a credit loss model to calculate allowances based on its internal loss experience and current conditions and forecasts, by class of financing receivable. The company records an unallocated reserve that is calculated by applying a reserve rate to its portfolio, excluding accounts that have been individually evaluated and specifically reserved. This reserve rate is based upon credit rating, probability of default, term and loss history. The allowance is adjusted quarterly for expected recoveries of amounts that were previously written off or are expected to be written off. Recoveries cannot exceed the aggregated amount of the previous write-off or expected write-off. Macroeconomic variables attributed to the expected credit losses for client financing receivables may vary by class of financing receivables based on historical experiences, portfolio composition and current environment. In addition to a qualitative review of credit risk factors across the portfolio, the company considers forward-looking macroeconomic variables such as gross domestic product, unemployment rates, equity prices and corporate profits when quantifying the impact of economic forecasts on its client financing receivables allowance for expected credit losses. The company also considers the impact of current conditions and economic forecasts relating to specific industries, geographical areas, and client-credit ratings on the portfolio. Under this approach, forecasts of these variables over two years are considered reasonable and supportable. Beyond two years, the company reverts to long-term average loss experience. Forward-looking estimates require the use of judgment, particularly in times of economic uncertainty. Consistent with the first half of 2020, the company continues to monitor the evolving global impacts from the COVID-19 pandemic as well as its impact on external economic models, which have been revised with increased frequency throughout the year. The company’s allowances at September 30, 2020, reflect the qualitative process described above. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. The allowance for commercial financing receivables is estimated based on a combination of write-off history and current economic conditions, excluding any individually evaluated accounts. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material. |
Past Due Financing Receivables | Past Due Financing Receivables |
Commitments | Effective January 1, 2020, the company adopted the new standard on credit losses, which resulted in the recognition of a related allowance for non-cancellable off-balance sheet commitments. Refer to note 2, “Accounting Changes,” for additional information. The allowance for these commitments is recorded in other liabilities in the Consolidated Balance Sheet and was not material at September 30, 2020. The company collectively evaluates the allowance for these arrangements using a provision methodology consistent with the portfolio of the commitments. Refer to note 8, “Financing Receivables,” for additional information.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. |
Contingencies | The company records a provision with respect 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 quarter ended September 30, 2020 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 reasonably 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 strength 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. It 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 reasonably 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. |
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 assets 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 fluctuations. In the Consolidated Balance Sheet, the company does not offset derivative assets against liabilities in master netting arrangements 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 amounts were recognized for the right to reclaim or the obligation to return cash collateral at September 30, 2020 and $26 million was recognized in other accounts receivable for the right to reclaim cash collateral at December 31, 2019. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in restricted cash in the Consolidated Balance Sheet. No amount was rehypothecated at September 30, 2020 and December 31, 2019. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at September 30, 2020 December 31, 2019 In its hedging programs, the company may use forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, equity swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments. |
Derivatives, Methods of Accounting, Hedge Effectiveness | (3) The company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. |
Stock-Based Compensation | Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Recognition | |
Schedule of disaggregation of revenue | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Cloud & Data Platforms $ 2,775 $ 2,308 $ 8,108 $ 6,398 Cognitive Applications 1,317 1,305 * 3,745 3,914 * Transaction Processing Platforms 1,461 1,589 4,687 5,419 Total Cloud & Cognitive Software $ 5,553 $ 5,201 * $ 16,540 $ 15,731 * Consulting 1,966 2,016 * 5,973 6,037 * Application Management 1,758 1,897 5,332 5,724 Global Process Services 240 247 687 752 Total Global Business Services $ 3,965 $ 4,160 * $ 11,992 $ 12,513 * Infrastructure & Cloud Services 4,933 5,071 14,663 15,454 Technology Support Services 1,528 1,629 4,582 4,958 Total Global Technology Services $ 6,462 $ 6,700 $ 19,245 $ 20,412 Systems Hardware 919 1,117 3,404 3,358 Operating Systems Software 338 364 1,074 1,204 Total Systems $ 1,257 $ 1,481 $ 4,477 $ 4,562 Global Financing** 273 343 837 1,100 Other 50 142 * 163 1,053 * Total revenue $ 17,560 $ 18,028 $ 53,253 $ 55,370 * Recast to conform to current period presentation. Refer to note 4, “Segments,” for additional information. ** Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. |
Schedule of disaggregation of revenue by geography | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Americas $ 8,139 $ 8,514 $ 24,755 $ 25,813 Europe/Middle East/Africa 5,564 5,477 16,775 17,354 Asia Pacific 3,857 4,036 11,723 12,203 Total $ 17,560 $ 18,028 $ 53,253 $ 55,370 |
Schedule of reconciliation of contract balances | At September 30, At December 31, (Dollars in millions) 2020 2019 Notes and accounts receivable — trade (net of allowances of $354 in 2020 and $299 in 2019) $ 6,099 $ 7,870 Contract assets (1) 528 492 Deferred income (current) 11,681 12,026 Deferred income (noncurrent) 3,820 3,851 (1) Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. |
Schedule of notes and accounts receivable - trade allowance for credit losses | (Dollars in millions) January 1, 2020* Additions / (Releases) Write-offs Other** September 30, 2020 $ 316 $ 79 $ (39) $ (2) $ 354 January 1, 2019 Additions / (Releases) Write-offs Other** December 31, 2019 $ 309 $ 98 $ (113) $ 5 $ 299 * Opening balance does not equal the allowance at December 31, 2019 due to the adoption of the guidance for current expected credit losses. Refer to note 2, “Accounting Changes,” for additional information . ** Primarily represents translation adjustments . The contract assets allowance for credit losses was not material in any of the periods presented. |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segments | |
Revenue and Pre-tax Income by Segment | Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the three months ended September 30, 2020: External revenue $ 5,553 $ 3,965 $ 6,462 $ 1,257 $ 273 $ 17,510 Internal revenue 875 49 312 240 208 1,683 Total revenue $ 6,428 $ 4,014 $ 6,774 $ 1,497 $ 480 $ 19,193 Pre-tax income/(loss) from continuing operations $ 1,834 $ 570 $ 399 $ (37) $ 196 $ 2,962 Revenue year-to-year change 9.2 % (5.1) % (3.1) % (10.6) % (25.6) % (1.2) % Pre-tax income/(loss) year-to-year change 42.2 % 0.6 % (18.7) % nm (28.9) % 11.3 % Pre-tax income/(loss) margin 28.5 % 14.2 % 5.9 % (2.5) % 40.7 % 15.4 % For the three months ended September 30, 2019: External revenue $ 5,201 * $ 4,160 * $ 6,700 $ 1,481 $ 343 $ 17,886 * Internal revenue 686 70 287 195 302 1,541 Total revenue $ 5,888 * $ 4,230 * $ 6,988 $ 1,676 $ 645 $ 19,427 * Pre-tax income from continuing operations $ 1,290 * $ 567 * $ 490 $ 39 $ 275 $ 2,661 * Pre-tax income margin 21.9 %* 13.4 %* 7.0 % 2.3 % 42.6 % 13.7 %* nm - not meaningful Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the nine months ended September 30, 2020: External revenue $ 16,540 $ 11,992 $ 19,245 $ 4,477 $ 837 $ 53,090 Internal revenue 2,431 150 911 628 660 4,780 Total revenue $ 18,971 $ 12,142 $ 20,155 $ 5,106 $ 1,497 $ 57,870 Pre-tax income/(loss) from continuing operations $ 4,475 $ 1,203 $ 471 $ (7) $ 566 $ 6,708 Revenue year-to-year change 6.2 % (4.6) % (5.3) % 0.3 % (24.5) % (1.8) % Pre-tax income/(loss) year-to-year change (11.9) % 4.2 % (53.0) % (93.6) % (29.5) % (15.5) % Pre-tax income/(loss) margin 23.6 % 9.9 % 2.3 % (0.1) % 37.8 % 11.6 % For the nine months ended September 30, 2019: External revenue $ 15,731 * $ 12,513 * $ 20,412 $ 4,562 $ 1,100 $ 54,317 * Internal revenue 2,135 213 879 528 884 4,638 Total revenue $ 17,865 * $ 12,726 * $ 21,291 $ 5,091 $ 1,983 $ 58,956 * Pre-tax income/(loss) from continuing operations $ 5,082 * $ 1,154 * $ 1,000 $ (101) $ 803 $ 7,938 * Pre-tax income/(loss) margin 28.4 %* 9.1 %* 4.7 % (2.0) % 40.5 % 13.5 %* |
Reconciliation of segment revenue and pre-tax income to IBM as reported | Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended September 30: 2020 2019 Revenue: Total reportable segments $ 19,193 $ 19,427 * Other — divested businesses 4 83 * Other revenue 46 59 Eliminations of internal transactions (1,683) (1,541) Total consolidated revenue $ 17,560 $ 18,028 Pre-tax income from continuing operations: Total reportable segments $ 2,962 $ 2,661 * Amortization of acquired intangible assets (459) (473) Acquisition-related (charges)/income (1) (255) Non-operating retirement-related (costs)/income (291) (145) Eliminations of internal transactions (158) (84) Other — divested businesses (20) (25) * Unallocated corporate amounts (206) (157) Total pre-tax income from continuing operations $ 1,827 $ 1,522 * Recast to conform to current period presentation. Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2020 2019 Revenue: Total reportable segments $ 57,870 $ 58,956 * Other — divested businesses 36 863 * Other revenue 127 190 Eliminations of internal transactions (4,780) (4,638) Total consolidated revenue $ 53,253 $ 55,370 Pre-tax income from continuing operations: Total reportable segments $ 6,708 $ 7,938 * Amortization of acquired intangible assets (1,404) (816) Acquisition-related (charges)/income (3) (396) Non-operating retirement-related (costs)/income (829) (419) Eliminations of internal transactions (334) (233) Other — divested businesses (17) 480 * Unallocated corporate amounts (773) (380) Total pre-tax income from continuing operations $ 3,348 $ 6,173 * Recast to conform to current period presentation. |
Acquisitions_Divestitures (Tabl
Acquisitions/Divestitures (Tables) - Red Hat, Inc. | 9 Months Ended |
Sep. 30, 2020 | |
Acquisitions/Divestitures | |
Business acquisition, purchase price allocation | Amortization Allocated (Dollars in millions) Life (in years) Amount Current assets* $ 3,186 Property, plant and equipment/noncurrent assets 948 Intangible assets: Goodwill N/A 22,985 Client relationships 10 7,215 Completed technology 9 4,571 Trademarks 20 1,686 Total assets acquired $ 40,592 Current liabilities** 1,395 Noncurrent liabilities 4,117 Total liabilities assumed $ 5,512 Total purchase price $ 35,080 * Includes $2.2 billion of cash and cash equivalents. ** Includes $485 million of short-term debt related to the convertible notes acquired from Red Hat that were recognized at their fair value on the acquisition date, which was fully settled as of October 1, 2019. |
Business acquisition, goodwill segment allocation | (Dollars in billions) Goodwill Segment Allocated* Cloud & Cognitive Software $ 18.4 Global Technology Services 3.1 Global Business Services 1.1 Systems 0.4 Total $ 23.0 * It is expected that approximately six percent of the goodwill will be deductible for tax purposes. |
Business acquisition, pro forma information | (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2019 2019 Revenue $ 18,567 $ 57,424 Net income $ 2,249 $ 5,664 |
Earnings Per Share of Common _2
Earnings Per Share of Common Stock (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share of Common Stock | |
Computation of basic and diluted earnings per share | For the Three Months Ended (Dollars in millions except per share amounts) September 30, 2020 September 30, 2019 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 891,381,032 886,018,372 Add — Incremental shares under stock-based compensation plans 4,595,327 5,368,268 Add — Incremental shares associated with contingently issuable shares 1,315,874 1,453,105 Number of shares on which diluted earnings per share is calculated 897,292,233 892,839,745 Income from continuing operations $ 1,698 $ 1,673 Income/(loss) from discontinued operations, net of tax (1) (1) Net income on which basic earnings per share is calculated $ 1,698 $ 1,672 Income from continuing operations $ 1,698 $ 1,673 Net income applicable to contingently issuable shares — — Income from continuing operations on which diluted earnings per share is calculated $ 1,698 $ 1,673 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (1) (1) Net income on which diluted earnings per share is calculated $ 1,698 $ 1,672 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 1.89 $ 1.87 Discontinued operations 0.00 0.00 Total $ 1.89 $ 1.87 Basic Continuing operations $ 1.90 $ 1.89 Discontinued operations 0.00 0.00 Total $ 1.90 $ 1.89 For the Nine Months Ended (Dollars in millions except per share amounts) September 30, 2020 September 30, 2019 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 889,595,181 887,291,199 Add — Incremental shares under stock-based compensation plans 4,875,369 4,007,433 Add — Incremental shares associated with contingently issuable shares 1,286,300 1,228,726 Number of shares on which diluted earnings per share is calculated 895,756,850 892,527,357 Income from continuing operations $ 4,237 $ 5,766 Income/(loss) from discontinued operations, net of tax (2) (5) Net income on which basic earnings per share is calculated $ 4,234 $ 5,761 Income from continuing operations $ 4,237 $ 5,766 Net income applicable to contingently issuable shares (2) 0 Income from continuing operations on which diluted earnings per share is calculated $ 4,234 $ 5,766 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (2) (5) Net income on which diluted earnings per share is calculated $ 4,232 $ 5,762 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 4.72 $ 6.46 Discontinued operations 0.00 (0.01) Total $ 4.72 $ 6.45 Basic Continuing operations $ 4.76 $ 6.50 Discontinued operations 0.00 (0.01) Total $ 4.76 $ 6.49 |
Financial Assets & Liabilities
Financial Assets & Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Financial Assets & Liabilities | |
Financial assets and financial liabilities measured at fair value on a recurring basis | Fair Value Hierarchy At September 30, 2020 At December 31, 2019 (Dollars in millions) Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents (1) Time deposits and certificates of deposit (2) 2 $ 9,880 $ N/A $ 4,392 $ N/A Money market funds 1 658 N/A 427 N/A U.S. government securities (2) 2 100 N/A — N/A Total cash equivalents $ 10,638 $ N/A $ 4,819 $ N/A Equity investments (3) 1 1 N/A 0 N/A Debt securities-current (2)(4) 2 1,200 N/A 696 N/A Debt securities-noncurrent (2)(5) 2 — N/A 65 N/A Derivatives designated as hedging instruments Interest rate contracts 2 98 — 56 — Foreign exchange contracts 2 93 566 175 635 Derivatives not designated as hedging instruments Foreign exchange contracts 2 9 11 10 33 Equity contracts (6) 1,2 4 7 1 4 Total $ 12,043 $ 583 $ 5,823 $ 673 (1) Included within cash and cash equivalents in the Consolidated Balance Sheet. (2) Available-for-sale securities with an amortized cost basis that approximates fair value. (3) Included within investments and sundry assets in the Consolidated Balance Sheet. (4) Primarily includes time deposits and U.S. treasury bills that are reported within marketable securities in the Consolidated Balance Sheet. (5) Primarily includes corporate debt securities with maturities of less than two years that are reported within investments and sundry assets in the Consolidated Balance Sheet. (6) Level 1 includes immaterial amounts related to equity futures contracts. (7) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Balance Sheet at September 30, 2020 were $83 million and $121 million, respectively, and at December 31, 2019 were $149 million and $94 million, respectively. (8) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2020 were $480 million and $103 million, respectively, and at December 31, 2019 were $167 million and $506 million , respectively. |
Financing Receivables (Tables)
Financing Receivables (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Financing Receivables | |
Summary of the components of financing receivables | Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At September 30, 2020: (Loans) Leases Receivables Total Financing receivables, gross $ 11,599 $ 4,124 $ 2,127 $ 17,849 Unearned income (479) (339) (3) (822) Residual value* — 507 — 507 Amortized cost $ 11,119 $ 4,292 $ 2,124 $ 17,534 Allowance for credit losses (162) (92) (9) (264) Total financing receivables, net $ 10,957 $ 4,200 $ 2,114 $ 17,271 Current portion $ 6,921 $ 1,813 $ 2,114 $ 10,848 Noncurrent portion $ 4,036 $ 2,387 $ — $ 6,423 * Includes guaranteed and unguaranteed residual value. Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At December 31, 2019: (Loans) Leases Receivables Total Financing receivables, gross $ 13,592 $ 6,077 $ 3,836 $ 23,504 Unearned income (570) (509) (4) (1,083) Recorded investment $ 13,022 $ 5,567 $ 3,831 $ 22,421 Allowance for credit losses (138) (72) (11) (221) Unguaranteed residual value — 652 — 652 Guaranteed residual value — 53 — 53 Total financing receivables, net $ 12,884 $ 6,199 $ 3,820 $ 22,904 Current portion $ 8,037 $ 2,334 $ 3,820 $ 14,192 Noncurrent portion $ 4,847 $ 3,865 $ — $ 8,712 |
Schedule of financing receivables and allowance for credit losses by class | (Dollars in millions) At September 30, 2020: Americas EMEA Asia Pacific Total Amortized cost $ 7,631 $ 4,813 $ 2,968 $ 15,411 Allowance for credit losses Beginning balance at December 31, 2019 $ 120 $ 54 $ 36 $ 210 Adjustment for adoption of new standard 21 15 5 41 Beginning balance at January 1, 2020 $ 142 $ 69 $ 41 $ 252 Write-offs $ (27) $ (1) $ (3) $ (31) Recoveries 0 0 2 2 Additions/(releases) 33 8 (1) 40 Other* (11) 2 0 (9) Ending balance at September 30, 2020 $ 137 $ 78 $ 39 $ 254 * Primarily represents translation adjustments. (Dollars in millions) At December 31, 2019: Americas EMEA Asia Pacific Total Recorded investment Lease receivables $ 3,419 $ 1,186 $ 963 $ 5,567 Loan receivables 6,726 3,901 2,395 13,022 Ending balance $ 10,144 $ 5,087 $ 3,359 $ 18,590 Recorded investment collectively evaluated for impairment $ 10,032 $ 5,040 $ 3,326 $ 18,399 Recorded investment individually evaluated for impairment $ 112 $ 47 $ 32 $ 191 Allowance for credit losses Beginning balance at January 1, 2019 Lease receivables $ 53 $ 22 $ 24 $ 99 Loan receivables 105 43 32 179 Total $ 158 $ 65 $ 56 $ 279 Write-offs $ (42) $ (3) $ (18) $ (63) Recoveries 1 0 1 2 Additions/(releases) 5 (7) (3) (5) Other* (1) 0 (1) (2) Ending balance at December 31, 2019 $ 120 $ 54 $ 36 $ 210 Lease receivables $ 33 $ 23 $ 16 $ 72 Loan receivables $ 88 $ 31 $ 20 $ 138 Related allowance, collectively evaluated for impairment $ 25 $ 11 $ 4 $ 39 Related allowance, individually evaluated for impairment $ 96 $ 43 $ 32 $ 171 * Primarily represents translation adjustments. |
Schedule of past due financing receivables | Amortized Billed Total Amortized Cost Invoices Amortized (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Cost Not At September 30, 2020: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 7,631 $ 257 $ 166 $ 31 $ 102 EMEA 4,813 99 13 5 93 Asia Pacific 2,968 60 27 6 34 Total client financing receivables $ 15,411 $ 416 $ 206 $ 41 $ 229 (1) At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. (2) Of the amortized cost not accruing, there is a related allowance of $170 million. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2020, respectively. Recorded Billed Recorded Total Recorded Investment Invoices Investment (Dollars in millions) Recorded Investment > 90 Days and > 90 Days and Not At December 31, 2019: Investment > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 3,419 $ 187 $ 147 $ 11 $ 41 EMEA 1,186 28 13 2 17 Asia Pacific 963 19 7 1 11 Total lease receivables $ 5,567 $ 234 $ 168 $ 14 $ 69 Americas $ 6,726 $ 127 $ 71 $ 11 $ 72 EMEA 3,901 77 8 3 72 Asia Pacific 2,395 26 6 2 21 Total loan receivables $ 13,022 $ 231 $ 85 $ 15 $ 166 Total $ 18,590 $ 465 $ 253 $ 29 $ 235 (1) At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. (2) Of the recorded investment not accruing, $191 million is individually evaluated for impairment with a related allowance of $171 million. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2019, respectively. |
Schedule of net recorded investment by credit quality indicator | (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2020: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2020 $ 1,786 $ 1,301 $ 1,038 $ 1,352 $ 710 $ 287 2019 1,334 763 745 614 609 170 2018 1,002 489 372 296 448 188 2017 422 194 92 147 225 66 2016 108 78 44 55 142 40 2015 and prior 41 112 33 25 58 23 Total $ 4,694 $ 2,937 $ 2,324 $ 2,489 $ 2,193 $ 775 (Dollars in millions) Lease Receivables Loan Receivables At December 31, 2019: Americas EMEA Asia Pacific Americas EMEA Asia Pacific Credit rating: Aaa – Aa3 $ 465 $ 54 $ 43 $ 1,028 $ 193 $ 189 A1 – A3 750 181 454 1,186 395 892 Baa1 – Baa3 955 409 147 1,882 1,527 619 Ba1 – Ba2 746 326 154 1,513 921 388 Ba3 – B1 215 140 101 471 564 205 B2 – B3 242 50 47 522 253 72 Caa – D 13 2 2 36 18 10 Total $ 3,385 $ 1,162 $ 947 $ 6,638 $ 3,871 $ 2,376 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases | |
Schedule of amounts included in the Consolidated Income Statement related to lessor activity | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Lease income – sales-type and direct financing leases Sales-type lease selling price $ 154 $ 188 $ 733 $ 516 Less: Carrying value of underlying assets* 64 75 258 204 Gross profit $ 90 $ 113 $ 475 $ 312 Interest income on lease receivables 56 71 195 222 Total sales-type and direct financing lease income $ 145 $ 184 $ 670 $ 534 Lease income – operating leases 65 80 204 252 Variable lease income 25 12 82 38 Total lease income $ 235 $ 276 $ 956 $ 824 * Excludes unguaranteed residual value. |
Intangible Assets Including G_2
Intangible Assets Including Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets Including Goodwill | |
Intangible asset balances by major asset class | At September 30, 2020 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class Capitalized software $ 1,769 $ (785) $ 984 Client relationships 8,698 (1,852) 6,847 Completed technology 5,900 (1,531) 4,369 Patents/trademarks 2,210 (467) 1,743 Other** 56 (37) 18 Total $ 18,634 $ (4,672) $ 13,962 At December 31, 2019 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class Capitalized software $ 1,749 $ (743) $ 1,006 Client relationships 8,921 (1,433) 7,488 Completed technology 6,261 (1,400) 4,861 Patents/trademarks 2,301 (445) 1,856 Other** 56 (31) 24 Total $ 19,287 $ (4,052) $ 15,235 * Amounts as of September 30, 2020 and December 31, 2019 include an increase in net intangible asset balances of $133 million and a decrease of $42 million, respectively, due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems . |
Intangible assets, future amortization expense | Capitalized Acquired (Dollars in millions) Software Intangibles Total Remainder of 2020 $ 154 $ 454 $ 608 2021 501 1,766 2,267 2022 261 1,704 1,964 2023 68 1,390 1,458 2024 0 1,340 1,340 Thereafter — 6,324 6,324 |
Changes in goodwill balances by reportable segment | Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 1/1/2020 Additions Adjustments Divestitures Adjustments** 9/30/2020 Cloud & Cognitive Software $ 43,037 $ 25 $ (139) $ — $ 186 $ 43,109 Global Business Services 5,775 — — — 47 5,822 Global Technology Services 7,141 — — — 13 7,154 Systems 2,270 — — — 1 2,270 Other—divested businesses — — — — — — Total $ 58,222 $ 25 $ (139) $ — $ 248 $ 58,355 Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 1/1/2019 Additions Adjustments Divestitures Adjustments** 12/31/2019 Cloud & Cognitive Software* $ 24,463 $ 18,399 $ 133 $ — $ 41 $ 43,037 Global Business Services 4,711 1,059 1 (1) 5 5,775 Global Technology Services 3,988 3,119 — — 34 7,141 Systems 1,847 525 (110) — 7 2,270 Other—divested businesses* 1,256 — — (1,256) — — Total $ 36,265 $ 23,102 $ 24 $ (1,257) $ 87 $ 58,222 * Recast to conform to 2020 presentation. ** Primarily driven by foreign currency translation. |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Borrowings | |
Short-Term Debt | At September 30, At December 31, (Dollars in millions) 2020 2019 Commercial paper $ 25 $ 304 Short-term loans 584 971 Long-term debt—current maturities 9,677 7,522 Total $ 10,285 $ 8,797 |
Long-Term Debt | Balance Balance (Dollars in millions) Maturities 9/30/2020 12/31/2019 U.S. dollar debt (weighted-average interest rate at September 30, 2020):* 2.1% 2020 $ 1,500 $ 4,326 1.4% 2021 5,516 8,498 2.6% 2022 6,245 6,289 3.3% 2023 2,406 2,388 3.3% 2024 5,035 5,045 6.7% 2025 635 636 3.3% 2026 4,373 4,350 3.0% 2027 2,219 969 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 — 5.9% 2032 600 600 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 — 4.0% 2042 1,107 1,107 7.0% 2045 27 27 4.7% 2046 650 650 4.3% 2049 3,000 3,000 3.0% 2050 750 — 7.1% 2096 316 316 $ 42,771 $ 44,594 Other currencies (weighted-average interest rate at September 30, 2020, in parentheses):* Euro (1.1%) 2020–2040 $ 19,354 $ 14,306 Pound sterling (2.7%) 2020–2022 1,360 1,390 Japanese yen (0.3%) 2022–2026 1,379 1,339 Other (3.1%) 2021–2024 242 375 $ 65,106 $ 62,003 Finance lease obligations (1.9%) 2021–2030 291 204 $ 65,397 $ 62,207 Less: net unamortized discount 884 881 Less: net unamortized debt issuance costs 161 142 Add: fair value adjustment** 453 440 $ 64,805 $ 61,624 Less: current maturities 9,677 7,522 Total $ 55,129 $ 54,102 * Includes notes, debentures, bank loans and secured borrowings. ** The portion of the company’s fixed-rate debt obligations that was hedged was reflected in the Consolidated Balance Sheet as an amount equal to the sum of the debt’s carrying value and a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. |
Pre-swap annual contractual obligations of long-term debt outstanding | Pre-swap annual contractual obligations of long-term debt outstanding at September 30, 2020, are as follows: (Dollars in millions) Total Remainder of 2020 $ 4,343 2021 7,003 2022 7,276 2023 5,564 2024 6,454 Thereafter 34,757 Total $ 65,397 |
Interest on Debt | (Dollars in millions) For the nine months ended September 30: 2020 2019 Cost of financing $ 346 $ 483 Interest expense 971 990 Interest capitalized 6 5 Total interest paid and accrued $ 1,323 $ 1,478 |
Commitments (Tables)
Commitments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Commitments | |
Changes in warranty liabilities | Standard Warranty Liability (Dollars in millions) 2020 2019 Balance at January 1 $ 113 $ 118 Current period accruals 56 66 Accrual adjustments to reflect actual experience (15) (1) Charges incurred (73) (86) Balance at September 30 $ 80 $ 98 Extended Warranty Liability (Dollars in millions) 2020 2019 Balance at January 1 $ 477 $ 533 Revenue deferred for new extended warranty contracts 115 124 Amortization of deferred revenue (169) (194) Other* (3) (8) Balance at September 30 $ 419 $ 455 Current portion $ 196 $ 226 Noncurrent portion $ 223 $ 230 * Other primarily consists of foreign currency translation adjustments. |
Equity Activity (Tables)
Equity Activity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity Activity | |
Reclassifications and taxes related to items of other comprehensive income | (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (439) $ 247 $ (192) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ (1) $ 0 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ (1) Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (32) $ 8 $ (24) Reclassification of (gains)/losses to: Cost of services (10) 2 (7) Cost of sales 4 (1) 3 Cost of financing 6 (2) 5 SG&A expense 5 (1) 4 Other (income) and expense (93) 23 (70) Interest expense 19 (5) 14 Total unrealized gains/(losses) on cash flow hedges $ (101) $ 26 $ (75) Retirement-related benefit plans (1): Prior service costs/(credits) $ (1) $ 0 $ 0 Net (losses)/gains arising during the period 0 0 0 Curtailments and settlements 21 (6) 14 Amortization of prior service (credits)/costs 0 1 1 Amortization of net (gains)/losses 586 (161) 425 Total retirement-related benefit plans $ 607 $ (167) $ 440 Other comprehensive income/(loss) $ 66 $ 106 $ 172 (1) These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2019: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (509) $ (109) $ (618) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 3 $ (1) $ 2 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 3 $ (1) $ 2 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (439) $ 110 $ (329) Reclassification of (gains)/losses to: Cost of services (22) 6 (17) Cost of sales (10) 3 (7) Cost of financing 21 (5) 15 SG&A expense (11) 3 (8) Other (income) and expense 447 (112) 334 Interest expense 64 (16) 48 Total unrealized gains/(losses) on cash flow hedges $ 49 $ (12) $ 36 Retirement-related benefit plans (1): Net (losses)/gains arising during the period $ 0 $ 0 $ 0 Curtailments and settlements 3 (1) 2 Amortization of prior service (credits)/costs (3) 3 (1) Amortization of net (gains)/losses 461 (128) 333 Total retirement-related benefit plans $ 461 $ (127) $ 335 Other comprehensive income/(loss) $ 4 $ (249) $ (245) (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (1,354) $ 260 $ (1,094) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (249) $ 63 $ (186) Reclassification of (gains)/losses to: Cost of services (18) 5 (14) Cost of sales (14) 4 (10) Cost of financing 21 (5) 16 SG&A expense (12) 3 (9) Other (income) and expense (74) 19 (55) Interest expense 60 (15) 45 Total unrealized gains/(losses) on cash flow hedges $ (285) $ 73 $ (212) Retirement-related benefit plans (1): Prior service costs/(credits) $ (5) $ 1 $ (3) Net (losses)/gains arising during the period 65 (24) 41 Curtailments and settlements 42 (12) 30 Amortization of prior service (credits)/costs 1 2 3 Amortization of net (gains)/losses 1,722 (473) 1,249 Total retirement-related benefit plans $ 1,826 $ (507) $ 1,319 Other comprehensive income/(loss) $ 187 $ (175) $ 12 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2019: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (333) $ (72) $ (405) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 1 $ 0 $ 1 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 1 $ 0 $ 1 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (798) $ 196 $ (601) Reclassification of (gains)/losses to: Cost of services (52) 13 (38) Cost of sales (40) 11 (29) Cost of financing 73 (18) 55 SG&A expense (45) 12 (33) Other (income) and expense 331 (83) 248 Interest expense 150 (38) 112 Total unrealized gains/(losses) on cash flow hedges $ (380) $ 93 $ (287) Retirement-related benefit plans (1): Net (losses)/gains arising during the period $ 113 $ (23) $ 90 Curtailments and settlements 7 (1) 6 Amortization of prior service (credits)/costs (9) 4 (5) Amortization of net (gains)/losses 1,385 (380) 1,005 Total retirement-related benefit plans $ 1,496 $ (401) $ 1,095 Other comprehensive income/(loss) $ 784 $ (380) $ 404 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. |
Accumulated other comprehensive income/(loss) (net of tax) | 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 (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2020 $ (179) $ (3,700) $ (24,718) $ 0 $ (28,597) Other comprehensive income before reclassifications (186) (1,094) 37 0 (1,242) Amount reclassified from accumulated other comprehensive income (27) — 1,281 — 1,255 Total change for the period $ (212) $ (1,094) $ 1,319 $ 0 $ 12 September 30, 2020 $ (391) $ (4,794) $ (23,399) $ 0 $ (28,584) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. 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 (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2019 $ 284 $ (3,690) $ (26,083) $ 0 $ (29,490) Other comprehensive income before reclassifications (601) (405) 89 1 (916) Amount reclassified from accumulated other comprehensive income 315 — 1,005 — 1,320 Total change for the period $ (287) $ (405) $ 1,095 $ 1 $ 404 September 30, 2019 $ (3) $ (4,095) $ (24,988) $ 0 $ (29,086) * |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Financial Instruments | |
Amounts related to cumulative basis adjustments for fair value hedges | September 30, December 31, (Dollars in millions) 2020 2019 Short-term debt: Carrying amount of the hedged item $ (1,308) $ — Cumulative hedging adjustments included in the carrying amount - assets/(liabilities) (8) — Long-term debt: Carrying amount of the hedged item $ (2,117) $ (3,411) Cumulative hedging adjustments included in the carrying amount - assets/(liabilities) (445) (1) (440) (1) (1) Includes ($365) million and ($404) million of hedging adjustments on discontinued hedging relationships at September 30, 2020 and December 31, 2019, respectively. |
Effect of derivative instruments in the consolidated income statement | Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the three months ended September 30: 2020 2019 2020 2019 Cost of services $ 7,357 $ 7,840 $ 10 $ 22 Cost of sales 1,601 1,635 (4) 10 Cost of financing 172 217 3 (11) SG&A expense 4,647 5,024 58 20 Other (income) and expense 253 (31) 101 (561) Interest expense 323 432 8 (35) Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the three months ended September 30: Line Item 2020 2019 2020 2019 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 3 $ 7 $ 0 Interest expense 0 9 20 0 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 8 (114) N/A N/A Equity contracts SG&A expense 63 9 N/A N/A Total $ 71 $ (94) $ 27 $ 0 Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the three months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2020 2019 Line Item 2020 2019 2020 2019 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts (32) (439) Cost of services 10 22 — — Cost of sales (4) 10 — — Cost of financing (5) (20) — — SG&A expense (5) 11 — — Other (income) and expense 93 (447) — — Interest expense (15) (61) — — Instruments in net investment hedges (4): Foreign exchange contracts (983) 435 Cost of financing — — 2 7 Interest expense — — 7 20 Total $ (1,015) $ (4) $ 69 $ (488) $ 9 $ 27 (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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. (4) Instruments in net investment hedges include derivative and non-derivative instruments. N/A - not applicable Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the nine months ended September 30: 2020 2019 2020 2019 Cost of services $ 22,720 $ 24,293 $ 18 $ 52 Cost of sales 4,964 4,979 14 40 Cost of financing 517 710 9 (47) SG&A expense 15,849 15,171 24 199 Other (income) and expense 614 (850) 92 (358) Interest expense 971 990 24 (96) Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the nine months ended September 30: Line Item 2020 2019 2020 2019 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 20 $ 51 $ (3) $ (44) Interest expense 57 105 (9) (89) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 18 (27) N/A N/A Equity contracts SG&A expense 12 153 N/A N/A Total $ 108 $ 283 $ (13) $ (133) Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the nine months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2020 2019 Line Item 2020 2019 2020 2019 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ (168) Cost of financing $ (3) $ (2) $ — $ — Interest expense (10) (5) — — Foreign exchange contracts (249) (630) Cost of services 18 52 — — Cost of sales 14 40 — — Cost of financing (18) (71) — — SG&A expense 12 45 — — Other (income) and expense 74 (331) — — Interest expense (50) (146) — — Instruments in net investment hedges (4): Foreign exchange contracts (1,033) 306 Cost of financing — — 13 19 Interest expense — — 37 38 Total $ (1,281) $ (491) $ 37 $ (418) $ 50 $ 57 (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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. (4) Instruments in net investment hedges include derivative and non-derivative instruments. N/A - not applicable |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Stock-Based Compensation | |
Stock-based compensation cost included in income from continuing operations | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 Cost $ 42 $ 29 $ 109 $ 71 Selling, general and administrative 129 147 401 313 Research, development and engineering 50 44 147 84 Pre-tax stock-based compensation cost $ 222 $ 220 $ 658 $ 468 Income tax benefits (50) (50) (146) (104) Total net stock-based compensation cost $ 172 $ 170 $ 512 $ 364 |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Retirement-Related Benefits | |
Pre-tax cost for all retirement-related plans | Yr. to Yr. (Dollars in millions) Percent For the three months ended September 30: 2020 2019 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ 610 $ 459 32.9 % Nonpension postretirement plans — cost 50 53 (5.9) Total $ 660 $ 512 28.9 % Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2020 2019 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ 1,789 $ 1,337 33.8 % Nonpension postretirement plans — cost 151 160 (5.2) Total $ 1,941 $ 1,497 29.6 % |
Components of the cost/(income) for the company's pension plans | (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended September 30: 2020 2019 2020 2019 Service cost $ — $ — $ 99 $ 93 Interest cost (1) 375 470 142 202 Expected return on plan assets (1) (542) (650) (323) (391) Amortization of prior service costs/(credits) (1) 4 4 (5) (7) Recognized actuarial losses (1) 207 140 360 313 Curtailments and settlements (1) — — 21 3 Multi-employer plans — — 7 10 Other costs/(credits) (1) — — 6 11 Total net periodic pension (income)/cost of defined benefit plans $ 44 $ (36) $ 307 $ 235 Cost of defined contribution plans 148 151 111 109 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 192 $ 115 $ 418 $ 344 (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2020 2019 2020 2019 Service cost $ — $ — $ 289 $ 279 Interest cost (1) 1,126 1,411 408 616 Expected return on plan assets (1) (1,627) (1,949) (943) (1,186) Amortization of prior service costs/(credits) (1) 12 12 (14) (20) Recognized actuarial losses (1) 622 419 1,041 939 Curtailments and settlements (1) — — 42 7 Multi-employer plans — — 22 26 Other costs/(credits) (1) — — 20 22 Total net periodic pension (income)/cost of defined benefit plans $ 133 $ (107) $ 865 $ 683 Cost of defined contribution plans 457 440 334 321 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 590 $ 333 $ 1,200 $ 1,004 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. |
Components of the cost/(income) for the company's nonpension postretirement plans | (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended September 30: 2020 2019 2020 2019 Service cost $ 2 $ 3 $ 1 $ 1 Interest cost (1) 26 36 8 12 Expected return on plan assets (1) — — (1) (1) Amortization of prior service costs/(credits) (1) 1 (1) 0 0 Recognized actuarial losses (1) 7 0 5 3 Curtailments and settlements (1) — — — — Total nonpension postretirement plans cost recognized in Consolidated Income Statement $ 36 $ 38 $ 14 $ 15 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2020 2019 2020 2019 Service cost $ 7 $ 8 $ 4 $ 4 Interest cost (1) 77 109 26 37 Expected return on plan assets (1) — — (3) (4) Amortization of prior service costs/(credits) (1) 3 (2) 0 0 Recognized actuarial losses (1) 22 0 16 8 Curtailments and settlements (1) — — 0 0 Total nonpension postretirement plans cost recognized in Consolidated Income Statement $ 109 $ 115 $ 43 $ 45 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. |
Schedule of contributions | Plan Contributions Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2020 2019 2020 2019 U.S. nonpension postretirement benefit plan $ 65 $ 35 $ 265 $ 262 Non-U.S. DB and multi-employer plans 16 32 127 159 Total plan contributions $ 80 $ 66 $ 392 $ 421 |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Provision for/(benefit from) income taxes | $ 128 | $ (151) | $ (888) | $ 407 | |
Deferred tax asset from intra-entity sale | $ 3,442 | ||||
Net one-time benefit | $ 939 | ||||
Other (income) and expense | |||||
Noncontrolling interest amounts, net of tax | $ 3.4 | $ 7.1 | $ 14.7 | $ 19 |
Accounting Changes - Credit Los
Accounting Changes - Credit Losses (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Accounting Changes | ||
Deferred tax assets | $ 8,852 | $ 5,182 |
Retained earnings | $ 162,806 | 162,954 |
Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | ||
Accounting Changes | ||
Allowance for credit losses | 81 | |
Deferred tax assets | (14) | |
Retained earnings | $ (66) |
Accounting Changes - Leases (De
Accounting Changes - Leases (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Leases | |||
Operating right-of-use assets | $ 4,715 | $ 4,996 | |
Finance lease obligations | $ 291 | $ 204 | |
Accounting Standards Update 2016-02, Leases | Cumulative Effect, Period of Adoption, Adjustment | |||
Leases | |||
Operating right-of-use assets | $ 4,800 | ||
Financing right-of-use assets | 200 | ||
Operating lease liabilities | 5,100 | ||
Finance lease obligations | $ 200 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue by Major Products/Service Offerings (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Revenue by Major Products/Service Offerings | |||||
Total Revenue | $ 17,560 | $ 18,028 | $ 53,253 | $ 55,370 | $ 77,000 |
External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Total Revenue | 17,510 | 17,886 | 53,090 | 54,317 | |
Other | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 50 | 142 | 163 | 1,053 | |
Cloud & Cognitive Software | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 5,553 | 5,201 | 16,540 | 15,731 | |
Total Revenue | 5,553 | 5,201 | 16,540 | 15,731 | |
Global Business Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 3,965 | 4,160 | 11,992 | 12,513 | |
Total Revenue | 3,965 | 4,160 | 11,992 | 12,513 | |
Global Technology Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 6,462 | 6,700 | 19,245 | 20,412 | |
Total Revenue | 6,462 | 6,700 | 19,245 | 20,412 | |
Systems | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,257 | 1,481 | 4,477 | 4,562 | |
Total Revenue | 1,257 | 1,481 | 4,477 | 4,562 | |
Global Financing | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Financial Services Revenue | 273 | 343 | 837 | 1,100 | |
Total Revenue | 273 | 343 | 837 | 1,100 | |
Cognitive Applications | Cloud & Cognitive Software | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,317 | 1,305 | 3,745 | 3,914 | |
Cloud & Data Platforms | Cloud & Cognitive Software | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 2,775 | 2,308 | 8,108 | 6,398 | |
Transaction Processing Platforms | Cloud & Cognitive Software | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,461 | 1,589 | 4,687 | 5,419 | |
Consulting | Global Business Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,966 | 2,016 | 5,973 | 6,037 | |
Application Management | Global Business Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,758 | 1,897 | 5,332 | 5,724 | |
Global Process Services | Global Business Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 240 | 247 | 687 | 752 | |
Infrastructure & Cloud Services | Global Technology Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 4,933 | 5,071 | 14,663 | 15,454 | |
Technology Support Services | Global Technology Services | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 1,528 | 1,629 | 4,582 | 4,958 | |
Systems Hardware | Systems | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | 919 | 1,117 | 3,404 | 3,358 | |
Operating Systems Software | Systems | External Revenue | |||||
Revenue by Major Products/Service Offerings | |||||
Revenue | $ 338 | $ 364 | $ 1,074 | $ 1,204 |
Revenue Recognition - Disaggr_2
Revenue Recognition - Disaggregation of Revenue by Geography (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Revenue by Geography | |||||
Revenues | $ 17,560 | $ 18,028 | $ 53,253 | $ 55,370 | $ 77,000 |
Americas | |||||
Revenue by Geography | |||||
Revenues | 8,139 | 8,514 | 24,755 | 25,813 | |
EMEA | |||||
Revenue by Geography | |||||
Revenues | 5,564 | 5,477 | 16,775 | 17,354 | |
Asia Pacific | |||||
Revenue by Geography | |||||
Revenues | $ 3,857 | $ 4,036 | $ 11,723 | $ 12,203 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligations (Details) - USD ($) $ in Billions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Revenue Recognition | ||
Practical expedient, remaining performance obligations | true | true |
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied | $ 117 |
Revenue Recognition - Remaini_2
Revenue Recognition - Remaining Performance Obligations, Expected Timing of Satisfaction (Details) | Sep. 30, 2020 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 60.00% |
Duration of expected recognition period for remaining performance obligation | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 35.00% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | Minimum | |
Remaining Performance Obligations | |
Duration of expected recognition period for remaining performance obligation | 3 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | Maximum | |
Remaining Performance Obligations | |
Duration of expected recognition period for remaining performance obligation | 5 years |
Revenue Recognition - Performan
Revenue Recognition - Performance Obligations Satisfied or Partially Satisfied in Prior Periods (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Revenue Recognition | ||
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods | $ 12 | $ (45) |
Revenue Recognition - Reconcili
Revenue Recognition - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Reconciliation of Contract Balances | |||
Notes and accounts receivable - trade (net of allowances of $354 in 2020 and $299 in 2019) | $ 6,099 | $ 6,099 | $ 7,870 |
Notes and accounts receivable - trade, allowances | 354 | 354 | 299 |
Contract assets | 528 | 528 | 492 |
Deferred income (current) | 11,681 | 11,681 | 12,026 |
Deferred income (noncurrent) | 3,820 | 3,820 | $ 3,851 |
Revenue recognized that was included in deferred income at the beginning of the period | $ 4,200 | $ 8,600 |
Revenue Recognition - Trade all
Revenue Recognition - Trade allowance for credit losses (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Roll forward of notes and accounts receivable - trade allowance for credit losses | ||
Allowance for Credit Loss, Beginning Balance | $ 299 | $ 309 |
Additions / (Releases) | 79 | 98 |
Write-offs | (39) | (113) |
Other | (2) | 5 |
Allowance for Credit Loss, Ending Balance | 354 | 299 |
Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | ||
Roll forward of notes and accounts receivable - trade allowance for credit losses | ||
Allowance for Credit Loss, Beginning Balance | $ 316 | |
Allowance for Credit Loss, Ending Balance | $ 316 |
Segments - Results of Continuin
Segments - Results of Continuing Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment Information | |||||
Revenue | $ 17,560 | $ 18,028 | $ 53,253 | $ 55,370 | $ 77,000 |
Pre-tax income/(loss) from continuing operations | 1,827 | 1,522 | 3,348 | 6,173 | |
External Revenue | |||||
Segment Information | |||||
Revenue | 17,510 | 17,886 | 53,090 | 54,317 | |
External Revenue | Cloud & Cognitive Software | |||||
Segment Information | |||||
Revenue | 5,553 | 5,201 | 16,540 | 15,731 | |
External Revenue | Global Business Services | |||||
Segment Information | |||||
Revenue | 3,965 | 4,160 | 11,992 | 12,513 | |
External Revenue | Global Technology Services | |||||
Segment Information | |||||
Revenue | 6,462 | 6,700 | 19,245 | 20,412 | |
External Revenue | Systems | |||||
Segment Information | |||||
Revenue | 1,257 | 1,481 | 4,477 | 4,562 | |
External Revenue | Global Financing | |||||
Segment Information | |||||
Revenue | 273 | 343 | 837 | 1,100 | |
Internal transactions | |||||
Segment Information | |||||
Revenue | (1,683) | (1,541) | (4,780) | (4,638) | |
Pre-tax income/(loss) from continuing operations | (158) | (84) | (334) | (233) | |
Internal transactions | Cloud & Cognitive Software | |||||
Segment Information | |||||
Revenue | (875) | (686) | (2,431) | (2,135) | |
Internal transactions | Global Business Services | |||||
Segment Information | |||||
Revenue | (49) | (70) | (150) | (213) | |
Internal transactions | Global Technology Services | |||||
Segment Information | |||||
Revenue | (312) | (287) | (911) | (879) | |
Internal transactions | Systems | |||||
Segment Information | |||||
Revenue | (240) | (195) | (628) | (528) | |
Internal transactions | Global Financing | |||||
Segment Information | |||||
Revenue | (208) | (302) | (660) | (884) | |
Business Segments | |||||
Segment Information | |||||
Revenue | 19,193 | 19,427 | 57,870 | 58,956 | |
Pre-tax income/(loss) from continuing operations | $ 2,962 | $ 2,661 | $ 6,708 | $ 7,938 | |
Revenue year-to-year change (as a percent) | (1.20%) | (1.80%) | |||
Pre-tax income/(loss) year-to-year change (as a percent) | 11.30% | (15.50%) | |||
Pre-tax income/(loss) margin (as a percent) | 15.40% | 13.70% | 11.60% | 13.50% | |
Business Segments | Cloud & Cognitive Software | |||||
Segment Information | |||||
Revenue | $ 6,428 | $ 5,888 | $ 18,971 | $ 17,865 | |
Pre-tax income/(loss) from continuing operations | $ 1,834 | $ 1,290 | $ 4,475 | $ 5,082 | |
Revenue year-to-year change (as a percent) | 9.20% | 6.20% | |||
Pre-tax income/(loss) year-to-year change (as a percent) | 42.20% | (11.90%) | |||
Pre-tax income/(loss) margin (as a percent) | 28.50% | 21.90% | 23.60% | 28.40% | |
Business Segments | Global Business Services | |||||
Segment Information | |||||
Revenue | $ 4,014 | $ 4,230 | $ 12,142 | $ 12,726 | |
Pre-tax income/(loss) from continuing operations | $ 570 | $ 567 | $ 1,203 | $ 1,154 | |
Revenue year-to-year change (as a percent) | (5.10%) | (4.60%) | |||
Pre-tax income/(loss) year-to-year change (as a percent) | 0.60% | 4.20% | |||
Pre-tax income/(loss) margin (as a percent) | 14.20% | 13.40% | 9.90% | 9.10% | |
Business Segments | Global Technology Services | |||||
Segment Information | |||||
Revenue | $ 6,774 | $ 6,988 | $ 20,155 | $ 21,291 | |
Pre-tax income/(loss) from continuing operations | $ 399 | $ 490 | $ 471 | $ 1,000 | |
Revenue year-to-year change (as a percent) | (3.10%) | (5.30%) | |||
Pre-tax income/(loss) year-to-year change (as a percent) | (18.70%) | (53.00%) | |||
Pre-tax income/(loss) margin (as a percent) | 5.90% | 7.00% | 2.30% | 4.70% | |
Business Segments | Systems | |||||
Segment Information | |||||
Revenue | $ 1,497 | $ 1,676 | $ 5,106 | $ 5,091 | |
Pre-tax income/(loss) from continuing operations | $ (37) | $ 39 | $ (7) | $ (101) | |
Revenue year-to-year change (as a percent) | (10.60%) | 0.30% | |||
Pre-tax income/(loss) year-to-year change (as a percent) | (93.60%) | ||||
Pre-tax income/(loss) margin (as a percent) | (2.50%) | 2.30% | (0.10%) | (2.00%) | |
Business Segments | Global Financing | |||||
Segment Information | |||||
Revenue | $ 480 | $ 645 | $ 1,497 | $ 1,983 | |
Pre-tax income/(loss) from continuing operations | $ 196 | $ 275 | $ 566 | $ 803 | |
Revenue year-to-year change (as a percent) | (25.60%) | (24.50%) | |||
Pre-tax income/(loss) year-to-year change (as a percent) | (28.90%) | (29.50%) | |||
Pre-tax income/(loss) margin (as a percent) | 40.70% | 42.60% | 37.80% | 40.50% | |
Adjustment | |||||
Segment Information | |||||
Revenue | $ 300 |
Segments - Revenue Reconciliati
Segments - Revenue Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Revenue | |||||
Revenue | $ 17,560 | $ 18,028 | $ 53,253 | $ 55,370 | $ 77,000 |
Business Segments | |||||
Revenue | |||||
Revenue | 19,193 | 19,427 | 57,870 | 58,956 | |
Other | |||||
Revenue | |||||
Other - divested businesses | 4 | 83 | 36 | 863 | |
Other revenue | 46 | 59 | 127 | 190 | |
Internal transactions | |||||
Revenue | |||||
Revenue | $ (1,683) | $ (1,541) | $ (4,780) | $ (4,638) |
Segments - Pre-Tax Income Recon
Segments - Pre-Tax Income Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Pre-tax income from continuing operations | ||||
Amortization of acquired intangible assets | $ (459) | $ (473) | $ (1,404) | $ (816) |
Acquisition-related (charges)/income | (1) | (255) | (3) | (396) |
Non-operating retirement-related (costs)/income | (291) | (145) | (829) | (419) |
Other - divested businesses | (20) | (25) | (17) | 480 |
Income from continuing operations before income taxes | 1,827 | 1,522 | 3,348 | 6,173 |
Business Segments | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | 2,962 | 2,661 | 6,708 | 7,938 |
Internal transactions | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | (158) | (84) | (334) | (233) |
Unallocated corporate amounts | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | $ (206) | $ (157) | $ (773) | $ (380) |
Acquisitions_Divestitures (Deta
Acquisitions/Divestitures (Details) $ / shares in Units, $ in Billions | Jul. 09, 2019USD ($)$ / shares | Sep. 30, 2020item | Jun. 30, 2020item | Mar. 31, 2020item | Sep. 30, 2020item |
Acquisitions | |||||
Percentage of business acquired (as a percent) | 100.00% | 100.00% | |||
Red Hat, Inc. | |||||
Acquisitions | |||||
Percentage of business acquired (as a percent) | 100.00% | ||||
Cash paid to acquiree shareholders (in dollars per share) | $ / shares | $ 190 | ||||
Aggregate acquisitions cost | $ 35 | ||||
Businesses acquired, cash consideration | $ 34 | ||||
Cloud & Cognitive Software | |||||
Acquisitions | |||||
Number of acquisitions | item | 1 | 1 | 1 | 3 |
Acquisitions_Divestitures - Pur
Acquisitions/Divestitures - Purchase Price Allocation (Details) - USD ($) $ in Millions | Jul. 09, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Acquisitions | ||||
Goodwill | $ 58,355 | $ 58,222 | $ 36,265 | |
Red Hat, Inc. | ||||
Acquisitions | ||||
Current assets | $ 3,186 | |||
Property, plant, and equipment/noncurrent assets | 948 | |||
Goodwill | 22,985 | $ 23,000 | ||
Total assets acquired | 40,592 | |||
Current liabilities | 1,395 | |||
Noncurrent liabilities | 4,117 | |||
Total liabilities assumed | 5,512 | |||
Total purchase price | $ 35,080 | |||
Acquired intangible asset, weighted average useful life | 10 years 10 months 24 days | |||
Cash and cash equivalents | $ 2,200 | |||
Short-term debt | 485 | |||
Red Hat, Inc. | Completed technology | ||||
Acquisitions | ||||
Intangible assets | $ 4,571 | |||
Acquired intangible asset, weighted average useful life | 9 years | |||
Red Hat, Inc. | Client relationships | ||||
Acquisitions | ||||
Intangible assets | $ 7,215 | |||
Acquired intangible asset, weighted average useful life | 10 years | |||
Red Hat, Inc. | Trademarks | ||||
Acquisitions | ||||
Intangible assets | $ 1,686 | |||
Acquired intangible asset, weighted average useful life | 20 years |
Acquisitions_Divestitures - Goo
Acquisitions/Divestitures - Goodwill (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 30, 2020 | Dec. 31, 2019 | Jul. 09, 2019 | Dec. 31, 2018 | |
Acquisitions | ||||
Goodwill | $ 58,355 | $ 58,222 | $ 36,265 | |
Red Hat, Inc. | ||||
Acquisitions | ||||
Goodwill | $ 23,000 | $ 22,985 | ||
Expected percent of goodwill deductible for tax purposes | 6.00% | |||
Cloud & Cognitive Software | Red Hat, Inc. | ||||
Acquisitions | ||||
Goodwill | $ 18,400 | |||
Global Technology Services | Red Hat, Inc. | ||||
Acquisitions | ||||
Goodwill | 3,100 | |||
Global Business Services | Red Hat, Inc. | ||||
Acquisitions | ||||
Goodwill | 1,100 | |||
Systems | Red Hat, Inc. | ||||
Acquisitions | ||||
Goodwill | $ 400 |
Acquisitions_Divestitures - Pro
Acquisitions/Divestitures - Pro forma information (Details) - Red Hat, Inc. - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Acquisitions | ||
Revenue | $ 18,567 | $ 57,424 |
Net income | $ 2,249 | $ 5,664 |
Acquisitions_Divestitures - Div
Acquisitions/Divestitures - Divestitures (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 |
Select Standalone Cloud and Cognitive Software Products | |||||
Divestitures | |||||
Consideration | $ 1,775 | ||||
Contingent consideration included in total | 150 | ||||
Cash consideration received | $ 812 | $ 812 | |||
Contingent consideration received | $ 90 | ||||
Cash payments by IBM for deferred revenue earned and received post divestiture | $ 51 | $ 270 | |||
Pre-tax gain on sale of business | 640 | ||||
Period after closing to receive outstanding contingent consideration | 27 months | ||||
Select Marketing Platform and Commerce Offerings | |||||
Divestitures | |||||
Pre-tax gain on sale of business | $ 80 | ||||
Select Marketing Platform and Commerce Offerings | U.S. | |||||
Divestitures | |||||
Cash consideration received | $ 240 | ||||
Remaining consideration to be received | $ 150 | ||||
Period after closing for receipt of remaining consideration | 36 months | ||||
Sales Performance Management Offerings | |||||
Divestitures | |||||
Cash consideration received | $ 230 | ||||
Pre-tax gain on sale of business | $ 136 |
Earnings Per Share of Common _3
Earnings Per Share of Common Stock - Computation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Weighted-average number of shares on which earnings per share calculations are based | ||||
Weighted-average shares outstanding during period (in shares) | 891,381,032 | 886,018,372 | 889,595,181 | 887,291,199 |
Add - Incremental shares under stock-based compensation plans (in shares) | 4,595,327 | 5,368,268 | 4,875,369 | 4,007,433 |
Add - Incremental shares associated with contingently issuable shares (in shares) | 1,315,874 | 1,453,105 | 1,286,300 | 1,228,726 |
Assuming dilution (in shares) | 897,292,233 | 892,839,745 | 895,756,850 | 892,527,357 |
Net income on which basic earnings per share is calculated | ||||
Income from continuing operations | $ 1,698 | $ 1,673 | $ 4,237 | $ 5,766 |
Income/(loss) from discontinued operations, net of tax | (1) | (1) | (2) | (5) |
Net income on which basic earnings per share is calculated | 1,698 | 1,672 | 4,234 | 5,761 |
Net income on which diluted earnings per share is calculated | ||||
Income from continuing operations | 1,698 | 1,673 | 4,237 | 5,766 |
Net income applicable to contingently issuable shares | (2) | 0 | ||
Income from continuing operations on which diluted earnings per share is calculated | 1,698 | 1,673 | 4,234 | 5,766 |
Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated | (1) | (1) | (2) | (5) |
Net income on which diluted earnings per share is calculated | $ 1,698 | $ 1,672 | $ 4,232 | $ 5,762 |
Assuming dilution | ||||
Continuing operations (in dollars per share) | $ 1.89 | $ 1.87 | $ 4.72 | $ 6.46 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Total (in dollars per share) | 1.89 | 1.87 | 4.72 | 6.45 |
Basic | ||||
Continuing operations (in dollars per share) | 1.90 | 1.89 | 4.76 | 6.50 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Total (in dollars per share) | $ 1.90 | $ 1.89 | $ 4.76 | $ 6.49 |
Earnings Per Share of Common _4
Earnings Per Share of Common Stock - Antidilutive Stock Options (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock Options | ||||
Antidilutive stock options | ||||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 1,510,886 | 761,659 | 1,386,591 | 886,899 |
Financial Assets & Liabilitie_2
Financial Assets & Liabilities - Impairment (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Financial Assets & Liabilities | ||||
Impairment for credit losses | $ 0 | $ 0 | ||
Non-credit impairment | $ 0 | $ 0 | ||
Available-for-sale securities impairment | $ 0 | $ 0 |
Financial Assets & Liabilitie_3
Financial Assets & Liabilities - Fair Value Measurements (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | $ 1,200 | $ 696 |
Potential reduction in net position of total derivative assets | 191 | 194 |
Potential reduction in net position of total derivative liabilities | 191 | 194 |
Recurring | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 10,638 | 4,819 |
Total assets | 12,043 | 5,823 |
Total liabilities | 583 | 673 |
Recurring | Prepaid expenses and other current assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 83 | 149 |
Recurring | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 121 | 94 |
Recurring | Other accrued expenses and liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 480 | 167 |
Recurring | Other liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 103 | 506 |
Recurring | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Equity investments | 1 | 0 |
Recurring | Level 1 | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 658 | 427 |
Recurring | Level 2 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | 1,200 | 696 |
Debt securities - noncurrent | 65 | |
Recurring | Level 2 | Interest rate contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 98 | 56 |
Recurring | Level 2 | Foreign exchange contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 93 | 175 |
Derivatives designated as hedging - Liabilities | 566 | 635 |
Derivatives not designated as hedging - Assets | 9 | 10 |
Derivatives not designated as hedging - Liabilities | 11 | 33 |
Recurring | Level 2 | Time deposits and certificates of deposit | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 9,880 | 4,392 |
Recurring | Level 2 | U.S. government securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 100 | |
Recurring | Level 1 And 2 | Equity contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives not designated as hedging - Assets | 4 | 1 |
Derivatives not designated as hedging - Liabilities | $ 7 | $ 4 |
Maximum | Debt | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Term of debt instrument | 2 years |
Financial Assets & Liabilitie_4
Financial Assets & Liabilities - Not Measured at Fair Value (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Long-Term Debt | ||
Long-term debt | $ 55,129 | $ 54,102 |
Fair value of long-term debt | $ 61,783 | $ 58,431 |
Financing Receivables - Payment
Financing Receivables - Payment Terms (Details) | 9 Months Ended |
Sep. 30, 2020 | |
Lease receivables | Minimum | |
Financing receivables | |
Financing receivable, payment terms | 2 years |
Lease receivables | Maximum | |
Financing receivables | |
Financing receivable, payment terms | 6 years |
Commercial financing receivables | Minimum | |
Financing receivables | |
Financing receivable, payment terms | 30 days |
Commercial financing receivables | Maximum | |
Financing receivables | |
Financing receivable, payment terms | 90 days |
Loan receivables | Maximum | |
Financing receivables | |
Financing receivable, payment terms | 7 years |
Financing Receivables - Compone
Financing Receivables - Components of Financing Receivables (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Components of the company's financing receivables | ||||
Financing receivables, gross | $ 17,849 | $ 17,849 | $ 23,504 | |
Unearned income | (822) | (822) | (1,083) | |
Residual value | 507 | 507 | ||
Amortized Cost/Recorded Investment | 17,534 | 17,534 | 22,421 | |
Allowance for credit losses | (264) | (264) | (221) | |
Unguaranteed residual value | 652 | |||
Guaranteed residual value | 53 | |||
Total financing receivables, net | 17,271 | 17,271 | 22,904 | |
Current portion | 10,848 | 10,848 | 14,192 | |
Noncurrent portion | 6,423 | 6,423 | 8,712 | |
Financing receivables pledged as collateral for borrowings | 596 | 596 | 1,062 | |
Sold financing receivables | 899 | 1,610 | ||
Lease receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 4,124 | 4,124 | 6,077 | |
Unearned income | (339) | (339) | (509) | |
Residual value | 507 | 507 | ||
Amortized Cost/Recorded Investment | 4,292 | 4,292 | 5,567 | |
Allowance for credit losses | (92) | (92) | (72) | $ (99) |
Unguaranteed residual value | 652 | |||
Guaranteed residual value | 53 | |||
Total financing receivables, net | 4,200 | 4,200 | 6,199 | |
Current portion | 1,813 | 1,813 | 2,334 | |
Noncurrent portion | 2,387 | 2,387 | 3,865 | |
Sold financing receivables | 435 | 852 | ||
Commercial financing receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 2,127 | 2,127 | 3,836 | |
Unearned income | (3) | (3) | (4) | |
Amortized Cost/Recorded Investment | 2,124 | 2,124 | 3,831 | |
Allowance for credit losses | (9) | (9) | (11) | |
Total financing receivables, net | 2,114 | 2,114 | 3,820 | |
Current portion | 2,114 | 2,114 | 3,820 | |
Loan receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 11,599 | 11,599 | 13,592 | |
Unearned income | (479) | (479) | (570) | |
Amortized Cost/Recorded Investment | 11,119 | 11,119 | 13,022 | |
Allowance for credit losses | (162) | (162) | (138) | $ (179) |
Total financing receivables, net | 10,957 | 10,957 | 12,884 | |
Current portion | 6,921 | 6,921 | 8,037 | |
Noncurrent portion | 4,036 | 4,036 | $ 4,847 | |
Sold financing receivables | $ 464 | $ 758 | ||
Minimum | ||||
Components of the company's financing receivables | ||||
Financing receivables sold that were due in the next 12 months (as a percent) | 50.00% |
Financing Receivables - Collect
Financing Receivables - Collectively Evaluated Financing Receivables (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Maximum | ||
Financing receivables | ||
Reasonable and supportable economic forecast duration | 2 years | |
Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | ||
Financing receivables | ||
Financing receivables - credit allowance, including related off-balance sheet commitments) | $ 64 |
Financing Receivables - By Port
Financing Receivables - By Portfolio Segment (Details) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020USD ($)item | Dec. 31, 2019USD ($)item | |
Financing receivables | ||
Number of portfolio segments | item | 2 | |
Number of classes of financing receivable | item | 3 | 3 |
Amortized cost/Recorded investment | $ 17,534 | $ 22,421 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 221 | |
Allowance for credit losses, ending balance | 264 | 221 |
Total Client Financing Receivables Portfolio Segment | ||
Financing receivables | ||
Amortized cost/Recorded investment | 15,411 | 18,590 |
Recorded investment collectively evaluated for impairment | 18,399 | |
Recorded investment individually evaluated for impairment | 191 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 210 | 279 |
Write-offs | (31) | (63) |
Recoveries | 2 | 2 |
Additions/(releases) | 40 | (5) |
Other | (9) | (2) |
Allowance for credit losses, ending balance | 254 | 210 |
Related allowance, collectively evaluated for impairment | 39 | |
Related allowance, individually evaluated for impairment | 171 | |
Total Client Financing Receivables Portfolio Segment | Americas | ||
Financing receivables | ||
Amortized cost/Recorded investment | 7,631 | 10,144 |
Recorded investment collectively evaluated for impairment | 10,032 | |
Recorded investment individually evaluated for impairment | 112 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 120 | 158 |
Write-offs | (27) | (42) |
Recoveries | 0 | 1 |
Additions/(releases) | 33 | 5 |
Other | (11) | (1) |
Allowance for credit losses, ending balance | 137 | 120 |
Related allowance, collectively evaluated for impairment | 25 | |
Related allowance, individually evaluated for impairment | 96 | |
Total Client Financing Receivables Portfolio Segment | EMEA | ||
Financing receivables | ||
Amortized cost/Recorded investment | 4,813 | 5,087 |
Recorded investment collectively evaluated for impairment | 5,040 | |
Recorded investment individually evaluated for impairment | 47 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 54 | 65 |
Write-offs | (1) | (3) |
Recoveries | 0 | 0 |
Additions/(releases) | 8 | (7) |
Other | 2 | 0 |
Allowance for credit losses, ending balance | 78 | 54 |
Related allowance, collectively evaluated for impairment | 11 | |
Related allowance, individually evaluated for impairment | 43 | |
Total Client Financing Receivables Portfolio Segment | Asia Pacific | ||
Financing receivables | ||
Amortized cost/Recorded investment | 2,968 | 3,359 |
Recorded investment collectively evaluated for impairment | 3,326 | |
Recorded investment individually evaluated for impairment | 32 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 36 | 56 |
Write-offs | (3) | (18) |
Recoveries | 2 | 1 |
Additions/(releases) | (1) | (3) |
Other | 0 | (1) |
Allowance for credit losses, ending balance | 39 | 36 |
Related allowance, collectively evaluated for impairment | 4 | |
Related allowance, individually evaluated for impairment | 32 | |
Lease receivables | ||
Financing receivables | ||
Amortized cost/Recorded investment | 4,292 | 5,567 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 72 | 99 |
Write-offs | (16) | |
Additions/(releases) | (6) | |
Allowance for credit losses, ending balance | 92 | 72 |
Lease receivables | Americas | ||
Financing receivables | ||
Amortized cost/Recorded investment | 3,419 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 33 | 53 |
Allowance for credit losses, ending balance | 33 | |
Lease receivables | EMEA | ||
Financing receivables | ||
Amortized cost/Recorded investment | 1,186 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 23 | 22 |
Allowance for credit losses, ending balance | 23 | |
Lease receivables | Asia Pacific | ||
Financing receivables | ||
Amortized cost/Recorded investment | 963 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 16 | 24 |
Allowance for credit losses, ending balance | 16 | |
Loan receivables | ||
Financing receivables | ||
Amortized cost/Recorded investment | 11,119 | 13,022 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 138 | 179 |
Write-offs | (47) | |
Additions/(releases) | 2 | |
Allowance for credit losses, ending balance | 162 | 138 |
Loan receivables | Americas | ||
Financing receivables | ||
Amortized cost/Recorded investment | 6,726 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 88 | 105 |
Allowance for credit losses, ending balance | 88 | |
Loan receivables | EMEA | ||
Financing receivables | ||
Amortized cost/Recorded investment | 3,901 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 31 | 43 |
Allowance for credit losses, ending balance | 31 | |
Loan receivables | Asia Pacific | ||
Financing receivables | ||
Amortized cost/Recorded investment | 2,395 | |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 20 | 32 |
Allowance for credit losses, ending balance | 20 | |
Cumulative Effect, Period of Adoption, Adjustment | Total Client Financing Receivables Portfolio Segment | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 41 | |
Allowance for credit losses, ending balance | 41 | |
Cumulative Effect, Period of Adoption, Adjustment | Total Client Financing Receivables Portfolio Segment | Americas | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 21 | |
Allowance for credit losses, ending balance | 21 | |
Cumulative Effect, Period of Adoption, Adjustment | Total Client Financing Receivables Portfolio Segment | EMEA | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 15 | |
Allowance for credit losses, ending balance | 15 | |
Cumulative Effect, Period of Adoption, Adjustment | Total Client Financing Receivables Portfolio Segment | Asia Pacific | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 5 | |
Allowance for credit losses, ending balance | 5 | |
Cumulative Effect, Period of Adoption, Adjusted Balance | Total Client Financing Receivables Portfolio Segment | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 252 | |
Allowance for credit losses, ending balance | 252 | |
Cumulative Effect, Period of Adoption, Adjusted Balance | Total Client Financing Receivables Portfolio Segment | Americas | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 142 | |
Allowance for credit losses, ending balance | 142 | |
Cumulative Effect, Period of Adoption, Adjusted Balance | Total Client Financing Receivables Portfolio Segment | EMEA | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 69 | |
Allowance for credit losses, ending balance | 69 | |
Cumulative Effect, Period of Adoption, Adjusted Balance | Total Client Financing Receivables Portfolio Segment | Asia Pacific | ||
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | $ 41 | |
Allowance for credit losses, ending balance | $ 41 |
Financing Receivables - Past Du
Financing Receivables - Past Due (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | $ 17,534 | $ 22,421 |
Total Client Financing Receivables Portfolio Segment | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 15,411 | 18,590 |
Amortized cost/Recorded Investment Not Accruing | 229 | 235 |
Impaired financing receivables individually evaluated for impairment with related allowance | 191 | |
Impaired financing receivables, related allowance | 170 | 171 |
Total Client Financing Receivables Portfolio Segment | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 416 | 465 |
Amortized cost/Recorded Investment > 90 Days and Accruing | 206 | 253 |
Billed Invoices > 90 Days and Accruing | 41 | 29 |
Total Client Financing Receivables Portfolio Segment | Americas | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 7,631 | 10,144 |
Amortized cost/Recorded Investment Not Accruing | 102 | |
Total Client Financing Receivables Portfolio Segment | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 257 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 166 | |
Billed Invoices > 90 Days and Accruing | 31 | |
Total Client Financing Receivables Portfolio Segment | EMEA | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 4,813 | 5,087 |
Amortized cost/Recorded Investment Not Accruing | 93 | |
Total Client Financing Receivables Portfolio Segment | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 99 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 13 | |
Billed Invoices > 90 Days and Accruing | 5 | |
Total Client Financing Receivables Portfolio Segment | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 2,968 | 3,359 |
Amortized cost/Recorded Investment Not Accruing | 34 | |
Total Client Financing Receivables Portfolio Segment | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 60 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 27 | |
Billed Invoices > 90 Days and Accruing | 6 | |
Lease receivables | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 4,292 | 5,567 |
Amortized cost/Recorded Investment Not Accruing | 69 | |
Lease receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 234 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 168 | |
Billed Invoices > 90 Days and Accruing | 14 | |
Lease receivables | Americas | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 3,419 | |
Amortized cost/Recorded Investment Not Accruing | 41 | |
Lease receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 187 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 147 | |
Billed Invoices > 90 Days and Accruing | 11 | |
Lease receivables | EMEA | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 1,186 | |
Amortized cost/Recorded Investment Not Accruing | 17 | |
Lease receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 28 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 13 | |
Billed Invoices > 90 Days and Accruing | 2 | |
Lease receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 963 | |
Amortized cost/Recorded Investment Not Accruing | 11 | |
Lease receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 19 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 7 | |
Billed Invoices > 90 Days and Accruing | 1 | |
Loan receivables | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | $ 11,119 | 13,022 |
Amortized cost/Recorded Investment Not Accruing | 166 | |
Loan receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 231 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 85 | |
Billed Invoices > 90 Days and Accruing | 15 | |
Loan receivables | Americas | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 6,726 | |
Amortized cost/Recorded Investment Not Accruing | 72 | |
Loan receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 127 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 71 | |
Billed Invoices > 90 Days and Accruing | 11 | |
Loan receivables | EMEA | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 3,901 | |
Amortized cost/Recorded Investment Not Accruing | 72 | |
Loan receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 77 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 8 | |
Billed Invoices > 90 Days and Accruing | 3 | |
Loan receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 2,395 | |
Amortized cost/Recorded Investment Not Accruing | 21 | |
Loan receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 26 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 6 | |
Billed Invoices > 90 Days and Accruing | $ 2 |
Financing Receivables - Credit
Financing Receivables - Credit Quality Year of Origination (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | $ 17,534 | $ 22,421 |
Americas | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,786 | |
2019 | 1,334 | |
2018 | 1,002 | |
2017 | 422 | |
2016 | 108 | |
2015 and prior | 41 | |
Amortized Cost/Recorded Investment | 4,694 | |
Americas | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,301 | |
2019 | 763 | |
2018 | 489 | |
2017 | 194 | |
2016 | 78 | |
2015 and prior | 112 | |
Amortized Cost/Recorded Investment | 2,937 | |
EMEA | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,038 | |
2019 | 745 | |
2018 | 372 | |
2017 | 92 | |
2016 | 44 | |
2015 and prior | 33 | |
Amortized Cost/Recorded Investment | 2,324 | |
EMEA | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,352 | |
2019 | 614 | |
2018 | 296 | |
2017 | 147 | |
2016 | 55 | |
2015 and prior | 25 | |
Amortized Cost/Recorded Investment | 2,489 | |
Asia Pacific | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 710 | |
2019 | 609 | |
2018 | 448 | |
2017 | 225 | |
2016 | 142 | |
2015 and prior | 58 | |
Amortized Cost/Recorded Investment | 2,193 | |
Asia Pacific | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 287 | |
2019 | 170 | |
2018 | 188 | |
2017 | 66 | |
2016 | 40 | |
2015 and prior | 23 | |
Amortized Cost/Recorded Investment | $ 775 |
Financing Receivables - Credi_2
Financing Receivables - Credit Quality Indicators (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Troubled debt restructurings of financing receivables | ||
Lease receivables | Americas | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 3,385 | |
Lease receivables | Americas | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 465 | |
Lease receivables | Americas | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 750 | |
Lease receivables | Americas | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 955 | |
Lease receivables | Americas | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 746 | |
Lease receivables | Americas | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 215 | |
Lease receivables | Americas | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 242 | |
Lease receivables | Americas | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 13 | |
Lease receivables | EMEA | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,162 | |
Lease receivables | EMEA | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 54 | |
Lease receivables | EMEA | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 181 | |
Lease receivables | EMEA | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 409 | |
Lease receivables | EMEA | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 326 | |
Lease receivables | EMEA | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 140 | |
Lease receivables | EMEA | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 50 | |
Lease receivables | EMEA | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 2 | |
Lease receivables | Asia Pacific | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 947 | |
Lease receivables | Asia Pacific | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 43 | |
Lease receivables | Asia Pacific | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 454 | |
Lease receivables | Asia Pacific | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 147 | |
Lease receivables | Asia Pacific | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 154 | |
Lease receivables | Asia Pacific | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 101 | |
Lease receivables | Asia Pacific | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 47 | |
Lease receivables | Asia Pacific | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 2 | |
Loan receivables | Americas | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 6,638 | |
Loan receivables | Americas | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,028 | |
Loan receivables | Americas | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,186 | |
Loan receivables | Americas | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,882 | |
Loan receivables | Americas | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,513 | |
Loan receivables | Americas | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 471 | |
Loan receivables | Americas | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 522 | |
Loan receivables | Americas | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 36 | |
Loan receivables | EMEA | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 3,871 | |
Loan receivables | EMEA | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 193 | |
Loan receivables | EMEA | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 395 | |
Loan receivables | EMEA | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 1,527 | |
Loan receivables | EMEA | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 921 | |
Loan receivables | EMEA | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 564 | |
Loan receivables | EMEA | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 253 | |
Loan receivables | EMEA | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 18 | |
Loan receivables | Asia Pacific | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 2,376 | |
Loan receivables | Asia Pacific | Aaa - Aa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 189 | |
Loan receivables | Asia Pacific | A1 - A3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 892 | |
Loan receivables | Asia Pacific | Baa1 - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 619 | |
Loan receivables | Asia Pacific | Ba1 - Ba2 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 388 | |
Loan receivables | Asia Pacific | Ba3 - B1 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 205 | |
Loan receivables | Asia Pacific | B2 - B3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | 72 | |
Loan receivables | Asia Pacific | Caa - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Amortized Cost/Recorded Investment | $ 10 |
Leases - Lease Amounts Included
Leases - Lease Amounts Included in Consolidated Income Statement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Lease income - sales-type and direct financing leases | ||||
Sales-type lease selling price | $ 154 | $ 188 | $ 733 | $ 516 |
Less: Carrying value of underlying assets | 64 | 75 | 258 | 204 |
Gross profit | 90 | 113 | 475 | 312 |
Interest income on lease receivables | 56 | 71 | 195 | 222 |
Total sales-type and direct financing lease income | 145 | 184 | 670 | 534 |
Lease income - operating leases | 65 | 80 | 204 | 252 |
Variable lease income | 25 | 12 | 82 | 38 |
Total lease income | $ 235 | $ 276 | $ 956 | $ 824 |
Intangible Assets Including G_3
Intangible Assets Including Goodwill - Intangible Assets by Class (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Intangible asset balances by major asset class | ||
Gross Carrying Amount | $ 18,634 | $ 19,287 |
Accumulated Amortization | (4,672) | (4,052) |
Net Carrying Amount | 13,962 | 15,235 |
Amount of foreign currency translation increase (decrease) | 133 | (42) |
Capitalized software | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 1,769 | 1,749 |
Accumulated Amortization | (785) | (743) |
Net Carrying Amount | 984 | 1,006 |
Client relationships | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 8,698 | 8,921 |
Accumulated Amortization | (1,852) | (1,433) |
Net Carrying Amount | 6,847 | 7,488 |
Completed technology | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 5,900 | 6,261 |
Accumulated Amortization | (1,531) | (1,400) |
Net Carrying Amount | 4,369 | 4,861 |
Patents/trademarks | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 2,210 | 2,301 |
Accumulated Amortization | (467) | (445) |
Net Carrying Amount | 1,743 | 1,856 |
Other intangible assets | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 56 | 56 |
Accumulated Amortization | (37) | (31) |
Net Carrying Amount | $ 18 | $ 24 |
Intangible Assets Including G_4
Intangible Assets Including Goodwill - Intangible Assets Activity (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Intangible assets | ||||
Intangible assets, increase (decrease) | $ (1,273) | |||
Intangible asset amortization expense | $ 613 | $ 614 | 1,858 | $ 1,224 |
Retirement of fully amortized intangible assets | $ 1,258 |
Intangible Assets Including G_5
Intangible Assets Including Goodwill - Future Amortization (Details) $ in Millions | Sep. 30, 2020USD ($) |
Future amortization expense, by year | |
Remainder of 2020 | $ 608 |
2021 | 2,267 |
2022 | 1,964 |
2023 | 1,458 |
2024 | 1,340 |
Thereafter | 6,324 |
Capitalized software | |
Future amortization expense, by year | |
Remainder of 2020 | 154 |
2021 | 501 |
2022 | 261 |
2023 | 68 |
2024 | 0 |
Acquired intangibles | |
Future amortization expense, by year | |
Remainder of 2020 | 454 |
2021 | 1,766 |
2022 | 1,704 |
2023 | 1,390 |
2024 | 1,340 |
Thereafter | $ 6,324 |
Intangible Assets Including G_6
Intangible Assets Including Goodwill - Goodwill by Segment (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 58,222 | $ 36,265 |
Goodwill Additions | 25 | 23,102 |
Purchase Price Adjustments | 24 | |
Divestitures | (1,257) | |
Foreign Currency Translation and Other Adjustments | 248 | 87 |
Ending Balance | 58,355 | 58,222 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Purchase Price Adjustments | (139) | |
Ending Balance | 23,000 | |
Cloud & Cognitive Software | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Ending Balance | 18,400 | |
Global Business Services | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Ending Balance | 1,100 | |
Global Technology Services | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Ending Balance | 3,100 | |
Systems | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Ending Balance | 400 | |
Business Segments | Cloud & Cognitive Software | ||
Changes in Goodwill Balances | ||
Beginning Balance | 43,037 | 24,463 |
Goodwill Additions | 25 | 18,399 |
Purchase Price Adjustments | 133 | |
Foreign Currency Translation and Other Adjustments | 186 | 41 |
Ending Balance | 43,109 | 43,037 |
Business Segments | Cloud & Cognitive Software | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Purchase Price Adjustments | (139) | |
Business Segments | Global Business Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 5,775 | 4,711 |
Goodwill Additions | 1,059 | |
Purchase Price Adjustments | 1 | |
Divestitures | (1) | |
Foreign Currency Translation and Other Adjustments | 47 | 5 |
Ending Balance | 5,822 | 5,775 |
Business Segments | Global Technology Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 7,141 | 3,988 |
Goodwill Additions | 3,119 | |
Foreign Currency Translation and Other Adjustments | 13 | 34 |
Ending Balance | 7,154 | 7,141 |
Business Segments | Systems | ||
Changes in Goodwill Balances | ||
Beginning Balance | 2,270 | 1,847 |
Goodwill Additions | 525 | |
Purchase Price Adjustments | (110) | |
Foreign Currency Translation and Other Adjustments | 1 | 7 |
Ending Balance | $ 2,270 | 2,270 |
Other | Divested businesses | ||
Changes in Goodwill Balances | ||
Beginning Balance | 1,256 | |
Divestitures | $ (1,256) |
Borrowings - Short-Term Debt (D
Borrowings - Short-Term Debt (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Short-term debt disclosures | ||
Commercial paper | $ 25 | $ 304 |
Short-term loans | 584 | 971 |
Long-term debt - current maturities | 9,677 | 7,522 |
Short-term Debt, Total | $ 10,285 | $ 8,797 |
Commercial paper | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 1.40% | 1.60% |
Short-term loans | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 5.40% | 6.10% |
Borrowings - Long-Term Debt, Co
Borrowings - Long-Term Debt, Components (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 65,106 | $ 62,003 |
Finance lease obligations | 291 | 204 |
Long-term debt, gross | 65,397 | 62,207 |
Less: net unamortized discount | 884 | 881 |
Less: net unamortized debt issuance cost | 161 | 142 |
Add: fair value adjustment | 453 | 440 |
Total | 64,805 | 61,624 |
Less: current maturities | 9,677 | 7,522 |
Total long-term debt (excluding current portion) | $ 55,129 | 54,102 |
Finance lease obligations, interest rate | 1.90% | |
U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 42,771 | 44,594 |
Euro | ||
Borrowings | ||
Long-term debt, gross | $ 19,354 | 14,306 |
Debt instrument, weighted-average interest rate (as a percent) | 1.10% | |
Pound sterling | ||
Borrowings | ||
Long-term debt, gross | $ 1,360 | 1,390 |
Debt instrument, weighted-average interest rate (as a percent) | 2.70% | |
Japanese yen | ||
Borrowings | ||
Long-term debt, gross | $ 1,379 | 1,339 |
Debt instrument, weighted-average interest rate (as a percent) | 0.30% | |
Other | ||
Borrowings | ||
Long-term debt, gross | $ 242 | 375 |
Debt instrument, weighted-average interest rate (as a percent) | 3.10% | |
Maturing 2020 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,500 | 4,326 |
Debt instrument, weighted-average interest rate (as a percent) | 2.10% | |
Maturing 2021 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,516 | 8,498 |
Debt instrument, weighted-average interest rate (as a percent) | 1.40% | |
Maturing 2022 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 6,245 | 6,289 |
Debt instrument, weighted-average interest rate (as a percent) | 2.60% | |
Maturing 2023 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,406 | 2,388 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2024 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,035 | 5,045 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2025 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 635 | 636 |
Debt instrument, weighted-average interest rate (as a percent) | 6.70% | |
Maturing 2026 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 4,373 | 4,350 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2027 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,219 | 969 |
Debt instrument, weighted-average interest rate (as a percent) | 3.00% | |
Maturing 2028 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 313 | 313 |
Debt instrument, weighted-average interest rate (as a percent) | 6.50% | |
Maturing 2029 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 3,250 | 3,250 |
Debt instrument, weighted-average interest rate (as a percent) | 3.50% | |
Maturing 2030 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,350 | |
Debt instrument, weighted-average interest rate (as a percent) | 2.00% | |
Maturing 2032 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 600 | 600 |
Debt instrument, weighted-average interest rate (as a percent) | 5.90% | |
Maturing 2038 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 83 | 83 |
Debt instrument, weighted-average interest rate (as a percent) | 8.00% | |
Maturing 2039 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,745 | 2,745 |
Debt instrument, weighted-average interest rate (as a percent) | 4.50% | |
Maturing 2040 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 650 | |
Debt instrument, weighted-average interest rate (as a percent) | 2.90% | |
Maturing 2042 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,107 | 1,107 |
Debt instrument, weighted-average interest rate (as a percent) | 4.00% | |
Maturing 2045 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 27 | 27 |
Debt instrument, weighted-average interest rate (as a percent) | 7.00% | |
Maturing 2046 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 650 | 650 |
Debt instrument, weighted-average interest rate (as a percent) | 4.70% | |
Maturing 2049 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 3,000 | 3,000 |
Debt instrument, weighted-average interest rate (as a percent) | 4.30% | |
Maturing 2050 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 750 | |
Debt instrument, weighted-average interest rate (as a percent) | 3.00% | |
Maturing 2096 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 316 | $ 316 |
Debt instrument, weighted-average interest rate (as a percent) | 7.10% |
Borrowings - Long-Term Debt, _2
Borrowings - Long-Term Debt, Covenants (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Borrowings | |
Limit based on net tangible assets | 10.00% |
Credit Facilities | |
Borrowings | |
Minimum net interest expense ratio | 2.20 |
Default provision on credit facility | $ 500 |
Borrowings - Long-Term Debt, De
Borrowings - Long-Term Debt, Debt Issued (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | |
Long-term Debt Instrument | |||
Notes Issued | |||
Aggregate amount of debt issued | $ 20,000 | ||
U.S dollar. fixed and/or floating rate notes | |||
Notes Issued | |||
Aggregate amount of debt issued | $ 4,000 | 20,000 | |
Euro fixed-rate notes | |||
Notes Issued | |||
Aggregate amount of debt issued | 4,100 | $ 5,700 | |
Fixed rate debt due in 2021 | |||
Notes Issued | |||
Outstanding debt redeemed | $ 2,900 | ||
Loss upon redemption on notes | $ (49) |
Borrowings - Pre-Swap Obligatio
Borrowings - Pre-Swap Obligations (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Pre-swap annual contractual obligations of long-term debt outstanding | ||
Remainder of 2020 | $ 4,343 | |
2021 | 7,003 | |
2022 | 7,276 | |
2023 | 5,564 | |
2024 | 6,454 | |
Thereafter | 34,757 | |
Total | $ 65,397 | $ 62,207 |
Borrowings - Interest on Debt (
Borrowings - Interest on Debt (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Interest on Debt | ||
Interest capitalized | $ 6 | $ 5 |
Total interest paid and accrued | 1,323 | 1,478 |
Cost of financing | ||
Interest on Debt | ||
Interest paid | 346 | 483 |
Interest expense | ||
Interest on Debt | ||
Interest paid | $ 971 | $ 990 |
Borrowings - Lines of Credit (D
Borrowings - Lines of Credit (Details) - USD ($) $ in Millions | Jul. 02, 2020 | Jun. 30, 2020 | Sep. 30, 2020 |
Five-Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 10,250 | ||
Credit facility term | 5 years | ||
Option to extend maturity period | 2 years | ||
364-Day Credit Agreement, 2019 | |||
Lines of Credit | |||
Amount of credit facility | $ 2,500 | ||
Credit facility term | 364 days | ||
Three-Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 2,500 | ||
Credit facility term | 3 years | ||
Credit Agreement 364 Days 2020 | |||
Lines of Credit | |||
Amount of credit facility | $ 2,500 | ||
Credit facility term | 364 days | ||
Credit Facilities | |||
Lines of Credit | |||
Borrowings outstanding | $ 0 |
Commitments - Extensions of Cre
Commitments - Extensions of Credit (Details) - USD ($) $ in Billions | Sep. 30, 2020 | Dec. 31, 2019 |
Extended lines of credit | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 1.9 | $ 1.8 |
Financing for client purchase agreements | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 5.3 | $ 6.3 |
Commitments - Standard Warranty
Commitments - Standard Warranty Liability (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Movement in standard warranty liability | ||
Beginning Balance | $ 113 | $ 118 |
Current period accruals | 56 | 66 |
Accrual adjustments to reflect actual experience | (15) | (1) |
Charges incurred | (73) | (86) |
Ending Balance | $ 80 | $ 98 |
Commitments - Extended Warranty
Commitments - Extended Warranty Liability (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Movement in deferred income | ||||
Amortization of deferred revenue | $ (4,200) | $ (8,600) | ||
Current portion | 11,681 | 11,681 | $ 12,026 | |
Noncurrent portion | 3,820 | 3,820 | $ 3,851 | |
Extended Warranty | ||||
Movement in deferred income | ||||
Beginning Balance | 477 | $ 533 | ||
Revenue deferred for new extended warranty contracts | 115 | 124 | ||
Amortization of deferred revenue | (169) | (194) | ||
Other | (3) | (8) | ||
Ending Balance | 419 | 419 | 455 | |
Current portion | 196 | 196 | 226 | |
Noncurrent portion | $ 223 | $ 223 | $ 230 |
Contingencies (Details)
Contingencies (Details) $ in Millions | 1 Months Ended | 9 Months Ended | |
May 31, 2015defendant | Sep. 30, 2020USD ($)country | Oct. 30, 2017claim | |
Brazil Tax Matters | |||
Loss Contingencies | |||
Damages sought, value | $ | $ 700 | ||
SCO v. IBM | |||
Loss Contingencies | |||
Number of remaining claims | claim | 1 | ||
Litigation Case In United States District Court regarding divesting Microelectronics business, alleging violations of the Employee Retirement Income Security Act | |||
Loss Contingencies | |||
Number of officers or executives named as defendants | defendant | 3 | ||
Minimum | |||
Loss Contingencies | |||
Clients' presence in number of countries | country | 175 |
Equity Activity - Reclassificat
Equity Activity - Reclassifications and Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | $ 9,130 | $ 9,692 | $ 28,202 | $ 29,982 |
SG&A expense | 4,647 | 5,024 | 15,849 | 15,171 |
Other (income) and expense | 253 | (31) | 614 | (850) |
Interest expense | 323 | 432 | 971 | 990 |
Provision for/(benefit from) income taxes | 128 | (151) | (888) | 407 |
Net (income) loss | (1,698) | (1,672) | (4,234) | (5,761) |
Other comprehensive income/(loss) | 172 | (245) | 12 | 404 |
Services | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 7,357 | 7,840 | 22,720 | 24,293 |
Sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 1,601 | 1,635 | 4,964 | 4,979 |
Financing | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 172 | 217 | 517 | 710 |
Accumulated Other Comprehensive Income/(Loss) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (1,242) | (916) | ||
Reclassification/amortization, Net of Tax Amount | 1,255 | 1,320 | ||
Other comprehensive income/(loss), Before Tax Amount | 66 | 4 | 187 | 784 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 106 | (249) | (175) | (380) |
Other comprehensive income/(loss) | 172 | (245) | 12 | 404 |
Foreign Currency Translation Adjustments | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (1,094) | (405) | ||
Other comprehensive income/(loss), Before Tax Amount | (439) | (509) | (1,354) | (333) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 247 | (109) | 260 | (72) |
Other comprehensive income/(loss) | (192) | (618) | (1,094) | (405) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Before Tax Amount | (1) | 3 | 0 | 1 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | (1) | 0 | 0 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (1) | 2 | 0 | 1 |
Other comprehensive income/(loss), Before Tax Amount | (1) | 3 | 0 | 1 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 0 | (1) | 0 | 0 |
Other comprehensive income/(loss) | (1) | 2 | 0 | 1 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Before Tax Amount | (32) | (439) | (249) | (798) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 8 | 110 | 63 | 196 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (24) | (329) | (186) | (601) |
Reclassification/amortization, Net of Tax Amount | (27) | 315 | ||
Other comprehensive income/(loss), Before Tax Amount | (101) | 49 | (285) | (380) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 26 | (12) | 73 | 93 |
Other comprehensive income/(loss) | (75) | 36 | (212) | (287) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
SG&A expense | 5 | (11) | (12) | (45) |
Other (income) and expense | (93) | 447 | (74) | 331 |
Interest expense | 19 | 64 | 60 | 150 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Services | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | (10) | (22) | (18) | (52) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 4 | (10) | (14) | (40) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Financing | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 6 | 21 | 21 | 73 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of services | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | 2 | 6 | 5 | 13 |
Net (income) loss | (7) | (17) | (14) | (38) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | (1) | 3 | 4 | 11 |
Net (income) loss | 3 | (7) | (10) | (29) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of financing | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | (2) | (5) | (5) | (18) |
Net (income) loss | 5 | 15 | 16 | 55 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | SG&A expense | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | (1) | 3 | 3 | 12 |
Net (income) loss | 4 | (8) | (9) | (33) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Other (income) and expense | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | 23 | (112) | 19 | (83) |
Net (income) loss | (70) | 334 | (55) | 248 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Interest expense | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | (5) | (16) | (15) | (38) |
Net (income) loss | 14 | 48 | 45 | 112 |
Net Change Retirement-Related Benefit Plans | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 37 | 89 | ||
Reclassification/amortization, Net of Tax Amount | 1,281 | 1,005 | ||
Other comprehensive income/(loss), Before Tax Amount | 607 | 461 | 1,826 | 1,496 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (167) | (127) | (507) | (401) |
Other comprehensive income/(loss) | 440 | 335 | 1,319 | 1,095 |
Retirement-Related Benefit Plans, Prior Service Costs/(Credits) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Before Tax Amount | (1) | (5) | ||
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 1 | ||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | (3) | ||
Reclassification/amortization, Before Tax Amount | 0 | (3) | 1 | (9) |
Reclassification/amortization, Tax (Expense)/Benefit | 1 | 3 | 2 | 4 |
Reclassification/amortization, Net of Tax Amount | 1 | (1) | 3 | (5) |
Retirement-Related Benefit Plans, Net Gains/(Losses) | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Before Tax Amount | 0 | 0 | 65 | 113 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 0 | (24) | (23) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | 0 | 41 | 90 |
Reclassification/amortization, Before Tax Amount | 586 | 461 | 1,722 | 1,385 |
Reclassification/amortization, Tax (Expense)/Benefit | (161) | (128) | (473) | (380) |
Reclassification/amortization, Net of Tax Amount | 425 | 333 | 1,249 | 1,005 |
Retirement-Related Benefit Plans, Curtailments and Settlements | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Unrealized gains/(losses) arising during the period, Before Tax Amount | 21 | 3 | 42 | 7 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (6) | (1) | (12) | (1) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | $ 14 | $ 2 | $ 30 | $ 6 |
Equity Activity - AOCI Rollforw
Equity Activity - AOCI Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | $ 20,688 | $ 17,776 | $ 20,985 | $ 16,929 |
Other comprehensive income/(loss) | 172 | (245) | 12 | 404 |
Balance at the End of the Period | 21,334 | 18,096 | 21,334 | 18,096 |
Accumulated Other Comprehensive Income/(Loss) | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (28,757) | (28,841) | (28,597) | (29,490) |
Other comprehensive income before reclassifications | (1,242) | (916) | ||
Amount reclassified from accumulated other comprehensive income | 1,255 | 1,320 | ||
Other comprehensive income/(loss) | 172 | (245) | 12 | 404 |
Balance at the End of the Period | (28,584) | (29,086) | (28,584) | (29,086) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (179) | 284 | ||
Other comprehensive income before reclassifications | (24) | (329) | (186) | (601) |
Amount reclassified from accumulated other comprehensive income | (27) | 315 | ||
Other comprehensive income/(loss) | (75) | 36 | (212) | (287) |
Balance at the End of the Period | (391) | (3) | (391) | (3) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (3,700) | (3,690) | ||
Other comprehensive income before reclassifications | (1,094) | (405) | ||
Other comprehensive income/(loss) | (192) | (618) | (1,094) | (405) |
Balance at the End of the Period | (4,794) | (4,095) | (4,794) | (4,095) |
Net Change Retirement-Related Benefit Plans | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (24,718) | (26,083) | ||
Other comprehensive income before reclassifications | 37 | 89 | ||
Amount reclassified from accumulated other comprehensive income | 1,281 | 1,005 | ||
Other comprehensive income/(loss) | 440 | 335 | 1,319 | 1,095 |
Balance at the End of the Period | (23,399) | (24,988) | (23,399) | (24,988) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | 0 | 0 | ||
Other comprehensive income before reclassifications | (1) | 2 | 0 | 1 |
Other comprehensive income/(loss) | (1) | 2 | 0 | 1 |
Balance at the End of the Period | $ 0 | $ 0 | $ 0 | $ 0 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Offsetting (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Derivative Financial Instruments | ||
Potential reduction in net position of total derivative assets | $ 191 | $ 194 |
Potential reduction in net position of total derivative liabilities | 191 | 194 |
Cash collateral rehypothecated | 0 | 0 |
Other receivables | ||
Derivative Financial Instruments | ||
Right to reclaim cash collateral | $ 0 | $ 26 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Hedging Programs (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | |
Instruments in net investment hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 8,600 | $ 7,900 | |
Average remaining maturity | 2 months 12 days | 1 month 6 days | |
Interest rate swaps | Derivative instruments in fair value hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 3,000 | $ 3,000 | |
Average remaining maturity | 1 year 4 months 24 days | 2 years 2 months 12 days | |
Interest rate swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 0 | $ 0 | |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 4,200 | 7,100 | |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | Maximum | |||
Derivative Financial Instruments | |||
Term of contract | 1 year | ||
Foreign exchange contracts | Instruments in net investment hedges | |||
Derivative Financial Instruments | |||
Increase (decrease) in derivative | $ 10,500 | ||
Notional amount | $ 17,800 | 7,300 | |
Foreign exchange forward contracts | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 4 years | ||
Notional amount | $ 8,900 | $ 9,700 | |
Average remaining maturity | 8 months 12 days | 9 months 18 days | |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | $ (72) | $ 145 | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (144) | ||
Cross-currency swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 7 years | ||
Increase (decrease) in derivative | $ (5,700) | ||
Notional amount | 2,400 | 8,200 | |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | (266) | $ (185) | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (24) | ||
Forward-starting interest rate swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Amount of terminated derivative | $ 5,500 | ||
Number of derivative instruments outstanding | 0 | 0 | |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | $ (179) | $ (192) | |
Gains (losses) expected to be reclassified to net income within the next 12 months | (18) | ||
Equity contracts hedging employee compensation obligations | Not designated as hedging instruments - economic hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 1,200 | $ 1,300 | |
Long-term Debt Instrument | |||
Derivative Financial Instruments | |||
Aggregate amount of debt issued | $ 20,000 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Cumulative Basis Adjustments for Fair Value Hedges (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Short-term debt | ||
Amounts recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges | ||
Carrying amount of the hedged item | $ (1,308) | |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | (8) | |
Long-term debt | ||
Amounts recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges | ||
Carrying amount of the hedged item | (2,117) | $ (3,411) |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | (445) | (440) |
Hedging adjustments on discontinued hedging relationships | $ (365) | $ (404) |
Derivative Financial Instrume_6
Derivative Financial Instruments - Effect of Hedge Activity on Income and Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative Instruments, Gain (Loss) | ||||
Cost | $ 9,130 | $ 9,692 | $ 28,202 | $ 29,982 |
SG&A expense | 4,647 | 5,024 | 15,849 | 15,171 |
Other (income) and expense | 253 | (31) | 614 | (850) |
Interest expense | 323 | 432 | 971 | 990 |
Cost of services | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 10 | 22 | 18 | 52 |
Cost of sales | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | (4) | 10 | 14 | 40 |
Cost of financing | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 3 | (11) | 9 | (47) |
SG&A expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 58 | 20 | 24 | 199 |
Other (income) and expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 101 | (561) | 92 | (358) |
Interest expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 8 | (35) | 24 | (96) |
Services | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | 7,357 | 7,840 | 22,720 | 24,293 |
Sales | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | 1,601 | 1,635 | 4,964 | 4,979 |
Financing | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | $ 172 | $ 217 | $ 517 | $ 710 |
Derivative Financial Instrume_7
Derivative Financial Instruments - Gains and Losses (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | $ 71 | $ (94) | $ 108 | $ 283 |
Gain (loss) recognized in earnings attributable to risk being hedged | 27 | 0 | (13) | (133) |
Cash flow hedges and net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (1,015) | (4) | (1,281) | (491) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 69 | (488) | 37 | (418) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | 9 | 27 | 50 | 57 |
Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (168) | |||
Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (32) | (439) | (249) | (630) |
Foreign exchange contracts | Instruments in net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (983) | 435 | (1,033) | 306 |
Cost of services | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 10 | 22 | 18 | 52 |
Cost of sales | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (4) | 10 | 14 | 40 |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 0 | 3 | 20 | 51 |
Gain (loss) recognized in earnings attributable to risk being hedged | 7 | 0 | (3) | (44) |
Cost of financing | Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (1) | (1) | (3) | (2) |
Cost of financing | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (5) | (20) | (18) | (71) |
Cost of financing | Foreign exchange contracts | Instruments in net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | 2 | 7 | 13 | 19 |
SG&A expense | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (5) | 11 | 12 | 45 |
SG&A expense | Equity contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 63 | 9 | 12 | 153 |
Other (income) and expense | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 93 | (447) | 74 | (331) |
Other (income) and expense | Foreign exchange contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 8 | (114) | 18 | (27) |
Interest expense | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 0 | 9 | 57 | 105 |
Gain (loss) recognized in earnings attributable to risk being hedged | 20 | 0 | (9) | (89) |
Interest expense | Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (3) | (3) | (10) | (5) |
Interest expense | Foreign exchange contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (15) | (61) | (50) | (146) |
Interest expense | Foreign exchange contracts | Instruments in net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | $ 7 | $ 20 | $ 37 | $ 38 |
Derivative Financial Instrume_8
Derivative Financial Instruments - Other Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative Financial Instruments | ||||
Gains (losses) excluded from the assessment of hedge effectiveness for fair value hedges | ||||
Gains (losses) excluded from the assessment of hedge effectiveness for cash flow hedges | ||||
Gains (losses) associated with underlying exposure that did not occur or was not expected to occur for cash flow hedges |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 222 | $ 220 | $ 658 | $ 468 |
Income tax benefits | (50) | (50) | (146) | (104) |
Net stock-based compensation cost | 172 | 170 | 512 | 364 |
Pre-tax stock-based compensation cost increase (decrease) | 2 | 189 | ||
Unrecognized compensation cost related to non-vested awards | 1,400 | $ 1,400 | ||
Unrecognized compensation cost related to non-vested awards, weighted average period of recognition | 2 years 6 months | |||
Restricted Stock Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 49 | $ 112 | ||
Performance Share Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | (27) | (29) | ||
Red Hat, Inc. | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) related to conversion of stock-based awards of acquired entities | (20) | 107 | ||
Cost | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 42 | 29 | 109 | 71 |
SG&A expense | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 129 | 147 | 401 | 313 |
Research, development and engineering | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 50 | $ 44 | $ 147 | $ 84 |
Retirement-Related Benefits - A
Retirement-Related Benefits - All Retirement Plans Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Retirement-Related Benefits | ||||
Defined benefit and contribution pension plans - cost | $ 610 | $ 459 | $ 1,789 | $ 1,337 |
Nonpension postretirement plans - cost | 50 | 53 | 151 | 160 |
Total | $ 660 | $ 512 | $ 1,941 | $ 1,497 |
Year-to-year percent change, defined benefit and contribution pension plans cost (as a percent) | 32.90% | 33.80% | ||
Year-to-year percent change, nonpension postretirement plans cost (as a percent) | (5.90%) | (5.20%) | ||
Year-to-year percent change, total (as a percent) | 28.90% | 29.60% |
Retirement-Related Benefits - C
Retirement-Related Benefits - Cost of Pension Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Cost/(Income) of Pension Plans | ||||
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | $ 610 | $ 459 | $ 1,789 | $ 1,337 |
U.S. | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Interest cost | $ 375 | $ 470 | $ 1,126 | $ 1,411 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (542) | $ (650) | $ (1,627) | $ (1,949) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of prior service costs/(credits) | $ 4 | $ 4 | $ 12 | $ 12 |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 207 | $ 140 | $ 622 | $ 419 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Other costs - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 44 | $ (36) | $ 133 | $ (107) |
Cost of defined contribution plans | 148 | 151 | 457 | 440 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | 192 | 115 | 590 | 333 |
Non-U.S. | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Service cost | 99 | 93 | 289 | 279 |
Interest cost | $ 142 | $ 202 | $ 408 | $ 616 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (323) | $ (391) | $ (943) | $ (1,186) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of prior service costs/(credits) | $ (5) | $ (7) | $ (14) | $ (20) |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 360 | $ 313 | $ 1,041 | $ 939 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements | $ 21 | $ 3 | $ 42 | $ 7 |
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Multi-employer plans | $ 7 | $ 10 | $ 22 | $ 26 |
Other costs/(credits) | $ 6 | $ 11 | $ 20 | $ 22 |
Other costs - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 307 | $ 235 | $ 865 | $ 683 |
Cost of defined contribution plans | 111 | 109 | 334 | 321 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | $ 418 | $ 344 | $ 1,200 | $ 1,004 |
Retirement-Related Benefits - N
Retirement-Related Benefits - Nonpension Postretirement Cost (Details) - Nonpension Postretirement Benefit Plans - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
U.S. | ||||
Post retirement plan cost | ||||
Service cost | $ 2 | $ 3 | $ 7 | $ 8 |
Interest cost | $ 26 | $ 36 | $ 77 | $ 109 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of prior service costs/(credits) | $ 1 | $ (1) | $ 3 | $ (2) |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 7 | $ 0 | $ 22 | $ 0 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 36 | $ 38 | $ 109 | $ 115 |
Non-U.S. | ||||
Post retirement plan cost | ||||
Service cost | 1 | 1 | 4 | 4 |
Interest cost | $ 8 | $ 12 | $ 26 | $ 37 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (1) | $ (1) | $ (3) | $ (4) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of prior service costs/(credits) | $ 0 | $ 0 | $ 0 | $ 0 |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 5 | $ 3 | $ 16 | $ 8 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements | $ 0 | $ 0 | ||
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 14 | $ 15 | $ 43 | $ 45 |
Retirement-Related Benefits -_2
Retirement-Related Benefits - Contributions (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Retirement-Related Benefits | ||||
Employer contributions | $ 80 | $ 66 | $ 392 | $ 421 |
Pension Plans, including Multi-employer Plans, and Nonpension Postretirement Benefits Plans | ||||
Retirement-Related Benefits | ||||
Contributions by employer - Noncash | 65 | 65 | 475 | 421 |
U.S. | ||||
Retirement-Related Benefits | ||||
Employer contributions | 65 | 35 | 265 | 262 |
Non-U.S. | ||||
Retirement-Related Benefits | ||||
Employer contributions | $ 16 | $ 32 | $ 127 | $ 159 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event - USD ($) $ / shares in Units, $ in Billions | Oct. 27, 2020 | Dec. 31, 2020 |
Subsequent Events | ||
Dividend declared, date | Oct. 27, 2020 | |
Dividend declared (in dollars per share) | $ 1.63 | |
Dividend payable, date | Dec. 10, 2020 | |
Shareholders of record, date | Nov. 10, 2020 | |
Expected | ||
Subsequent Events | ||
Charge for structural actions | $ 2.3 |