Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 10, 2021 | Jun. 30, 2020 | |
Document Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 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 Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
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 | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 893,594,090 | ||
Entity Public Float | $ 107.5 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
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 | 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 | 1.250% 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 | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue (Note C) | $ 73,620 | $ 77,147 | $ 79,591 |
Cost | 38,046 | 40,659 | 42,655 |
Gross profit | 35,575 | 36,488 | 36,936 |
Expense and other (income) | |||
Selling, general and administrative | 23,082 | 20,604 | 19,366 |
Research, development and engineering (Note F) | 6,333 | 5,989 | 5,379 |
Intellectual property and custom development income | (626) | (648) | (1,026) |
Other (income) and expense | 861 | (968) | 1,152 |
Interest expense (Note P&T) | 1,288 | 1,344 | 723 |
Total expense and other (income) | 30,937 | 26,322 | 25,594 |
Income from continuing operations before income taxes | 4,637 | 10,166 | 11,342 |
Provision for/(benefit from) income taxes (Note G) | (864) | 731 | 2,619 |
Income from continuing operations | 5,501 | 9,435 | 8,723 |
Income/(loss) from discontinued operations, net of tax | 89 | (4) | 5 |
Net income | $ 5,590 | $ 9,431 | $ 8,728 |
Assuming dilution | |||
Continuing operations (in dollars per share) (Note H) | $ 6.13 | $ 10.57 | $ 9.51 |
Discontinued operations (in dollars per share) (Note H) | 0.10 | (0.01) | 0.01 |
Total (in dollars per share) (Note H) | 6.23 | 10.56 | 9.52 |
Basic | |||
Continuing operations (in dollars per share) (Note H) | 6.18 | 10.63 | 9.56 |
Discontinued operations (in dollars per share) (Note H) | 0.10 | 0 | 0.01 |
Total (in dollars per share) (Note H) | $ 6.28 | $ 10.63 | $ 9.57 |
Weighted-average number of common shares outstanding | |||
Assuming dilution (in shares) | 896,563,971 | 892,813,376 | 916,315,714 |
Basic (in shares) | 890,348,679 | 887,235,105 | 912,048,072 |
Services | |||
Revenue (Note C) | $ 45,004 | $ 47,493 | $ 49,257 |
Cost | 30,404 | 32,491 | 33,687 |
Sales | |||
Revenue (Note C) | 27,484 | 28,252 | 28,735 |
Cost | 6,934 | 7,263 | 7,835 |
Financing | |||
Revenue (Note C) | 1,133 | 1,402 | 1,599 |
Cost | $ 708 | $ 904 | $ 1,132 |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||
Net income | $ 5,590 | $ 9,431 | $ 8,728 |
Other comprehensive income/(loss), before tax | |||
Foreign currency translation adjustments (Note S) | (1,500) | (39) | (730) |
Net changes related to available-for-sale securities (Note S) | |||
Unrealized gains/(losses) arising during the period | (1) | 1 | (2) |
Total net changes related to available-for-sale securities | (1) | 1 | (2) |
Unrealized gains/(losses) on cash flow hedges (Note S) | |||
Unrealized gains/(losses) arising during the period | (349) | (689) | (136) |
Reclassification of (gains)/losses to net income | (21) | 75 | 449 |
Total unrealized gains/(losses) on cash flow hedges | (370) | (614) | 313 |
Retirement-related benefit plans (Note S) | |||
Prior service costs/(credits) | (37) | (73) | (182) |
Net (losses)/gains arising during the period | (1,678) | (120) | (2,517) |
Curtailments and settlements | 52 | 41 | 11 |
Amortization of prior service (credits)/costs | 13 | (9) | (73) |
Amortization of net (gains)/losses | 2,314 | 1,843 | 2,966 |
Total retirement-related benefit plans | 664 | 1,681 | 204 |
Other comprehensive income/(loss), before tax (Note S) | (1,206) | 1,029 | (215) |
Income tax (expense)/benefit related to items of other comprehensive income (Note S) | 466 | (136) | (262) |
Other comprehensive income/(loss) (Note S) | (740) | 893 | (476) |
Total comprehensive income | $ 4,850 | $ 10,324 | $ 8,252 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 13,212 | $ 8,172 |
Restricted cash | 463 | 141 |
Marketable securities (Note I) | 600 | 696 |
Notes and accounts receivable-trade (net of allowances of $351 in 2020 and $299 in 2019) | 7,132 | 7,870 |
Short-term financing receivables (net of allowances of $218 in 2020 and $188 in 2019) (Note K) | 10,892 | 14,192 |
Other accounts receivable (net of allowances of $28 in 2020 and $33 in 2019) | 714 | 1,733 |
Inventory (Note J) | 1,839 | 1,619 |
Deferred costs (Note C) | 2,107 | 1,896 |
Prepaid expenses and other current assets | 2,206 | 2,101 |
Total current assets | 39,165 | 38,420 |
Property, plant and equipment (Note L) | 33,176 | 32,028 |
Less: Accumulated depreciation (Note L) | 23,136 | 22,018 |
Property, plant and equipment - net (Note L) | 10,040 | 10,010 |
Operating right-of-use assets-net (Note M) | 4,686 | 4,996 |
Long-term financing receivables (net of allowances of $45 in 2020 and $33 in 2019) (Note K) | 7,086 | 8,712 |
Prepaid pension assets (Note V) | 7,610 | 6,865 |
Deferred costs (Note C) | 2,449 | 2,472 |
Deferred taxes (Note G) | 9,241 | 5,182 |
Goodwill (Note N) | 59,617 | 58,222 |
Intangible assets-net (Note N) | 13,796 | 15,235 |
Investments and sundry assets (Note O) | 2,282 | 2,074 |
Total assets | 155,971 | 152,186 |
Current liabilities | ||
Taxes (Note G) | 3,301 | 2,839 |
Short-term debt (Notes I&P) | 7,183 | 8,797 |
Accounts payable | 4,908 | 4,896 |
Compensation and benefits | 3,440 | 3,406 |
Deferred income | 12,833 | 12,026 |
Operating lease liabilities (Note M) | 1,357 | 1,380 |
Other accrued expenses and liabilities | 6,847 | 4,357 |
Total current liabilities | 39,869 | 37,701 |
Long-term debt (Notes I&P) | 54,355 | 54,102 |
Retirement and nonpension postretirement benefit obligations (Note V) | 18,248 | 17,142 |
Deferred income | 4,301 | 3,851 |
Operating lease liabilities (Note M) | 3,574 | 3,879 |
Other liabilities (Note Q) | 14,897 | 14,526 |
Total liabilities | 135,244 | 131,202 |
Commitments and Contingencies (Note R) | ||
IBM stockholders' equity | ||
Common stock, par value $.20 per share, and additional paid-in capital Shares authorized: 4,687,500,000 Shares issued (2020- 2,242,969,004; 2019-2,237,996,975) | 56,556 | 55,895 |
Retained earnings | 162,717 | 162,954 |
Treasury stock, at cost (shares: 2020-1,350,315,580; 2019-1,350,886,521) | (169,339) | (169,413) |
Accumulated other comprehensive income/(loss) | (29,337) | (28,597) |
Total IBM stockholders' equity | 20,597 | 20,841 |
Noncontrolling interests (Note A) | 129 | 144 |
Total equity | 20,727 | 20,985 |
Total liabilities and equity | $ 155,971 | $ 152,186 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
CONSOLIDATED BALANCE SHEET | ||
Notes and accounts receivable - trade, allowances | $ 351 | $ 299 |
Short-term financing receivables, allowances | 218 | 188 |
Other accounts receivable, allowances | 28 | 33 |
Long-term financing receivables, allowances | $ 45 | $ 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) | 2,242,969,004 | 2,237,996,975 |
Treasury stock, Shares (in shares) | 1,350,315,580 | 1,350,886,521 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities | |||
Net income | $ 5,590 | $ 9,431 | $ 8,728 |
Adjustments to reconcile net income to cash provided by operating activities | |||
Depreciation | 4,227 | 4,209 | 3,127 |
Amortization of intangibles | 2,468 | 1,850 | 1,353 |
Stock-based compensation | 937 | 679 | 510 |
Deferred taxes | (3,203) | (1,527) | 853 |
Net (gain)/loss on asset sales and other | (70) | (1,096) | 123 |
Change in operating assets and liabilities, net of acquisitions/divestitures | |||
Receivables (including financing receivables) | 5,297 | 502 | 1,006 |
Retirement related | 936 | 301 | 1,368 |
Inventory | (209) | 67 | (127) |
Other assets/other liabilities | 2,087 | 858 | (1,819) |
Accounts payable | 138 | (503) | 126 |
Net cash provided by operating activities | 18,197 | 14,770 | 15,247 |
Cash flows from investing activities | |||
Payments for property, plant and equipment | (2,618) | (2,286) | (3,395) |
Proceeds from disposition of property, plant and equipment | 188 | 537 | 248 |
Investment in software | (612) | (621) | (569) |
Purchases of marketable securities and other investments | (6,246) | (3,693) | (7,041) |
Proceeds from disposition of marketable securities and other investments | 5,618 | 3,961 | 6,487 |
Non-operating finance receivables - net | 475 | 6,720 | (503) |
Acquisition of businesses, net of cash acquired | (336) | (32,630) | (139) |
Divestiture of businesses, net of cash transferred | 503 | 1,076 | |
Net cash provided by/(used in) investing activities | (3,028) | (26,936) | (4,913) |
Cash flows from financing activities | |||
Proceeds from new debt | 10,504 | 31,825 | 6,891 |
Payments to settle debt | (13,365) | (12,944) | (8,533) |
Short-term borrowings/(repayments) less than 90 days - net | (853) | (2,597) | 1,341 |
Common stock repurchases | (1,361) | (4,443) | |
Common stock repurchases for tax withholdings | (302) | (272) | (171) |
Financing - other | 92 | 99 | 111 |
Cash dividends paid | (5,797) | (5,707) | (5,666) |
Net cash provided by/(used in) financing activities | (9,721) | 9,042 | (10,469) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (87) | (167) | (495) |
Net change in cash, cash equivalents and restricted cash | 5,361 | (3,290) | (630) |
Cash, cash equivalents and restricted cash at January 1 | 8,314 | 11,604 | 12,234 |
Cash, cash equivalents and restricted cash at December 31 | 13,675 | 8,314 | 11,604 |
Supplemental data | |||
Income taxes paid-net of refunds received | 2,253 | 2,091 | 1,745 |
Interest paid on debt | $ 1,830 | $ 1,685 | $ 1,423 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total IBM Stockholders' EquityCumulative Effect, Period of Adoption, Adjustment | Total IBM Stockholders' Equity | Common Stock and Additional Paid-in Capital | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income/(Loss)Cumulative Effect, Period of Adoption, Adjustment | Accumulated Other Comprehensive Income/(Loss) | Non-Controlling Interests | Cumulative Effect, Period of Adoption, Adjustment | Total |
Balance at the Beginning of the Period at Dec. 31, 2017 | $ 17,594 | $ 54,566 | $ 153,126 | $ (163,507) | $ (2,422) | $ (26,592) | $ 131 | $ 17,725 | |||
Net income plus other comprehensive income/(loss): | |||||||||||
Net income | 8,728 | 8,728 | 8,728 | ||||||||
Other comprehensive income/(loss) | (476) | (476) | (476) | ||||||||
Total comprehensive income/(loss) | 8,252 | 8,252 | |||||||||
Cash dividends paid - common stock | (5,666) | (5,666) | (5,666) | ||||||||
Common stock issued under employee plans | 585 | 585 | 585 | ||||||||
Purchases and sales of treasury stock under employee plans - net | (103) | 15 | (117) | (103) | |||||||
Other treasury shares purchased, not retired | (4,447) | (4,447) | (4,447) | ||||||||
Changes in other equity | 0 | 0 | 0 | 0 | |||||||
Changes in noncontrolling interests | 3 | 3 | |||||||||
Balance at the End of the Period (Accounting Standards Update 2014-09, Revenue from Contracts with Customers) at Dec. 31, 2018 | $ 580 | $ 580 | $ 580 | ||||||||
Balance at the End of the Period (Accounting Standards Updates 2016-01 (Financial Instruments), 2017-12 (Hedging) and 2018-02 (Stranded Tax Effects)) at Dec. 31, 2018 | 2,422 | $ (2,422) | |||||||||
Balance at the End 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 | 9,431 | 9,431 | 9,431 | ||||||||
Other comprehensive income/(loss) | 893 | 893 | 893 | ||||||||
Total comprehensive income/(loss) | 10,324 | 10,324 | |||||||||
Cash dividends paid - common stock | (5,707) | (5,707) | (5,707) | ||||||||
Common stock issued under employee plans | 745 | 745 | 745 | ||||||||
Purchases and sales of treasury stock under employee plans - net | 19 | 30 | (11) | 19 | |||||||
Other treasury shares purchased, not retired | (1,331) | (1,331) | (1,331) | ||||||||
Changes in other equity | (5) | (5) | (5) | ||||||||
Changes in noncontrolling interests | 10 | 10 | |||||||||
Balance at the End of the Period at Dec. 31, 2019 | 20,841 | 55,895 | 162,954 | (169,413) | (28,597) | 144 | 20,985 | ||||
Net income plus other comprehensive income/(loss): | |||||||||||
Net income | 5,590 | 5,590 | 5,590 | ||||||||
Other comprehensive income/(loss) | (740) | (740) | (740) | ||||||||
Total comprehensive income/(loss) | 4,850 | 4,850 | |||||||||
Cash dividends paid - common stock | (5,797) | (5,797) | (5,797) | ||||||||
Common stock issued under employee plans | 661 | 661 | 661 | ||||||||
Purchases and sales of treasury stock under employee plans - net | 110 | 36 | 74 | 110 | |||||||
Changes in noncontrolling interests | (15) | (15) | |||||||||
Balance at the End of the Period at Dec. 31, 2020 | $ (66) | $ 20,597 | $ 56,556 | $ (66) | $ 162,717 | $ (169,339) | $ (29,337) | $ 129 | $ (66) | $ 20,727 |
CONSOLIDATED STATEMENT OF EQU_2
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
CONSOLIDATED STATEMENT OF EQUITY | |||
Cash dividend per common share | $ 6.51 | $ 6.43 | $ 6.21 |
Common stock issued under employee plans (in shares) | 4,972,028 | 4,569,917 | 3,998,245 |
Purchases of treasury stock under employee plans (in shares) | 2,363,966 | 2,000,704 | 1,173,416 |
Sales of treasury stock under employee plans (in shares) | 2,934,907 | 2,041,347 | 424,589 |
Other treasury shares purchased, not retired (in shares) | 9,979,516 | 32,949,233 |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Significant Accounting Policies | |
Significant Accounting Policies | NOTE A. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior-year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. On October 8, 2020, the company announced that it will separate the managed infrastructure services unit of its Global Technology Services (GTS) segment into a new public company (NewCo). The managed infrastructure services unit is comprised of outsourcing and other infrastructure modernization and management services. 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 will report the managed infrastructure services unit as discontinued operations after 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 two of the company’s reportable segments, but did not impact the Consolidated Financial Statements. Refer to note D, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Annual Report are reported on a comparable basis. On July 9, 2019, the company completed the acquisition of all the outstanding shares of Red Hat, Inc. (Red Hat). Refer to note E, “Acquisitions & Divestitures,” and note N, “Intangible Assets Including Goodwill,” for additional information. The benefit from income taxes for the year ended December 31, 2020 includes the tax impacts of an intra-entity sale of certain of the company’s intellectual property, which resulted in a net benefit of $0.9 billion in the first quarter of 2020. The impact of the enactment of the Tax Cuts and Jobs Act (U.S. tax reform) resulted in a charge to income taxes of $0.1 billion and $2.0 billion, for the years ended December 31, 2019 and 2018, respectively. In 2020, there was no impact from the enactment of U.S. tax reform. Refer to note G, “Taxes,” for additional information. Noncontrolling interest amounts of $22 million, $25 million and $17 million, net of tax, for the years ended December 31, 2020, 2019 and 2018, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. Principles of Consolidation The Consolidated Financial Statements include the accounts of IBM and its controlled subsidiaries, which are primarily majority owned. Any noncontrolling interest in the equity of a subsidiary is reported as a component of total equity in the Consolidated Balance Sheet. Net income and losses attributable to the noncontrolling interest is reported as described above in the Consolidated Income Statement. The accounts of variable interest entities (VIEs) are included in the Consolidated Financial Statements, if required. Investments in business entities in which the company does not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method and the company’s proportionate share of income or loss is recorded in other (income) and expense. The accounting policy for other investments in equity securities is described within the “Marketable Securities” section of this note. Equity investments in non-publicly traded entities lacking controlling financial interest or significant influence are primarily measured at cost, absent other indicators of fair value, net of impairment, if any. All intercompany transactions and accounts have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts that are reported in the Consolidated Financial Statements and accompanying disclosures. Estimates are made for the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, loss contingencies, allowance for credit losses and other matters. 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, including in 2020, the macroeconomic impacts of the COVID-19 pandemic. Actual results may be different from these estimates. Revenue The company accounts for a contract with a client when it has written approval, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service transfers to a client, in an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring those products or services. If the consideration promised in a contract includes a variable amount, the company estimates the amount to which it expects to be entitled using either the expected value or most likely amount method. The company’s contracts may include terms that could cause variability in the transaction price, including, for example, rebates, volume discounts, service-level penalties, and performance bonuses or other forms of contingent revenue. The company only includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The company may not be able to reliably estimate contingent revenue in certain long-term arrangements due to uncertainties that are not expected to be resolved for a long period of time or when the company’s experience with similar types of contracts is limited. The company’s arrangements infrequently include contingent revenue. Changes in estimates of variable consideration are included in note C, “Revenue Recognition.” The company’s standard billing terms are that payment is due upon receipt of invoice, payable within 30 days. Invoices are generally issued as control transfers and/or as services are rendered. Additionally, in determining the transaction price, the company adjusts the promised amount of consideration for the effects of the time value of money if the billing terms are not standard and the timing of payments agreed to by the parties to the contract provide the client or the company with a significant benefit of financing, in which case the contract contains a significant financing component. As a practical expedient, the company does not account for significant financing components if the period between when the company transfers the promised product or service to the client and when the client pays for that product or service will be one year or less. Most arrangements that contain a financing component are financed through the company’s Global Financing business and include explicit financing terms. The company may include subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the company is acting as an agent between the client and the vendor, and gross when the company is the principal for the transaction. To determine whether the company is an agent or principal, the company considers whether it obtains control of the products or services before they are transferred to the customer. In making this evaluation, several factors are considered, most notably whether the company has primary responsibility for fulfillment to the client, as well as inventory risk and pricing discretion. The company recognizes revenue on sales to solution providers, resellers and distributors (herein referred to as resellers) when the reseller has economic substance apart from the company and the reseller is considered the principal for the transaction with the end-user client. The company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In addition to the aforementioned general policies, the following are the specific revenue recognition policies for arrangements with multiple performance obligations and for each major category of revenue. Arrangements with Multiple Performance Obligations The company’s global capabilities as a hybrid cloud platform and AI company include services, software, hardware and related financing. The company enters into revenue arrangements that may consist of any combination of these products and services based on the needs of its clients. The company continues to develop new products and offerings and continuously reinvents its platforms and delivery methods, including the use of cloud and as-a-Service models. These are not separate businesses; they are offerings across the segments that address market opportunities in analytics, data, cloud and security. Revenue from these offerings follows the specific revenue recognition policies for arrangements with multiple performance obligations and for each major category of revenue, depending on the type of offering, which are comprised of services, hardware and/or software. To the extent that a product or service in multiple performance obligation arrangements is subject to other specific accounting guidance, such as leasing guidance, that product or service is accounted for in accordance with such specific guidance. For all other products or services in these arrangements, the company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis. When products and services are not distinct, the company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation. The revenue policies in the Services, Hardware and/or Software sections below are applied to each performance obligation, as applicable. Services The company’s primary services offerings include cloud and infrastructure services, including outsourcing, and other managed services; application management services; global process services (GPS); maintenance and support; and consulting, including the design and development of complex IT systems to a client’s specifications (e.g., design and build). Many of these services can be delivered entirely or partially through cloud or as-a-Service delivery models. The company’s services are provided on a time-and-material basis, as a fixed-price contract or as a fixed-price per measure of output contract and the contract terms range from less than one year to over 10 years. In services arrangements, the company typically satisfies the performance obligation and recognizes revenue over time. In design and build arrangements, the performance obligation is satisfied over time either because the client controls the asset as it is created (e.g., when the asset is built at the customer site) or because the company’s performance does not create an asset with an alternative use and the company has an enforceable right to payment plus a reasonable profit for performance completed to date. In most other services arrangements, the performance obligation is satisfied over time because the client simultaneously receives and consumes the benefits provided as the company performs the services. In outsourcing, other managed services, application management, GPS and other cloud-based services arrangements, the company determines whether the services performed during the initial phases of the arrangement, such as setup activities, are distinct. In most cases, the arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage. As a result, revenue is generally recognized over the period the services are provided on a usage basis. This results in revenue recognition that corresponds with the value to the client of the services transferred to date relative to the remaining services promised. Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred. Revenue from as-a-Service type contracts, such as Infrastructure-as-a-Service, is recognized either on a straight-line basis or on a usage basis, depending on the terms of the arrangement (such as whether the company is standing ready to perform or whether the contract has usage-based metrics). If an as-a-Service contract includes setup activities, those promises in the arrangement are evaluated to determine if they are distinct. Revenue related to maintenance and support services and extended warranty is recognized on a straight-line basis over the period of performance because the company is standing ready to provide services. In design and build contracts, revenue is recognized based on progress toward completion of the performance obligation using a cost-to-cost measure of progress. Revenue is recognized based on the labor costs incurred to date as a percentage of the total estimated labor costs to fulfill the contract. Due to the nature of the work performed in these arrangements, the estimation of cost at completion is complex, subject to many variables and requires significant judgment. Key factors reviewed by the company to estimate costs to complete each contract are future labor and product costs and expected productivity efficiencies. Changes in original estimates are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known by the company. Refer to note C, “Revenue Recognition,” for the amount of revenue recognized in the reporting period on a cumulative catch-up basis (i.e., from performance obligations satisfied, or partially satisfied, in previous periods). The company performs ongoing profitability analyses of its design and build services contracts accounted for using a cost-to-cost measure of progress in order to determine whether the latest estimates of revenues, costs and profits require updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. For other types of services contracts, any losses are recorded as incurred. In some services contracts, the company bills the client prior to recognizing revenue from performing the services. Deferred income of $4,994 million and $5,106 million at December 31, 2020 and 2019, respectively, is included in the Consolidated Balance Sheet. In other services contracts, the company performs the services prior to billing the client. When the company performs services prior to billing the client in design and build contracts, the right to consideration is typically subject to milestone completion or client acceptance and the unbilled accounts receivable is classified as a contract asset. At December 31, 2020 and 2019, contract assets for services contracts of $448 million and $424 million, respectively, are included in prepaid expenses and other current assets in the Consolidated Balance Sheet. The remaining amount of unbilled accounts receivable of $1,008 million and $1,071 million at December 31, 2020 and 2019, respectively, is included in notes and accounts receivable–trade in the Consolidated Balance Sheet. Billings usually occur in the month after the company performs the services or in accordance with specific contractual provisions. Hardware The company’s hardware offerings include the sale or lease of system servers and storage solutions. The capabilities of these products can also be delivered through as-a-Service or cloud delivery models, such as Storage-as-a-Service. The company also offers installation services for its more complex hardware products. Hardware offerings are often sold with distinct maintenance services, described in the Services section above. Revenue from hardware sales is recognized when control has transferred to the customer which typically occurs when the hardware has been shipped to the client, risk of loss has transferred to the client and the company has a present right to payment for the hardware. In limited circumstances when a hardware sale includes client acceptance provisions, revenue is recognized either when client acceptance has been obtained, client acceptance provisions have lapsed, or the company has objective evidence that the criteria specified in the client acceptance provisions have been satisfied. Revenue from hardware sales-type leases is recognized at the beginning of the lease term. Revenue from rentals and operating leases is recognized on a straight-line basis over the term of the rental or lease. Revenue from as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. Installation services are accounted for as distinct performance obligations with revenue recognized as the services are performed. Shipping and handling activities that occur after the client has obtained control of a product are accounted for as an activity to fulfill the promise to transfer the product rather than as an additional promised service and, therefore, no revenue is deferred and recognized over the shipping period. Software The company’s software offerings include cognitive applications, which contain many of the company’s strategic areas including analytics, data and security; cloud and data platforms, which contain the company’s distributed middleware and data platform software, including Red Hat; transaction processing platforms, which primarily supports mission-critical systems for clients; and, operating systems software, which provides operating systems for IBM Z and Power Systems hardware. These offerings include proprietary software and open source software, and many can be delivered entirely or partially through as-a-Service or cloud delivery models, while others are delivered as on-premise software licenses. Revenue from proprietary perpetual (one-time charge) license software is recognized at a point in time at the inception of the arrangement when control transfers to the client, if the software license is distinct from the post-contract support (PCS) offered by the company. In limited circumstances, when the software requires continuous updates to provide the intended functionality, the software license and PCS are not distinct and revenue for the single performance obligation is recognized over time as the PCS is provided. This is only applicable to certain security software perpetual licenses offered by the company. Revenue from proprietary term license software is recognized at a point in time for the committed term of the contract (which is typically one month due to client termination rights), unless consideration depends on client usage, in which case revenue is recognized when the usage occurs. Clients may contract to convert their existing IBM term license software into perpetual license software plus PCS. When proprietary term license software is converted to perpetual license software, the consideration becomes fixed with no cancellability and, therefore, revenue for the perpetual license is recognized upon conversion, consistent with the accounting for other perpetual licenses, as described above. PCS revenue is recognized as described below. The company also has open source software offerings. Since open source software is offered under an open source licensing model and therefore, the license is available for free, the standalone selling price is zero. As such, when the license is sold with PCS or other products and services, no consideration is allocated to the license when it is a distinct performance obligation and therefore no revenue is recognized when control of the license transfers to the client. Revenue is recognized over the PCS period. In certain cases, open source software is bundled with proprietary software and, if the open source software is not considered distinct, the software bundle (e.g., Cloud Pak) is accounted for under a proprietary software model. Revenue from PCS is recognized over the contract term on a straight-line basis because the company is providing a service of standing ready to provide support, when-and-if needed, and is providing unspecified software upgrades on a when-and-if available basis over the contract term. Revenue from software hosting or Software-as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. In software hosting arrangements, the rights provided to the client (e.g., ownership of a license, contract termination provisions and the feasibility of the client to operate the software) are considered in determining whether the arrangement includes a license. In arrangements that include a software license, the associated revenue is recognized in accordance with the software license recognition policy above rather than over time as a service. Financing Financing income attributable to sales-type leases, direct financing leases and loans is recognized on the accrual basis using the effective interest method. Operating lease income is recognized on a straight-line basis over the term of the lease. Standalone Selling Price The company allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price (SSP) is the price at which the company would sell a promised product or service separately to a client. In most cases, the company is able to establish SSP based on the observable prices of products or services sold separately in comparable circumstances to similar clients. The company typically establishes SSP ranges for its products and services which are reassessed on a periodic basis or when facts and circumstances change. In certain instances, the company may not be able to establish a SSP range based on observable prices and the company estimates SSP. The company estimates SSP by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, competitive positioning, competitor actions, internal costs, profit objectives and pricing practices. Additionally, in certain circumstances, the company may estimate SSP for a product or service by applying the residual approach. This approach is most commonly used when certain perpetual software licenses are only sold bundled with one year of PCS and a price has not been established for the software. Estimating SSP is a formal process that includes review and approval by the company’s management. Services Costs Recurring operating costs for services contracts are recognized as incurred. For fixed-price design and build contracts, the costs of external hardware and software accounted for under the cost-to-cost measure of progress are deferred and recognized based on the labor costs incurred to date (i.e., the measure of progress), as a percentage of the total estimated labor costs to fulfill the contract as control transfers over time for these performance obligations. Certain eligible, nonrecurring costs (i.e., setup costs) incurred in the initial phases of outsourcing contracts and other cloud-based services contracts, including Software-as-a-Service arrangements, are capitalized when the costs relate directly to the contract, the costs generate or enhance resources of the company that will be used in satisfying the performance obligation in the future, and the costs are expected to be recovered. These costs consist of transition and setup costs related to the installation of systems and processes and other deferred fulfillment costs, including, for example, prepaid assets used in services contracts (i.e., prepaid software or prepaid maintenance). Capitalized costs are amortized on a straight-line basis over the expected period of benefit, which includes anticipated contract renewals or extensions, consistent with the transfer to the client of the services to which the asset relates. Additionally, fixed assets associated with these contracts are capitalized and depreciated on a straight-line basis over the expected useful life of the asset. If an asset is contract specific, then the depreciation period is the shorter of the useful life of the asset or the contract term. Amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements are deferred and amortized on a straight-line basis as a reduction of revenue over the expected period of benefit. The company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. If the carrying amount is deemed not recoverable, an impairment loss is recognized. Refer to note C, “Revenue Recognition,” for the amount of deferred costs to fulfill a contract at December 31, 2020 and 2019. In situations in which an outsourcing contract is terminated, the terms of the contract may require the client to reimburse the company for the recovery of unbilled accounts receivable, unamortized deferred contract costs and additional costs incurred by the company to transition the services. Software Costs Costs that are related to the conceptual formulation and design of licensed software programs are expensed as incurred to research, development and engineering expense; costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Capitalized amounts are amortized on a straight-line basis over periods ranging up to three years and are recorded in software cost within cost of sales. The company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. Costs to support or service licensed programs are charged to software cost within cost of sales as incurred. The company capitalizes certain costs that are incurred to purchase or develop internal-use software. Internal-use software programs also include software used by the company to deliver Software-as-a-Service when the client does not receive a license to the software and the company has no substantive plans to market the software externally. Capitalized costs are amortized on a straight-line basis over periods ranging up to three years and are recorded in selling, general and administrative expense or cost of sales, depending on whether the software is used by the company in revenue generating transactions. Additionally, the company may capitalize certain types of implementation costs and amortize them over the term of the arrangement when the company is a customer in a cloud-computing arrangement. Incremental Costs of Obtaining a Contract Incremental costs of obtaining a contract (e.g., sales commissions) are capitalized and amortized on a straight-line basis over the expected customer relationship period if the company expects to recover those costs. The expected customer relationship period is determined based on the average customer relationship period, including expected renewals, for each offering type and ranges from three Product Warranties The company offers warranties for its hardware products that generally range up to three years, with the majority being either one Revenue from extended warranty contracts is initially recorded as deferred income and subsequently recognized on a straight-line basis over the delivery period because the company is providing a service of standing ready to provide services over such term. Refer to note R, “Commitments & Contingencies,” for additional information. Shipping and Handling Costs related to shipping and handling are recognized as incurred and included in cost in the Consolidated Income Statement. Expense and Other Income Selling, General and Administrative Selling, general and administrative (SG&A) expense is charged to income as incurred, except for certain sales commissions, which are capitalized and amortized. For further information regarding capitalizing sales commissions, see “Incremental Costs of Obtaining a Contract” above. Expenses of promoting and selling products and services are classified as selling expense and, in addition to sales commissions, include such items as compensation, advertising and travel. General and administrative expense includes such items as compensation, legal costs, office supplies, non-income taxes, insurance and office rental. In addition, general and administrative expense includes other operating items such as an allowance for credit losses, workforce rebalancing charges for contractually obligated payments to employees terminated in the ongoing course of business, acquisition costs related to business combinations, amortization of certain intangible assets and environmental remediation costs. Advertising and Promotional Expense The company expenses advertising and promotional costs as incurred. Cooperative advertising reimbursements from vendors are recorded net of advertising and promotional expense in the period in which the related advertising and promotional expense is incurred. Advertising and promotional expense, which includes media, agency and promotional expense, was $1,542 million, $1,647 million and $1,466 million in 2020, 2019 and 2018, respectively, and is recorded in SG&A expense in the Consolidated Income Statement. Research, Development and Engineering Research, development and engineering (RD&E) costs are expensed as incurred. Software costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Intellectual Property and Custom Development Income The company licenses and sells the rights to certain of its intellectual property (IP) including internally developed patents, trade secrets and technological know-how. Certain IP transactions to third parties are licensing/royalty-based and others are transaction-based sales/other transfers. Income from licensing arrangements is recognized at the inception of the license term if the nature of the company’s promise is to provide a right to use the company’s intellectual property as it exists at that point in time (i.e., the license is functional intellectual property) and control has transferred to the client. Income is recognized over time if the nature of the company’s promise is to provide a right to access the company’s intellectual property throughout the license period (i.e., the license is symbolic intellectual property), such as a trademark license. Licensing arrangements include IP partnerships whereby a business partner licenses source code from the company and becomes responsible for developing, maintaining and enhancing the product. The company retains its customers and go-to-market capability and any royalty due to the partner is recognized in cost of sales. The IP partner has the rights to market the product and its derivative works under its own brand and remits royalty to the company on those sales, which are recorded as royalty-based fees. Depending on the nature of the transaction, an IP partnership would be accounted for as a divestiture if the company concludes the transaction meets the definition of a business. Inc |
Accounting Changes
Accounting Changes | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Changes | |
Accounting Changes | NOTE B. 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– Reclassification of Certain Tax Effects from AOCI Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Revenue Recognition–Contracts with Customers Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– For all other standards that the company adopted in the periods presented, there was no material impact in the consolidated financial results. |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2020 | |
Revenue Recognition | |
Revenue Recognition | NOTE C. REVENUE RECOGNITION During 2020, in the unprecedented macroeconomic environment that resulted from the COVID-19 pandemic, clients focused on operational stability, flexibility and cash preservation which impacted the company's revenue performance. Disaggregation of Revenue The following tables provide details of revenue by major products/service offerings and by geography. Revenue by Major Products/Service Offerings ($ in millions) For the year ended December 31: 2020 2019 2018 Cloud & Data Platforms $ 11,481 ** $ 9,499 $ 8,603 Cognitive Applications 5,290 5,456 * 5,280 * Transaction Processing Platforms 6,606 7,936 7,974 Total Cloud & Cognitive Software $ 23,376 $ 22,891 * $ 21,857 * Consulting $ 8,083 $ 8,157 * $ 7,906 * Application Management 7,133 7,646 7,852 Global Process Services 945 995 1,037 Total Global Business Services $ 16,162 $ 16,798 * $ 16,795 * Infrastructure & Cloud Services $ 19,669 $ 20,736 $ 22,185 Technology Support Services 6,144 6,625 6,961 Total Global Technology Services $ 25,812 $ 27,361 $ 29,146 Systems Hardware $ 5,481 $ 5,918 $ 6,363 Operating Systems Software 1,497 1,686 1,671 Total Systems $ 6,978 $ 7,604 $ 8,034 Global Financing È $ 1,123 $ 1,400 $ 1,590 Other $ 169 $ 1,092 * $ 2,169 * Total Revenue $ 73,620 $ 77,147 $ 79,591 * Recast to conform to 2020 presentation. ** Red Hat was acquired on July 9, 2019. Results in 2020 include a full year of Red Hat revenue. È Revenue by Geography ($ in millions) For the year ended December 31: 2020 2019 2018 Americas $ 34,114 $ 36,274 $ 36,994 Europe/Middle East/Africa 23,644 24,443 25,491 Asia Pacific 15,863 16,430 17,106 Total $ 73,620 $ 77,147 $ 79,591 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 December 31, 2020, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $124 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 year ended December 31, 2020, revenue was reduced by $29 million for performance obligations satisfied (or partially satisfied) in previous periods mainly due to changes in estimates on contracts with cost-to-cost measures of progress. Refer to note A, “Significant Accounting Policies,” for additional information on these contracts and estimates of costs to complete. Reconciliation of Contract Balances The following table provides information about notes and accounts receivable—trade, contract assets and deferred income balances. ($ in millions) At December 31: 2020 2019 Notes and accounts receivable—trade (net of allowances of $351 in 2020 and $299 in 2019) $ 7,132 $ 7,870 Contract assets* 497 492 Deferred income (current) 12,833 12,026 Deferred income (noncurrent) 4,301 3,851 * Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. The amount of revenue recognized during the year ended December 31, 2020 that was included within the deferred income balance at December 31, 2019 was $10.1 billion and primarily related to services and software. The following table provides roll forwards of the notes and accounts receivable—trade allowance for expected credit losses for the years ended December 31, 2020 and 2019. ($ in millions) January 1, 2020 * Additions/(Releases) Write-offs Other ** December 31, 2020 $ 316 $ 76 $ (46) $ 5 $ 351 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 B, “Accounting Changes,” for additional information. ** Primarily represents translation adjustments. The contract assets allowance for expected credit losses was not material in the years ended December 31, 2020 and 2019. Deferred Costs ($ in millions) At December 31: 2020 2019 Capitalized costs to obtain a contract $ 842 $ 609 Deferred costs to fulfill a contract Deferred setup costs 1,859 1,939 Other deferred fulfillment costs 1,855 1,820 Total deferred costs* $ 4,556 $ 4,368 * Of the total deferred costs, $2,107 million was current and $2,449 million was noncurrent at December 31, 2020 and $1,896 million was current and $2,472 million was noncurrent at December 31, 2019. The amount of total deferred costs amortized during the year ended December 31, 2020 was $3,793 million and there were no material impairment losses incurred. Refer to note A, “Significant Accounting Policies,” for additional information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract. |
Segments
Segments | 12 Months Ended |
Dec. 31, 2020 | |
Segments | |
Segments | NOTE D. SEGMENTS 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. 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 and 2018 was approximately $0.3 billion and $0.4 billion, respectively. 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) The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Segment revenue and pre-tax income include transactions between the segments that are intended to reflect an arm’s-length, market-based transfer price. Systems that are used by Global Technology Services in outsourcing arrangements are primarily sourced internally from the Systems segment, and software is primarily sourced internally through the Cloud & Cognitive Software and Systems segments. For providing IT services that are used internally, Global Technology Services and Global Business Services recover cost, as well as a reasonable fee, that is intended to reflect the arm’s-length value of providing the services. They enter into arm’s-length loans at prices equivalent to market rates with Global Financing to facilitate the acquisition of equipment and software used in services engagements. All internal transaction prices are reviewed annually, and reset if appropriate. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the company’s management system, e.g., advertising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associated with the elimination of internal transactions and other miscellaneous items. The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company and have been recast for the prior-year periods due to the company’s January 2020 segment changes. Performance measurement is based on pre-tax income from continuing operations. These results are used, in part, by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments. In the fourth quarter of 2020, the company recorded a charge of $2.0 billion in selling, general and administrative expense in the Consolidated Income Statement for severance and employee related benefits in accordance with the accounting guidance for ongoing benefit arrangements. The impact to pre-tax income from continuing operations by segment was as follows: Cloud & Cognitive Software ($0.6 billion), Global Business Services ($0.4 billion), Global Technology Services ($0.9 billion), Systems ($0.2 billion) and the impact to Global Financing was not material. Management System Segment View ($ in millions) Cloud & Global Global Cognitive Business Technology Global Total For the year ended December 31: Software Services Services Systems Financing Segments 2020 External revenue $ 23,376 $ 16,162 $ 25,812 $ 6,978 $ 1,123 $ 73,451 Internal revenue 3,169 193 1,226 824 894 6,306 Total revenue $ 26,545 $ 16,355 $ 27,039 $ 7,802 $ 2,017 $ 79,758 Pre-tax income from continuing operations È $ 6,362 $ 1,351 $ 117 $ 449 $ 761 $ 9,040 Revenue year-to-year change 3.2 % (4.2) % (5.2) % (6.3) % (23.4) % (3.1) % Pre-tax income year-to-year change (18.5) % (16.8) % (92.9) % (36.0) % (27.8) % (29.6) % Pre-tax income margin 24.0 % 8.3 % 0.4 % 5.8 % 37.7 % 11.3 % 2019 External revenue $ 22,891 * $ 16,798 * $ 27,361 $ 7,604 $ 1,400 $ 76,054 * Internal revenue 2,827 278 1,157 726 1,232 6,220 Total revenue $ 25,718 * $ 17,076 * $ 28,518 $ 8,330 $ 2,632 $ 82,274 * Pre-tax income from continuing operations $ 7,811 * $ 1,623 * $ 1,645 $ 701 $ 1,055 $ 12,835 * Revenue year-to-year change 2.7 %* (0.3) %* (5.0) % (5.9) % (17.8) % (2.3) %* Pre-tax income year-to-year change (12.4) %* 1.3 %* (7.6) % (22.4) % (22.5) % (11.9) %* Pre-tax income margin 30.4 %* 9.5 %* 5.8 % 8.4 % 40.1 % 15.6 %* 2018 External revenue $ 21,857 * $ 16,795 * $ 29,146 $ 8,034 $ 1,590 $ 77,421 * Internal revenue 3,190 326 872 815 1,610 6,813 Total revenue $ 25,047 * $ 17,121 * $ 30,018 $ 8,848 $ 3,200 $ 84,235 * Pre-tax income from continuing operations $ 8,914 * $ 1,602 * $ 1,781 $ 904 $ 1,361 $ 14,562 * Revenue year-to-year change 2.0 %* 3.0 %* 0.5 % (1.1) % 1.0 % 1.3 %* Pre-tax income year-to-year change 10.0 %* 26.2 %* (32.0) % (19.9) % 6.5 % 1.2 %* Pre-tax income margin 35.6 %* 9.4 %* 5.9 % 10.2 % 42.5 % 17.3 %* È * Recast to conform to 2020 presentation. Reconciliations of IBM as Reported ($ in millions) For the year ended December 31: 2020 2019 2018 Revenue Total reportable segments $ 79,758 $ 82,274 * $ 84,235 * Other—divested businesses 37 930 * 1,961 * Other revenue 132 162 207 Elimination of internal transactions (6,306) (6,220) (6,813) Total IBM consolidated revenue $ 73,620 $ 77,147 $ 79,591 * Recast to conform to 2020 presentation. ($ in millions) For the year ended December 31: 2020 2019 2018 Pre-tax income from continuing operations Total reportable segments $ 9,040 È $ 12,835 * $ 14,562 * Amortization of acquired intangible assets (1,858) (1,298) (809) Acquisition-related charges (13) (423) (16) Non-operating retirement-related (costs)/income (1,123) (615) (1,572) Spin-off-related charges (28) — — Elimination of internal transactions (381) (290) (725) Other—divested businesses (9) 574 * 287 * Unallocated corporate amounts (990) (617) (385) Total pre-tax income from continuing operations $ 4,637 È $ 10,166 $ 11,342 È * Recast to conform to 2020 presentation. Immaterial Items Investment in Equity Alliances and Equity Alliances Gains/(Losses) The investments in equity alliances and the resulting gains and (losses) from these investments that are attributable to the segments did not have a material effect on the financial position or the financial results of the segments. Segment Assets and Other Items Cloud & Cognitive Software assets are mainly goodwill, acquired intangible assets and accounts receivable. Global Business Services assets are primarily goodwill and accounts receivable. Global Technology Services assets are primarily goodwill, plant, property and equipment, including the assets associated with the outsourcing business, accounts receivable and acquired intangible assets. Systems assets are primarily goodwill, manufacturing inventory, and plant, property and equipment. Global Financing assets are primarily financing receivables, cash and marketable securities, and fixed assets under operating leases. To ensure the efficient use of the company’s space and equipment, several segments may share leased or owned plant, property and equipment assets. Where assets are shared, landlord ownership of the assets is assigned to one segment and is not allocated to each user segment. This is consistent with the company’s management system and is reflected accordingly in the table below. In those cases, there will not be a precise correlation between segment pre-tax income and segment assets. Depreciation expense and capital expenditures that are reported by each segment also are consistent with the landlord ownership basis of asset assignment. Global Financing amounts for interest income and interest expense reflect the interest income and interest expense associated with the Global Financing business, including the intercompany financing activities discussed on page 28, as well as the income from investment in cash and marketable securities. Management System Segment View ($ in millions) Cloud & Global Global Cognitive Business Technology Global Total For the year ended December 31: Software Services Services Systems Financing Segments 2020 Assets $ 58,752 $ 10,290 $ 21,971 $ 4,620 $ 25,075 $ 120,708 Depreciation/amortization of intangibles** 1,168 180 2,605 343 119 4,415 Capital expenditures/investments in intangibles 548 28 2,039 249 41 2,906 Interest income — — — — 1,058 1,058 Interest expense — — — — 307 307 2019 Assets $ 58,342 * $ 10,136 * $ 22,436 $ 4,590 $ 29,568 $ 125,072 * Depreciation/amortization of intangibles** 1,089 * 167 * 2,601 350 186 4,392 Capital expenditures/investments in intangibles 517 * 47 * 1,575 305 57 2,501 Interest income — — — — 1,490 1,490 Interest expense — — — — 512 512 2018 Assets $ 28,502 * $ 8,443 * $ 17,624 $ 4,030 $ 41,320 $ 99,920 * Depreciation/amortization of intangibles** 1,051 * 108 * 2,359 315 229 4,063 Capital expenditures/investments in intangibles 468 * 58 * 2,569 241 274 3,610 Interest income — — — — 1,647 1,647 Interest expense — — — — 515 515 * Recast to conform to 2020 presentation. ** Segment pre-tax income from continuing operations does not include the amortization of intangible assets. Reconciliations of IBM as Reported ($ in millions) At December 31: 2020 2019 2018 Assets Total reportable segments $ 120,708 $ 125,072 * $ 99,920 * Elimination of internal transactions (4,685) (4,317) (7,143) Other-divested businesses 218 1,906 * 2,702 * Unallocated amounts Cash and marketable securities 12,486 7,308 10,393 Notes and accounts receivable 1,589 1,488 * 1,597 Deferred tax assets 9,012 4,995 5,089 Plant, other property and equipment 2,206 2,262 * 2,463 * Operating right-of-use assets** 3,409 3,530 — Pension assets 7,610 6,865 4,666 Other 3,417 3,077 * 3,695 * Total IBM consolidated assets $ 155,971 $ 152,186 $ 123,382 * Recast to conform to 2020 presentation. ** Reflects the adoption of the FASB guidance on leases in 2019. Major Clients No single client represented 10 percent or more of the company’s total revenue in 2020, 2019 or 2018. Geographic Information The following provides information for those countries that are 10 percent or more of the specific category. Revenue* ($ in millions) For the year ended December 31: 2020 2019 2018 United States $ 26,978 $ 28,395 $ 29,078 Japan 8,694 8,681 8,489 Other countries 37,949 40,071 42,024 Total IBM consolidated revenue $ 73,620 $ 77,147 $ 79,591 * Revenues are attributed to countries based on the location of the client. Plant and Other Property–Net ($ in millions) At December 31: 2020 2019 2018 United States $ 4,410 $ 4,485 $ 4,585 Other countries 5,533 5,294 5,774 Total $ 9,943 $ 9,778 $ 10,359 Operating Right-of-Use Assets–Net* ($ in millions) At December 31: 2020 2019 2018 United States $ 1,243 $ 1,386 $ — Japan 606 659 — Other countries 2,836 2,951 — Total $ 4,686 $ 4,996 $ — * Reflects the adoption of the FASB guidance on leases in 2019. Revenue by Classes of Similar Products or Services The following table presents external revenue for similar classes of products or services within the company’s reportable segments. Client solutions often include IBM software and systems and other suppliers’ products if the client solution requires it. For each of the segments that include services, Software-as-a-Service, consulting, education, training and other product-related services are included as services. For each of these segments, software includes product license charges and ongoing subscriptions. ($ in millions) For the year ended December 31: 2020 2019 2018 Cloud & Cognitive Software Software $ 19,107 $ 18,649 * $ 17,906 * Services 4,159 4,076 * 3,795 * Systems 110 166 156 Global Business Services Services $ 15,896 $ 16,527 * $ 16,439 * Software 180 156 151 Systems 86 115 206 Global Technology Services Services $ 19,632 $ 20,768 $ 22,222 Maintenance 4,815 5,183 5,484 Systems 967 1,072 1,069 Software 399 338 371 Systems Servers $ 3,466 $ 3,746 $ 3,996 Storage 1,801 1,920 2,114 Software 1,359 1,528 1,499 Services 351 410 425 Global Financing Financing $ 834 $ 1,120 $ 1,223 Used equipment sales 289 281 366 * Recast to conform to 2020 presentation. |
Acquisitions & Divestitures
Acquisitions & Divestitures | 12 Months Ended |
Dec. 31, 2020 | |
Acquisitions & Divestitures | |
Acquisitions & Divestitures | NOTE E. ACQUISITIONS & DIVESTITURES Acquisitions The company accounts for business combinations using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recorded at their acquisition date fair values. Significant judgments and use of estimates are required when performing valuations. For example, the company uses judgments when estimating the fair value of intangible assets using a discounted cash flow model, which involves the use of significant estimates and assumptions with respect to revenue growth rates, the customer attrition rate and discount rates. 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. 2020 In 2020, the company completed seven acquisitions at an aggregate cost of $723 million. The following acquisitions closed in 2020. Each acquisition is expected to enhance the company’s portfolio of products and services capabilities and further advance IBM’s hybrid cloud and AI strategy. Acquisition Segment Description of Acquired Business First Quarter Stratoss Lifecycle Manager business (Stratoss) from Accanto Systems Oy Cloud & Cognitive Software Cloud native business designed to deliver web-scale levels of operational automation for the cloud-based networking world Second Quarter Automated Security Assurance Platform business (ASAP) from Spanugo Inc. Cloud & Cognitive Software Cloud cybersecurity platform, will integrate into the IBM public cloud to further meet the security demands of clients in highly regulated industries Third Quarter WDG Soluções Em Sistemas E Automação De Processos LTDA (WDG Automation) Cloud & Cognitive Software Provider of robotic process automation Fourth Quarter Instana Cloud & Cognitive Software Application performance monitoring and observability company which helps businesses better manage applications that span the hybrid cloud landscape TruQua Enterprises, LLC (TruQua) Global Business Services IT services provider and SAP development partner Expertus Technologies Inc. (Expertus) Global Business Services Provider of cloud solutions for the financial services industry 7Summits LLC (7Summits) Global Business Services Leading Salesforce partner that delivers transformative digital experiences across industries At December 31, 2020, the remaining cash to be remitted by the company related to certain fourth-quarter acquisitions was $323 million. This amount has been classified as restricted cash in the Consolidated Balance Sheet, most of which is expected to be paid in the first quarter of 2021. The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of December 31, 2020. ($ in millions) Amortization Total Life (in Years) Acquisitions Current assets $ 35 Property, plant and equipment/noncurrent assets 7 Intangible assets Goodwill N/A 575 Client relationships 5 — 7 84 Completed technology 2 — 7 73 Trademarks 1 — 7 11 Total assets acquired $ 784 Current liabilities 19 Noncurrent liabilities 41 Total liabilities assumed $ 61 Total purchase price $ 723 N/A—Not applicable The goodwill generated is primarily attributable to the assembled workforce of the acquired businesses and the increased synergies expected to be achieved from the integration of the acquired businesses into the company’s various integrated solutions and services neither of which qualifies as an amortizable intangible asset. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 6.8 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. Goodwill of $362 million, $205 million and $8 million was assigned to the Cloud & Cognitive Software segment, Global Business Services segment and Systems segment, respectively. It is expected that none of the goodwill will be deductible for tax purposes. The valuation of the assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date; however, material changes are not expected. Transactions Closed in 2021– 2019 In 2019, the company completed one acquisition at an aggregate cost of $35 billion. Red Hat– all On the acquisition date, Red Hat shareholders received $190 per share in cash, representing a total equity value of approximately $34 billion. The company funded the transaction through a combination of cash on hand and proceeds from debt issuances. The following table reflects the purchase price and the resulting purchase price allocation as of December 31, 2020. The net purchase price adjustments recorded during 2020 were primarily related to noncurrent tax assets and liabilities. ($ in millions) Amortization Allocated 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 $485 million of short-term debt related to the convertible notes acquired from Red Hat that were recognized at their fair value on the acquisition date, which was fully settled as of October 1, 2019. N/A-Not applicable The goodwill generated was primarily attributable to the assembled workforce of Red Hat and the increased synergies expected to be achieved from the integration of Red Hat products into the company’s various integrated solutions neither of which qualify as an amortizable intangible asset. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 10.9 years. These identified intangible assets will be amortized on a straight-line basis over their useful lives, which approximates the pattern that the assets’ economic benefits are expected to be consumed over time. The following table presents the goodwill allocated to the segments as of December 31, 2020. ($ 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 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) ($ in millions) For the year ended December 31: 2019 2018 Revenue $ 79,628 $ 81,360 Net income $ 9,723 $ 5,702 2018 In 2018, the company completed two acquisitions for an aggregate cost of $49 million. One acquisition was completed by the Cloud & Cognitive Software segment and one acquisition by the Global Business Services segment. These acquisitions did not have a material impact on the Consolidated Financial Statements. Divestitures 2020 In the fourth quarter of 2020, the company entered into a definitive agreement to sell certain remaining OEM commercial financing capabilities reported within the Global Financing segment. The financial terms related to this transaction are not material. The transaction is expected to be completed in the second half of 2021. 2019 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 December 31, 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 $288 million and $174 million during the years ended December 31, 2020 and December 31, 2019, respectively, for such contracts. Select IBM Marketing Platform and Commerce Offerings– The transaction included commercial software and services offerings. In addition, IBM is providing Centerbridge with IT transition services. All other contracted transition services concluded as of June 30, 2020. Upon closing, Centerbridge announced that this business would be re-branded under the name Acoustic. The closing completed for the U.S. on June 30, 2019. The company received a net cash payment of $240 million in 2019 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 December 31, 2020 was $82 million. 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 2019 divested businesses are reported in Other–divested businesses as described in note D, "Segments." In addition to the above, the company completed three divestitures reported in the Global Financing segment, the Global Business Services segment and the Other–divested businesses in 2019. The financial terms related to each of these transactions were not material. The pre-tax gains recognized on the divestitures above were recorded in other (income) and expense in the Consolidated Income Statement. 2018 The company had no divestitures in 2018. |
Research, Development & Enginee
Research, Development & Engineering | 12 Months Ended |
Dec. 31, 2020 | |
Research, Development & Engineering | |
Research, Development & Engineering | NOTE F. RESEARCH, DEVELOPMENT & ENGINEERING RD&E expense was $6,333 million in 2020, $5,989 million in 2019 and $5,379 million in 2018. The company incurred total expense of $6,039 million, $5,657 million and $5,027 million in 2020, 2019 and 2018, respectively, for scientific research and the application of scientific advances to the development of new and improved products and their uses, as well as services and their application. Within these amounts, software-related expense was $3,732 million, $3,541 million and $3,050 million in 2020, 2019 and 2018, respectively. Expense for product-related engineering was $295 million, $334 million and $352 million in 2020, 2019 and 2018, respectively. |
Taxes
Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Taxes | |
Taxes | NOTE G. TAXES ($ in millions) For the year ended December 31: 2020 2019 2018 Income/(loss) from continuing operations before income taxes U.S. operations $ (1,726) $ (315) $ 627 Non-U.S. operations 6,363 10,481 10,715 Total income from continuing operations before income taxes $ 4,637 $ 10,166 $ 11,342 The income from continuing operations provision for/(benefit from) income taxes by geographic operations was as follows: ($ in millions) For the year ended December 31: 2020 2019 2018 U.S. operations $ 2,004 $ (408) $ 1,199 Non-U.S. operations (2,868) 1,139 1,420 Total continuing operations provision for/(benefit from) income taxes $ (864) $ 731 $ 2,619 The components of the income from continuing operations provision for/(benefit from) income taxes by taxing jurisdiction were as follows: ($ in millions) For the year ended December 31: 2020 2019 2018 U.S. federal Current $ 315 $ 331 $ (342) Deferred 1,177 (839) 1,377 $ 1,492 $ (508) $ 1,035 U.S. state and local Current $ 316 $ (85) $ 127 Deferred (315) (82) (292) $ 1 $ (167) $ (165) Non-U.S. Current $ 1,827 $ 1,829 $ 2,135 Deferred (4,184) (423) (386) $ (2,357) $ 1,406 $ 1,749 Total continuing operations provision for/(benefit from) income taxes $ (864) $ 731 $ 2,619 Discontinued operations provision for/(benefit from) income taxes (13) (1) 2 Provision for social security, real estate, personal property and other taxes 3,199 3,304 3,322 Total taxes included in net income $ 2,322 $ 4,034 $ 5,943 A reconciliation of the statutory U.S. federal tax rate to the company’s effective tax rate from continuing operations was as follows: For the year ended December 31: 2020 2019 2018 Statutory rate 21 % 21 % 21 % Enactment of U.S. tax reform — 1 18 Tax differential on foreign income (15) (11) (9) Intra-entity IP sale (20) — — Domestic incentives (4) (2) (3) State and local 0 (1) (1) Other (1) (1) (3) Effective rate (19) % 7 % 23 % Percentages rounded for disclosure purposes. The significant components reflected within the tax rate reconciliation labeled “Tax differential on foreign income” include the effects of foreign subsidiaries’ earnings taxed at rates other than the U.S. statutory rate, foreign export incentives, U.S. taxes on foreign income and any net impacts of intercompany transactions. These items also reflect audit settlements or changes in the amount of unrecognized tax benefits associated with each of these items. The continuing operations effective rate for 2020 was (18.6) percent compared to 7.2 percent in 2019. The decrease in the effective tax rate was primarily driven by an intra-entity sale of certain of the company’s intellectual property which required the recognition of a $3.4 billion deferred tax asset. The recognition of this non-U.S. deferred tax asset and its related GILTI impacts in the U.S. resulted in a net tax benefit of $0.9 billion in the first quarter of 2020. In addition, a change in foreign tax law resulted in a $0.2 billion tax benefit in the current year. On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform resulted in charges to tax expense of $0.1 billion and $2.0 billion for the years ended December 31, 2019 and 2018, respectively. In 2020, there was no impact from the enactment of U.S. tax reform. In 2018, the charge was primarily attributable to the company’s election to include GILTI in measuring deferred taxes, plus refinements to the one-time U.S. transition tax and foreign tax costs on undistributed foreign earnings. The charge in 2019 was related to additional tax reform guidance issued by the U.S. Treasury in January 2019. The effect of tax law changes on deferred tax assets and liabilities did not have a material impact on the company’s 2020 effective tax rate. Deferred Tax Assets ($ in millions) At December 31: 2020 2019 Retirement benefits $ 3,946 $ 3,766 Leases 1,525 1,729 Share-based and other compensation 616 637 Domestic tax loss/credit carryforwards 1,746 1,259 Deferred income 712 600 Foreign tax loss/credit carryforwards 818 836 Bad debt, inventory and warranty reserves 361 298 Depreciation 308 253 Hedging losses 576 — Restructuring charges 302 138 ** Accruals 483 368 Intangible assets 3,540 * 592 Capitalized research and development 1,387 722 Other 1,441 1,300 Gross deferred tax assets 17,761 12,498 Less: valuation allowance 850 608 Net deferred tax assets $ 16,911 $ 11,890 * Deferred Tax Liabilities ($ in millions) At December 31: 2020 2019 Goodwill and intangible assets $ 2,679 $ 3,111 GILTI deferred taxes 4,365 * 1,908 Leases and right-of-use assets 1,908 2,216 Depreciation 709 728 Retirement benefits 1,221 1,002 Software development costs 1,007 1,075 Deferred transition costs 205 233 Undistributed foreign earnings 307 725 Other 741 940 Gross deferred tax liabilities $ 13,142 $ 11,938 * The increase in the balance was primarily due to an intra-entity sale of intellectual property in the first quarter of 2020. ** Previously included in Other. For financial reporting purposes, the company had foreign and domestic loss carryforwards, the tax effect of which was $661 million, including a tax only capital loss in a subsidiary, as well as foreign and domestic credit carryforwards of $1,903 million. Substantially all of these carryforwards are available for at least two years and the majority are available for 10 years or more. The valuation allowances as of December 31, 2020, 2019 and 2018 were $850 million, $608 million and $915 million, respectively. The amounts principally apply to certain foreign and domestic loss carryforwards and credits. In the opinion of management, it is more likely than not that these assets will not be realized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. The amount of unrecognized tax benefits at December 31, 2020 increased by $1,422 million in 2020 to $8,568 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows: ($ in millions) 2020 2019 2018 Balance at January 1 $ 7,146 $ 6,759 $ 7,031 Additions based on tax positions related to the current year 1,690 816 394 Additions for tax positions of prior years 159 779 1,201 Reductions for tax positions of prior years (including impacts due to a lapse of statute) (408) (922) (1,686) Settlements (19) (286) (181) Balance at December 31 $ 8,568 $ 7,146 $ 6,759 The additions to unrecognized tax benefits related to the current and prior years were primarily attributable to non-U.S. tax matters, including transfer pricing, as well as U.S. federal and state tax matters, credits and incentives. The settlements and reductions to unrecognized tax benefits for tax positions of prior years were primarily attributable to U.S. federal and state tax matters, non-U.S. audits and impacts due to lapse of statute of limitations. The unrecognized tax benefits at December 31, 2020 of $8,568 million can be reduced by $574 million associated with timing adjustments, U.S. tax credits, potential transfer pricing adjustments and state income taxes. The net amount of $7,994 million, if recognized, would favorably affect the company’s effective tax rate. The net amounts at December 31, 2019 and 2018 were $6,562 million and $6,041 million, respectively. Interest and penalties related to income tax liabilities are included in income tax expense. During the year ended December 31, 2020, the company recognized $117 million in interest expense and penalties; in 2019, the company recognized $13 million in interest expense and penalties; and, in 2018, the company recognized a net benefit of $14 million in interest expense and penalties. The company had $843 million for the payment of interest and penalties accrued at December 31, 2020, and had $819 million accrued at December 31, 2019. Within the next 12 months, the company believes it is reasonably possible that the total amount of unrecognized tax benefits associated with certain positions may be reduced. The potential decrease in the amount of unrecognized tax benefits is associated with the anticipated resolution of the company’s U.S. income tax audit for 2015 and 2016, as well as various non-U.S. audits. The company estimates that the unrecognized tax benefits at December 31, 2020 could be reduced by $368 million. During the fourth quarter of 2020, the U.S. Internal Revenue Service (IRS) concluded its examination of the company’s U.S. income tax returns for 2013 and 2014, which had a specific focus on certain cross-border transactions that occurred in 2013 and issued a final Revenue Agent’s Report (RAR). The IRS’ proposed adjustments relative to these cross-border transactions, if sustained, would result in additional taxable income of approximately $4.5 billion. The company strongly disagrees with the IRS on these specific matters and intends to protest the proposed adjustments through the IRS Appeals Office and U.S. courts, if necessary. The company believes it has appropriately accounted for all of its uncertain tax positions. In the third quarter of 2018, the IRS commenced its audit of the company’s U.S. tax returns for 2015 and 2016. The company anticipates that this audit will be completed in 2021. With respect to major U.S. state and foreign taxing jurisdictions, the company is generally no longer subject to tax examinations for years prior to 2015. The company is no longer subject to income tax examination of its U.S. federal tax return for years prior to 2013. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as it relates to the amount and/or timing of income, deductions and tax credits. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result for these years. The company is involved in a number of income tax-related matters in India challenging tax assessments issued by the India Tax Authorities. As of December 31, 2020, the company had recorded $742 million as prepaid income taxes in India. A significant portion of this balance represents cash tax deposits paid over time to protect the company’s right to appeal various income tax assessments made by the India Tax Authorities. Although the outcome of tax audits are always uncertain, the company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result for these years. Within consolidated retained earnings at December 31, 2020 were undistributed after-tax earnings from certain non-U.S. subsidiaries that were not indefinitely reinvested. At December 31, 2020, the company had a deferred tax liability of $307 million for the estimated taxes associated with the repatriation of these earnings. Undistributed earnings of approximately $980 million and other outside basis differences in foreign subsidiaries were indefinitely reinvested in foreign operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings and outside basis differences was not practicable. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | NOTE H. EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per share of common stock. ($ in millions except per share amounts) For the year ended December 31: 2020 2019 2018 Weighted-average number of shares on which earnings per share calculations are based Basic 890,348,679 887,235,105 912,048,072 Add—incremental shares under stock-based compensation plans 4,802,940 4,199,440 2,786,316 Add—incremental shares associated with contingently issuable shares 1,412,352 1,378,831 1,481,326 Assuming dilution 896,563,971 892,813,376 916,315,714 Income from continuing operations $ 5,501 $ 9,435 $ 8,723 Income/(loss) from discontinued operations, net of tax* 89 (4) 5 Net income on which basic earnings per share is calculated $ 5,590 $ 9,431 $ 8,728 Income from continuing operations $ 5,501 $ 9,435 $ 8,723 Net income applicable to contingently issuable shares (2) 0 (6) Income from continuing operations on which diluted earnings per share is calculated $ 5,499 $ 9,435 $ 8,718 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated* 89 (4) 5 Net income on which diluted earnings per share is calculated $ 5,588 $ 9,431 $ 8,722 Earnings/(loss) per share of common stock Assuming dilution Continuing operations $ 6.13 $ 10.57 $ 9.51 Discontinued operations 0.10 (0.01) 0.01 Total $ 6.23 $ 10.56 $ 9.52 Basic Continuing operations $ 6.18 $ 10.63 $ 9.56 Discontinued operations 0.10 0.00 0.01 Total $ 6.28 $ 10.63 $ 9.57 * Related to discontinued operations of Microelectronics, divested in 2015. Weighted-average stock options to purchase 1,417,665 common shares in 2020, 855,679 common shares in 2019 and 576,776 common shares in 2018 were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the common shares for the full year, and therefore, the effect would have been antidilutive. |
Financial Assets & Liabilities
Financial Assets & Liabilities | 12 Months Ended |
Dec. 31, 2020 | |
Financial Assets & Liabilities | |
Financial Assets & Liabilities | NOTE I. FINANCIAL ASSETS & LIABILITIES Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at December 31, 2020 and 2019. ($ in millions) Fair Value 2020 2019 At December 31: Hierarchy Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents (1) Time deposits and certificates of deposit (2) 2 $ 7,668 N/A $ 4,392 N/A Money market funds 1 148 N/A 427 N/A U.S. government securities (2) 2 500 N/A — N/A Total cash equivalents $ 8,316 N/A $ 4,819 N/A Equity investments (3) 1 2 N/A 0 N/A Debt securities–current (2)(4) 2 600 N/A 696 N/A Debt securities–noncurrent (2)(5) 2 7 N/A 65 N/A Derivatives designated as hedging instruments Interest rate contracts 2 100 — 56 — Foreign exchange contracts 2 111 580 175 635 Derivatives not designated as hedging instruments Foreign exchange contracts 2 13 47 10 33 Equity contracts (6) 1,2 12 — 1 4 Total $ 9,161 $ 627 $ 5,823 $ 673 (1) (2) (3) (4) (5) (6) (7) (8) 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 December 31, 2020 and 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 $54,355 million and $54,102 million, and the estimated fair value was $61,598 million and $58,431 million at December 31, 2020 and 2019, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2020 | |
Inventory | |
Inventory | NOTE J. INVENTORY ($ in millions) At December 31: 2020 2019 Finished goods $ 190 $ 220 Work in process and raw materials 1,649 1,399 Total $ 1,839 $ 1,619 |
Financing Receivables
Financing Receivables | 12 Months Ended |
Dec. 31, 2020 | |
Financing Receivables | |
Financing Receivables | NOTE K. 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 Effective January 1, 2020, the company adopted the new accounting standard related to current expected credit losses. Under this new guidance, financing receivables are presented at amortized cost. 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. Refer to note A, “Significant Accounting Policies,” and note B, “Accounting Changes” for additional information. A summary of the components of the company’s financing receivables is presented as follows: ($ in millions) Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial Receivables/ Direct Financing Financing At December 31, 2020: (Loans) Leases Receivables Total Financing receivables, gross $ 12,159 $ 4,001 $ 2,419 $ 18,580 Unearned income (488) (335) 0 (823) Residual value* — 485 — 485 Amortized cost $ 11,671 $ 4,151 $ 2,419 $ 18,242 Allowance for credit losses (173) (82) (8) (263) Total financing receivables, net $ 11,498 $ 4,069 $ 2,411 $ 17,979 Current portion $ 6,955 $ 1,525 $ 2,411 $ 10,892 Noncurrent portion $ 4,542 $ 2,544 $ — $ 7,086 * Includes guaranteed and unguaranteed residual value. ($ in millions) Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial 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. Sale of receivables arrangements are also utilized in the normal course of business as part of the company’s cash and liquidity management. Financing receivables pledged as collateral for borrowings were $482 million and $1,062 million at December 31, 2020 and 2019, respectively. These borrowings are included in note P, “Borrowings.” Transfer of Financial Assets For the year ended December 31, 2020, the company sold $2,562 million of client financing receivables to third parties, consisting of loan and lease receivables of $1,410 million and $1,152 million, respectively. More than half of the receivables sold were classified as current assets at the time of sale. On December 24, 2020, the company entered into an agreement with a third-party investor to sell up to $3,000 million of IBM short-term commercial financing receivables, at any one time, on a revolving basis. The company sold $515 million of commercial financing receivables under the agreement in the fourth quarter of 2020. In addition, the company included $383 million of commercial financing receivables classified as held for sale at December 31, 2020 in short-term financing receivables in the Consolidated Balance Sheet. The carrying value of the receivables classified as held for sale approximates fair value. The transfers of these receivables qualified as true sales and therefore reduced financing receivables, resulting in a benefit to cash flows from operating activities. The impact to the Consolidated Income Statement, including fees and net gain or loss associated with the transfer of these receivables for the year ended December 31, 2020, was not material. The company did not have any material sales of financing receivables or any financing receivables classified as held for sale for the years ended December 31, 2019 and 2018. Financing Receivables by Portfolio Segment The following tables present the amortized cost basis or recorded investment for client financing receivables at December 31, 2020 and 2019, further segmented by three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material. ($ in millions) At December 31, 2020: Americas EMEA Asia Pacific Total Amortized cost $ 7,758 $ 5,023 $ 3,042 $ 15,822 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 (28) (3) (3) (34) Recoveries 0 0 2 3 Additions/(releases) 33 5 (4) 34 Other* (6) 6 1 1 Ending balance at December 31, 2020 $ 141 $ 77 $ 37 $ 255 * Primarily represents translation adjustments. IBM 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 allowance for credit losses at December 31, 2020 reflect the qualitative process which is described further in note A, “Significant Accounting Policies”. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. ($ 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 expected credit losses recorded for lease receivables and loan receivables were a release of $6 million and an addition of $2 million, respectively, for the year ended December 31, 2019. When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies.” Past Due Financing Receivables The company summarizes information about the amortized cost basis or recorded investment in client financing receivables, including amortized cost or recorded investments aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost or recorded investment not accruing. ($ in millions) Amortized Billed Amortized Total Amortized Cost Invoices Cost Amortized Cost > 90 Days and > 90 Days and Not At December 31, 2020: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 7,758 $ 295 $ 200 $ 12 $ 96 EMEA 5,023 119 28 5 95 Asia Pacific 3,042 42 12 4 32 Total client financing receivables $ 15,822 $ 456 $ 241 $ 20 $ 223 (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 $178 million. Financing income recognized on these receivables was immaterial for the year ended December 31, 2020. ($ in millions) Recorded Billed Recorded Total Recorded Investment Invoices Investment 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 $171 million. Financing income on these receivables was immaterial for the year ended December 31, 2019. Credit Quality Indicators The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan. The following tables present the amortized cost basis or recorded investment for client financing receivables by credit quality indicator, at December 31, 2020 and 2019, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. Effective January 1, 2020, under the new guidance for current expected credit losses, the company discloses its credit quality by year of origination. Additionally, under the new guidance, the amortized cost is presented on a gross basis, whereas under the prior guidance, the company presented the recorded investment net of the allowance for credit losses. At December 31, 2020, the credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduces the risk to IBM. ($ in millions) Americas EMEA Asia Pacific At December 31, 2020: Aaa - Baa3 Ba1 - D Aaa - Baa3 Ba1 - D Aaa - Baa3 Ba1 - D Vintage year: 2020 $ 2,818 $ 1,449 $ 1,513 $ 1,427 $ 958 $ 351 2019 988 623 668 519 564 123 2018 829 360 329 245 419 167 2017 285 154 70 128 205 52 2016 90 52 33 46 114 33 2015 and prior 28 81 22 22 38 18 Total $ 5,038 $ 2,720 $ 2,635 $ 2,387 $ 2,298 $ 743 ($ 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 for the years ended December 31, 2020 and 2019. |
Property, Plant & Equipment
Property, Plant & Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant & Equipment | |
Property, Plant & Equipment | NOTE L. PROPERTY, PLANT & EQUIPMENT ($ in millions) At December 31: 2020 2019 Land and land improvements $ 381 $ 365 Buildings and building and leasehold improvements 9,416 9,364 Information technology equipment 19,419 18,054 Production, engineering, office and other equipment 3,695 3,721 Plant and other property—gross 32,911 31,504 Less: Accumulated depreciation 22,968 21,726 Plant and other property—net 9,943 9,778 Rental machines 265 523 Less: Accumulated depreciation 168 292 Rental machines—net 97 232 Total—net $ 10,040 $ 10,010 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases | |
Leases | NOTE M. LEASES Accounting for Leases as a Lessee The following tables presents the various components of lease costs: ($ in millions) For the year ended December 31: 2020 2019 Finance lease cost $ 91 $ 30 Operating lease cost 1,581 1,645 Short-term lease cost 38 38 Variable lease cost 480 534 Sublease income (31) (24) Total lease cost $ 2,158 $ 2,223 The company had no sale and leaseback transactions for the year ended December 31, 2020. The company recorded net gains on sale and leaseback transactions of $41 million for the year ended December 31, 2019. Rental expense, including amounts charged to inventory and fixed assets, and excluding amounts previously reserved, was $1,944 million for the year ended December 31, 2018. The following table presents supplemental information relating to the cash flows arising from lease transactions. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating and finance lease liabilities, and, as such, are excluded from the amounts below. ($ in millions) For the year ended December 31: 2020 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from finance leases $ 10 $ 8 Financing cash outflows from finance leases 85 22 Operating cash outflows from operating leases 1,566 1,541 ROU assets obtained in exchange for new finance lease liabilities 176 209 * ROU assets obtained in exchange for new operating lease liabilities 1,130 6,481 * * Includes opening balance additions as a result of the adoption of the new lease guidance effective January 1, 2019. The post adoption addition of leases for the year ended December 31, 2019 was $1,679 million for operating leases and immaterial for finance leases. The following table presents the weighted-average lease term and discount rate for finance and operating leases. At December 31: 2020 2019 Finance leases Weighted-average remaining lease term 3.9 yrs. 4.8 yrs. Weighted-average discount rate 1.28 % 1.62 % Operating leases Weighted-average remaining lease term 5.0 yrs. 5.4 yrs. Weighted-average discount rate 3.06 % 3.03 % The following table presents a maturity analysis of expected undiscounted cash flows for operating and finance leases on an annual basis for the next five years and thereafter. ($ in millions) Imputed 2021 2022 2023 2024 2025 Thereafter Interest * Total ** Finance leases $ 106 $ 90 $ 62 $ 33 $ 16 $ 36 $ (47) $ 296 Operating leases 1,468 1,186 885 683 405 638 (334) 4,930 * Imputed interest represents the difference between undiscounted cash flows and discounted cash flows. ** The company entered into lease agreements for certain facilities and equipment with payments totaling approximately $376 million that have not yet commenced as of December 31, 2020, and therefore are not included in this table. The following table presents the total amount of finance leases recognized in the Consolidated Balance Sheet: ($ in millions) At December 31: 2020 2019 ROU Assets—Property, plant and equipment $ 282 $ 187 Lease Liabilities Short-term debt 97 52 Long-term debt 199 151 Accounting for Leases as a Lessor The following table presents amounts included in the Consolidated Income Statement related to lessor activity: ($ in millions) For the year ended December 31: 2020 2019 Lease income—sales-type and direct financing leases Sales-type lease selling price $ 1,357 $ 1,509 Less: Carrying value of underlying assets* 439 591 Gross profit 917 918 Interest income on lease receivables 249 303 Total sales-type and direct financing lease income 1,166 1,221 Lease income—operating leases 260 324 Variable lease income 115 56 Total lease income $ 1,541 $ 1,601 * Excludes unguaranteed residual value. Sales-Type and Direct Financing Leases At December 31, 2020 and 2019, the unguaranteed residual values of sales-type and direct financing leases were $469 million and $652 million, respectively. For further information on the company’s net investment in leases, including guaranteed and unguaranteed residual values, refer to note K, “Financing Receivables.” For the years ended December 31, 2020 and 2019, impairment of residual values was immaterial. The following table presents a maturity analysis of the lease payments due to IBM on sales-type and direct financing leases over the next five years and thereafter, as well as a reconciliation of the undiscounted cash flows to the financing receivables recognized in the Consolidated Balance Sheet at December 31, 2020: ($ in millions) Total 2021 $ 1,766 2022 1,233 2023 645 2024 275 2025 74 Thereafter 7 Total undiscounted cash flows $ 4,001 Present value of lease payments (recognized as financing receivables) 3,666 * Difference between undiscounted cash flows and discounted cash flows $ 335 * The present value of the lease payments will not equal the financing receivables balances in the Consolidated Balance Sheet, due to certain items including IDCs, allowance for credit losses and residual values, which are included in the financing receivable balance, but are not included in the future lease payments. Operating Leases The following table presents a maturity analysis of the undiscounted lease payments due to IBM on operating leases over the next five years and thereafter, at December 31, 2020: ($ in millions) Total 2021 $ 50 2022 15 2023 2 2024 0 2025 — Thereafter — Total undiscounted cash flows $ 67 There were no material impairment losses incurred for equipment provided to clients under an operating lease for the years ended December 31, 2020 and 2019. At December 31, 2020 and 2019, the unguaranteed residual values of operating leases were $48 million and $81 million, respectively. |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets Including Goodwill | |
Intangible Assets Including Goodwill | NOTE N. INTANGIBLE ASSETS INCLUDING GOODWILL Intangible Assets The following table presents the company’s intangible asset balances by major asset class: ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2020: Amount Amortization Amount * Intangible asset class Capitalized software $ 1,777 $ (814) $ 963 Client relationships 8,838 (2,056) 6,783 Completed technology 5,957 (1,671) 4,286 Patents/trademarks 2,246 (499) 1,747 Other** 56 (39) 16 Total $ 18,874 $ (5,079) $ 13,796 * Includes an increase in net intangible asset balance of $279 million due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2019: 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 * Includes a decrease in net intangible asset balance of $42 million due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. There was no impairment of intangible assets recorded in 2020 and 2019. The net carrying amount of intangible assets decreased $1,439 million during the year ended December 31, 2020, primarily due to intangible asset amortization, partially offset by additions of capitalized software. The aggregate intangible amortization expense was $2,468 million and $1,850 million for the years ended December 31, 2020 and 2019, respectively. The increase in intangible amortization expense during 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 2020 and 2019, respectively, the company retired $1,483 million and $946 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet is estimated to be the following at December 31, 2020: Capitalized Acquired ($ in millions) Software Intangibles Total 2021 $ 544 $ 1,809 $ 2,353 2022 305 1,746 2,051 2023 114 1,432 1,546 2024 0 1,382 1,383 2025 — 1,364 1,364 Thereafter — 5,099 5,099 Goodwill The changes in the goodwill balances by reportable segment, for the years ended December 31, 2020 and 2019, are as follows: ($ in millions) Foreign Currency Purchase Translation Balance at Goodwill Price and Other Balance at Segment January 1, 2020 Additions Adjustments Divestitures Adjustments ** December 31, 2020 Cloud & Cognitive Software $ 43,037 $ 362 $ (139) $ — $ 675 $ 43,934 Global Business Services 5,775 205 — — 165 6,145 Global Technology Services 7,141 — — — 104 7,245 Systems 2,270 8 — — 15 2,293 Total $ 58,222 $ 575 $ (139) $ — $ 960 $ 59,617 ($ in millions) Foreign Currency Purchase Translation Balance at Goodwill Price and Other Balance at Segment January 1, 2019 Additions Adjustments Divestitures Adjustments ** December 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 2020 or 2019 and the company has no accumulated impairment losses. Purchase price adjustments recorded in 2020 and 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 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 2019 were not material. |
Investments & Sundry Assets
Investments & Sundry Assets | 12 Months Ended |
Dec. 31, 2020 | |
Investments & Sundry Assets | |
Investments & Sundry Assets | NOTE O. INVESTMENTS & SUNDRY ASSETS ($ in millions) At December 31: 2020 2019 Derivatives—noncurrent $ 151 $ 94 Alliance investments Equity method 172 184 Non-equity method 54 38 Long-term deposits 239 242 Other receivables 423 276 Employee benefit-related 238 253 Prepaid income taxes 777 664 Other assets 227 321 Total $ 2,282 $ 2,074 |
Borrowings
Borrowings | 12 Months Ended |
Dec. 31, 2020 | |
Borrowings | |
Borrowings | NOTE P. BORROWINGS Short-Term Debt ($ in millions) At December 31: 2020 2019 Commercial paper $ — $ 304 Short-term loans 130 971 Long-term debt—current maturities 7,053 7,522 Total $ 7,183 $ 8,797 The weighted-average interest rate for commercial paper at December 31, 2019 was 1.6 percent. The weighted-average interest rate for short-term loans was 5.7 percent and 6.1 percent at December 31, 2020 and 2019, respectively. Long-Term Debt Pre-Swap Borrowing ($ in millions) At December 31: Maturities 2020 2019 U.S. dollar debt (weighted-average interest rate at December 31, 2020):* 2.3% 2020 $ — $ 4,326 1.3% 2021 5,499 8,498 2.6% 2022 6,233 6,289 3.3% 2023 2,395 2,388 3.3% 2024 5,029 5,045 6.8% 2025 631 636 3.3% 2026 4,370 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 $ 41,218 $ 44,594 Other currencies (weighted-average interest rate at December 31, 2020, in parentheses):* Euro (1.1%) 2021-2040 $ 18,355 $ 14,306 Pound sterling (2.6%) 2021-2022 411 1,390 Japanese yen (0.3%) 2022-2026 1,409 1,339 Other (3.7%) 2021-2024 324 375 $ 61,718 $ 62,003 Finance lease obligations (1.5%) 2021-2030 296 204 $ 62,013 $ 62,207 Less: net unamortized discount 875 881 Less: net unamortized debt issuance costs 156 142 Add: fair value adjustment** 426 440 $ 61,408 $ 61,624 Less: current maturities 7,053 7,522 Total $ 54,355 $ 54,102 * Includes notes, debentures, bank loans and secured borrowings. ** The portion of the company’s fixed-rate debt obligations that is hedged is 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 all of 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 E, “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 $49 million in the first quarter of 2020 upon redemption, which was recorded in other (income) and expense in the Consolidated Income Statement. Post-Swap Borrowing (Long-Term Debt, Including Current Portion) ($ in millions) 2020 2019 Weighted-Average Weighted-Average For the year ended December 31: Amount Interest Rate Amount Interest Rate Fixed-rate debt $ 53,442 2.7 % $ 52,169 2.9 % Floating-rate debt* 7,966 1.1 % 9,455 2.2 % Total $ 61,408 $ 61,624 * Includes $2,975 million in 2020 and 2019 of notional interest rate swaps that effectively convert fixed-rate long-term debt into floating-rate debt. Refer to note T, “Derivative Financial Instruments,” for additional information. Pre-swap annual contractual obligations of long-term debt outstanding at December 31, 2020, are as follows: ($ in millions) Total 2021 $ 7,053 2022 7,345 2023 5,807 2024 6,506 2025 4,282 Thereafter 31,020 Total $ 62,013 Interest on Debt ($ in millions) For the year ended December 31: 2020 2019 2018 Cost of financing $ 451 $ 608 $ 757 Interest expense 1,288 1,344 723 Interest capitalized 6 5 3 Total interest paid and accrued $ 1,745 $ 1,957 $ 1,482 Refer to the related discussion in note D, “Segments,” for total interest expense of the Global Financing segment. Refer to note T, “Derivative Financial Instruments,” for a discussion of the use of foreign currency denominated debt designated as a hedge of net investment, as well as a discussion of the use of currency and interest rate swaps in the company’s debt risk management program. 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 . Each of the facility sizes remained unchanged. The total expense recorded by the company related to the Five-Year Credit Agreement was $8 million in 2020, $7 million in 2019 and $7 million in 2018. The total expense recorded by the company related to the 364-day and Three-Year Credit Agreements was $4 million in 2020, $2 million in 2019 and $2 million in 2018. The Five-Year Credit Agreement permits the company and its subsidiary borrowers to borrow up to $10.25 billion on a revolving basis. Borrowings of the subsidiary borrowers will be unconditionally backed by the company. The company may also, upon the agreement of either existing lenders, or of additional banks not currently party to the Five-Year Credit Agreement, increase the commitments under the Credit Agreement up to an additional $1.75 billion. The 364-day Credit Agreement and the Three-Year Credit Agreement allow the company and IBM Credit (each a Borrower) to borrow up to an aggregate of $5 billion on a revolving basis. Neither Borrower is a guarantor or co-obligor of the other Borrower under the 364-day and Three-Year Credit Agreements. Subject to certain conditions stated in the Five-Year , 364-day and Three-Year Credit Agreements (the Credit Agreements), the Borrowers may borrow, prepay and re-borrow amounts under the Credit Agreements at any time during the term of such agreements. Funds borrowed may be used for the general corporate purposes of the Borrowers. Interest rates on borrowings under the Credit Agreements will be based on prevailing market interest rates, as further described in the Credit Agreements. The Credit Agreements contain customary representations and warranties, covenants, events of default, and indemnification provisions. The company believes that circumstances that might give rise to breach of these covenants or an event of default, as specified in the Credit Agreements, are remote. The company also has other committed lines of credit in some of the geographies which are not significant in the aggregate. Interest rates and other terms of borrowing under these lines of credit vary from country to country, depending on local market conditions. As of December 31, 2020, there were no borrowings by the company, or its subsidiaries, under these credit facilities. |
Other Liabilities
Other Liabilities | 12 Months Ended |
Dec. 31, 2020 | |
Other Liabilities | |
Other Liabilities | NOTE Q. OTHER LIABILITIES ($ in millions) At December 31: 2020 2019 Income tax reserves $ 5,274 $ 5,118 Excess 401(k) Plus Plan 1,635 1,521 Disability benefits 452 478 Derivative liabilities 40 506 Workforce reductions 956 725 Deferred taxes 5,472 5,230 Other taxes payable 253 42 Environmental accruals 246 254 Warranty accruals 33 45 Asset retirement obligations 117 94 Acquisition related 60 9 Divestiture related 62 65 Other 297 439 Total $ 14,897 $ 14,526 In response to changing business needs, the company periodically takes workforce reduction actions to improve productivity, cost competitiveness and to rebalance skills. The noncurrent contractually obligated future payments associated with these activities are reflected in the workforce reductions caption in the previous table. The noncurrent liabilities are workforce accruals primarily related to terminated employees who are no longer working for the company who were granted annual payments to supplement their incomes in certain countries. Depending on the individual country’s legal requirements, these required payments will continue until the former employee begins receiving pension benefits or passes away. The total amounts accrued for workforce reductions, including amounts classified as other accrued expenses and liabilities in the Consolidated Balance Sheet were $3,151 million and $950 million at December 31, 2020 and 2019, respectively. The increase in the total amount accrued as of December 31, 2020 relates primarily to the workforce reduction action in the fourth quarter of 2020 for which the company recorded a charge of $2,036 million in selling, general and administrative expense in the Consolidated Income Statement for severance and employee related benefits in accordance with the accounting guidance for ongoing benefit arrangements. The company employs extensive internal environmental protection programs that primarily are preventive in nature. The company also participates in environmental assessments and cleanups at a number of locations, including operating facilities, previously owned facilities and Superfund sites. The company’s maximum exposure for all environmental liabilities cannot be estimated and no amounts have been recorded for non-ARO environmental liabilities that are not probable or estimable. The total amounts accrued for non-ARO environmental liabilities, including amounts classified as current in the Consolidated Balance Sheet, that do not reflect actual or anticipated insurance recoveries, were $266 million and $270 million at December 31, 2020 and 2019, respectively. Estimated environmental costs are not expected to materially affect the consolidated financial position or consolidated results of the company’s operations in future periods. However, estimates of future costs are subject to change due to protracted cleanup periods and changing environmental remediation regulations. As of December 31, 2020, the company was unable to estimate the range of settlement dates and the related probabilities for certain asbestos remediation AROs. These conditional AROs are primarily related to the encapsulated structural fireproofing that is not subject to abatement unless the buildings are demolished and non-encapsulated asbestos that the company would remediate only if it performed major renovations of certain existing buildings. Because these conditional obligations have indeterminate settlement dates, the company could not develop a reasonable estimate of their fair values. The company will continue to assess its ability to estimate fair values at each future reporting date. The related liability will be recognized once sufficient additional information becomes available. The total amounts accrued for ARO liabilities, including amounts classified as current in the Consolidated Balance Sheet were $154 million and $150 million at December 31, 2020 and 2019, respectively. |
Commitments & Contingencies
Commitments & Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments & Contingencies | |
Commitments & Contingencies | NOTE R. COMMITMENTS & CONTINGENCIES Commitments The company’s extended lines of credit to third-party entities include unused amounts of $2.1 billion and $1.8 billion at December 31, 2020 and 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 $5.2 billion and $6.3 billion at December 31, 2020 and 2019, respectively. Effective January 1, 2020, the company adopted the new standard on current expected credit losses, which resulted in the recognition of a related allowance for non-cancellable off-balance sheet commitments. Refer to note B, “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 December 31, 2020. The company collectively evaluates the allowance for these arrangements using a provision methodology consistent with the portfolio of the commitments. Refer to note A, “Significant Accounting Policies,” 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 indemnification provisions typically 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 December 31, 2020 and 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 ($ in millions) 2020 2019 Balance at January 1 $ 113 $ 118 Current period accruals 83 111 Accrual adjustments to reflect experience (16) (1) Charges incurred (96) (115) Balance at December 31 $ 83 $ 113 Extended Warranty Liability (Deferred Income) ($ in millions) 2020 2019 Balance at January 1 $ 477 $ 533 Revenue deferred for new extended warranty contracts 166 198 Amortization of deferred revenue (224) (253) Other* 6 (2) Balance at December 31 $ 425 $ 477 Current portion $ 204 $ 227 Noncurrent portion $ 221 $ 250 * Other consists primarily of foreign currency translation adjustments. 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. Further, given the rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, the company or its clients could become subject to actions or proceedings in various jurisdictions. 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 years ended December 31, 2020, 2019 and 2018 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 current or 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. In February 2021, the parties reached an agreement to settle the matter subject to court approval. 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 $750 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 | 12 Months Ended |
Dec. 31, 2020 | |
Equity Activity | |
Equity Activity | NOTE S. EQUITY ACTIVITY The authorized capital stock of IBM consists of 4,687,500,000 shares of common stock with a $.20 per share par value, of which 892,653,424 shares were outstanding at December 31, 2020, and 150,000,000 shares of preferred stock with a $.01 per share par value, none of which were outstanding at December 31, 2020. Stock Repurchases The Board of Directors authorizes the company to repurchase IBM common stock. The company suspended its share repurchase program effective with the close of the Red Hat acquisition on July 9, 2019 in order to focus on reducing debt related to the acquisition. The company repurchased 9,979,516 common shares at a cost of $1,331 million, and 32,949,233 common shares at a cost of $4,447 million in 2019 and 2018, respectively. These amounts reflect transactions executed through December 31 of each year. Actual cash disbursements for repurchased shares may differ due to varying settlement dates for these transactions. At December 31, 2020, $2,008 million of Board common stock repurchase authorization was available. Other Stock Transactions The company issued the following shares of common stock as part of its stock-based compensation plans and employees stock purchase plan: 4,972,028 shares in 2020, 4,569,917 shares in 2019, and 3,998,245 shares in 2018. The company issued 2,934,907 treasury shares in 2020, 2,041,347 treasury shares in 2019 and 424,589 treasury shares in 2018, as a result of restricted stock unit releases and exercises of stock options by employees of certain acquired businesses and by non-U.S. employees. Also, as part of the company’s stock-based compensation plans, 2,363,966 common shares at a cost of $302 million, 2,000,704 common shares at a cost of $272 million, and 1,173,416 common shares at a cost of $171 million in 2020, 2019 and 2018, respectively, were remitted by employees to the company in order to satisfy minimum statutory tax withholding requirements. These amounts are included in the treasury stock balance in the Consolidated Balance Sheet and the Consolidated Statement of Equity. Reclassifications and Taxes Related to Items of Other Comprehensive Income ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2020: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,500) $ 535 $ (965) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (1) $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ (349) $ 89 $ (261) Reclassification of (gains)/losses to: Cost of services (23) 6 (18) Cost of sales (2) 1 (2) Cost of financing 27 (7) 20 SG&A expense 0 0 0 Other (income) and expense (101) 25 (75) Interest expense 78 (20) 58 Total unrealized gains/(losses) on cash flow hedges $ (370) $ 94 $ (277) Retirement-related benefit plans (1) Prior service costs/(credits) $ (37) $ 7 $ (29) Net (losses)/gains arising during the period (1,678) 295 (1,383) Curtailments and settlements 52 (14) 38 Amortization of prior service (credits)/costs 13 (1) 12 Amortization of net (gains)/losses 2,314 (451) 1,863 Total retirement-related benefit plans $ 664 $ (163) $ 501 Other comprehensive income/(loss) $ (1,206) $ 466 $ (740) (1) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2019: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (39) $ 29 $ (10) 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 $ (689) $ 167 $ (522) Reclassification of (gains)/losses to: Cost of services (68) 17 (50) Cost of sales (51) 15 (37) Cost of financing 89 (22) 67 SG&A expense (53) 14 (39) Other (income) and expense (39) 10 (29) Interest expense 197 (50) 148 Total unrealized gains/(losses) on cash flow hedges $ (614) $ 151 $ (463) Retirement-related benefit plans (1) Prior service costs/(credits) $ (73) $ 10 $ (63) Net (losses)/gains arising during the period (120) 52 (68) Curtailments and settlements 41 (12) 29 Amortization of prior service (credits)/costs (9) 5 (4) Amortization of net (gains)/losses 1,843 (371) 1,471 Total retirement-related benefit plans $ 1,681 $ (316) $ 1,365 Other comprehensive income/(loss) $ 1,029 $ (136) $ 893 (1) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2018: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (730) $ (172) $ (902) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (2) $ 1 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (2) $ 1 $ (1) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ (136) $ 43 $ (93) Reclassification of (gains)/losses to: Cost of services (30) 8 (22) Cost of sales (8) 3 (5) Cost of financing 75 (19) 56 SG&A expense 0 0 0 Other (income) and expense 341 (86) 255 Interest expense 71 (18) 53 Total unrealized gains/(losses) on cash flow hedges $ 313 $ (69) $ 244 Retirement-related benefit plans (1) Prior service costs/(credits) $ (182) $ 31 $ (151) Net (losses)/gains arising during the period (2,517) 576 (1,941) Curtailments and settlements 11 (2) 9 Amortization of prior service (credits)/costs (73) 5 (68) Amortization of net (gains)/losses 2,966 (632) 2,334 Total retirement-related benefit plans $ 204 $ (21) $ 184 Other comprehensive income/(loss) $ (215) $ (262) $ (476) (1) Accumulated Other Comprehensive Income/(Loss) (net of tax) ($ in millions) Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive Hedges Adjustments * Plans Securities Income/(Loss) December 31, 2017 $ 35 $ (2,834) $ (23,796) $ 3 $ (26,592) Cumulative effect of a change in accounting principle** 5 46 (2,471) (2) (2,422) Other comprehensive income before reclassifications (93) (902) (2,092) (1) (3,089) Amount reclassified from accumulated other comprehensive income 337 — 2,276 — 2,612 Total change for the period 244 (902) 184 (1) (476) December 31, 2018 284 (3,690) (26,083) 0 (29,490) Other comprehensive income before reclassifications (522) (10) (131) 1 (663) Amount reclassified from accumulated other comprehensive income 59 — 1,496 — 1,556 Total change for the period (463) (10) 1,365 1 893 December 31, 2019 (179) (3,700) (24,718) 0 (28,597) Other comprehensive income before reclassifications (261) (965) (1,412) 0 (2,638) Amount reclassified from accumulated other comprehensive income (16) — 1,914 — 1,898 Total change for the period $ (277) $ (965) $ 501 $ 0 $ (740) December 31, 2020 $ (456) $ (4,665) $ (24,216) $ 0 $ (29,337) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. ** Reflects the adoption of FASB guidance. Refer to note B, “Accounting Changes”. |
Derivative Financial Instrument
Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2020 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | NOTE T. 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 amount was recognized for the right to reclaim or the obligation to return cash collateral at December 31, 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 December 31, 2020 and 2019. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at December 31, 2020 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 December 31, 2020 and 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 December 31, 2020 and 2019 was approximately 1.2 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 December 31, 2020 and 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 P, “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 December 31, 2020 and 2019. In connection with cash flow hedges of forecasted interest payments related to the company’s borrowings, the company recorded net losses of $174 million and net losses of $192 million (before taxes) at December 31, 2020 and 2019, respectively, in AOCI. The company estimates that $18 million (before taxes) of the deferred net losses on derivatives in AOCI at December 31, 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 December 31, 2020 and 2019, the carrying value of debt designated as hedging instruments was $16.4 billion and $7.3 billion, respectively. The $9.0 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 this risk management purpose. At December 31, 2020 and 2019, the total notional amount of derivative instruments designated as net investment hedges was $7.2 billion and $7.9 billion, respectively. At December 31, 2020 and 2019, the weighted-average remaining maturity of these instruments was approximately 0.3 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 has hedged its exposure to the variability in future cash flows is approximately four years. At December 31, 2020 and 2019, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.0 billion and $9.7 billion, respectively. At December 31, 2020 and 2019, the weighted-average remaining maturity of these instruments was approximately 0.7 years and 0.8 years, respectively. At December 31, 2020 and 2019, in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net losses of $192 million and net gains of $145 million (before taxes), respectively, in AOCI. The company estimates that $285 million (before taxes) of deferred net losses on derivatives in AOCI at December 31, 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 December 31, 2020, the maximum length of time remaining over which the company has hedged its exposure was approximately seven years. At December 31, 2020 and 2019, the total notional amount of cross-currency swaps designated as cash flow hedges of foreign currency denominated debt was $1.5 billion and $8.2 billion, respectively. The primary driver of the $6.7 billion decrease in cross-currency swaps is part of the company’s risk management strategy to use the previously hedged foreign currency denominated debt as a hedge of net investment in foreign subsidiaries. At December 31, 2020 and 2019, in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses of $236 million and net losses of $185 million (before taxes), respectively, in AOCI. The company estimates that $23 million (before taxes) of deferred net losses on derivatives in AOCI at December 31, 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 December 31, 2020 and 2019, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $6.8 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 December 31, 2020 and 2019, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.3 billion at both periods. Cumulative Basis Adjustments for Fair Value Hedges At December 31, 2020 and 2019, the following amounts were recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: ($ in millions) At December 31: 2020 2019 Short-term debt: Carrying amount of the hedged item $ (1,302) $ — Cumulative hedging adjustments included in the carrying amount—assets/(liabilities) (2) — Long-term debt: Carrying amount of the hedged item (2,097) (3,411) Cumulative hedging adjustments included in the carrying amount—assets/(liabilities)* (424) (440) * Includes ($353) million and ($404) million of hedging adjustments on discontinued hedging relationships at December 31, 2020 and 2019, respectively. The Effect of Derivative Instruments in the Consolidated Income Statement The total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value hedges, cash flow hedges, net investment hedges and derivatives not designated as hedging instruments are recorded and the total effect of hedge activity on these income and expense line items are as follows: ($ in millions) Gains/(Losses) of Total Total Hedge Activity For the year ended December 31: 2020 2019 2018 2020 2019 2018 Cost of services $ 30,404 $ 32,491 $ 33,687 $ 23 $ 68 $ 30 Cost of sales 6,934 7,263 7,835 2 51 8 Cost of financing 708 904 1,132 12 (42) (6) SG&A expense 23,082 20,604 19,366 141 267 (116) Other (income) and expense 861 (968) 1,152 101 (15) (434) Interest expense 1,288 1,344 723 35 (93) (6) ($ in millions) Gain/(Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk Income Statement Derivatives Being Hedged (2) For the year ended December 31: Line Item 2020 2019 2018 2020 2019 2018 Derivative instruments in fair value hedges (1) Interest rate contracts Cost of financing $ 20 $ 44 $ (61) $ 4 $ (32) $ 97 Interest expense 58 98 (58) 11 (71) 92 Derivative instruments not designated as hedging instruments Foreign exchange contracts Other (income) 1 (53) (93) N/A N/A N/A Equity contracts SG&A expense 142 214 (116) N/A N/A N/A Total $ 220 $ 302 $ (327) $ 14 $ (103) $ 189 ($ in millions) Gain/(Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income Consolidated Reclassified Amounts Excluded from For the year ended Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) December 31: 2020 2019 2018 Line Item 2020 2019 2018 2020 2019 2018 Derivative instruments in cash flow hedges Interest rate contracts $ — $ (168) $ (35) Cost of financing $ (5) $ (3) $ — $ — $ — $ — Interest expense (13) (8) — — — — Foreign exchange contracts (349) (521) (101) Cost of services 23 68 30 — — — Cost of sales 2 51 8 — — — Cost of financing (23) (86) (75) — — — SG&A expense 0 53 0 — — — Other (income) 101 39 (341) — — — Interest expense (65) (190) (71) — — — Instruments in net investment hedges (4) Foreign exchange contracts (2,127) (95) 686 Cost of financing — — — 16 35 33 Interest expense — — — 45 77 31 Total $ (2,477) $ (784) $ 549 $ 21 $ (75) $ (449) $ 60 $ 112 $ 64 (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 with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries. N/A–Not applicable For the years ending December 31, 2020, 2019 and 2018, 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 | 12 Months Ended |
Dec. 31, 2020 | |
Stock-Based Compensation | |
Stock-Based Compensation | NOTE U. STOCK-BASED COMPENSATION The following table presents total stock-based compensation cost included in income from continuing operations. ($ in millions) For the year ended December 31: 2020 2019 2018 Cost $ 153 $ 100 $ 82 SG&A expense 586 453 361 RD&E expense 198 126 67 Pre-tax stock-based compensation cost 937 679 510 Income tax benefits (213) (155) (116) Net stock-based compensation cost $ 724 $ 524 $ 393 Red Hat was acquired on July 9, 2019. The 2020 results include a full year of compensation expense for issuances and conversions of stock-based compensation for Red Hat compared to six months in 2019. The company’s total unrecognized compensation cost related to non-vested awards at December 31, 2020 was $1.4 billion and is expected to be recognized over a weighted-average period of approximately 2.2 years. Capitalized stock-based compensation cost was not material at December 31, 2020, 2019 and 2018. Incentive Awards Stock-based incentive awards are provided to employees under the terms of the company’s long-term performance plans (the Plans). The Plans are administered by the Executive Compensation and Management Resources Committee of the Board of Directors. Awards available under the Plans principally include restricted stock units, performance share units, stock options or any combination thereof. There were 293 million shares originally authorized to be awarded under the company's existing Plans and 66 million shares granted under previous plans that, if and when those awards were cancelled, could be reissued under the existing Plans. At December 31, 2020, 103 million unused shares were available to be granted. Stock Awards Stock awards are made in the form of Restricted Stock Units (RSUs), including Retention Restricted Stock Units (RRSUs), or Performance Share Units (PSUs). The following table summarizes RSU and PSU activity under the Plans during the years ended December 31, 2020, 2019 and 2018. RSUs PSUs Weighted-Average Weighted-Average Grant Price Number of Units Grant Price Number of Units Balance at January 1, 2018 $ 141 8,555,263 $ 144 2,649,313 Awards granted 121 4,806,790 130 909,140 Awards released 148 (2,579,962) 152 (666,244) Awards canceled/forfeited/performance adjusted 139 (979,387) 147 (472,514) * Balance at December 31, 2018 $ 130 9,802,704 $ 136 2,419,695 ** Awards granted 119 5,650,861 117 1,395,534 Awards released 136 (3,145,016) 140 (846,672) Awards canceled/forfeited/performance adjusted 128 (981,921) 131 (112,107) * Balance at December 31, 2019 $ 123 11,326,628 $ 126 2,856,450 ** Awards granted 115 10,651,955 117 1,582,666 Awards released 126 (3,781,240) 137 (630,974) Awards canceled/forfeited/performance adjusted 121 (1,300,639) 125 (256,642) * Balance at December 31, 2020 $ 117 16,896,704 $ 120 3,551,500 ** * Includes adjustments of (70,089), (8,544) and (328,120) PSUs for 2020, 2019 and 2018, respectively, because final performance metrics were above or below specified targets. ** Represents the number of shares expected to be issued based on achievement of grant date performance targets. The actual number of shares issued will depend on final performance against specified targets over the vesting period. The total fair value of RSUs and PSUs granted and vested during the years ended December 31, 2020, 2019 and 2018 were as follows: ($ in millions) For the year ended December 31: 2020 2019 2018 RSUs Granted $ 1,220 $ 674 $ 583 Vested 478 428 381 PSUs Granted $ 186 $ 164 $ 118 Vested 86 118 101 In connection with vesting and release of RSUs and PSUs, the tax benefits realized by the company for the years ended December 31, 2020, 2019 and 2018 were $139 million, $131 million and $117 million, respectively. Stock Options In 2016, the company made one grant of 1.5 million premium-priced stock options. As of December 31, 2020, these options were vested with a weighted-average exercise price of $140 per share and had a remaining weighted-average contractual life of approximately 5.1 years. The options are exercisable within a range of $129 to $154. These vested options had no intrinsic value as of December 31, 2020. The company has not granted options since 2016. No material stock options were exercised, forfeited or canceled during the years ended December 31, 2020, 2019 and 2018. The company settles employee stock option exercises primarily with newly issued common shares and, occasionally, with treasury shares. Total treasury shares held at December 31, 2020 and 2019 were approximately 1,350 million and 1,351 million shares, respectively. Acquisitions In connection with the acquisition of Red Hat in July 2019, the company issued and assumed 6.4 million stock awards with a fair value of $845 million. A share conversion ratio of 1.35 was applied to convert Red Hat’s outstanding equity awards for Red Hat’s common stock into IBM stock awards. At December 31, 2020, there were 2.1 million of these stock awards outstanding with a weighted-average grant price of $140 per share. In connection with various other acquisition transactions, there was an additional 0.1 million stock options outstanding at December 31, 2020, as a result of the company’s conversion of stock-based awards previously granted by acquired entities. The weighted-average exercise price of these awards was $44 per share. IBM Employees Stock Purchase Plan The company maintains a non-compensatory Employees Stock Purchase Plan (ESPP). The ESPP enables eligible participants to purchase shares of IBM common stock at a 5 percent discount off the average market price on the day of purchase through payroll deductions of up to 10 percent of eligible compensation. Eligible compensation includes any compensation received by the employee during the year. The ESPP provides for semi-annual offering periods during which shares may be purchased and continues as long as shares remain available under the ESPP, unless terminated earlier at the discretion of the Board of Directors. Individual ESPP participants are restricted from purchasing more than $25,000 of common stock in one calendar year or 1,000 shares in an offering period. Employees purchased approximately one million shares under the ESPP during each year ended December 31, 2020, 2019 and 2018. Cash dividends declared and paid by the company on its common stock also include cash dividends on the company stock purchased through the ESPP. Dividends are paid on full and fractional shares and can be reinvested. The company stock purchased through the ESPP is considered outstanding and is included in the weighted-average outstanding shares for purposes of computing basic and diluted earnings per share. Approximately 17.8 million shares were available for purchase under the ESPP at December 31, 2020. |
Retirement-Related Benefits
Retirement-Related Benefits | 12 Months Ended |
Dec. 31, 2020 | |
Retirement-Related Benefits | |
Retirement-Related Benefits | NOTE V. RETIREMENT-RELATED BENEFITS Description of Plans IBM sponsors the following retirement-related plans/benefits: Plan Eligibility Funding Benefit Calculation Other U.S. Defined Benefit (DB) Pension Plans Qualified Personal Pension Plan (PPP) U.S. regular, full-time and part-time employees hired prior to January 1, 2005 Company contributes to irrevocable trust fund, held for sole benefit of participants and beneficiaries Vary based on the participant: Five-year , final pay formula based on salary, years of service, mortality and other participant-specific factors Cash balance formula based on percentage of employees’ annual salary, as well as an interest crediting rate Benefit accruals ceased December 31, 2007 Excess Personal Pension Plan (PPP) Unfunded, provides benefits in excess of IRS limitations for qualified plans Supplemental Executive Retention Plan (Retention Plan) Eligible U.S. executives Unfunded Based on average earnings, years of service and age at termination of employment U.S. Defined Contribution (DC) Plans (1) 401(k) Plus U.S. regular, full-time and part-time employees All contributions are made in cash and invested in accordance with participants’ investment elections Dollar-for-dollar match, generally 5 or 6 percent of eligible compensation and automatic matching of 1, 2 or 4 percent of eligible compensation, depending on date of hire Employees generally receive contributions after one year of service Excess 401(k) Plus U.S. employees whose eligible compensation is expected to exceed IRS compensation limit for qualified plans Unfunded, non-qualified amounts deferred are record-keeping (notional) accounts and are not held in trust for the participants, but may be invested in accordance with participants’ investment elections (under the 401(k) Plus Plan options) Company match and automatic contributions (at the same rate under 401(k) Plus Plan) on eligible compensation deferred and on compensation earned in excess of the IRC pay limit. The percentage varies depending on eligibility and years of service Employees generally receive contributions after one year of service. Amounts deferred into the Plan, including company contributions, are recorded as liabilities U.S. Nonpension Postretirement Benefit Plan Nonpension Postretirement Plan Medical and dental benefits for eligible U.S. retirees and eligible dependents, as well as life insurance for eligible U.S. retirees Company contributes to irrevocable trust fund, held for the sole benefit of participants and beneficiaries Varies based on plan design formulas and eligibility requirements Since January 1, 2004, new hires are not eligible for these benefits Non-U.S. Plans DB or DC Eligible regular employees in certain non-U.S. subsidiaries or branches Company deposits funds under various fiduciary-type arrangements, purchases annuities under group contracts or provides reserves for these plans Based either on years of service and the employee’s compensation (generally during a fixed number of years immediately before retirement) or on annual credits In certain countries, benefit accruals have ceased and/or have been closed to new hires as of various dates Nonpension Postretirement Plan Medical and dental benefits for eligible non-U.S. retirees and eligible dependents, as well as life insurance for certain eligible non-U.S. retirees Primarily unfunded except for a few select countries where the company contributes to irrevocable trust funds held for the sole benefit of participants and beneficiaries Varies based on plan design formulas and eligibility requirements by country Most non-U.S. retirees are covered by local government sponsored and administered programs (1) Matching and automatic contributions are made once at the end of the year for employees that are employed as of December 15 of the plan year. Contributions may be made for certain types of separations that occur prior to December 15. Plan Financial Information Summary of Financial Information The following table presents a summary of the total retirement-related benefits net periodic (income)/cost recorded in the Consolidated Income Statement. ($ in millions) U.S. Plans Non-U.S. Plans Total For the year ended December 31: 2020 2019 2018 2020 2019 2018 2020 2019 2018 Defined benefit pension plans $ 167 $ (153) $ 542 $ 1,178 $ 955 $ 1,284 $ 1,345 $ 803 $ 1,827 Retention Plan 11 11 17 — — — 11 11 17 Total defined benefit pension plans (income)/cost $ 178 $ (142) $ 559 $ 1,178 $ 955 $ 1,284 $ 1,355 $ 813 $ 1,843 IBM 401(k) Plus Plan and non-U.S. plans $ 585 $ 588 $ 588 $ 447 $ 427 $ 412 $ 1,032 $ 1,015 $ 1,000 Excess 401(k) 27 26 24 — — — 27 26 24 Total defined contribution plans cost $ 612 $ 613 $ 612 $ 447 $ 427 $ 412 $ 1,058 $ 1,040 $ 1,024 Nonpension postretirement benefit plans cost $ 145 $ 154 $ 147 $ 58 $ 65 $ 51 $ 203 $ 219 $ 198 Total retirement-related benefits net periodic cost $ 934 $ 624 $ 1,319 $ 1,683 $ 1,448 $ 1,747 $ 2,617 $ 2,072 $ 3,066 The following table presents a summary of the total PBO for defined benefit pension plans, APBO for nonpension postretirement benefit plans, fair value of plan assets and the associated funded status recorded in the Consolidated Balance Sheet. ($ in millions) Benefit Obligations Fair Value of Plan Assets Funded Status* At December 31: 2020 2019 2020 2019 2020 2019 U.S. Plans Overfunded plans Qualified PPP $ 50,375 $ 48,471 $ 54,386 $ 51,784 $ 4,011 $ 3,313 Underfunded plans Excess PPP $ 1,556 $ 1,473 $ — $ — $ (1,556) $ (1,473) Retention Plan 306 288 — — (306) (288) Nonpension postretirement benefit plan 3,791 3,857 15 3 (3,776) (3,854) Total underfunded U.S. plans $ 5,653 $ 5,618 $ 15 $ 3 $ (5,638) $ (5,615) Non-U.S. Plans Overfunded plans Qualified defined benefit pension plans** $ 20,649 $ 18,371 $ 24,246 $ 21,921 $ 3,597 $ 3,550 Nonpension postretirement benefit plans 21 19 22 21 1 2 Total overfunded non-U.S. plans $ 20,670 $ 18,390 $ 24,269 $ 21,942 $ 3,599 $ 3,552 Underfunded plans Qualified defined benefit pension plans** $ 25,160 $ 23,222 $ 19,586 $ 18,398 $ (5,574) $ (4,824) Nonqualified defined benefit pension plans 7,180 6,731 — — (7,180) (6,731) Nonpension postretirement benefit plans 755 828 31 44 (723) (785) Total underfunded non-U.S. plans $ 33,095 $ 30,782 $ 19,617 $ 18,442 $ (13,478) $ (12,340) Total overfunded plans $ 71,044 $ 66,861 $ 78,654 $ 73,726 $ 7,610 $ 6,865 Total underfunded plans $ 38,747 $ 36,399 $ 19,632 $ 18,445 $ (19,116) $ (17,955) * Funded status is recognized in the Consolidated Balance Statement as follows: Asset amounts as prepaid pension assets; (Liability) amounts as compensation and benefits (current liability) and retirement and nonpension postretirement benefit obligations (noncurrent liability). ** Non-U.S. qualified plans represent plans funded outside of the U.S. Non-U.S. nonqualified plans are unfunded. At December 31, 2020, the company’s qualified defined benefit pension plans worldwide were 102 percent funded compared to the benefit obligations, with the U.S. Qualified PPP 108 percent funded. Overall, including nonqualified plans, the company’s defined benefit pension plans worldwide were 93 percent funded. Defined Benefit Pension and Nonpension Postretirement Benefit Plan Financial Information The following tables through page 132 represent financial information for the company’s retirement-related benefit plans, excluding defined contribution plans. The defined benefit pension plans under U.S. Plans consist of the Qualified PPP, the Excess PPP and the Retention Plan. The defined benefit pension plans and the nonpension postretirement benefit plans under non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. The nonpension postretirement benefit plan under U.S. Plan consists of only the U.S. Nonpension Postretirement Benefit Plan. The following tables present the components of net periodic (income)/cost of the retirement-related benefit plans recognized in the Consolidated Income Statement, excluding defined contribution plans. ($ in millions) Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans For the year ended December 31: 2020 2019 2018 2020 2019 2018 Service cost $ — $ — $ — $ 392 $ 370 $ 413 Interest cost (1) 1,501 1,882 1,719 563 847 830 Expected return on plan assets (1) (2,169) (2,599) (2,701) (1,275) (1,588) (1,342) Amortization of transition assets (1) — — — — 0 0 Amortization of prior service costs/(credits) (1) 16 16 16 (8) (23) (83) Recognized actuarial losses (1) 829 559 1,525 1,406 1,249 1,401 Curtailments and settlements (1) — — — 52 41 11 Multi-employer plans — — — 29 32 38 Other costs/(credits) — — — 18 28 16 Total net periodic (income)/cost $ 178 $ (142) $ 559 $ 1,178 $ 955 $ 1,284 ($ in millions) Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans For the year ended December 31: 2020 2019 2018 2020 2019 2018 Service cost $ 9 $ 10 $ 13 $ 5 $ 5 $ 5 Interest cost (1) 103 145 132 36 55 45 Expected return (1) — — 0 (4) (5) (6) Amortization of transition assets (1) — — — 0 — 0 Amortization of prior service costs/(credits) (1) 4 (2) (7) 0 0 0 Recognized actuarial losses (1) 29 1 10 21 10 6 Curtailments and settlements ( 1) — — — 0 0 0 Other costs/(credits) — — — 0 — — Total net periodic cost $ 145 $ 154 $ 147 $ 58 $ 65 $ 51 (1) These components of net periodic pension costs are included in other (income) and expense in the Consolidated Income Statement. For the U.S. Qualified PPP, beginning in 2019, substantially all participants are considered inactive. The amortization period of unrecognized actuarial losses was changed to the average remaining life expectancy of inactive plan participants, which was 18 years as of December 31, 2018. Beginning in 2019, there was a reduction to amortization expense of approximately $900 million annually. There was no impact to the funded status, retiree benefit payments or funding requirements. The following table presents the changes in benefit obligations and plan assets of the company’s retirement-related benefit plans, excluding DC plans. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Change in benefit obligation Benefit obligation at January 1 $ 50,232 $ 47,812 $ 48,324 $ 45,770 $ 3,857 $ 3,912 $ 848 $ 705 Service cost — — 392 370 9 10 5 5 Interest cost 1,501 1,882 563 847 103 145 36 55 Plan participants' contributions — — 23 23 56 57 — — Acquisitions/divestitures, net 1 — 50 (32) — — 0 0 Actuarial losses/(gains) 4,071 4,040 2,766 3,467 135 148 (3) 141 Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Direct benefit payments (123) (124) (420) (403) 0 (6) (24) (27) Foreign exchange impact — — 3,283 134 — — (82) (1) Amendments/curtailments/ settlements/other 0 — (47) 50 — (21) (1) (23) Benefit obligation at December 31 $ 52,237 $ 50,232 $ 52,989 $ 48,324 $ 3,791 $ 3,857 $ 775 $ 848 Change in plan assets Fair value of plan assets at January 1 $ 51,784 $ 48,213 $ 40,319 $ 36,758 $ 3 $ 29 $ 65 $ 65 Actual return on plan assets 6,046 6,949 2,571 4,896 0 1 4 7 Employer contributions — — 182 243 325 304 — — Acquisitions/divestitures, net 1 — 97 (25) — — — — Plan participants' contributions — — 23 23 56 57 — — Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Foreign exchange impact — — 2,599 333 — — (10) (1) Amendments/curtailments/ settlements/other — — (13) (7) 0 — 0 0 Fair value of plan assets at December 31 $ 54,386 $ 51,784 $ 43,832 $ 40,319 $ 15 $ 3 $ 53 $ 65 Funded status at December 31 $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) Accumulated benefit obligation* $ 52,237 $ 50,232 $ 52,513 $ 47,645 N/A N/A N/A N/A * Represents the benefit obligation assuming no future participant compensation increases. N/A–Not applicable The following table presents the net funded status recognized in the Consolidated Balance Sheet. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans At December 31: 2020 2019 2020 2019 2020 2019 2020 2019 Prepaid pension assets $ 4,011 $ 3,313 $ 3,597 $ 3,550 $ 0 $ 0 $ 1 $ 2 Current liabilities—compensation and benefits (122) (120) (366) (313) (346) (346) (34) (33) Noncurrent liabilities—retirement and nonpension postretirement benefit obligations (1,740) (1,641) (12,388) (11,242) (3,430) (3,507) (690) (752) Funded status—net $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) The following table presents the pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in OCI and the changes in the pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in AOCI for the retirement-related benefit plans. ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Net loss at January 1 $ 16,608 $ 17,476 $ 17,272 $ 18,452 $ 551 $ 405 $ 287 $ 172 Current period loss/(gain) 194 (309) 1,338 109 135 147 (2) 125 Curtailments and settlements — — (52) (41) — — 0 0 Amortization of net loss included in net periodic (income)/cost (829) (559) (1,406) (1,249) (29) (1) (21) (10) Net loss at December 31 $ 15,972 $ 16,608 $ 17,151 $ 17,272 $ 656 $ 551 $ 264 $ 287 Prior service costs/(credits) at January 1 $ 41 $ 57 $ 297 $ 172 $ 34 $ 52 $ (4) $ 4 Current period prior service costs/(credits) — — 37 102 — (21) — (8) Curtailments, settlements and other — — 0 — — — — — Amortization of prior service (costs)/credits included in net periodic (income)/cost (16) (16) 8 23 (4) 2 0 0 Prior service costs/(credits) at December 31 $ 24 $ 41 $ 342 $ 297 $ 30 $ 34 $ (4) $ (4) Transition (assets)/liabilities at January 1 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Amortization of transition assets/(liabilities) included in net periodic (income)/cost — — 0 0 — — 0 — Transition (assets)/liabilities at December 31 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Total loss recognized in accumulated other comprehensive income/(loss)* $ 15,997 $ 16,648 $ 17,493 $ 17,569 $ 687 $ 585 $ 260 $ 283 * Refer to note S, “Equity Activity,” for the total change in AOCI, and the Consolidated Statement of Comprehensive Income for the components of net periodic (income)/cost, including the related tax effects, recognized in OCI for the retirement-related benefit plans. On October 26, 2018, the High Court in London in the case of Lloyds Pension Group Trustees Limited v Lloyds Bank PLC, confirmed that the UK defined benefit pension plans are required to equalize pension benefits to take into account unequal guaranteed minimum pension benefits accrued during the period 1990-1997. As a result of this court decision, IBM recorded an increase of $125 million to the PBO for the IBM UK defined benefit plan, which represents approximately 1 percent of the UK PBO. This amount was recorded as prior service cost in OCI for the year ended December 31, 2018. In 2020, the High Court issued a follow on judgment to the 2018 ruling which did not have a material impact to the PBO as of December 31, 2020. Assumptions Used to Determine Plan Financial Information Underlying both the measurement of benefit obligations and net periodic (income)/cost are actuarial valuations. These valuations use participant-specific information such as salary, age and years of service, as well as certain assumptions, the most significant of which include estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. The company evaluates these assumptions, at a minimum, annually, and makes changes as necessary. The following tables present the assumptions used to measure the net periodic (income)/cost and the year-end benefit obligations for retirement-related benefit plans. Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 Discount rate 3.10 % 4.10 % 3.40 % 1.19 % 1.85 % 1.76 % Expected long-term returns on plan assets 4.50 % 5.25 % 5.25 % 3.37 % 4.38 % 3.62 % Rate of compensation increase N/A N/A N/A 2.60 % 2.18 % 2.41 % Interest crediting rate 2.70 % 3.60 % 2.30 % 0.28 % 0.30 % 0.30 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 2.20 % 3.10 % 4.10 % 0.86 % 1.19 % 1.85 % Rate of compensation increase N/A N/A N/A 2.50 % 2.60 % 2.18 % Interest crediting rate 1.10 % 2.70 % 3.60 % 0.26 % 0.28 % 0.30 % N/A–Not applicable Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Weighted-average assumptions used to measure net periodic cost for the year ended December 31 Discount rate 2.80 % 3.90 % 3.30 % 4.98 % 7.48 % 7.28 % Expected long-term returns on plan assets N/A N/A N/A 7.51 % 8.64 % 8.91 % Interest crediting rate 2.70 % 3.60 % 2.30 % N/A N/A N/A Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 1.80 % 2.80 % 3.90 % 4.46 % 4.98 % 7.48 % Interest crediting rate 1.10 % 2.70 % 3.60 % N/A N/A N/A N/A–Not applicable Item Description of Assumptions Discount Rate Changes in discount rate assumptions impact net periodic (income)/cost and the PBO. For the U.S. and certain non-U.S. countries, a portfolio of high-quality corporate bonds is used to construct a yield curve. Cash flows from the company’s expected benefit obligation payments are matched to the yield curve to derive the discount rates. In other non-U.S. countries where the markets for high-quality long-term bonds are not as well developed, a portfolio of long-term government bonds is used as a base, and a credit spread is added to simulate corporate bond yields at these maturities in the jurisdiction of each plan. This is the benchmark for developing the respective discount rates. Expected Long-Term Returns on Plan Assets Represents the expected long-term returns on plan assets based on the calculated market-related value of plan assets and considers long-term expectations for future returns and the investment policies and strategies discussed on pages 134 to 135. These rates of return are developed and tested for reasonableness against historical returns by the company. The use of expected returns may result in pension income that is greater or less than the actual return of those plan assets in a given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns, and therefore result in a pattern of income or loss recognition that more closely matches the pattern of the services provided by the employees. The difference between actual and expected returns is recognized as a component of net loss or gain in AOCI, which is amortized as a component of net periodic (income)/cost over the service lives or life expectancy of the plan participants, depending on the plan, provided such amounts exceed certain thresholds provided by accounting standards. The market-related value of plan assets recognizes changes in the fair value of plan assets systematically over a five-year period in the expected return on plan assets line in net periodic (income)/cost. The projected long-term rate of return on plan assets for 2021 is 3.75 percent for U.S. and 2.86 percent for non-U.S. DB Plans. Rate of Compensation Increases and Mortality Assumptions Compensation rate increases are determined based on the company’s long-term plans for such increases. These rate increases are not applicable to the U.S. DB pension plans as benefit accruals ceased December 31, 2007. Mortality assumptions are based on life expectancy and death rates for different types of participants and are periodically updated based on actual experience. Interest Crediting Rate Benefits for certain participants in the PPP are calculated using a cash balance formula. An assumption underlying this formula is an interest crediting rate, which impacts both net periodic (income)/cost and the PBO. This provides the basis for projecting the expected interest rate that plan participants will earn on the benefits that they are expected to receive in the following year and is based on the average from August to October of the one-year U.S. Treasury Constant Maturity yield plus one percent. Healthcare Cost Trend Rate For nonpension postretirement benefit plans, the company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates. The healthcare cost trend rate has an insignificant effect on plan costs or the benefit obligation due to the terms of the plan which limit the company’s obligation to the participants. The company’s U.S. healthcare cost trend rate assumption for 2021 is 6.25 percent. The company assumes that trend rate will decrease to 5.0 percent over the next six years. Plan Assets Retirement-related benefit plan assets are recognized and measured at fair value. Because of the inherent uncertainty of valuations, these fair value measurements may not necessarily reflect the amounts the company could realize in current market transactions. Investment Policies and Strategies The investment objectives of the Qualified PPP portfolio are designed to generate returns that will enable the plan to meet its future obligations. The precise amount for which these obligations will be settled depends on future events, including the retirement dates and life expectancy of the plans’ participants. The obligations are estimated using actuarial assumptions, based on the current economic environment and other pertinent factors described above. The Qualified PPP portfolio’s investment strategy balances the requirement to generate returns, using potentially higher yielding assets such as equity securities, with the need to control risk in the portfolio with less volatile assets, such as fixed-income securities. Risks include, among others, inflation, volatility in equity values and changes in interest rates that could cause the plan to become underfunded, thereby increasing its dependence on contributions from the company. To mitigate any potential concentration risk, careful consideration is given to balancing the portfolio among industry sectors, companies and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. There were no significant changes to investment strategy made in 2020 and none are planned for 2021. The Qualified PPP portfolio’s target allocation is 12 percent equity securities, 80 percent fixed-income securities, 3 percent real estate and 5 percent other investments. The assets are managed by professional investment firms and investment professionals who are employees of the company. They are bound by investment mandates determined by the company’s management and are measured against specific benchmarks. Among these managers, consideration is given, but not limited to, balancing security concentration, issuer concentration, investment style and reliance on particular active and passive investment strategies. Market liquidity risks are tightly controlled, with $3,870 million of the Qualified PPP portfolio as of December 31, 2020 invested in private market assets consisting of private equities and private real estate investments, which are less liquid than publicly traded securities. In addition, the Qualified PPP portfolio had $1,203 million in commitments for future investments in private markets to be made over a number of years. These commitments are expected to be funded from plan assets. Derivatives are used as an effective means to achieve investment objectives and/or as a component of the plan’s risk management strategy. The primary reasons for the use of derivatives are fixed income management, including duration, interest rate management and credit exposure, cash equitization and to manage currency strategies. Outside the U.S., the investment objectives are similar to those described previously, subject to local regulations. The weighted-average target allocation for the non-U.S. plans is 16 percent equity securities, 70 percent fixed-income securities, 3 percent real estate and 11 percent other investments, which is consistent with the allocation decisions made by the company’s management. In some countries, a higher percentage allocation to fixed income is required to manage solvency and funding risks. In others, the responsibility for managing the investments typically lies with a board that may include up to 50 percent of members elected by employees and retirees. This can result in slight differences compared with the strategies previously described. The percentage of non-U.S. plans investment in assets that are less liquid is consistent with the U.S. plan. The use of derivatives is also consistent with the U.S. plan and mainly for currency hedging, interest rate risk management, credit exposure and alternative investment strategies. The company’s nonpension postretirement benefit plans are underfunded or unfunded. For some plans, the company maintains a nominal, highly liquid trust fund balance to ensure timely benefit payments. Defined Benefit Pension Plan Assets The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2020. The U.S. Plan consists of the Qualified PPP and the non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities (1) $ 2,714 $ 0 $ — $ 2,714 $ 474 $ 0 $ — $ 474 Equity mutual funds (2) 105 — — 105 0 — — 0 Fixed income Government and related (3) — 21,375 — 21,375 — 9,760 2 9,762 Corporate bonds (4) — 18,217 542 18,759 — 3,725 — 3,725 Mortgage and asset-backed securities — 612 — 612 — 3 — 3 Fixed income mutual funds (5) 470 — — 470 — — — — Insurance contracts (6) — — — — — 6,675 — 6,675 Cash and short-term investments (7) 76 1,001 — 1,077 352 651 — 1,002 Real estate — — — — — — 298 298 Derivatives (8) (3) 18 — 15 69 521 — 590 Other mutual funds (9) — — — — 29 — — 29 Subtotal 3,363 41,222 542 45,128 923 21,335 300 22,559 Investments measured at net asset value using the NAV practical expedient (10) — — — 9,579 — — — 21,313 Other (11) — — — (321) — — — (39) Fair value of plan assets $ 3,363 $ 41,222 $ 542 $ 54,386 $ 923 $ 21,335 $ 300 $ 43,832 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) The U.S. nonpension postretirement benefit plan assets of $15 million were invested primarily in cash equivalents, categorized as Level 1 in the fair value hierarchy. The non-U.S. nonpension postretirement benefit plan assets of $53 million, primarily in Brazil, and, to a lesser extent, in Mexico and South Africa, were invested primarily in government and related fixed-income securities and corporate bonds, categorized as Level 2 in the fair value hierarchy. The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2019. The U.S. Plan consists of the Qualified PPP and the non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities (1) $ 1,943 $ — $ — $ 1,943 $ 2,209 $ 0 $ — $ 2,209 Equity mutual funds (2) 85 — — 85 — — — — Fixed income Government and related (3) — 21,134 — 21,134 — 10,288 2 10,290 Corporate bonds (4) — 16,666 518 17,185 — 2,124 — 2,124 Mortgage and asset-backed securities — 630 — 630 — 19 — 19 Fixed income mutual funds (5) 386 — — 386 — — — — Insurance contracts — — — — — 1,862 — 1,862 Cash and short-term investments (6) 54 848 — 903 204 644 — 849 Real estate — — — — — — 328 328 Derivatives (7) 0 6 — 6 18 969 — 987 Other mutual funds (8) — — — — 25 0 — 25 Subtotal 2,469 39,284 518 42,271 2,456 15,907 330 18,693 Investments measured at net asset value using the NAV practical expedient (9) |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events | |
Subsequent Events | NOTE W. SUBSEQUENT EVENTS On January 26, 2021, the company announced that the Board of Directors approved a quarterly dividend of $1.63 per common share. The dividend is payable March 10, 2021 to shareholders of record on February 10, 2021. |
SCHEDULE II VALUATION AND QUALI
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | 12 Months Ended |
Dec. 31, 2020 | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | |
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | SCHEDULE II INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31: (Dollars in Millions) Description Balance at Beginning of Period Additions/ (Deductions) Write-offs Other Balance at End of Period Allowance For Credit Losses 2020 —Current $ 556 * $ 104 $ (85) $ 23 $ 597 —Noncurrent $ 56 * $ 4 $ (0) $ (13) $ 47 2019 —Current $ 591 $ 99 $ (174) $ 5 $ 521 —Noncurrent $ 48 $ (10) $ (4) $ (1) $ 33 2018 —Current $ 594 $ 69 $ (62) $ (11) $ 591 —Noncurrent $ 74 $ (3) $ (2) $ (20) $ 48 Allowance For Inventory Losses 2020 $ 490 $ 135 $ (125) $ 15 $ 514 2019 $ 530 $ 115 $ (166) $ 11 $ 490 2018 $ 574 $ 136 $ (162) $ (19) $ 530 Revenue Based Provisions 2020 $ 498 $ 774 $ (755) $ 4 $ 522 2019 $ 500 $ 823 $ (830) $ 5 $ 498 2018 $ 451 $ 897 $ (828) $ (20) $ 500 * Additions/(Deductions) to the allowances represent changes in estimates of unrecoverable amounts in receivables and inventory and are recorded to expense and cost accounts, respectively. Amounts are written-off when they are deemed unrecoverable by the company. Additions/(Deductions) to Revenue Based Provisions represent changes in estimated reductions to revenue, primarily as a result of revenue-related programs, including customer and business partner |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior-year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. On October 8, 2020, the company announced that it will separate the managed infrastructure services unit of its Global Technology Services (GTS) segment into a new public company (NewCo). The managed infrastructure services unit is comprised of outsourcing and other infrastructure modernization and management services. 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 will report the managed infrastructure services unit as discontinued operations after 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 two of the company’s reportable segments, but did not impact the Consolidated Financial Statements. Refer to note D, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Annual Report are reported on a comparable basis. On July 9, 2019, the company completed the acquisition of all the outstanding shares of Red Hat, Inc. (Red Hat). Refer to note E, “Acquisitions & Divestitures,” and note N, “Intangible Assets Including Goodwill,” for additional information. The benefit from income taxes for the year ended December 31, 2020 includes the tax impacts of an intra-entity sale of certain of the company’s intellectual property, which resulted in a net benefit of $0.9 billion in the first quarter of 2020. The impact of the enactment of the Tax Cuts and Jobs Act (U.S. tax reform) resulted in a charge to income taxes of $0.1 billion and $2.0 billion, for the years ended December 31, 2019 and 2018, respectively. In 2020, there was no impact from the enactment of U.S. tax reform. Refer to note G, “Taxes,” for additional information. Noncontrolling interest amounts of $22 million, $25 million and $17 million, net of tax, for the years ended December 31, 2020, 2019 and 2018, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. |
Principles of Consolidation | Principles of Consolidation The Consolidated Financial Statements include the accounts of IBM and its controlled subsidiaries, which are primarily majority owned. Any noncontrolling interest in the equity of a subsidiary is reported as a component of total equity in the Consolidated Balance Sheet. Net income and losses attributable to the noncontrolling interest is reported as described above in the Consolidated Income Statement. The accounts of variable interest entities (VIEs) are included in the Consolidated Financial Statements, if required. Investments in business entities in which the company does not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method and the company’s proportionate share of income or loss is recorded in other (income) and expense. The accounting policy for other investments in equity securities is described within the “Marketable Securities” section of this note. Equity investments in non-publicly traded entities lacking controlling financial interest or significant influence are primarily measured at cost, absent other indicators of fair value, net of impairment, if any. All intercompany transactions and accounts have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts that are reported in the Consolidated Financial Statements and accompanying disclosures. Estimates are made for the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, loss contingencies, allowance for credit losses and other matters. 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, including in 2020, the macroeconomic impacts of the COVID-19 pandemic. Actual results may be different from these estimates. |
Revenue | Revenue The company accounts for a contract with a client when it has written approval, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service transfers to a client, in an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring those products or services. If the consideration promised in a contract includes a variable amount, the company estimates the amount to which it expects to be entitled using either the expected value or most likely amount method. The company’s contracts may include terms that could cause variability in the transaction price, including, for example, rebates, volume discounts, service-level penalties, and performance bonuses or other forms of contingent revenue. The company only includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The company may not be able to reliably estimate contingent revenue in certain long-term arrangements due to uncertainties that are not expected to be resolved for a long period of time or when the company’s experience with similar types of contracts is limited. The company’s arrangements infrequently include contingent revenue. Changes in estimates of variable consideration are included in note C, “Revenue Recognition.” The company’s standard billing terms are that payment is due upon receipt of invoice, payable within 30 days. Invoices are generally issued as control transfers and/or as services are rendered. Additionally, in determining the transaction price, the company adjusts the promised amount of consideration for the effects of the time value of money if the billing terms are not standard and the timing of payments agreed to by the parties to the contract provide the client or the company with a significant benefit of financing, in which case the contract contains a significant financing component. As a practical expedient, the company does not account for significant financing components if the period between when the company transfers the promised product or service to the client and when the client pays for that product or service will be one year or less. Most arrangements that contain a financing component are financed through the company’s Global Financing business and include explicit financing terms. The company may include subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the company is acting as an agent between the client and the vendor, and gross when the company is the principal for the transaction. To determine whether the company is an agent or principal, the company considers whether it obtains control of the products or services before they are transferred to the customer. In making this evaluation, several factors are considered, most notably whether the company has primary responsibility for fulfillment to the client, as well as inventory risk and pricing discretion. The company recognizes revenue on sales to solution providers, resellers and distributors (herein referred to as resellers) when the reseller has economic substance apart from the company and the reseller is considered the principal for the transaction with the end-user client. The company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In addition to the aforementioned general policies, the following are the specific revenue recognition policies for arrangements with multiple performance obligations and for each major category of revenue. Arrangements with Multiple Performance Obligations The company’s global capabilities as a hybrid cloud platform and AI company include services, software, hardware and related financing. The company enters into revenue arrangements that may consist of any combination of these products and services based on the needs of its clients. The company continues to develop new products and offerings and continuously reinvents its platforms and delivery methods, including the use of cloud and as-a-Service models. These are not separate businesses; they are offerings across the segments that address market opportunities in analytics, data, cloud and security. Revenue from these offerings follows the specific revenue recognition policies for arrangements with multiple performance obligations and for each major category of revenue, depending on the type of offering, which are comprised of services, hardware and/or software. To the extent that a product or service in multiple performance obligation arrangements is subject to other specific accounting guidance, such as leasing guidance, that product or service is accounted for in accordance with such specific guidance. For all other products or services in these arrangements, the company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis. When products and services are not distinct, the company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation. The revenue policies in the Services, Hardware and/or Software sections below are applied to each performance obligation, as applicable. Services The company’s primary services offerings include cloud and infrastructure services, including outsourcing, and other managed services; application management services; global process services (GPS); maintenance and support; and consulting, including the design and development of complex IT systems to a client’s specifications (e.g., design and build). Many of these services can be delivered entirely or partially through cloud or as-a-Service delivery models. The company’s services are provided on a time-and-material basis, as a fixed-price contract or as a fixed-price per measure of output contract and the contract terms range from less than one year to over 10 years. In services arrangements, the company typically satisfies the performance obligation and recognizes revenue over time. In design and build arrangements, the performance obligation is satisfied over time either because the client controls the asset as it is created (e.g., when the asset is built at the customer site) or because the company’s performance does not create an asset with an alternative use and the company has an enforceable right to payment plus a reasonable profit for performance completed to date. In most other services arrangements, the performance obligation is satisfied over time because the client simultaneously receives and consumes the benefits provided as the company performs the services. In outsourcing, other managed services, application management, GPS and other cloud-based services arrangements, the company determines whether the services performed during the initial phases of the arrangement, such as setup activities, are distinct. In most cases, the arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage. As a result, revenue is generally recognized over the period the services are provided on a usage basis. This results in revenue recognition that corresponds with the value to the client of the services transferred to date relative to the remaining services promised. Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred. Revenue from as-a-Service type contracts, such as Infrastructure-as-a-Service, is recognized either on a straight-line basis or on a usage basis, depending on the terms of the arrangement (such as whether the company is standing ready to perform or whether the contract has usage-based metrics). If an as-a-Service contract includes setup activities, those promises in the arrangement are evaluated to determine if they are distinct. Revenue related to maintenance and support services and extended warranty is recognized on a straight-line basis over the period of performance because the company is standing ready to provide services. In design and build contracts, revenue is recognized based on progress toward completion of the performance obligation using a cost-to-cost measure of progress. Revenue is recognized based on the labor costs incurred to date as a percentage of the total estimated labor costs to fulfill the contract. Due to the nature of the work performed in these arrangements, the estimation of cost at completion is complex, subject to many variables and requires significant judgment. Key factors reviewed by the company to estimate costs to complete each contract are future labor and product costs and expected productivity efficiencies. Changes in original estimates are reflected in revenue on a cumulative catch-up basis in the period in which the circumstances that gave rise to the revision become known by the company. Refer to note C, “Revenue Recognition,” for the amount of revenue recognized in the reporting period on a cumulative catch-up basis (i.e., from performance obligations satisfied, or partially satisfied, in previous periods). The company performs ongoing profitability analyses of its design and build services contracts accounted for using a cost-to-cost measure of progress in order to determine whether the latest estimates of revenues, costs and profits require updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. For other types of services contracts, any losses are recorded as incurred. In some services contracts, the company bills the client prior to recognizing revenue from performing the services. Deferred income of $4,994 million and $5,106 million at December 31, 2020 and 2019, respectively, is included in the Consolidated Balance Sheet. In other services contracts, the company performs the services prior to billing the client. When the company performs services prior to billing the client in design and build contracts, the right to consideration is typically subject to milestone completion or client acceptance and the unbilled accounts receivable is classified as a contract asset. At December 31, 2020 and 2019, contract assets for services contracts of $448 million and $424 million, respectively, are included in prepaid expenses and other current assets in the Consolidated Balance Sheet. The remaining amount of unbilled accounts receivable of $1,008 million and $1,071 million at December 31, 2020 and 2019, respectively, is included in notes and accounts receivable–trade in the Consolidated Balance Sheet. Billings usually occur in the month after the company performs the services or in accordance with specific contractual provisions. Hardware The company’s hardware offerings include the sale or lease of system servers and storage solutions. The capabilities of these products can also be delivered through as-a-Service or cloud delivery models, such as Storage-as-a-Service. The company also offers installation services for its more complex hardware products. Hardware offerings are often sold with distinct maintenance services, described in the Services section above. Revenue from hardware sales is recognized when control has transferred to the customer which typically occurs when the hardware has been shipped to the client, risk of loss has transferred to the client and the company has a present right to payment for the hardware. In limited circumstances when a hardware sale includes client acceptance provisions, revenue is recognized either when client acceptance has been obtained, client acceptance provisions have lapsed, or the company has objective evidence that the criteria specified in the client acceptance provisions have been satisfied. Revenue from hardware sales-type leases is recognized at the beginning of the lease term. Revenue from rentals and operating leases is recognized on a straight-line basis over the term of the rental or lease. Revenue from as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. Installation services are accounted for as distinct performance obligations with revenue recognized as the services are performed. Shipping and handling activities that occur after the client has obtained control of a product are accounted for as an activity to fulfill the promise to transfer the product rather than as an additional promised service and, therefore, no revenue is deferred and recognized over the shipping period. Software The company’s software offerings include cognitive applications, which contain many of the company’s strategic areas including analytics, data and security; cloud and data platforms, which contain the company’s distributed middleware and data platform software, including Red Hat; transaction processing platforms, which primarily supports mission-critical systems for clients; and, operating systems software, which provides operating systems for IBM Z and Power Systems hardware. These offerings include proprietary software and open source software, and many can be delivered entirely or partially through as-a-Service or cloud delivery models, while others are delivered as on-premise software licenses. Revenue from proprietary perpetual (one-time charge) license software is recognized at a point in time at the inception of the arrangement when control transfers to the client, if the software license is distinct from the post-contract support (PCS) offered by the company. In limited circumstances, when the software requires continuous updates to provide the intended functionality, the software license and PCS are not distinct and revenue for the single performance obligation is recognized over time as the PCS is provided. This is only applicable to certain security software perpetual licenses offered by the company. Revenue from proprietary term license software is recognized at a point in time for the committed term of the contract (which is typically one month due to client termination rights), unless consideration depends on client usage, in which case revenue is recognized when the usage occurs. Clients may contract to convert their existing IBM term license software into perpetual license software plus PCS. When proprietary term license software is converted to perpetual license software, the consideration becomes fixed with no cancellability and, therefore, revenue for the perpetual license is recognized upon conversion, consistent with the accounting for other perpetual licenses, as described above. PCS revenue is recognized as described below. The company also has open source software offerings. Since open source software is offered under an open source licensing model and therefore, the license is available for free, the standalone selling price is zero. As such, when the license is sold with PCS or other products and services, no consideration is allocated to the license when it is a distinct performance obligation and therefore no revenue is recognized when control of the license transfers to the client. Revenue is recognized over the PCS period. In certain cases, open source software is bundled with proprietary software and, if the open source software is not considered distinct, the software bundle (e.g., Cloud Pak) is accounted for under a proprietary software model. Revenue from PCS is recognized over the contract term on a straight-line basis because the company is providing a service of standing ready to provide support, when-and-if needed, and is providing unspecified software upgrades on a when-and-if available basis over the contract term. Revenue from software hosting or Software-as-a-Service arrangements is recognized either on a straight-line basis or on a usage basis as described in the Services section above. In software hosting arrangements, the rights provided to the client (e.g., ownership of a license, contract termination provisions and the feasibility of the client to operate the software) are considered in determining whether the arrangement includes a license. In arrangements that include a software license, the associated revenue is recognized in accordance with the software license recognition policy above rather than over time as a service. Financing Financing income attributable to sales-type leases, direct financing leases and loans is recognized on the accrual basis using the effective interest method. Operating lease income is recognized on a straight-line basis over the term of the lease. Standalone Selling Price The company allocates the transaction price to each performance obligation on a relative standalone selling price basis. The standalone selling price (SSP) is the price at which the company would sell a promised product or service separately to a client. In most cases, the company is able to establish SSP based on the observable prices of products or services sold separately in comparable circumstances to similar clients. The company typically establishes SSP ranges for its products and services which are reassessed on a periodic basis or when facts and circumstances change. In certain instances, the company may not be able to establish a SSP range based on observable prices and the company estimates SSP. The company estimates SSP by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, competitive positioning, competitor actions, internal costs, profit objectives and pricing practices. Additionally, in certain circumstances, the company may estimate SSP for a product or service by applying the residual approach. This approach is most commonly used when certain perpetual software licenses are only sold bundled with one year of PCS and a price has not been established for the software. Estimating SSP is a formal process that includes review and approval by the company’s management. |
Costs, Warranties, Shipping and Handling | Services Costs Recurring operating costs for services contracts are recognized as incurred. For fixed-price design and build contracts, the costs of external hardware and software accounted for under the cost-to-cost measure of progress are deferred and recognized based on the labor costs incurred to date (i.e., the measure of progress), as a percentage of the total estimated labor costs to fulfill the contract as control transfers over time for these performance obligations. Certain eligible, nonrecurring costs (i.e., setup costs) incurred in the initial phases of outsourcing contracts and other cloud-based services contracts, including Software-as-a-Service arrangements, are capitalized when the costs relate directly to the contract, the costs generate or enhance resources of the company that will be used in satisfying the performance obligation in the future, and the costs are expected to be recovered. These costs consist of transition and setup costs related to the installation of systems and processes and other deferred fulfillment costs, including, for example, prepaid assets used in services contracts (i.e., prepaid software or prepaid maintenance). Capitalized costs are amortized on a straight-line basis over the expected period of benefit, which includes anticipated contract renewals or extensions, consistent with the transfer to the client of the services to which the asset relates. Additionally, fixed assets associated with these contracts are capitalized and depreciated on a straight-line basis over the expected useful life of the asset. If an asset is contract specific, then the depreciation period is the shorter of the useful life of the asset or the contract term. Amounts paid to clients in excess of the fair value of acquired assets used in outsourcing arrangements are deferred and amortized on a straight-line basis as a reduction of revenue over the expected period of benefit. The company performs periodic reviews to assess the recoverability of deferred contract transition and setup costs. If the carrying amount is deemed not recoverable, an impairment loss is recognized. Refer to note C, “Revenue Recognition,” for the amount of deferred costs to fulfill a contract at December 31, 2020 and 2019. In situations in which an outsourcing contract is terminated, the terms of the contract may require the client to reimburse the company for the recovery of unbilled accounts receivable, unamortized deferred contract costs and additional costs incurred by the company to transition the services. Software Costs Costs that are related to the conceptual formulation and design of licensed software programs are expensed as incurred to research, development and engineering expense; costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. Capitalized amounts are amortized on a straight-line basis over periods ranging up to three years and are recorded in software cost within cost of sales. The company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. Costs to support or service licensed programs are charged to software cost within cost of sales as incurred. The company capitalizes certain costs that are incurred to purchase or develop internal-use software. Internal-use software programs also include software used by the company to deliver Software-as-a-Service when the client does not receive a license to the software and the company has no substantive plans to market the software externally. Capitalized costs are amortized on a straight-line basis over periods ranging up to three years and are recorded in selling, general and administrative expense or cost of sales, depending on whether the software is used by the company in revenue generating transactions. Additionally, the company may capitalize certain types of implementation costs and amortize them over the term of the arrangement when the company is a customer in a cloud-computing arrangement. Incremental Costs of Obtaining a Contract Incremental costs of obtaining a contract (e.g., sales commissions) are capitalized and amortized on a straight-line basis over the expected customer relationship period if the company expects to recover those costs. The expected customer relationship period is determined based on the average customer relationship period, including expected renewals, for each offering type and ranges from three Product Warranties The company offers warranties for its hardware products that generally range up to three years, with the majority being either one Revenue from extended warranty contracts is initially recorded as deferred income and subsequently recognized on a straight-line basis over the delivery period because the company is providing a service of standing ready to provide services over such term. Refer to note R, “Commitments & Contingencies,” for additional information. Shipping and Handling Costs related to shipping and handling are recognized as incurred and included in cost in the Consolidated Income Statement. |
Selling, General and Administrative | Selling, General and Administrative Selling, general and administrative (SG&A) expense is charged to income as incurred, except for certain sales commissions, which are capitalized and amortized. For further information regarding capitalizing sales commissions, see “Incremental Costs of Obtaining a Contract” above. Expenses of promoting and selling products and services are classified as selling expense and, in addition to sales commissions, include such items as compensation, advertising and travel. General and administrative expense includes such items as compensation, legal costs, office supplies, non-income taxes, insurance and office rental. In addition, general and administrative expense includes other operating items such as an allowance for credit losses, workforce rebalancing charges for contractually obligated payments to employees terminated in the ongoing course of business, acquisition costs related to business combinations, amortization of certain intangible assets and environmental remediation costs. |
Advertising and Promotional Expense | Advertising and Promotional Expense The company expenses advertising and promotional costs as incurred. Cooperative advertising reimbursements from vendors are recorded net of advertising and promotional expense in the period in which the related advertising and promotional expense is incurred. Advertising and promotional expense, which includes media, agency and promotional expense, was $1,542 million, $1,647 million and $1,466 million in 2020, 2019 and 2018, respectively, and is recorded in SG&A expense in the Consolidated Income Statement. |
Research, Development and Engineering | Research, Development and Engineering Research, development and engineering (RD&E) costs are expensed as incurred. Software costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset. |
Intellectual Property and Custom Development Income | Intellectual Property and Custom Development Income The company licenses and sells the rights to certain of its intellectual property (IP) including internally developed patents, trade secrets and technological know-how. Certain IP transactions to third parties are licensing/royalty-based and others are transaction-based sales/other transfers. Income from licensing arrangements is recognized at the inception of the license term if the nature of the company’s promise is to provide a right to use the company’s intellectual property as it exists at that point in time (i.e., the license is functional intellectual property) and control has transferred to the client. Income is recognized over time if the nature of the company’s promise is to provide a right to access the company’s intellectual property throughout the license period (i.e., the license is symbolic intellectual property), such as a trademark license. Licensing arrangements include IP partnerships whereby a business partner licenses source code from the company and becomes responsible for developing, maintaining and enhancing the product. The company retains its customers and go-to-market capability and any royalty due to the partner is recognized in cost of sales. The IP partner has the rights to market the product and its derivative works under its own brand and remits royalty to the company on those sales, which are recorded as royalty-based fees. Depending on the nature of the transaction, an IP partnership would be accounted for as a divestiture if the company concludes the transaction meets the definition of a business. Income from royalty-based fee arrangements is recognized at the later of when the subsequent sale or usage occurs or the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The company also enters into cross-licensing arrangements of patents, and income from these arrangements is recognized when control transfers to the customer. In addition, the company earns income from certain custom development projects with strategic technology partners and specific clients. The company records the income from these projects over time as the company satisfies the performance obligation if the fee is nonrefundable and is not dependent upon the ultimate success of the project. |
Other (Income) and Expense | Other (Income) and Expense Other (income) and expense includes interest income (other than from Global Financing external transactions), gains and losses on certain derivative instruments, gains and losses from securities and other investments, gains and losses from certain real estate transactions, foreign currency transaction gains and losses, gains and losses from the sale of financial assets, gains and losses from the sale of businesses, other than reported as discontinued operations, and amounts related to accretion of asset retirement obligations. Other (income) and expense also includes certain components of retirement-related costs, including interest costs, expected return on plan assets, amortization of prior service costs (credits), curtailments and settlements and other net periodic pension/post-retirement benefit costs. |
Business Combinations and Intangible Assets Including Goodwill | Business Combinations and Intangible Assets Including Goodwill The company accounts for business combinations using the acquisition method and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree are recorded at their acquisition date fair values. Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the company and the acquired assembled workforce, neither of which qualifies as a separately identifiable intangible asset. Goodwill recorded in an acquisition is assigned to applicable reporting units based on expected revenues or expected cash flows. Identifiable intangible assets with finite lives are amortized over their useful lives. Amortization of completed technology is recorded in cost, and amortization of all other intangible assets is recorded in SG&A expense. Acquisition-related costs, including advisory, legal, accounting, valuation and pre-close and other costs, are typically expensed in the periods in which the costs are incurred and are recorded in SG&A expense. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date. |
Impairment | Impairment Long-lived assets, other than goodwill, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment test is based on undiscounted cash flows and, if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values. Goodwill is tested for impairment at least annually, in the fourth quarter and whenever changes in circumstances indicate an impairment may exist. The goodwill impairment test is performed at the reporting unit level, which is generally at the level of or one level below an operating segment. |
Depreciation and Amortization | Depreciation and Amortization Property, plant and equipment are carried at cost and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of certain depreciable assets are as follows: buildings, 30 to 50 years; building equipment, 10 to 20 years; land improvements, 20 years; production, engineering, office and other equipment, 2 to 20 years; and information technology equipment, 1.5 to 5 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, rarely exceeding 25 years. As noted within the “Software Costs” section of this note, capitalized software costs are amortized on a straight-line basis over periods ranging up to 3 years. Other intangible assets are amortized over periods between 1 and 20 years. |
Environmental | Environmental The cost of internal environmental protection programs that are preventative in nature are expensed as incurred. When a cleanup program becomes likely, and it is probable that the company will incur cleanup costs and those costs can be reasonably estimated, the company accrues remediation costs for known environmental liabilities. |
Asset Retirement Obligations | Asset Retirement Obligations Asset retirement obligations (ARO) are legal obligations associated with the retirement of long-lived assets and the liability is initially recorded at fair value. The related asset retirement costs are capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the company records period-to-period changes in the ARO liability resulting from the passage of time in interest expense and revisions to either the timing or the amount of the original expected cash flows to the related assets. |
Defined Benefit Pension and Nonpension Postretirement Benefit Plans, Defined Contribution Plans | Defined Benefit Pension and Nonpension Postretirement Benefit Plans The funded status of the company’s defined benefit pension plans and nonpension postretirement benefit plans (retirement-related benefit plans) is recognized in the Consolidated Balance Sheet. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO), which represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future compensation levels. For the nonpension postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation (APBO), which represents the actuarial present value of postretirement benefits attributed to employee services already rendered. The fair value of plan assets represents the current market value of assets held in an irrevocable trust fund, held for the sole benefit of participants, which are invested by the trust fund. Overfunded plans, with the fair value of plan assets exceeding the benefit obligation, are aggregated and recorded as a prepaid pension asset equal to this excess. Underfunded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and nonpension postretirement benefit obligation equal to this excess. The current portion of the retirement and nonpension post-retirement benefit obligations represents the actuarial present value of benefits payable in the next 12 months exceeding the fair value of plan assets, measured on a plan-by-plan basis. This obligation is recorded in compensation and benefits in the Consolidated Balance Sheet. Net periodic pension and nonpension postretirement benefit cost/(income) is recorded in the Consolidated Income Statement and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs/(credits) and (gains)/losses previously recognized as a component of other comprehensive income/(loss) (OCI) and amortization of the net transition asset remaining in accumulated other comprehensive income/(loss) (AOCI). The service cost component of net benefit cost is recorded in Cost, SG&A and RD&E in the Consolidated Income Statement (unless eligible for capitalization) based on the employees’ respective functions. The other components of net benefit cost are presented separately from service cost within other (income) and expense in the Consolidated Income Statement. (Gains)/losses and prior service costs/(credits) are recognized as a component of OCI in the Consolidated Statement of Comprehensive Income as they arise. Those (gains)/losses and prior service costs/(credits) are subsequently recognized as a component of net periodic cost/(income) pursuant to the recognition and amortization provisions of applicable accounting guidance. (Gains)/losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service costs/(credits) represent the cost of benefit changes attributable to prior service granted in plan amendments. The measurement of benefit obligations and net periodic cost/(income) is based on estimates and assumptions approved by the company’s management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. Defined Contribution Plans The company’s contribution for defined contribution plans is recorded when the employee renders service to the company. The charge is recorded in Cost, SG&A and RD&E in the Consolidated Income Statement based on the employees’ respective functions. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation represents the cost related to stock-based awards granted to employees. The company measures stock-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost on a straight-line basis (net of estimated forfeitures) over the employee requisite service period. The company grants its employees Restricted Stock Units (RSUs), including Retention Restricted Stock Units (RRSUs); Performance Share Units (PSUs); and periodically grants stock options. RSUs are stock awards granted to employees that entitle the holder to shares of common stock as the award vests, typically over a one The company records deferred tax assets for awards that result in deductions on the company’s income tax returns, based on the amount of compensation cost recognized and the relevant statutory tax rates. The differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the income tax return are recorded as a benefit or expense to the provision for income taxes in the Consolidated Income Statement. |
Income Taxes | Income Taxes Income tax expense is based on reported income before income taxes. Deferred income taxes reflect the tax effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. U.S. tax reform introduced Global Intangible Low-Taxed Income (GILTI), which subjects a U.S. shareholder to current tax on income earned by certain foreign subsidiaries. Beginning in 2018, the company elected to include GILTI in measuring deferred taxes. Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely than not be realized. In assessing the need for a valuation allowance, management considers all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies/actions. When the company changes its determination as to the amount of deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact to income tax expense in the period in which such determination is made. The company recognizes additional tax liabilities when the company believes that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The noncurrent portion of tax liabilities is included in other liabilities in the Consolidated Balance Sheet. To the extent that new information becomes available which causes the company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. |
Translation of Non-U.S. Currency Amounts | Translation of Non-U.S. Currency Amounts Assets and liabilities of non-U.S. subsidiaries that have a local functional currency are translated to U.S. dollars at year-end exchange rates. Translation adjustments are recorded in OCI. Income and expense items are translated at weighted-average rates of exchange prevailing during the year. Inventory, property, plant and equipment—net and other non-monetary assets and liabilities of non-U.S. subsidiaries and branches that operate in U.S. dollars are translated at the approximate exchange rates prevailing when the company acquired the assets or liabilities. All other assets and liabilities denominated in a currency other than U.S. dollars are translated at year-end exchange rates with the transaction gain or loss recognized in other (income) and expense. Income and expense items are translated at the weighted-average rates of exchange prevailing during the year. These translation gains and losses are included in net income for the period in which exchange rates change. |
Derivative Financial Instruments | Derivative Financial Instruments The company uses derivative financial instruments primarily to manage foreign currency and interest rate risk, and to a lesser extent, equity and credit risk. The company does not use derivative financial instruments for trading or speculative purposes. Derivatives that qualify for hedge accounting can be designated as either cash flow hedges, net investment hedges, or fair value hedges. The company may enter into derivative contracts that economically hedge certain of its risks, even when hedge accounting does not apply, or the company elects not to apply hedge accounting. Derivatives are recognized in the Consolidated Balance Sheet at fair value on a gross basis as either assets or liabilities and classified as current or noncurrent based upon whether the maturity of the instrument is less than or greater than 12 months. Changes in the fair value of derivatives designated as a cash flow hedge are recorded, net of applicable taxes, in OCI and subsequently reclassified into the same income statement line as the hedged exposure when the underlying hedged item is recognized in earnings. Effectiveness for net investment hedging derivatives is measured on a spot-to-spot basis. Changes in the fair value of highly effective net investment hedging derivatives and other non-derivative financial instruments designated as net investment hedges are recorded as foreign currency translation adjustments in AOCI. Changes in the fair value of the portion of a net investment hedging derivative excluded from the assessment of effectiveness are recorded in interest expense and cost of financing. Changes in the fair value of interest rate derivatives designated as a fair value hedge and the offsetting changes in the fair value of the underlying hedged exposure are recorded in interest expense and cost of financing. Changes in the fair value of derivatives not designated as hedges are reported in earnings primarily in other (income) and expense. See note T, “Derivative Financial Instruments,” for further information. The cash flows associated with derivatives designated as fair value and cash flow hedges are reported in cash flows from operating activities in the Consolidated Statement of Cash Flows. Cash flows from derivatives designated as net investment hedges and derivatives not designated as hedges are reported in cash flows from investing activities in the Consolidated Statement of Cash Flows. Cash flows from derivatives designated as hedges of foreign currency denominated debt directly associated with the settlement of the principal are reported in payments to settle debt in cash flows from financing activities in the Consolidated Statement of Cash Flows. |
Financial Instruments and Fair Value Measurement | Financial Instruments In determining the fair value of its financial instruments, the company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. See note I, “Financial Assets & Liabilities,” for further information. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized. Fair Value Measurement 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 and no material non-credit impairments recognized for the year ended December 31, 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 years ended December 31, 2019 and 2018. Certain nonfinancial assets such as property, plant and equipment, land, goodwill and intangible assets are 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 years ended December 31, 2020, 2019 and 2018. |
Cash Equivalents | Cash Equivalents All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents. |
Marketable Securities | Marketable Securities The company measures equity investments at fair value with changes recognized in net income. Debt securities included in current assets represent securities that are expected to be realized in cash within one year of the balance sheet date. Long-term debt securities and alliance equity securities are included in investments and sundry assets. Debt securities are considered available-for-sale and are reported at fair value with unrealized gains and losses, net of applicable taxes, in OCI. The realized gains and losses on available-for-sale debt securities are included in other (income) and expense in the Consolidated Income Statement. Realized gains and losses are calculated based on the specific identification method. |
Inventory | Inventory Raw materials, work in process and finished goods are stated at the lower of average cost or net realizable value. |
Notes and Accounts Receivable-Trade and Contract Assets | Notes and Accounts Receivable—Trade and Contract Assets The company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factors other than the passage of time. The majority of the company’s contract assets represent unbilled amounts related to design and build services contracts when the cost-to-cost method of revenue recognition is utilized, revenue recognized exceeds the amount billed to the client, and the right to consideration is subject to milestone completion or client acceptance. Contract assets are generally classified as current and are recorded on a net basis with deferred income (i.e., contract liabilities) at the contract level. |
Financing Receivables | 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. Leases are accounted for in accordance with lease accounting standards. Loans, which are generally unsecured, are primarily for software and services. Commercial financing receivables are primarily for working capital financing to suppliers, distributors and resellers of IBM products and services. Loans and commercial financing receivables are recorded at amortized cost, which approximates fair value. |
Transfers of Financial Assets | Transfers of Financial Assets The company enters into arrangements to sell certain financial assets (primarily notes and accounts receivable–trade and financing receivables) to third party financial institutions. For a transfer of financial assets to be considered a sale, the asset must be legally isolated from the company and the purchaser must have control of the asset. Determining whether all the requirements have been met includes an evaluation of legal considerations, the extent of the company’s continuing involvement with the assets transferred and any other relevant consideration. When the true sale criteria are met, the company derecognizes the carrying value of the financial asset transferred and recognizes a net gain or loss on the sale. The proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. If the true sale criteria are not met, the transfer is considered a secured borrowing and the financial asset remains on the Consolidated Balance Sheet with proceeds from the sale recognized as debt and recorded as cash flows from financing activities in the Consolidated Statement of Cash Flows. Arrangements to sell notes and accounts receivable–trade are used in the normal course of business as part of the company’s cash and liquidity management. Facilities primarily in the U.S., Canada and several countries in Europe enable the company to sell certain notes and accounts receivable–trade, without recourse, to third parties in order to manage credit, collection, concentration and currency risk. The gross amounts sold (the gross proceeds) under these arrangements were $3.1 billion, $2.1 billion and $2.2 billion for the years ended December 31, 2020, 2019 and 2018, respectively. Within the notes and accounts receivables–trade sold and derecognized from the Consolidated Balance Sheet, $0.5 billion, $0.5 billion, and $0.9 billion remained uncollected from customers at December 31, 2020, 2019 and 2018, respectively. The fees and the net gains and losses associated with the transfer of receivables were not material for any of the periods presented. Refer to note K, “Financing Receivables,” for more information on transfers of financing receivables. |
Allowance for Credit Losses - Financing Receivables | Allowance for Credit Losses Effective January 1, 2020, the company adopted the new accounting standard related to current expected credit losses. The standard applies to financial assets measured at amortized cost, including loans, net investments in leases, trade accounts receivable and certain off-balance sheet commitments. As of the effective date, the company estimates its allowance for current expected credit losses based on an expected loss model, compared to prior periods which were estimated using an incurred loss model. The impact related to adopting the new standard was not material. Certain changes resulting from the new standard impacted the company’s description of its significant accounting policies compared to 2019. For further information regarding the adoption of the new standard, see note B, “Accounting Changes”. Receivables are recorded concurrent with billing and shipment of a product and/or delivery of a service to customers. An allowance for uncollectible trade receivables and contract assets, if needed, is estimated based on specific customer situations, current and future expected economic conditions, past experiences of losses, as well as an assessment of potential recoverability of the balance due. The company estimates its allowances for expected credit losses for financing receivables by considering past events, including any historical default, historical concessions and resulting troubled debt restructurings, current economic conditions, any non-freestanding mitigating credit enhancements, and certain forward-looking information, including reasonable and supportable forecasts. As of January 1, 2020, the methodologies that the company uses to calculate its financing receivables reserves, which are applied consistently to its different portfolios, are as follows: Individually Evaluated– Collectively Evaluated– 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. 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. Macroeconomic variables may vary by class of financing receivables based on historical experiences, portfolio composition and current environment. The company also considers the impact of current conditions and economic forecasts relating to specific industries, geographical areas, and client-credit ratings, in addition to performing a qualitative review of credit risk factors across 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. The portfolio of commercial financing receivables is short term in nature and any allowance for these assets is estimated based on a combination of write-off history and current economic conditions, excluding any individually evaluated accounts. Other Credit-Related Policies Past Due– Non-Accrual– Write-Off– |
Leases | Leases The company conducts business as both a lessee and a lessor. In its ordinary course of business, the company enters into leases as a lessee for property, plant and equipment. The company is also the lessor of certain equipment, mainly through its Global Financing segment. When procuring goods or services, or upon entering into a contract with its clients, the company determines whether an arrangement contains a lease at its inception. As part of that evaluation, the company considers whether there is an implicitly or explicitly identified asset in the arrangement and whether the company, as the lessee, or the client, if the company is the lessor, has the right to control the use of that asset. |
Accounting for Leases as a Lessee | Accounting for Leases as a Lessee When the company is the lessee, all leases with a term of more than 12 months are recognized as right-of-use (ROU) assets and associated lease liabilities in the Consolidated Balance Sheet. The lease liabilities are measured at the lease commencement date and determined using the present value of the lease payments not yet paid and the company’s incremental borrowing rate, which approximates the rate at which the company would borrow on a secured basis in the country where the lease was executed. The interest rate implicit in the lease is generally not determinable in transactions where the company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs (IDCs), prepaid rent and lease incentives. The company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed amount. Operating leases are included in operating right-of-use assets–net, current operating lease liabilities and operating lease liabilities in the Consolidated Balance Sheet. Finance leases are included in property, plant and equipment, short-term debt and long-term debt in the Consolidated Balance Sheet. The lease term includes options to extend or terminate the lease when it is reasonably certain that the company will exercise that option. The company made a policy election to not recognize leases with a lease term of 12 months or less in the Consolidated Balance Sheet. For all asset classes, the company has elected the lessee practical expedient to combine lease and non-lease components (e.g., maintenance services) and account for the combined unit as a single lease component. A significant portion of the company’s lease portfolio is real estate, which are mainly accounted for as operating leases, and are primarily used for corporate offices and data centers. The average term of the real estate leases is approximately five years. The company also has equipment leases, such as IT equipment and vehicles, which have lease terms that range from two |
Accounting for Leases as a Lessor | Accounting for Leases as a Lessor The company typically enters into leases as an alternative means of realizing value from equipment that it would otherwise sell. Assets under lease include new and used IBM equipment and certain OEM products. IBM equipment generally consists of IBM Z, Power Systems and Storage Systems products. Lease payments due to IBM are typically fixed and paid in equal installments over the lease term. The majority of the company’s leases do not contain variable payments that are dependent on an index or a rate. Variable lease payments that do not depend on an index or a rate (e.g., property taxes), that are paid directly by the company and are reimbursed by the client, are recorded as revenue, along with the related cost, in the period in which collection of these payments is probable. Payments that are made directly by the client to a third party, including certain property taxes and insurance, are not considered part of variable payments and therefore are not recorded by the company. The company has made a policy election to exclude from consideration in contracts all collections from sales and other similar taxes. The company’s payment terms for leases are typically unconditional. Therefore, in an instance when the client requests to terminate the lease prior to the end of the lease term, the client would typically be required to pay the remaining lease payments in full. At the end of the lease term, the company allows the client to either return the equipment, purchase the equipment at the then-current fair market value or at a pre-stated purchase price or renew the lease based on mutually agreed upon terms. When lease arrangements include multiple performance obligations, the company allocates the consideration in the contract between the lease components and the non-lease components on a relative standalone selling price basis. Sales-Type and Direct Financing Leases For sales-type or direct financing lease, the carrying amount of the asset is derecognized from inventory and a net investment in the lease is recorded. For a sales-type lease, the net investment in the lease is measured at commencement date as the sum of the lease receivable and the estimated residual value of the equipment less unearned income and allowance for credit losses. Any selling profit or loss arising from a sales-type lease is recorded at lease commencement. Selling profit or loss is presented on a gross basis when the company enters into a lease to realize value from a product that it would otherwise sell in its ordinary course of business, whereas in transactions where the company enters into a lease for the purpose of generating revenue by providing financing, the selling profit or loss is presented on a net basis. Under a sales-type lease, initial direct costs are expensed at lease commencement. Over the term of the lease, the company recognizes finance income on the net investment in the lease and any variable lease payments, which are not included in the net investment in the lease. For a direct financing lease, the net investment in the lease is measured similarly to a sales-type lease, however, the net investment in the lease is reduced by any selling profit. In a direct financing lease, the selling profit and initial direct costs are deferred at commencement and recognized over the lease term. The company rarely enters into direct financing leases. The estimated residual value represents the estimated fair value of the equipment under lease at the end of the lease. Estimating residual value is a risk unique to financing activities, and management of this risk is dependent upon the ability to accurately project future equipment values. The company has insight into product plans and cycles for both the IBM and OEM IT products under lease. The company estimates the future fair value of leased equipment by using historical models, analyzing the current market for new and used equipment and obtaining forward-looking product information such as marketing plans and technology innovations. The company optimizes the recovery of residual values by extending lease arrangements with, or selling leased equipment to existing clients. The company has historically managed residual value risk both through insight into its own product cycles and monitoring of OEM IT product announcements. The company periodically reassesses the realizable value of its lease residual values. Anticipated decreases in specific future residual values that are considered to be other-than-temporary are recognized immediately upon identification and are recorded as an adjustment to the residual value estimate. For sales-type and direct financing leases, this reduction lowers the recorded net investment and is recognized as a loss charged to finance income in the period in which the estimate is changed, as well as an adjustment to unearned income to reduce future-period financing income. Operating Leases Equipment provided to clients under an operating lease is carried at cost within property, plant and equipment in the Consolidated Balance Sheet and depreciated over the lease term using the straight-line method, generally ranging from one At commencement of an operating lease, IDCs are deferred. As lease payments are made, the company records sales revenue over the lease term. IDCs are amortized over the lease term on the same basis as lease income is recorded. Assets under operating leases are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment test is based on undiscounted cash flows, and, if impaired, the asset is written down to fair value based on either discounted cash flows or appraised values. |
Common Stock | Common Stock Common stock refers to the $.20 par value per share capital stock as designated in the company’s Certificate of Incorporation. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis. |
Earnings Per Share of Common Stock | Earnings Per Share of Common Stock Earnings per share (EPS) is computed using the two-class method, which determines EPS for each class of common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings. Basic EPS of common stock is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS of common stock is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock awards, convertible notes and stock options. |
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– Reclassification of Certain Tax Effects from AOCI Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Revenue Recognition–Contracts with Customers Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– For all other standards that the company adopted in the periods presented, there was no material impact in the consolidated financial results. |
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 | The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. |
Segment Revenue and Pre-tax Income | Segment revenue and pre-tax income include transactions between the segments that are intended to reflect an arm’s-length, market-based transfer price. Systems that are used by Global Technology Services in outsourcing arrangements are primarily sourced internally from the Systems segment, and software is primarily sourced internally through the Cloud & Cognitive Software and Systems segments. For providing IT services that are used internally, Global Technology Services and Global Business Services recover cost, as well as a reasonable fee, that is intended to reflect the arm’s-length value of providing the services. They enter into arm’s-length loans at prices equivalent to market rates with Global Financing to facilitate the acquisition of equipment and software used in services engagements. All internal transaction prices are reviewed annually, and reset if appropriate. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the company’s management system, e.g., advertising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associated with the elimination of internal transactions and other miscellaneous items. The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company and have been recast for the prior-year periods due to the company’s January 2020 segment changes. Performance measurement is based on pre-tax income from continuing operations. These results are used, in part, by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments. |
Segment Assets and Other Items | To ensure the efficient use of the company’s space and equipment, several segments may share leased or owned plant, property and equipment assets. Where assets are shared, landlord ownership of the assets is assigned to one segment and is not allocated to each user segment. This is consistent with the company’s management system and is reflected accordingly in the table below. In those cases, there will not be a precise correlation between segment pre-tax income and segment assets. Depreciation expense and capital expenditures that are reported by each segment also are consistent with the landlord ownership basis of asset assignment. Global Financing amounts for interest income and interest expense reflect the interest income and interest expense associated with the Global Financing business, including the intercompany financing activities discussed on page 28, as well as the income from investment in cash and marketable securities. |
Acquisitions | Acquisitions The company accounts for business combinations using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recorded at their acquisition date fair values. Significant judgments and use of estimates are required when performing valuations. For example, the company uses judgments when estimating the fair value of intangible assets using a discounted cash flow model, which involves the use of significant estimates and assumptions with respect to revenue growth rates, the customer attrition rate and discount rates. 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. |
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 December 31, 2020 and 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 $54,355 million and $54,102 million, and the estimated fair value was $61,598 million and $58,431 million at December 31, 2020 and 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. |
Cash Payments Lease Costs | Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating and finance lease liabilities |
Commitments | 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 years ended December 31, 2020, 2019 and 2018 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. |
Offsetting Derivatives | 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. |
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. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue | |
Schedule of disaggregation of revenue | ($ in millions) For the year ended December 31: 2020 2019 2018 Cloud & Data Platforms $ 11,481 ** $ 9,499 $ 8,603 Cognitive Applications 5,290 5,456 * 5,280 * Transaction Processing Platforms 6,606 7,936 7,974 Total Cloud & Cognitive Software $ 23,376 $ 22,891 * $ 21,857 * Consulting $ 8,083 $ 8,157 * $ 7,906 * Application Management 7,133 7,646 7,852 Global Process Services 945 995 1,037 Total Global Business Services $ 16,162 $ 16,798 * $ 16,795 * Infrastructure & Cloud Services $ 19,669 $ 20,736 $ 22,185 Technology Support Services 6,144 6,625 6,961 Total Global Technology Services $ 25,812 $ 27,361 $ 29,146 Systems Hardware $ 5,481 $ 5,918 $ 6,363 Operating Systems Software 1,497 1,686 1,671 Total Systems $ 6,978 $ 7,604 $ 8,034 Global Financing È $ 1,123 $ 1,400 $ 1,590 Other $ 169 $ 1,092 * $ 2,169 * Total Revenue $ 73,620 $ 77,147 $ 79,591 * Recast to conform to 2020 presentation. ** Red Hat was acquired on July 9, 2019. Results in 2020 include a full year of Red Hat revenue. È |
Schedule of disaggregation of revenue by geography | ($ in millions) For the year ended December 31: 2020 2019 2018 Americas $ 34,114 $ 36,274 $ 36,994 Europe/Middle East/Africa 23,644 24,443 25,491 Asia Pacific 15,863 16,430 17,106 Total $ 73,620 $ 77,147 $ 79,591 |
Schedule of reconciliation of contract balances | ($ in millions) At December 31: 2020 2019 Notes and accounts receivable—trade (net of allowances of $351 in 2020 and $299 in 2019) $ 7,132 $ 7,870 Contract assets* 497 492 Deferred income (current) 12,833 12,026 Deferred income (noncurrent) 4,301 3,851 * Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. |
Schedule of notes and accounts receivable - trade allowance for credit losses | ($ in millions) January 1, 2020 * Additions/(Releases) Write-offs Other ** December 31, 2020 $ 316 $ 76 $ (46) $ 5 $ 351 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 B, “Accounting Changes,” for additional information. ** Primarily represents translation adjustments. |
Schedule of deferred contract costs | ($ in millions) At December 31: 2020 2019 Capitalized costs to obtain a contract $ 842 $ 609 Deferred costs to fulfill a contract Deferred setup costs 1,859 1,939 Other deferred fulfillment costs 1,855 1,820 Total deferred costs* $ 4,556 $ 4,368 * Of the total deferred costs, $2,107 million was current and $2,449 million was noncurrent at December 31, 2020 and $1,896 million was current and $2,472 million was noncurrent at December 31, 2019. |
Segments (Tables)
Segments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segments | |
Revenue and Pre-tax Income by Segment | ($ in millions) Cloud & Global Global Cognitive Business Technology Global Total For the year ended December 31: Software Services Services Systems Financing Segments 2020 External revenue $ 23,376 $ 16,162 $ 25,812 $ 6,978 $ 1,123 $ 73,451 Internal revenue 3,169 193 1,226 824 894 6,306 Total revenue $ 26,545 $ 16,355 $ 27,039 $ 7,802 $ 2,017 $ 79,758 Pre-tax income from continuing operations È $ 6,362 $ 1,351 $ 117 $ 449 $ 761 $ 9,040 Revenue year-to-year change 3.2 % (4.2) % (5.2) % (6.3) % (23.4) % (3.1) % Pre-tax income year-to-year change (18.5) % (16.8) % (92.9) % (36.0) % (27.8) % (29.6) % Pre-tax income margin 24.0 % 8.3 % 0.4 % 5.8 % 37.7 % 11.3 % 2019 External revenue $ 22,891 * $ 16,798 * $ 27,361 $ 7,604 $ 1,400 $ 76,054 * Internal revenue 2,827 278 1,157 726 1,232 6,220 Total revenue $ 25,718 * $ 17,076 * $ 28,518 $ 8,330 $ 2,632 $ 82,274 * Pre-tax income from continuing operations $ 7,811 * $ 1,623 * $ 1,645 $ 701 $ 1,055 $ 12,835 * Revenue year-to-year change 2.7 %* (0.3) %* (5.0) % (5.9) % (17.8) % (2.3) %* Pre-tax income year-to-year change (12.4) %* 1.3 %* (7.6) % (22.4) % (22.5) % (11.9) %* Pre-tax income margin 30.4 %* 9.5 %* 5.8 % 8.4 % 40.1 % 15.6 %* 2018 External revenue $ 21,857 * $ 16,795 * $ 29,146 $ 8,034 $ 1,590 $ 77,421 * Internal revenue 3,190 326 872 815 1,610 6,813 Total revenue $ 25,047 * $ 17,121 * $ 30,018 $ 8,848 $ 3,200 $ 84,235 * Pre-tax income from continuing operations $ 8,914 * $ 1,602 * $ 1,781 $ 904 $ 1,361 $ 14,562 * Revenue year-to-year change 2.0 %* 3.0 %* 0.5 % (1.1) % 1.0 % 1.3 %* Pre-tax income year-to-year change 10.0 %* 26.2 %* (32.0) % (19.9) % 6.5 % 1.2 %* Pre-tax income margin 35.6 %* 9.4 %* 5.9 % 10.2 % 42.5 % 17.3 %* È * Recast to conform to 2020 presentation. |
Reconciliation of segment revenue and pre-tax income to IBM as reported | Reconciliations of IBM as Reported ($ in millions) For the year ended December 31: 2020 2019 2018 Revenue Total reportable segments $ 79,758 $ 82,274 * $ 84,235 * Other—divested businesses 37 930 * 1,961 * Other revenue 132 162 207 Elimination of internal transactions (6,306) (6,220) (6,813) Total IBM consolidated revenue $ 73,620 $ 77,147 $ 79,591 * Recast to conform to 2020 presentation. ($ in millions) For the year ended December 31: 2020 2019 2018 Pre-tax income from continuing operations Total reportable segments $ 9,040 È $ 12,835 * $ 14,562 * Amortization of acquired intangible assets (1,858) (1,298) (809) Acquisition-related charges (13) (423) (16) Non-operating retirement-related (costs)/income (1,123) (615) (1,572) Spin-off-related charges (28) — — Elimination of internal transactions (381) (290) (725) Other—divested businesses (9) 574 * 287 * Unallocated corporate amounts (990) (617) (385) Total pre-tax income from continuing operations $ 4,637 È $ 10,166 $ 11,342 È * Recast to conform to 2020 presentation. |
Assets and Other Items by segment | ($ in millions) Cloud & Global Global Cognitive Business Technology Global Total For the year ended December 31: Software Services Services Systems Financing Segments 2020 Assets $ 58,752 $ 10,290 $ 21,971 $ 4,620 $ 25,075 $ 120,708 Depreciation/amortization of intangibles** 1,168 180 2,605 343 119 4,415 Capital expenditures/investments in intangibles 548 28 2,039 249 41 2,906 Interest income — — — — 1,058 1,058 Interest expense — — — — 307 307 2019 Assets $ 58,342 * $ 10,136 * $ 22,436 $ 4,590 $ 29,568 $ 125,072 * Depreciation/amortization of intangibles** 1,089 * 167 * 2,601 350 186 4,392 Capital expenditures/investments in intangibles 517 * 47 * 1,575 305 57 2,501 Interest income — — — — 1,490 1,490 Interest expense — — — — 512 512 2018 Assets $ 28,502 * $ 8,443 * $ 17,624 $ 4,030 $ 41,320 $ 99,920 * Depreciation/amortization of intangibles** 1,051 * 108 * 2,359 315 229 4,063 Capital expenditures/investments in intangibles 468 * 58 * 2,569 241 274 3,610 Interest income — — — — 1,647 1,647 Interest expense — — — — 515 515 * Recast to conform to 2020 presentation. ** Segment pre-tax income from continuing operations does not include the amortization of intangible assets. |
Reconciliation of assets to IBM as reported | ($ in millions) At December 31: 2020 2019 2018 Assets Total reportable segments $ 120,708 $ 125,072 * $ 99,920 * Elimination of internal transactions (4,685) (4,317) (7,143) Other-divested businesses 218 1,906 * 2,702 * Unallocated amounts Cash and marketable securities 12,486 7,308 10,393 Notes and accounts receivable 1,589 1,488 * 1,597 Deferred tax assets 9,012 4,995 5,089 Plant, other property and equipment 2,206 2,262 * 2,463 * Operating right-of-use assets** 3,409 3,530 — Pension assets 7,610 6,865 4,666 Other 3,417 3,077 * 3,695 * Total IBM consolidated assets $ 155,971 $ 152,186 $ 123,382 * Recast to conform to 2020 presentation. ** Reflects the adoption of the FASB guidance on leases in 2019. |
Geographic Information | Revenue* ($ in millions) For the year ended December 31: 2020 2019 2018 United States $ 26,978 $ 28,395 $ 29,078 Japan 8,694 8,681 8,489 Other countries 37,949 40,071 42,024 Total IBM consolidated revenue $ 73,620 $ 77,147 $ 79,591 * Revenues are attributed to countries based on the location of the client. Plant and Other Property–Net ($ in millions) At December 31: 2020 2019 2018 United States $ 4,410 $ 4,485 $ 4,585 Other countries 5,533 5,294 5,774 Total $ 9,943 $ 9,778 $ 10,359 Operating Right-of-Use Assets–Net* ($ in millions) At December 31: 2020 2019 2018 United States $ 1,243 $ 1,386 $ — Japan 606 659 — Other countries 2,836 2,951 — Total $ 4,686 $ 4,996 $ — * Reflects the adoption of the FASB guidance on leases in 2019. |
Revenue by Classes of Similar Products or Services | ($ in millions) For the year ended December 31: 2020 2019 2018 Cloud & Cognitive Software Software $ 19,107 $ 18,649 * $ 17,906 * Services 4,159 4,076 * 3,795 * Systems 110 166 156 Global Business Services Services $ 15,896 $ 16,527 * $ 16,439 * Software 180 156 151 Systems 86 115 206 Global Technology Services Services $ 19,632 $ 20,768 $ 22,222 Maintenance 4,815 5,183 5,484 Systems 967 1,072 1,069 Software 399 338 371 Systems Servers $ 3,466 $ 3,746 $ 3,996 Storage 1,801 1,920 2,114 Software 1,359 1,528 1,499 Services 351 410 425 Global Financing Financing $ 834 $ 1,120 $ 1,223 Used equipment sales 289 281 366 * Recast to conform to 2020 presentation. |
Acquisitions & Divestitures (Ta
Acquisitions & Divestitures (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Acquisitions & Divestitures | |
Business acquisition, goodwill segment allocation | ($ 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 | ($ in millions) For the year ended December 31: 2019 2018 Revenue $ 79,628 $ 81,360 Net income $ 9,723 $ 5,702 |
Red Hat, Inc. | |
Acquisitions & Divestitures | |
Business acquisition, purchase price allocation | ($ in millions) Amortization Allocated 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 $485 million of short-term debt related to the convertible notes acquired from Red Hat that were recognized at their fair value on the acquisition date, which was fully settled as of October 1, 2019. N/A-Not applicable |
2020 Acquisitions | |
Acquisitions & Divestitures | |
Business acquisition, purchase price allocation | ($ in millions) Amortization Total Life (in Years) Acquisitions Current assets $ 35 Property, plant and equipment/noncurrent assets 7 Intangible assets Goodwill N/A 575 Client relationships 5 — 7 84 Completed technology 2 — 7 73 Trademarks 1 — 7 11 Total assets acquired $ 784 Current liabilities 19 Noncurrent liabilities 41 Total liabilities assumed $ 61 Total purchase price $ 723 N/A—Not applicable |
Taxes (Tables)
Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Taxes | |
Income before income taxes | ($ in millions) For the year ended December 31: 2020 2019 2018 Income/(loss) from continuing operations before income taxes U.S. operations $ (1,726) $ (315) $ 627 Non-U.S. operations 6,363 10,481 10,715 Total income from continuing operations before income taxes $ 4,637 $ 10,166 $ 11,342 |
Components of the provision for income taxes by geographic operations and taxing jurisdiction | ($ in millions) For the year ended December 31: 2020 2019 2018 U.S. operations $ 2,004 $ (408) $ 1,199 Non-U.S. operations (2,868) 1,139 1,420 Total continuing operations provision for/(benefit from) income taxes $ (864) $ 731 $ 2,619 ($ in millions) For the year ended December 31: 2020 2019 2018 U.S. federal Current $ 315 $ 331 $ (342) Deferred 1,177 (839) 1,377 $ 1,492 $ (508) $ 1,035 U.S. state and local Current $ 316 $ (85) $ 127 Deferred (315) (82) (292) $ 1 $ (167) $ (165) Non-U.S. Current $ 1,827 $ 1,829 $ 2,135 Deferred (4,184) (423) (386) $ (2,357) $ 1,406 $ 1,749 Total continuing operations provision for/(benefit from) income taxes $ (864) $ 731 $ 2,619 Discontinued operations provision for/(benefit from) income taxes (13) (1) 2 Provision for social security, real estate, personal property and other taxes 3,199 3,304 3,322 Total taxes included in net income $ 2,322 $ 4,034 $ 5,943 |
Effective income tax rate reconciliation | For the year ended December 31: 2020 2019 2018 Statutory rate 21 % 21 % 21 % Enactment of U.S. tax reform — 1 18 Tax differential on foreign income (15) (11) (9) Intra-entity IP sale (20) — — Domestic incentives (4) (2) (3) State and local 0 (1) (1) Other (1) (1) (3) Effective rate (19) % 7 % 23 % Percentages rounded for disclosure purposes. |
Components of deferred tax assets and liabilities | Deferred Tax Assets ($ in millions) At December 31: 2020 2019 Retirement benefits $ 3,946 $ 3,766 Leases 1,525 1,729 Share-based and other compensation 616 637 Domestic tax loss/credit carryforwards 1,746 1,259 Deferred income 712 600 Foreign tax loss/credit carryforwards 818 836 Bad debt, inventory and warranty reserves 361 298 Depreciation 308 253 Hedging losses 576 — Restructuring charges 302 138 ** Accruals 483 368 Intangible assets 3,540 * 592 Capitalized research and development 1,387 722 Other 1,441 1,300 Gross deferred tax assets 17,761 12,498 Less: valuation allowance 850 608 Net deferred tax assets $ 16,911 $ 11,890 * Deferred Tax Liabilities ($ in millions) At December 31: 2020 2019 Goodwill and intangible assets $ 2,679 $ 3,111 GILTI deferred taxes 4,365 * 1,908 Leases and right-of-use assets 1,908 2,216 Depreciation 709 728 Retirement benefits 1,221 1,002 Software development costs 1,007 1,075 Deferred transition costs 205 233 Undistributed foreign earnings 307 725 Other 741 940 Gross deferred tax liabilities $ 13,142 $ 11,938 * The increase in the balance was primarily due to an intra-entity sale of intellectual property in the first quarter of 2020. ** Previously included in Other. |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ($ in millions) 2020 2019 2018 Balance at January 1 $ 7,146 $ 6,759 $ 7,031 Additions based on tax positions related to the current year 1,690 816 394 Additions for tax positions of prior years 159 779 1,201 Reductions for tax positions of prior years (including impacts due to a lapse of statute) (408) (922) (1,686) Settlements (19) (286) (181) Balance at December 31 $ 8,568 $ 7,146 $ 6,759 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share | |
Computation of basic and diluted earnings per share | ($ in millions except per share amounts) For the year ended December 31: 2020 2019 2018 Weighted-average number of shares on which earnings per share calculations are based Basic 890,348,679 887,235,105 912,048,072 Add—incremental shares under stock-based compensation plans 4,802,940 4,199,440 2,786,316 Add—incremental shares associated with contingently issuable shares 1,412,352 1,378,831 1,481,326 Assuming dilution 896,563,971 892,813,376 916,315,714 Income from continuing operations $ 5,501 $ 9,435 $ 8,723 Income/(loss) from discontinued operations, net of tax* 89 (4) 5 Net income on which basic earnings per share is calculated $ 5,590 $ 9,431 $ 8,728 Income from continuing operations $ 5,501 $ 9,435 $ 8,723 Net income applicable to contingently issuable shares (2) 0 (6) Income from continuing operations on which diluted earnings per share is calculated $ 5,499 $ 9,435 $ 8,718 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated* 89 (4) 5 Net income on which diluted earnings per share is calculated $ 5,588 $ 9,431 $ 8,722 Earnings/(loss) per share of common stock Assuming dilution Continuing operations $ 6.13 $ 10.57 $ 9.51 Discontinued operations 0.10 (0.01) 0.01 Total $ 6.23 $ 10.56 $ 9.52 Basic Continuing operations $ 6.18 $ 10.63 $ 9.56 Discontinued operations 0.10 0.00 0.01 Total $ 6.28 $ 10.63 $ 9.57 |
Financial Assets & Liabilities
Financial Assets & Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Financial Assets & Liabilities | |
Financial assets and financial liabilities measured at fair value on a recurring basis | ($ in millions) Fair Value 2020 2019 At December 31: Hierarchy Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents (1) Time deposits and certificates of deposit (2) 2 $ 7,668 N/A $ 4,392 N/A Money market funds 1 148 N/A 427 N/A U.S. government securities (2) 2 500 N/A — N/A Total cash equivalents $ 8,316 N/A $ 4,819 N/A Equity investments (3) 1 2 N/A 0 N/A Debt securities–current (2)(4) 2 600 N/A 696 N/A Debt securities–noncurrent (2)(5) 2 7 N/A 65 N/A Derivatives designated as hedging instruments Interest rate contracts 2 100 — 56 — Foreign exchange contracts 2 111 580 175 635 Derivatives not designated as hedging instruments Foreign exchange contracts 2 13 47 10 33 Equity contracts (6) 1,2 12 — 1 4 Total $ 9,161 $ 627 $ 5,823 $ 673 (1) (2) (3) (4) (5) (6) (7) (8) N/A – Not applicable |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Inventory | |
Inventory | ($ in millions) At December 31: 2020 2019 Finished goods $ 190 $ 220 Work in process and raw materials 1,649 1,399 Total $ 1,839 $ 1,619 |
Financing Receivables (Tables)
Financing Receivables (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Financing Receivables | |
Summary of the components of financing receivables | ($ in millions) Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial Receivables/ Direct Financing Financing At December 31, 2020: (Loans) Leases Receivables Total Financing receivables, gross $ 12,159 $ 4,001 $ 2,419 $ 18,580 Unearned income (488) (335) 0 (823) Residual value* — 485 — 485 Amortized cost $ 11,671 $ 4,151 $ 2,419 $ 18,242 Allowance for credit losses (173) (82) (8) (263) Total financing receivables, net $ 11,498 $ 4,069 $ 2,411 $ 17,979 Current portion $ 6,955 $ 1,525 $ 2,411 $ 10,892 Noncurrent portion $ 4,542 $ 2,544 $ — $ 7,086 * Includes guaranteed and unguaranteed residual value. ($ in millions) Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial 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 | ($ in millions) At December 31, 2020: Americas EMEA Asia Pacific Total Amortized cost $ 7,758 $ 5,023 $ 3,042 $ 15,822 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 (28) (3) (3) (34) Recoveries 0 0 2 3 Additions/(releases) 33 5 (4) 34 Other* (6) 6 1 1 Ending balance at December 31, 2020 $ 141 $ 77 $ 37 $ 255 * Primarily represents translation adjustments. ($ 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 | ($ in millions) Amortized Billed Amortized Total Amortized Cost Invoices Cost Amortized Cost > 90 Days and > 90 Days and Not At December 31, 2020: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 7,758 $ 295 $ 200 $ 12 $ 96 EMEA 5,023 119 28 5 95 Asia Pacific 3,042 42 12 4 32 Total client financing receivables $ 15,822 $ 456 $ 241 $ 20 $ 223 (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 $178 million. Financing income recognized on these receivables was immaterial for the year ended December 31, 2020. ($ in millions) Recorded Billed Recorded Total Recorded Investment Invoices Investment 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 $171 million. Financing income on these receivables was immaterial for the year ended December 31, 2019. |
Schedule of amortized cost/net recorded investment by credit quality indicator | ($ in millions) Americas EMEA Asia Pacific At December 31, 2020: Aaa - Baa3 Ba1 - D Aaa - Baa3 Ba1 - D Aaa - Baa3 Ba1 - D Vintage year: 2020 $ 2,818 $ 1,449 $ 1,513 $ 1,427 $ 958 $ 351 2019 988 623 668 519 564 123 2018 829 360 329 245 419 167 2017 285 154 70 128 205 52 2016 90 52 33 46 114 33 2015 and prior 28 81 22 22 38 18 Total $ 5,038 $ 2,720 $ 2,635 $ 2,387 $ 2,298 $ 743 ($ 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 |
Property, Plant & Equipment (Ta
Property, Plant & Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant & Equipment | |
Schedule of property, plant & equipment | ($ in millions) At December 31: 2020 2019 Land and land improvements $ 381 $ 365 Buildings and building and leasehold improvements 9,416 9,364 Information technology equipment 19,419 18,054 Production, engineering, office and other equipment 3,695 3,721 Plant and other property—gross 32,911 31,504 Less: Accumulated depreciation 22,968 21,726 Plant and other property—net 9,943 9,778 Rental machines 265 523 Less: Accumulated depreciation 168 292 Rental machines—net 97 232 Total—net $ 10,040 $ 10,010 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases | |
Schedule of various components of lease costs | ($ in millions) For the year ended December 31: 2020 2019 Finance lease cost $ 91 $ 30 Operating lease cost 1,581 1,645 Short-term lease cost 38 38 Variable lease cost 480 534 Sublease income (31) (24) Total lease cost $ 2,158 $ 2,223 |
Schedule of supplemental information relating to the cash flows arising from lease transactions | ($ in millions) For the year ended December 31: 2020 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from finance leases $ 10 $ 8 Financing cash outflows from finance leases 85 22 Operating cash outflows from operating leases 1,566 1,541 ROU assets obtained in exchange for new finance lease liabilities 176 209 * ROU assets obtained in exchange for new operating lease liabilities 1,130 6,481 * * Includes opening balance additions as a result of the adoption of the new lease guidance effective January 1, 2019. The post adoption addition of leases for the year ended December 31, 2019 was $1,679 million for operating leases and immaterial for finance leases. |
Schedule of weighted-average lease terms and discount rates | At December 31: 2020 2019 Finance leases Weighted-average remaining lease term 3.9 yrs. 4.8 yrs. Weighted-average discount rate 1.28 % 1.62 % Operating leases Weighted-average remaining lease term 5.0 yrs. 5.4 yrs. Weighted-average discount rate 3.06 % 3.03 % |
Schedule of expected undiscounted cash out flows for operating and finance leases | ($ in millions) Imputed 2021 2022 2023 2024 2025 Thereafter Interest * Total ** Finance leases $ 106 $ 90 $ 62 $ 33 $ 16 $ 36 $ (47) $ 296 Operating leases 1,468 1,186 885 683 405 638 (334) 4,930 * Imputed interest represents the difference between undiscounted cash flows and discounted cash flows. ** The company entered into lease agreements for certain facilities and equipment with payments totaling approximately $376 million that have not yet commenced as of December 31, 2020, and therefore are not included in this table. |
Schedule of finance lease right of use assets and liability | ($ in millions) At December 31: 2020 2019 ROU Assets—Property, plant and equipment $ 282 $ 187 Lease Liabilities Short-term debt 97 52 Long-term debt 199 151 |
Schedule of amounts included in the Consolidated Income Statement related to lessor activity | ($ in millions) For the year ended December 31: 2020 2019 Lease income—sales-type and direct financing leases Sales-type lease selling price $ 1,357 $ 1,509 Less: Carrying value of underlying assets* 439 591 Gross profit 917 918 Interest income on lease receivables 249 303 Total sales-type and direct financing lease income 1,166 1,221 Lease income—operating leases 260 324 Variable lease income 115 56 Total lease income $ 1,541 $ 1,601 * Excludes unguaranteed residual value. |
Schedule of maturity analysis of the lease payments due to IBM on sales-type and direct financing leases | ($ in millions) Total 2021 $ 1,766 2022 1,233 2023 645 2024 275 2025 74 Thereafter 7 Total undiscounted cash flows $ 4,001 Present value of lease payments (recognized as financing receivables) 3,666 * Difference between undiscounted cash flows and discounted cash flows $ 335 * The present value of the lease payments will not equal the financing receivables balances in the Consolidated Balance Sheet, due to certain items including IDCs, allowance for credit losses and residual values, which are included in the financing receivable balance, but are not included in the future lease payments. |
Schedule of maturity analysis of the undiscounted lease payments due to IBM on operating leases | ($ in millions) Total 2021 $ 50 2022 15 2023 2 2024 0 2025 — Thereafter — Total undiscounted cash flows $ 67 |
Intangible Assets Including G_2
Intangible Assets Including Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Intangible Assets Including Goodwill | |
Intangible asset balances by major asset class | ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2020: Amount Amortization Amount * Intangible asset class Capitalized software $ 1,777 $ (814) $ 963 Client relationships 8,838 (2,056) 6,783 Completed technology 5,957 (1,671) 4,286 Patents/trademarks 2,246 (499) 1,747 Other** 56 (39) 16 Total $ 18,874 $ (5,079) $ 13,796 * Includes an increase in net intangible asset balance of $279 million due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. ($ in millions) Gross Carrying Accumulated Net Carrying At December 31, 2019: 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 * Includes a decrease in net intangible asset balance of $42 million due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and nonproprietary business processes, methodologies and systems. |
Intangible assets, future amortization expense | Capitalized Acquired ($ in millions) Software Intangibles Total 2021 $ 544 $ 1,809 $ 2,353 2022 305 1,746 2,051 2023 114 1,432 1,546 2024 0 1,382 1,383 2025 — 1,364 1,364 Thereafter — 5,099 5,099 |
Changes in goodwill balances by reportable segment | ($ in millions) Foreign Currency Purchase Translation Balance at Goodwill Price and Other Balance at Segment January 1, 2020 Additions Adjustments Divestitures Adjustments ** December 31, 2020 Cloud & Cognitive Software $ 43,037 $ 362 $ (139) $ — $ 675 $ 43,934 Global Business Services 5,775 205 — — 165 6,145 Global Technology Services 7,141 — — — 104 7,245 Systems 2,270 8 — — 15 2,293 Total $ 58,222 $ 575 $ (139) $ — $ 960 $ 59,617 ($ in millions) Foreign Currency Purchase Translation Balance at Goodwill Price and Other Balance at Segment January 1, 2019 Additions Adjustments Divestitures Adjustments ** December 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. |
Investments & Sundry Assets (Ta
Investments & Sundry Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Investments & Sundry Assets | |
Investments & Sundry Assets | ($ in millions) At December 31: 2020 2019 Derivatives—noncurrent $ 151 $ 94 Alliance investments Equity method 172 184 Non-equity method 54 38 Long-term deposits 239 242 Other receivables 423 276 Employee benefit-related 238 253 Prepaid income taxes 777 664 Other assets 227 321 Total $ 2,282 $ 2,074 |
Borrowings (Tables)
Borrowings (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Borrowings | |
Short-Term Debt | ($ in millions) At December 31: 2020 2019 Commercial paper $ — $ 304 Short-term loans 130 971 Long-term debt—current maturities 7,053 7,522 Total $ 7,183 $ 8,797 |
Long-Term Debt | ($ in millions) At December 31: Maturities 2020 2019 U.S. dollar debt (weighted-average interest rate at December 31, 2020):* 2.3% 2020 $ — $ 4,326 1.3% 2021 5,499 8,498 2.6% 2022 6,233 6,289 3.3% 2023 2,395 2,388 3.3% 2024 5,029 5,045 6.8% 2025 631 636 3.3% 2026 4,370 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 $ 41,218 $ 44,594 Other currencies (weighted-average interest rate at December 31, 2020, in parentheses):* Euro (1.1%) 2021-2040 $ 18,355 $ 14,306 Pound sterling (2.6%) 2021-2022 411 1,390 Japanese yen (0.3%) 2022-2026 1,409 1,339 Other (3.7%) 2021-2024 324 375 $ 61,718 $ 62,003 Finance lease obligations (1.5%) 2021-2030 296 204 $ 62,013 $ 62,207 Less: net unamortized discount 875 881 Less: net unamortized debt issuance costs 156 142 Add: fair value adjustment** 426 440 $ 61,408 $ 61,624 Less: current maturities 7,053 7,522 Total $ 54,355 $ 54,102 * Includes notes, debentures, bank loans and secured borrowings. ** The portion of the company’s fixed-rate debt obligations that is hedged is 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. |
Post-Swap Borrowing (Long-Term Debt, Including Current Portion) | ($ in millions) 2020 2019 Weighted-Average Weighted-Average For the year ended December 31: Amount Interest Rate Amount Interest Rate Fixed-rate debt $ 53,442 2.7 % $ 52,169 2.9 % Floating-rate debt* 7,966 1.1 % 9,455 2.2 % Total $ 61,408 $ 61,624 * Includes $2,975 million in 2020 and 2019 of notional interest rate swaps that effectively convert fixed-rate long-term debt into floating-rate debt. Refer to note T, “Derivative Financial Instruments,” for additional information. |
Pre-swap annual contractual obligations of long-term debt outstanding | ($ in millions) Total 2021 $ 7,053 2022 7,345 2023 5,807 2024 6,506 2025 4,282 Thereafter 31,020 Total $ 62,013 |
Interest on Debt | ($ in millions) For the year ended December 31: 2020 2019 2018 Cost of financing $ 451 $ 608 $ 757 Interest expense 1,288 1,344 723 Interest capitalized 6 5 3 Total interest paid and accrued $ 1,745 $ 1,957 $ 1,482 |
Other Liabilities (Tables)
Other Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Other Liabilities | |
Other Liabilities | ($ in millions) At December 31: 2020 2019 Income tax reserves $ 5,274 $ 5,118 Excess 401(k) Plus Plan 1,635 1,521 Disability benefits 452 478 Derivative liabilities 40 506 Workforce reductions 956 725 Deferred taxes 5,472 5,230 Other taxes payable 253 42 Environmental accruals 246 254 Warranty accruals 33 45 Asset retirement obligations 117 94 Acquisition related 60 9 Divestiture related 62 65 Other 297 439 Total $ 14,897 $ 14,526 |
Commitments & Contingencies (Ta
Commitments & Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments & Contingencies | |
Changes in warranty liabilities | Standard Warranty Liability ($ in millions) 2020 2019 Balance at January 1 $ 113 $ 118 Current period accruals 83 111 Accrual adjustments to reflect experience (16) (1) Charges incurred (96) (115) Balance at December 31 $ 83 $ 113 Extended Warranty Liability (Deferred Income) ($ in millions) 2020 2019 Balance at January 1 $ 477 $ 533 Revenue deferred for new extended warranty contracts 166 198 Amortization of deferred revenue (224) (253) Other* 6 (2) Balance at December 31 $ 425 $ 477 Current portion $ 204 $ 227 Noncurrent portion $ 221 $ 250 * Other consists primarily of foreign currency translation adjustments. |
Equity Activity (Tables)
Equity Activity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity Activity | |
Reclassifications and taxes related to items of other comprehensive income | ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2020: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (1,500) $ 535 $ (965) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (1) $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ (349) $ 89 $ (261) Reclassification of (gains)/losses to: Cost of services (23) 6 (18) Cost of sales (2) 1 (2) Cost of financing 27 (7) 20 SG&A expense 0 0 0 Other (income) and expense (101) 25 (75) Interest expense 78 (20) 58 Total unrealized gains/(losses) on cash flow hedges $ (370) $ 94 $ (277) Retirement-related benefit plans (1) Prior service costs/(credits) $ (37) $ 7 $ (29) Net (losses)/gains arising during the period (1,678) 295 (1,383) Curtailments and settlements 52 (14) 38 Amortization of prior service (credits)/costs 13 (1) 12 Amortization of net (gains)/losses 2,314 (451) 1,863 Total retirement-related benefit plans $ 664 $ (163) $ 501 Other comprehensive income/(loss) $ (1,206) $ 466 $ (740) (1) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2019: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (39) $ 29 $ (10) 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 $ (689) $ 167 $ (522) Reclassification of (gains)/losses to: Cost of services (68) 17 (50) Cost of sales (51) 15 (37) Cost of financing 89 (22) 67 SG&A expense (53) 14 (39) Other (income) and expense (39) 10 (29) Interest expense 197 (50) 148 Total unrealized gains/(losses) on cash flow hedges $ (614) $ 151 $ (463) Retirement-related benefit plans (1) Prior service costs/(credits) $ (73) $ 10 $ (63) Net (losses)/gains arising during the period (120) 52 (68) Curtailments and settlements 41 (12) 29 Amortization of prior service (credits)/costs (9) 5 (4) Amortization of net (gains)/losses 1,843 (371) 1,471 Total retirement-related benefit plans $ 1,681 $ (316) $ 1,365 Other comprehensive income/(loss) $ 1,029 $ (136) $ 893 (1) ($ in millions) Before Tax Tax (Expense)/ Net of Tax For the year ended December 31, 2018: Amount Benefit Amount Other comprehensive income/(loss) Foreign currency translation adjustments $ (730) $ (172) $ (902) Net changes related to available-for-sale securities Unrealized gains/(losses) arising during the period $ (2) $ 1 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (2) $ 1 $ (1) Unrealized gains/(losses) on cash flow hedges Unrealized gains/(losses) arising during the period $ (136) $ 43 $ (93) Reclassification of (gains)/losses to: Cost of services (30) 8 (22) Cost of sales (8) 3 (5) Cost of financing 75 (19) 56 SG&A expense 0 0 0 Other (income) and expense 341 (86) 255 Interest expense 71 (18) 53 Total unrealized gains/(losses) on cash flow hedges $ 313 $ (69) $ 244 Retirement-related benefit plans (1) Prior service costs/(credits) $ (182) $ 31 $ (151) Net (losses)/gains arising during the period (2,517) 576 (1,941) Curtailments and settlements 11 (2) 9 Amortization of prior service (credits)/costs (73) 5 (68) Amortization of net (gains)/losses 2,966 (632) 2,334 Total retirement-related benefit plans $ 204 $ (21) $ 184 Other comprehensive income/(loss) $ (215) $ (262) $ (476) (1) |
Accumulated other comprehensive income/(loss) (net of tax) | ($ in millions) Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive Hedges Adjustments * Plans Securities Income/(Loss) December 31, 2017 $ 35 $ (2,834) $ (23,796) $ 3 $ (26,592) Cumulative effect of a change in accounting principle** 5 46 (2,471) (2) (2,422) Other comprehensive income before reclassifications (93) (902) (2,092) (1) (3,089) Amount reclassified from accumulated other comprehensive income 337 — 2,276 — 2,612 Total change for the period 244 (902) 184 (1) (476) December 31, 2018 284 (3,690) (26,083) 0 (29,490) Other comprehensive income before reclassifications (522) (10) (131) 1 (663) Amount reclassified from accumulated other comprehensive income 59 — 1,496 — 1,556 Total change for the period (463) (10) 1,365 1 893 December 31, 2019 (179) (3,700) (24,718) 0 (28,597) Other comprehensive income before reclassifications (261) (965) (1,412) 0 (2,638) Amount reclassified from accumulated other comprehensive income (16) — 1,914 — 1,898 Total change for the period $ (277) $ (965) $ 501 $ 0 $ (740) December 31, 2020 $ (456) $ (4,665) $ (24,216) $ 0 $ (29,337) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. ** Reflects the adoption of FASB guidance. Refer to note B, “Accounting Changes”. |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Derivative Financial Instruments | |
Amounts related to cumulative basis adjustments for fair value hedges | ($ in millions) At December 31: 2020 2019 Short-term debt: Carrying amount of the hedged item $ (1,302) $ — Cumulative hedging adjustments included in the carrying amount—assets/(liabilities) (2) — Long-term debt: Carrying amount of the hedged item (2,097) (3,411) Cumulative hedging adjustments included in the carrying amount—assets/(liabilities)* (424) (440) * Includes ($353) million and ($404) million of hedging adjustments on discontinued hedging relationships at December 31, 2020 and 2019, respectively. |
Effect of derivative instruments in the consolidated income statement | ($ in millions) Gains/(Losses) of Total Total Hedge Activity For the year ended December 31: 2020 2019 2018 2020 2019 2018 Cost of services $ 30,404 $ 32,491 $ 33,687 $ 23 $ 68 $ 30 Cost of sales 6,934 7,263 7,835 2 51 8 Cost of financing 708 904 1,132 12 (42) (6) SG&A expense 23,082 20,604 19,366 141 267 (116) Other (income) and expense 861 (968) 1,152 101 (15) (434) Interest expense 1,288 1,344 723 35 (93) (6) ($ in millions) Gain/(Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk Income Statement Derivatives Being Hedged (2) For the year ended December 31: Line Item 2020 2019 2018 2020 2019 2018 Derivative instruments in fair value hedges (1) Interest rate contracts Cost of financing $ 20 $ 44 $ (61) $ 4 $ (32) $ 97 Interest expense 58 98 (58) 11 (71) 92 Derivative instruments not designated as hedging instruments Foreign exchange contracts Other (income) 1 (53) (93) N/A N/A N/A Equity contracts SG&A expense 142 214 (116) N/A N/A N/A Total $ 220 $ 302 $ (327) $ 14 $ (103) $ 189 ($ in millions) Gain/(Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income Consolidated Reclassified Amounts Excluded from For the year ended Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) December 31: 2020 2019 2018 Line Item 2020 2019 2018 2020 2019 2018 Derivative instruments in cash flow hedges Interest rate contracts $ — $ (168) $ (35) Cost of financing $ (5) $ (3) $ — $ — $ — $ — Interest expense (13) (8) — — — — Foreign exchange contracts (349) (521) (101) Cost of services 23 68 30 — — — Cost of sales 2 51 8 — — — Cost of financing (23) (86) (75) — — — SG&A expense 0 53 0 — — — Other (income) 101 39 (341) — — — Interest expense (65) (190) (71) — — — Instruments in net investment hedges (4) Foreign exchange contracts (2,127) (95) 686 Cost of financing — — — 16 35 33 Interest expense — — — 45 77 31 Total $ (2,477) $ (784) $ 549 $ 21 $ (75) $ (449) $ 60 $ 112 $ 64 (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 with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries. N/A–Not applicable |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock-Based Compensation | |
Stock-based compensation cost included in income from continuing operations | ($ in millions) For the year ended December 31: 2020 2019 2018 Cost $ 153 $ 100 $ 82 SG&A expense 586 453 361 RD&E expense 198 126 67 Pre-tax stock-based compensation cost 937 679 510 Income tax benefits (213) (155) (116) Net stock-based compensation cost $ 724 $ 524 $ 393 |
Summary of Restricted Stock Units activity | RSUs PSUs Weighted-Average Weighted-Average Grant Price Number of Units Grant Price Number of Units Balance at January 1, 2018 $ 141 8,555,263 $ 144 2,649,313 Awards granted 121 4,806,790 130 909,140 Awards released 148 (2,579,962) 152 (666,244) Awards canceled/forfeited/performance adjusted 139 (979,387) 147 (472,514) * Balance at December 31, 2018 $ 130 9,802,704 $ 136 2,419,695 ** Awards granted 119 5,650,861 117 1,395,534 Awards released 136 (3,145,016) 140 (846,672) Awards canceled/forfeited/performance adjusted 128 (981,921) 131 (112,107) * Balance at December 31, 2019 $ 123 11,326,628 $ 126 2,856,450 ** Awards granted 115 10,651,955 117 1,582,666 Awards released 126 (3,781,240) 137 (630,974) Awards canceled/forfeited/performance adjusted 121 (1,300,639) 125 (256,642) * Balance at December 31, 2020 $ 117 16,896,704 $ 120 3,551,500 ** * Includes adjustments of (70,089), (8,544) and (328,120) PSUs for 2020, 2019 and 2018, respectively, because final performance metrics were above or below specified targets. ** Represents the number of shares expected to be issued based on achievement of grant date performance targets. The actual number of shares issued will depend on final performance against specified targets over the vesting period. |
Summary of Performance Share Units activity | RSUs PSUs Weighted-Average Weighted-Average Grant Price Number of Units Grant Price Number of Units Balance at January 1, 2018 $ 141 8,555,263 $ 144 2,649,313 Awards granted 121 4,806,790 130 909,140 Awards released 148 (2,579,962) 152 (666,244) Awards canceled/forfeited/performance adjusted 139 (979,387) 147 (472,514) * Balance at December 31, 2018 $ 130 9,802,704 $ 136 2,419,695 ** Awards granted 119 5,650,861 117 1,395,534 Awards released 136 (3,145,016) 140 (846,672) Awards canceled/forfeited/performance adjusted 128 (981,921) 131 (112,107) * Balance at December 31, 2019 $ 123 11,326,628 $ 126 2,856,450 ** Awards granted 115 10,651,955 117 1,582,666 Awards released 126 (3,781,240) 137 (630,974) Awards canceled/forfeited/performance adjusted 121 (1,300,639) 125 (256,642) * Balance at December 31, 2020 $ 117 16,896,704 $ 120 3,551,500 ** * Includes adjustments of (70,089), (8,544) and (328,120) PSUs for 2020, 2019 and 2018, respectively, because final performance metrics were above or below specified targets. ** Represents the number of shares expected to be issued based on achievement of grant date performance targets. The actual number of shares issued will depend on final performance against specified targets over the vesting period. |
Summary of total fair value of RSUs and PSUs granted and vested | ($ in millions) For the year ended December 31: 2020 2019 2018 RSUs Granted $ 1,220 $ 674 $ 583 Vested 478 428 381 PSUs Granted $ 186 $ 164 $ 118 Vested 86 118 101 |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Retirement-Related Benefits | |
Pre-tax cost for all retirement-related plans | ($ in millions) U.S. Plans Non-U.S. Plans Total For the year ended December 31: 2020 2019 2018 2020 2019 2018 2020 2019 2018 Defined benefit pension plans $ 167 $ (153) $ 542 $ 1,178 $ 955 $ 1,284 $ 1,345 $ 803 $ 1,827 Retention Plan 11 11 17 — — — 11 11 17 Total defined benefit pension plans (income)/cost $ 178 $ (142) $ 559 $ 1,178 $ 955 $ 1,284 $ 1,355 $ 813 $ 1,843 IBM 401(k) Plus Plan and non-U.S. plans $ 585 $ 588 $ 588 $ 447 $ 427 $ 412 $ 1,032 $ 1,015 $ 1,000 Excess 401(k) 27 26 24 — — — 27 26 24 Total defined contribution plans cost $ 612 $ 613 $ 612 $ 447 $ 427 $ 412 $ 1,058 $ 1,040 $ 1,024 Nonpension postretirement benefit plans cost $ 145 $ 154 $ 147 $ 58 $ 65 $ 51 $ 203 $ 219 $ 198 Total retirement-related benefits net periodic cost $ 934 $ 624 $ 1,319 $ 1,683 $ 1,448 $ 1,747 $ 2,617 $ 2,072 $ 3,066 |
Summary of the total PBO for defined benefit plans, APBO for nonpension postretirement benefit plans, fair value of plan assets and associated funded status | ($ in millions) Benefit Obligations Fair Value of Plan Assets Funded Status* At December 31: 2020 2019 2020 2019 2020 2019 U.S. Plans Overfunded plans Qualified PPP $ 50,375 $ 48,471 $ 54,386 $ 51,784 $ 4,011 $ 3,313 Underfunded plans Excess PPP $ 1,556 $ 1,473 $ — $ — $ (1,556) $ (1,473) Retention Plan 306 288 — — (306) (288) Nonpension postretirement benefit plan 3,791 3,857 15 3 (3,776) (3,854) Total underfunded U.S. plans $ 5,653 $ 5,618 $ 15 $ 3 $ (5,638) $ (5,615) Non-U.S. Plans Overfunded plans Qualified defined benefit pension plans** $ 20,649 $ 18,371 $ 24,246 $ 21,921 $ 3,597 $ 3,550 Nonpension postretirement benefit plans 21 19 22 21 1 2 Total overfunded non-U.S. plans $ 20,670 $ 18,390 $ 24,269 $ 21,942 $ 3,599 $ 3,552 Underfunded plans Qualified defined benefit pension plans** $ 25,160 $ 23,222 $ 19,586 $ 18,398 $ (5,574) $ (4,824) Nonqualified defined benefit pension plans 7,180 6,731 — — (7,180) (6,731) Nonpension postretirement benefit plans 755 828 31 44 (723) (785) Total underfunded non-U.S. plans $ 33,095 $ 30,782 $ 19,617 $ 18,442 $ (13,478) $ (12,340) Total overfunded plans $ 71,044 $ 66,861 $ 78,654 $ 73,726 $ 7,610 $ 6,865 Total underfunded plans $ 38,747 $ 36,399 $ 19,632 $ 18,445 $ (19,116) $ (17,955) * Funded status is recognized in the Consolidated Balance Statement as follows: Asset amounts as prepaid pension assets; (Liability) amounts as compensation and benefits (current liability) and retirement and nonpension postretirement benefit obligations (noncurrent liability). ** Non-U.S. qualified plans represent plans funded outside of the U.S. Non-U.S. nonqualified plans are unfunded. |
Components of net periodic (income)/cost of the company's retirement-related benefit plans | ($ in millions) Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans For the year ended December 31: 2020 2019 2018 2020 2019 2018 Service cost $ — $ — $ — $ 392 $ 370 $ 413 Interest cost (1) 1,501 1,882 1,719 563 847 830 Expected return on plan assets (1) (2,169) (2,599) (2,701) (1,275) (1,588) (1,342) Amortization of transition assets (1) — — — — 0 0 Amortization of prior service costs/(credits) (1) 16 16 16 (8) (23) (83) Recognized actuarial losses (1) 829 559 1,525 1,406 1,249 1,401 Curtailments and settlements (1) — — — 52 41 11 Multi-employer plans — — — 29 32 38 Other costs/(credits) — — — 18 28 16 Total net periodic (income)/cost $ 178 $ (142) $ 559 $ 1,178 $ 955 $ 1,284 ($ in millions) Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans For the year ended December 31: 2020 2019 2018 2020 2019 2018 Service cost $ 9 $ 10 $ 13 $ 5 $ 5 $ 5 Interest cost (1) 103 145 132 36 55 45 Expected return (1) — — 0 (4) (5) (6) Amortization of transition assets (1) — — — 0 — 0 Amortization of prior service costs/(credits) (1) 4 (2) (7) 0 0 0 Recognized actuarial losses (1) 29 1 10 21 10 6 Curtailments and settlements ( 1) — — — 0 0 0 Other costs/(credits) — — — 0 — — Total net periodic cost $ 145 $ 154 $ 147 $ 58 $ 65 $ 51 (1) These components of net periodic pension costs are included in other (income) and expense in the Consolidated Income Statement. |
Changes in benefit obligations | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Change in benefit obligation Benefit obligation at January 1 $ 50,232 $ 47,812 $ 48,324 $ 45,770 $ 3,857 $ 3,912 $ 848 $ 705 Service cost — — 392 370 9 10 5 5 Interest cost 1,501 1,882 563 847 103 145 36 55 Plan participants' contributions — — 23 23 56 57 — — Acquisitions/divestitures, net 1 — 50 (32) — — 0 0 Actuarial losses/(gains) 4,071 4,040 2,766 3,467 135 148 (3) 141 Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Direct benefit payments (123) (124) (420) (403) 0 (6) (24) (27) Foreign exchange impact — — 3,283 134 — — (82) (1) Amendments/curtailments/ settlements/other 0 — (47) 50 — (21) (1) (23) Benefit obligation at December 31 $ 52,237 $ 50,232 $ 52,989 $ 48,324 $ 3,791 $ 3,857 $ 775 $ 848 Change in plan assets Fair value of plan assets at January 1 $ 51,784 $ 48,213 $ 40,319 $ 36,758 $ 3 $ 29 $ 65 $ 65 Actual return on plan assets 6,046 6,949 2,571 4,896 0 1 4 7 Employer contributions — — 182 243 325 304 — — Acquisitions/divestitures, net 1 — 97 (25) — — — — Plan participants' contributions — — 23 23 56 57 — — Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Foreign exchange impact — — 2,599 333 — — (10) (1) Amendments/curtailments/ settlements/other — — (13) (7) 0 — 0 0 Fair value of plan assets at December 31 $ 54,386 $ 51,784 $ 43,832 $ 40,319 $ 15 $ 3 $ 53 $ 65 Funded status at December 31 $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) Accumulated benefit obligation* $ 52,237 $ 50,232 $ 52,513 $ 47,645 N/A N/A N/A N/A * Represents the benefit obligation assuming no future participant compensation increases. N/A–Not applicable |
Changes in plan assets | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Change in benefit obligation Benefit obligation at January 1 $ 50,232 $ 47,812 $ 48,324 $ 45,770 $ 3,857 $ 3,912 $ 848 $ 705 Service cost — — 392 370 9 10 5 5 Interest cost 1,501 1,882 563 847 103 145 36 55 Plan participants' contributions — — 23 23 56 57 — — Acquisitions/divestitures, net 1 — 50 (32) — — 0 0 Actuarial losses/(gains) 4,071 4,040 2,766 3,467 135 148 (3) 141 Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Direct benefit payments (123) (124) (420) (403) 0 (6) (24) (27) Foreign exchange impact — — 3,283 134 — — (82) (1) Amendments/curtailments/ settlements/other 0 — (47) 50 — (21) (1) (23) Benefit obligation at December 31 $ 52,237 $ 50,232 $ 52,989 $ 48,324 $ 3,791 $ 3,857 $ 775 $ 848 Change in plan assets Fair value of plan assets at January 1 $ 51,784 $ 48,213 $ 40,319 $ 36,758 $ 3 $ 29 $ 65 $ 65 Actual return on plan assets 6,046 6,949 2,571 4,896 0 1 4 7 Employer contributions — — 182 243 325 304 — — Acquisitions/divestitures, net 1 — 97 (25) — — — — Plan participants' contributions — — 23 23 56 57 — — Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Foreign exchange impact — — 2,599 333 — — (10) (1) Amendments/curtailments/ settlements/other — — (13) (7) 0 — 0 0 Fair value of plan assets at December 31 $ 54,386 $ 51,784 $ 43,832 $ 40,319 $ 15 $ 3 $ 53 $ 65 Funded status at December 31 $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) Accumulated benefit obligation* $ 52,237 $ 50,232 $ 52,513 $ 47,645 N/A N/A N/A N/A * Represents the benefit obligation assuming no future participant compensation increases. N/A–Not applicable |
Accumulated benefit obligation | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Change in benefit obligation Benefit obligation at January 1 $ 50,232 $ 47,812 $ 48,324 $ 45,770 $ 3,857 $ 3,912 $ 848 $ 705 Service cost — — 392 370 9 10 5 5 Interest cost 1,501 1,882 563 847 103 145 36 55 Plan participants' contributions — — 23 23 56 57 — — Acquisitions/divestitures, net 1 — 50 (32) — — 0 0 Actuarial losses/(gains) 4,071 4,040 2,766 3,467 135 148 (3) 141 Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Direct benefit payments (123) (124) (420) (403) 0 (6) (24) (27) Foreign exchange impact — — 3,283 134 — — (82) (1) Amendments/curtailments/ settlements/other 0 — (47) 50 — (21) (1) (23) Benefit obligation at December 31 $ 52,237 $ 50,232 $ 52,989 $ 48,324 $ 3,791 $ 3,857 $ 775 $ 848 Change in plan assets Fair value of plan assets at January 1 $ 51,784 $ 48,213 $ 40,319 $ 36,758 $ 3 $ 29 $ 65 $ 65 Actual return on plan assets 6,046 6,949 2,571 4,896 0 1 4 7 Employer contributions — — 182 243 325 304 — — Acquisitions/divestitures, net 1 — 97 (25) — — — — Plan participants' contributions — — 23 23 56 57 — — Benefits paid from trust (3,445) (3,378) (1,946) (1,902) (369) (389) (4) (6) Foreign exchange impact — — 2,599 333 — — (10) (1) Amendments/curtailments/ settlements/other — — (13) (7) 0 — 0 0 Fair value of plan assets at December 31 $ 54,386 $ 51,784 $ 43,832 $ 40,319 $ 15 $ 3 $ 53 $ 65 Funded status at December 31 $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) Accumulated benefit obligation* $ 52,237 $ 50,232 $ 52,513 $ 47,645 N/A N/A N/A N/A * Represents the benefit obligation assuming no future participant compensation increases. N/A–Not applicable |
Net funded status | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans At December 31: 2020 2019 2020 2019 2020 2019 2020 2019 Prepaid pension assets $ 4,011 $ 3,313 $ 3,597 $ 3,550 $ 0 $ 0 $ 1 $ 2 Current liabilities—compensation and benefits (122) (120) (366) (313) (346) (346) (34) (33) Noncurrent liabilities—retirement and nonpension postretirement benefit obligations (1,740) (1,641) (12,388) (11,242) (3,430) (3,507) (690) (752) Funded status—net $ 2,149 $ 1,551 $ (9,157) $ (8,005) $ (3,776) $ (3,854) $ (722) $ (783) |
Pre-tax net loss and prior service costs/(credits) and transition (assets)/liabilities recognized in OCI and changes in pre-tax net loss, prior service costs/(credits) and transition (assets)/liabilities recognized in AOCI | ($ in millions) Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans U.S. Plans Non-U.S. Plans U.S. Plan Non-U.S. Plans 2020 2019 2020 2019 2020 2019 2020 2019 Net loss at January 1 $ 16,608 $ 17,476 $ 17,272 $ 18,452 $ 551 $ 405 $ 287 $ 172 Current period loss/(gain) 194 (309) 1,338 109 135 147 (2) 125 Curtailments and settlements — — (52) (41) — — 0 0 Amortization of net loss included in net periodic (income)/cost (829) (559) (1,406) (1,249) (29) (1) (21) (10) Net loss at December 31 $ 15,972 $ 16,608 $ 17,151 $ 17,272 $ 656 $ 551 $ 264 $ 287 Prior service costs/(credits) at January 1 $ 41 $ 57 $ 297 $ 172 $ 34 $ 52 $ (4) $ 4 Current period prior service costs/(credits) — — 37 102 — (21) — (8) Curtailments, settlements and other — — 0 — — — — — Amortization of prior service (costs)/credits included in net periodic (income)/cost (16) (16) 8 23 (4) 2 0 0 Prior service costs/(credits) at December 31 $ 24 $ 41 $ 342 $ 297 $ 30 $ 34 $ (4) $ (4) Transition (assets)/liabilities at January 1 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Amortization of transition assets/(liabilities) included in net periodic (income)/cost — — 0 0 — — 0 — Transition (assets)/liabilities at December 31 $ — $ — $ 0 $ 0 $ — $ — $ 0 $ 0 Total loss recognized in accumulated other comprehensive income/(loss)* $ 15,997 $ 16,648 $ 17,493 $ 17,569 $ 687 $ 585 $ 260 $ 283 * Refer to note S, “Equity Activity,” for the total change in AOCI, and the Consolidated Statement of Comprehensive Income for the components of net periodic (income)/cost, including the related tax effects, recognized in OCI for the retirement-related benefit plans. On October 26, 2018, the High Court in London in the case of Lloyds Pension Group Trustees Limited v Lloyds Bank PLC, confirmed that the UK defined benefit pension plans are required to equalize pension benefits to take into account unequal guaranteed minimum pension benefits accrued during the period 1990-1997. As a result of this court decision, IBM recorded an increase of $125 million to the PBO for the IBM UK defined benefit plan, which represents approximately 1 percent of the UK PBO. This amount was recorded as prior service cost in OCI for the year ended December 31, 2018. In 2020, the High Court issued a follow on judgment to the 2018 ruling which did not have a material impact to the PBO as of December 31, 2020. |
Assumptions used to measure the net periodic (income)/cost and year-end benefit obligations | Defined Benefit Pension Plans U.S. Plans Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 Discount rate 3.10 % 4.10 % 3.40 % 1.19 % 1.85 % 1.76 % Expected long-term returns on plan assets 4.50 % 5.25 % 5.25 % 3.37 % 4.38 % 3.62 % Rate of compensation increase N/A N/A N/A 2.60 % 2.18 % 2.41 % Interest crediting rate 2.70 % 3.60 % 2.30 % 0.28 % 0.30 % 0.30 % Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 2.20 % 3.10 % 4.10 % 0.86 % 1.19 % 1.85 % Rate of compensation increase N/A N/A N/A 2.50 % 2.60 % 2.18 % Interest crediting rate 1.10 % 2.70 % 3.60 % 0.26 % 0.28 % 0.30 % N/A–Not applicable Nonpension Postretirement Benefit Plans U.S. Plan Non-U.S. Plans 2020 2019 2018 2020 2019 2018 Weighted-average assumptions used to measure net periodic cost for the year ended December 31 Discount rate 2.80 % 3.90 % 3.30 % 4.98 % 7.48 % 7.28 % Expected long-term returns on plan assets N/A N/A N/A 7.51 % 8.64 % 8.91 % Interest crediting rate 2.70 % 3.60 % 2.30 % N/A N/A N/A Weighted-average assumptions used to measure benefit obligations at December 31 Discount rate 1.80 % 2.80 % 3.90 % 4.46 % 4.98 % 7.48 % Interest crediting rate 1.10 % 2.70 % 3.60 % N/A N/A N/A N/A–Not applicable |
Defined benefit pension plans' asset classes and their associated fair value | The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2020. The U.S. Plan consists of the Qualified PPP and the non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities (1) $ 2,714 $ 0 $ — $ 2,714 $ 474 $ 0 $ — $ 474 Equity mutual funds (2) 105 — — 105 0 — — 0 Fixed income Government and related (3) — 21,375 — 21,375 — 9,760 2 9,762 Corporate bonds (4) — 18,217 542 18,759 — 3,725 — 3,725 Mortgage and asset-backed securities — 612 — 612 — 3 — 3 Fixed income mutual funds (5) 470 — — 470 — — — — Insurance contracts (6) — — — — — 6,675 — 6,675 Cash and short-term investments (7) 76 1,001 — 1,077 352 651 — 1,002 Real estate — — — — — — 298 298 Derivatives (8) (3) 18 — 15 69 521 — 590 Other mutual funds (9) — — — — 29 — — 29 Subtotal 3,363 41,222 542 45,128 923 21,335 300 22,559 Investments measured at net asset value using the NAV practical expedient (10) — — — 9,579 — — — 21,313 Other (11) — — — (321) — — — (39) Fair value of plan assets $ 3,363 $ 41,222 $ 542 $ 54,386 $ 923 $ 21,335 $ 300 $ 43,832 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) The U.S. nonpension postretirement benefit plan assets of $15 million were invested primarily in cash equivalents, categorized as Level 1 in the fair value hierarchy. The non-U.S. nonpension postretirement benefit plan assets of $53 million, primarily in Brazil, and, to a lesser extent, in Mexico and South Africa, were invested primarily in government and related fixed-income securities and corporate bonds, categorized as Level 2 in the fair value hierarchy. The following table presents the company’s defined benefit pension plans’ asset classes and their associated fair value at December 31, 2019. The U.S. Plan consists of the Qualified PPP and the non-U.S. Plans consist of all plans sponsored by the company’s subsidiaries. ($ in millions) U.S. Plan Non-U.S. Plans Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Equity Equity securities (1) $ 1,943 $ — $ — $ 1,943 $ 2,209 $ 0 $ — $ 2,209 Equity mutual funds (2) 85 — — 85 — — — — Fixed income Government and related (3) — 21,134 — 21,134 — 10,288 2 10,290 Corporate bonds (4) — 16,666 518 17,185 — 2,124 — 2,124 Mortgage and asset-backed securities — 630 — 630 — 19 — 19 Fixed income mutual funds (5) 386 — — 386 — — — — Insurance contracts — — — — — 1,862 — 1,862 Cash and short-term investments (6) 54 848 — 903 204 644 — 849 Real estate — — — — — — 328 328 Derivatives (7) 0 6 — 6 18 969 — 987 Other mutual funds (8) — — — — 25 0 — 25 Subtotal 2,469 39,284 518 42,271 2,456 15,907 330 18,693 Investments measured at net asset value using the NAV practical expedient (9) — — — 9,519 — — — 21,653 Other (10) — — — (6) — — — (26) Fair value of plan assets $ 2,469 $ 39,284 $ 518 $ 51,784 $ 2,456 $ 15,907 $ 330 $ 40,319 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) |
Reconciliation of the beginning and ending balances of Level 3 assets | The following tables present the reconciliation of the beginning and ending balances of Level 3 assets for the years ended December 31, 2020 and 2019 for the U.S. Plan. ($ in millions) Total * Balance at January 1, 2020 $ 518 Return on assets held at end of year 29 Return on assets sold during the year 0 Purchases, sales and settlements, net (5) Transfers, net 0 Balance at December 31, 2020 $ 542 * Corporate bonds. ($ in millions) Mortgage and Corporate Asset-Backed Bonds Securities Total Balance at January 1, 2019 $ 359 $ 4 $ 363 Return on assets held at end of year 40 — 40 Return on assets sold during the year 1 0 1 Purchases, sales and settlements, net 105 0 105 Transfers, net 13 (4) 9 Balance at December 31, 2019 $ 518 $ — $ 518 The following tables present the reconciliation of the beginning and ending balances of Level 3 assets for the years ended December 31, 2020 and 2019 for the non-U.S. Plans. ($ in millions) Government Private and Related Real Estate Total Balance at January 1, 2020 $ 2 $ 328 $ 330 Return on assets held at end of year 0 (29) (29) Return on assets sold during the year — 2 2 Purchases, sales and settlements, net — (14) (14) Transfers, net — 4 4 Foreign exchange impact 0 7 7 Balance at December 31, 2020 $ 2 $ 298 $ 300 ($ in millions) Government Private and Related Real Estate Total Balance at January 1, 2019 $ 2 $ 339 $ 341 Return on assets held at end of year 0 (11) (11) Return on assets sold during the year 0 4 4 Purchases, sales and settlements, net (1) (17) (18) Transfers, net — — — Foreign exchange impact 0 13 13 Balance at December 31, 2019 $ 2 $ 328 $ 330 |
Schedule of contributions and direct benefit payments | ($ in millions) For the years ended December 31: 2020 2019 Non-U.S. DB plans $ 182 $ 243 Nonpension postretirement benefit plans 325 304 Multi-employer plans 29 32 DC plans 1,058 1,040 Direct benefit payments 567 559 Total $ 2,161 $ 2,177 |
Total expected benefit payments | ($ in millions) Qualified Nonqualified Qualified Nonqualified Total Expected U.S. Plan U.S. Plans Non-U.S. Plans Non-U.S. Plans Benefit Payments Payments Payments Payments Payments 2021 $ 3,522 $ 123 $ 2,093 $ 364 $ 6,102 2022 3,490 122 2,124 354 6,091 2023 3,451 121 2,140 361 6,073 2024 3,393 120 2,160 368 6,040 2025 3,333 118 2,189 373 6,012 2026-2030 15,062 545 10,529 1,943 28,078 ($ in millions) Qualified Nonqualified Total Expected U.S. Plan Non-U.S. Plans Non-U.S. Plans Benefit Payments Payments Payments Payments 2021 $ 364 $ 16 $ 25 $ 405 2022 377 17 26 419 2023 380 18 25 423 2024 363 19 26 408 2025 339 20 25 385 2026-2030 1,296 119 123 1,538 |
Defined benefit pension plans with accumulated benefit obligations (ABO) in excess of plan assets | ($ in millions) 2020 2019 Benefit Plan Benefit Plan At December 31: Obligation Assets Obligation Assets Plans with PBO in excess of plan assets $ 34,202 $ 19,586 $ 31,714 $ 18,398 Plans with ABO in excess of plan assets 33,051 18,956 30,882 18,127 Plans with plan assets in excess of PBO 71,024 78,632 66,842 73,705 |
Schedule of nonpension postretirement benefit plan with APBO in excess of plan assets | ($ in millions) 2020 2019 Benefit Plan Benefit Plan At December 31: Obligation Assets Obligation Assets Plans with APBO in excess of plan assets $ 4,545 $ 45 $ 4,685 $ 47 Plans with plan assets in excess of APBO 21 22 19 21 |
Significant Accounting Polici_3
Significant Accounting Policies - Basis of Presentation (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Net one-time benefit | $ 900 | |||
Measurement period adjustments recognized related to U.S. tax reform | $ 0 | $ 100 | $ 2,000 | |
Other (income) and expense | ||||
Noncontrolling interest amounts, net of tax | $ 22 | $ 25 | $ 17 | |
Cloud & Cognitive Software and Global Business Services | ||||
Segments impacted by realignment | segment | 2 |
Significant Accounting Polici_4
Significant Accounting Policies - Billing and Financing Components (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue | |
Payment due period from receipt of invoice, per standard billing terms | 30 days |
Practical expedient, financing components | true |
Significant Accounting Polici_5
Significant Accounting Policies - Revenue Recognition for Major Categories of Revenue (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Amount of revenue deferred and recognized over the shipping period | $ 0 | |
Period of PCS support | 1 year | |
Services | ||
Disaggregation of Revenue [Line Items] | ||
Deferred income | $ 4,994 | $ 5,106 |
Contract assets | 448 | 424 |
Unbilled services accounts receivable included in notes and accounts receivable - trade | $ 1,008 | $ 1,071 |
Services | Minimum | ||
Disaggregation of Revenue [Line Items] | ||
Contract term, high end of range | 10 years | |
Services | Maximum | ||
Disaggregation of Revenue [Line Items] | ||
Contract term, low end of range | 1 year | |
Term License Software | ||
Disaggregation of Revenue [Line Items] | ||
Committed contract term | 1 month | |
Open Source Software | ||
Disaggregation of Revenue [Line Items] | ||
Standalone selling price | $ 0 | |
Allocation of consideration to open source software license | 0 | |
Revenue recognized when control is transferred to client | $ 0 |
Significant Accounting Polici_6
Significant Accounting Policies - Software Costs (Details) - Capitalized software - Maximum | 12 Months Ended |
Dec. 31, 2020 | |
Intangible assets | |
Amortization period | 3 years |
Cost of sales | |
Intangible assets | |
Amortization period | 3 years |
SG&A expense | |
Intangible assets | |
Amortization period | 3 years |
Significant Accounting Polici_7
Significant Accounting Policies - Incremental Costs of Obtaining a Contract (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Incremental Costs of Obtaining a Contract | |
Practical expedient, incremental costs of obtaining a contract | true |
Minimum | |
Incremental Costs of Obtaining a Contract | |
Capitalized costs to obtain contract, expected customer relationship period as amortization period | 3 years |
Maximum | |
Incremental Costs of Obtaining a Contract | |
Capitalized costs to obtain contract, expected customer relationship period as amortization period | 6 years |
Significant Accounting Polici_8
Significant Accounting Policies - Product Warranties (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Minimum | |
Product Warranties | |
Product warranty term | 1 year |
Maximum | |
Product Warranties | |
Product warranty term | 3 years |
Significant Accounting Polici_9
Significant Accounting Policies - Advertising and Promotional Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Significant Accounting Policies | |||
Advertising and promotional expense | $ 1,542 | $ 1,647 | $ 1,466 |
Significant Accounting Polic_10
Significant Accounting Policies - Depreciation (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Buildings | Minimum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 30 years |
Buildings | Maximum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 50 years |
Building equipment | Minimum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 10 years |
Building equipment | Maximum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 20 years |
Land improvements | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 20 years |
Production, engineering, office and other equipment | Minimum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 2 years |
Production, engineering, office and other equipment | Maximum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 20 years |
Information technology equipment | Minimum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 1 year 6 months |
Information technology equipment | Maximum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 5 years |
Leasehold improvements | Maximum | |
Depreciation and amortization | |
Estimated useful lives of certain depreciable assets | 25 years |
Significant Accounting Polic_11
Significant Accounting Policies - Amortization (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Capitalized software | Maximum | |
Intangible assets | |
Amortization period | 3 years |
Other intangible assets | Minimum | |
Intangible assets | |
Amortization period | 1 year |
Other intangible assets | Maximum | |
Intangible assets | |
Amortization period | 20 years |
Significant Accounting Polic_12
Significant Accounting Policies - Stock-Based Compensation (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Performance Share Units | |
Stock-Based Compensation | |
Vesting period | 3 years |
Minimum | Restricted Stock Units | |
Stock-Based Compensation | |
Vesting period | 1 year |
Maximum | Restricted Stock Units | |
Stock-Based Compensation | |
Vesting period | 5 years |
Significant Accounting Polic_13
Significant Accounting Policies - Fair Value Measurement (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Significant Accounting Policies | |||
Impairment for credit losses | $ 0 | ||
Available-for-sale securities impairment | $ 0 | $ 0 |
Significant Accounting Polic_14
Significant Accounting Policies - Transfers of Financial Assets (Details) - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Significant Accounting Policies | |||
Gross proceeds from transfers of financial assets | $ 3.1 | $ 2.1 | $ 2.2 |
Accounts receivable sold and derecognized that remain uncollected from customers | $ 0.5 | $ 0.5 | $ 0.9 |
Significant Accounting Polic_15
Significant Accounting Policies - Financing Receivables (Details) | 12 Months Ended |
Dec. 31, 2020itemsegment | |
Financing receivables | |
Number of portfolio segments | segment | 2 |
Number of classes of financing receivable | item | 3 |
Total Client Financing Receivables Portfolio Segment | |
Financing receivables | |
Period after which financing receivables become past due | 90 days |
Maximum | |
Financing receivables | |
Reasonable and supportable economic forecast duration | 2 years |
Significant Accounting Polic_16
Significant Accounting Policies - Leases (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Lessee, Lease, Description [Line Items] | |
Lessee, Operating Lease, Existence of Option to Extend [true false] | true |
Lessee, Operating Lease, Existence of Option to Terminate [true false] | true |
Lease, Practical Expedient, Lessor Single Lease Component [true false] | true |
Real estate leases | Weighted-Average | |
Lessee, Lease, Description [Line Items] | |
Lease terms (in years) | 5 years |
Equipment leases | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease terms (in years) | 2 years |
Equipment leases | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease terms (in years) | 5 years |
Rental Machines | Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 1 year |
Rental Machines | Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 4 years |
Significant Accounting Polic_17
Significant Accounting Policies - Common Stock (Details) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Significant Accounting Policies | ||
Common stock, Par value (in dollars per share) | $ 0.20 | $ 0.20 |
Accounting Changes - Credit Los
Accounting Changes - Credit Losses (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Accounting Changes | ||
Deferred tax assets | $ 9,241 | $ 5,182 |
Retained earnings | $ 162,717 | 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 | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Leases | ||||
Package of practical expedients | true | |||
Operating right-of-use assets | $ 4,686 | $ 4,996 | ||
Operating lease liabilities | 4,930 | |||
Finance lease obligations | $ 296 | $ 204 | ||
Reclassification from AOCI to retained earnings for stranded tax effects of U.S. tax reform | $ 2,400 | |||
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 |
Accounting Changes - Revenue Re
Accounting Changes - Revenue Recognition (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Accounting Changes | ||||
Deferred costs | $ 4,556 | $ 4,368 | ||
Deferred tax assets | 9,241 | 5,182 | ||
Liability for taxes | 3,301 | 2,839 | ||
Retained earnings | $ 162,717 | $ 162,954 | ||
Accounting Standards Update 2014-09, Revenue from Contracts with Customers | Cumulative Effect, Period of Adoption, Adjustment | ||||
Accounting Changes | ||||
Net contract assets | $ 557 | |||
Deferred costs | 737 | |||
Deferred income | 29 | |||
Deferred tax assets | $ 56 | (184) | ||
Retained earnings | $ 580 | $ 524 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue by Major Products/Service Offerings (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue by Major Products/Service Offerings | |||
Total Revenue | $ 73,620 | $ 77,147 | $ 79,591 |
External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Total Revenue | 73,451 | 76,054 | 77,421 |
Other | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 169 | 1,092 | 2,169 |
Cloud & Cognitive Software | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 23,376 | 22,891 | 21,857 |
Total Revenue | 23,376 | 22,891 | 21,857 |
Global Business Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 16,162 | 16,798 | 16,795 |
Total Revenue | 16,162 | 16,798 | 16,795 |
Global Technology Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 25,812 | 27,361 | 29,146 |
Total Revenue | 25,812 | 27,361 | 29,146 |
Systems | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 6,978 | 7,604 | 8,034 |
Total Revenue | 6,978 | 7,604 | 8,034 |
Global Financing | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Financial Services Revenue | 1,123 | 1,400 | 1,590 |
Total Revenue | 1,123 | 1,400 | 1,590 |
Cognitive Applications | Cloud & Cognitive Software | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 5,290 | 5,456 | 5,280 |
Cloud & Data Platforms | Cloud & Cognitive Software | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 11,481 | 9,499 | 8,603 |
Transaction Processing Platforms | Cloud & Cognitive Software | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 6,606 | 7,936 | 7,974 |
Consulting | Global Business Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 8,083 | 8,157 | 7,906 |
Application Management | Global Business Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 7,133 | 7,646 | 7,852 |
Global Process Services | Global Business Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 945 | 995 | 1,037 |
Infrastructure & Cloud Services | Global Technology Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 19,669 | 20,736 | 22,185 |
Technology Support Services | Global Technology Services | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 6,144 | 6,625 | 6,961 |
Systems Hardware | Systems | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | 5,481 | 5,918 | 6,363 |
Operating Systems Software | Systems | External Revenue | |||
Revenue by Major Products/Service Offerings | |||
Revenue | $ 1,497 | $ 1,686 | $ 1,671 |
Revenue Recognition - Disaggr_2
Revenue Recognition - Disaggregation of Revenue by Geography (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue by Geography | |||
Revenues | $ 73,620 | $ 77,147 | $ 79,591 |
Americas | |||
Revenue by Geography | |||
Revenues | 34,114 | 36,274 | 36,994 |
EMEA | |||
Revenue by Geography | |||
Revenues | 23,644 | 24,443 | 25,491 |
Asia Pacific | |||
Revenue by Geography | |||
Revenues | $ 15,863 | $ 16,430 | $ 17,106 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligations (Details) $ in Billions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Revenue Recognition | |
Practical expedient, remaining performance obligations | true |
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied | $ 124 |
Revenue Recognition - Remaini_2
Revenue Recognition - Remaining Performance Obligations, Expected Timing of Satisfaction (Details) | Dec. 31, 2020 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
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]: 2023-01-01 | |
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]: 2023-01-01 | 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]: 2023-01-01 | 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) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Revenue Recognition | |
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods | $ (29) |
Revenue Recognition - Reconcili
Revenue Recognition - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Reconciliation of Contract Balances | ||
Notes and accounts receivable-trade (net of allowances of $351 in 2020 and $299 in 2019) | $ 7,132 | $ 7,870 |
Notes and accounts receivable - trade, allowances | 351 | 299 |
Contract assets | 497 | 492 |
Deferred income (current) | 12,833 | 12,026 |
Deferred income (noncurrent) | 4,301 | $ 3,851 |
Revenue recognized that was included in deferred income at the beginning of the period | $ 10,100 |
Revenue Recognition - Trade All
Revenue Recognition - Trade Allowance for Credit Losses (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 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) | 76 | 98 |
Write-offs | (46) | (113) |
Other | 5 | 5 |
Allowance for Credit Loss, Ending Balance | 351 | 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 |
Revenue Recognition - Deferred
Revenue Recognition - Deferred Contract Costs (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Deferred Contract Costs | ||
Deferred contract costs | $ 4,556 | $ 4,368 |
Deferred contract costs, current | 2,107 | 1,896 |
Deferred contract costs, noncurrent | 2,449 | 2,472 |
Amortization of deferred contract costs | 3,793 | |
Costs to obtain a contract | ||
Deferred Contract Costs | ||
Deferred contract costs | 842 | 609 |
Deferred setup costs | ||
Deferred Contract Costs | ||
Deferred contract costs | 1,859 | 1,939 |
Other deferred fulfillment costs | ||
Deferred Contract Costs | ||
Deferred contract costs | $ 1,855 | $ 1,820 |
Segments - Results of Continuin
Segments - Results of Continuing Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Information | ||||
Revenue | $ 73,620 | $ 77,147 | $ 79,591 | |
Pre-tax income/(loss) from continuing operations | 4,637 | 10,166 | 11,342 | |
Charge for structural actions | $ 2,036 | |||
External Revenue | ||||
Segment Information | ||||
Revenue | 73,451 | 76,054 | 77,421 | |
External Revenue | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | 23,376 | 22,891 | 21,857 | |
External Revenue | Global Business Services | ||||
Segment Information | ||||
Revenue | 16,162 | 16,798 | 16,795 | |
External Revenue | Global Technology Services | ||||
Segment Information | ||||
Revenue | 25,812 | 27,361 | 29,146 | |
External Revenue | Systems | ||||
Segment Information | ||||
Revenue | 6,978 | 7,604 | 8,034 | |
External Revenue | Global Financing | ||||
Segment Information | ||||
Revenue | 1,123 | 1,400 | 1,590 | |
Internal transactions | ||||
Segment Information | ||||
Revenue | (6,306) | (6,220) | (6,813) | |
Pre-tax income/(loss) from continuing operations | (381) | (290) | (725) | |
Internal transactions | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | (3,169) | (2,827) | (3,190) | |
Internal transactions | Global Business Services | ||||
Segment Information | ||||
Revenue | (193) | (278) | (326) | |
Internal transactions | Global Technology Services | ||||
Segment Information | ||||
Revenue | (1,226) | (1,157) | (872) | |
Internal transactions | Systems | ||||
Segment Information | ||||
Revenue | (824) | (726) | (815) | |
Internal transactions | Global Financing | ||||
Segment Information | ||||
Revenue | (894) | (1,232) | (1,610) | |
Business Segments | ||||
Segment Information | ||||
Revenue | 79,758 | 82,274 | 84,235 | |
Pre-tax income/(loss) from continuing operations | $ 9,040 | $ 12,835 | $ 14,562 | |
Revenue year-to-year change (as a percent) | (3.10%) | (2.30%) | 1.30% | |
Pre-tax income/(loss) year-to-year change (as a percent) | (29.60%) | (11.90%) | 1.20% | |
Pre-tax income/(loss) margin (as a percent) | 11.30% | 15.60% | 17.30% | |
Business Segments | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | $ 26,545 | $ 25,718 | $ 25,047 | |
Pre-tax income/(loss) from continuing operations | $ 6,362 | $ 7,811 | $ 8,914 | |
Revenue year-to-year change (as a percent) | 3.20% | 2.70% | 2.00% | |
Pre-tax income/(loss) year-to-year change (as a percent) | (18.50%) | (12.40%) | 10.00% | |
Pre-tax income/(loss) margin (as a percent) | 24.00% | 30.40% | 35.60% | |
Business Segments | Global Business Services | ||||
Segment Information | ||||
Revenue | $ 16,355 | $ 17,076 | $ 17,121 | |
Pre-tax income/(loss) from continuing operations | $ 1,351 | $ 1,623 | $ 1,602 | |
Revenue year-to-year change (as a percent) | (4.20%) | (0.30%) | 3.00% | |
Pre-tax income/(loss) year-to-year change (as a percent) | (16.80%) | 1.30% | 26.20% | |
Pre-tax income/(loss) margin (as a percent) | 8.30% | 9.50% | 9.40% | |
Business Segments | Global Technology Services | ||||
Segment Information | ||||
Revenue | $ 27,039 | $ 28,518 | $ 30,018 | |
Pre-tax income/(loss) from continuing operations | $ 117 | $ 1,645 | $ 1,781 | |
Revenue year-to-year change (as a percent) | (5.20%) | (5.00%) | 0.50% | |
Pre-tax income/(loss) year-to-year change (as a percent) | (92.90%) | (7.60%) | (32.00%) | |
Pre-tax income/(loss) margin (as a percent) | 0.40% | 5.80% | 5.90% | |
Business Segments | Systems | ||||
Segment Information | ||||
Revenue | $ 7,802 | $ 8,330 | $ 8,848 | |
Pre-tax income/(loss) from continuing operations | $ 449 | $ 701 | $ 904 | |
Revenue year-to-year change (as a percent) | (6.30%) | (5.90%) | (1.10%) | |
Pre-tax income/(loss) year-to-year change (as a percent) | (36.00%) | (22.40%) | (19.90%) | |
Pre-tax income/(loss) margin (as a percent) | 5.80% | 8.40% | 10.20% | |
Business Segments | Global Financing | ||||
Segment Information | ||||
Revenue | $ 2,017 | $ 2,632 | $ 3,200 | |
Pre-tax income/(loss) from continuing operations | $ 761 | $ 1,055 | $ 1,361 | |
Revenue year-to-year change (as a percent) | (23.40%) | (17.80%) | 1.00% | |
Pre-tax income/(loss) year-to-year change (as a percent) | (27.80%) | (22.50%) | 6.50% | |
Pre-tax income/(loss) margin (as a percent) | 37.70% | 40.10% | 42.50% | |
Adjustment | ||||
Segment Information | ||||
Revenue | $ 300 | $ 400 | ||
SG&A expense | ||||
Segment Information | ||||
Charge for structural actions | $ 2,000 | |||
SG&A expense | Cloud & Cognitive Software | ||||
Segment Information | ||||
Pre-tax income/(loss) from continuing operations | $ (600) | |||
SG&A expense | Global Business Services | ||||
Segment Information | ||||
Pre-tax income/(loss) from continuing operations | (400) | |||
SG&A expense | Global Technology Services | ||||
Segment Information | ||||
Pre-tax income/(loss) from continuing operations | (900) | |||
SG&A expense | Systems | ||||
Segment Information | ||||
Pre-tax income/(loss) from continuing operations | $ (200) |
Segments - Revenue Reconciliati
Segments - Revenue Reconciliation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue | |||
Revenue | $ 73,620 | $ 77,147 | $ 79,591 |
Business Segments | |||
Revenue | |||
Revenue | 79,758 | 82,274 | 84,235 |
Other | |||
Revenue | |||
Other - divested businesses | 37 | 930 | 1,961 |
Other revenue | 132 | 162 | 207 |
Internal transactions | |||
Revenue | |||
Revenue | $ (6,306) | $ (6,220) | $ (6,813) |
Segments - Pre-Tax Income Recon
Segments - Pre-Tax Income Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Pre-tax income from continuing operations | ||||
Amortization of acquired intangible assets | $ (1,858) | $ (1,298) | $ (809) | |
Acquisition-related charges | (13) | (423) | (16) | |
Non-operating retirement-related (costs)/income | (1,123) | (615) | (1,572) | |
Spin-off related charges | (28) | |||
Other - divested businesses | (9) | 574 | 287 | |
Income from continuing operations before income taxes | 4,637 | 10,166 | 11,342 | |
Charge for structural actions | $ 2,036 | |||
Business Segments | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | 9,040 | 12,835 | 14,562 | |
Internal transactions | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | (381) | (290) | (725) | |
Unallocated corporate amounts | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | $ (990) | $ (617) | $ (385) |
Segments - Assets and Other Ite
Segments - Assets and Other Items (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020USD ($)segment | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Segment Information | |||
Number of business segments to which assets are assigned when ownership is shared between several segments | segment | 1 | ||
Assets | $ 155,971 | $ 152,186 | $ 123,382 |
Interest expense | 1,288 | 1,344 | 723 |
Business Segments | |||
Segment Information | |||
Assets | 120,708 | 125,072 | 99,920 |
Depreciation/amortization of intangibles | 4,415 | 4,392 | 4,063 |
Capital expenditures/investments in intangibles | 2,906 | 2,501 | 3,610 |
Interest income | 1,058 | 1,490 | 1,647 |
Interest expense | 307 | 512 | 515 |
Business Segments | Cloud & Cognitive Software | |||
Segment Information | |||
Assets | 58,752 | 58,342 | 28,502 |
Depreciation/amortization of intangibles | 1,168 | 1,089 | 1,051 |
Capital expenditures/investments in intangibles | 548 | 517 | 468 |
Business Segments | Global Business Services | |||
Segment Information | |||
Assets | 10,290 | 10,136 | 8,443 |
Depreciation/amortization of intangibles | 180 | 167 | 108 |
Capital expenditures/investments in intangibles | 28 | 47 | 58 |
Business Segments | Global Technology Services | |||
Segment Information | |||
Assets | 21,971 | 22,436 | 17,624 |
Depreciation/amortization of intangibles | 2,605 | 2,601 | 2,359 |
Capital expenditures/investments in intangibles | 2,039 | 1,575 | 2,569 |
Business Segments | Systems | |||
Segment Information | |||
Assets | 4,620 | 4,590 | 4,030 |
Depreciation/amortization of intangibles | 343 | 350 | 315 |
Capital expenditures/investments in intangibles | 249 | 305 | 241 |
Business Segments | Global Financing | |||
Segment Information | |||
Assets | 25,075 | 29,568 | 41,320 |
Depreciation/amortization of intangibles | 119 | 186 | 229 |
Capital expenditures/investments in intangibles | 41 | 57 | 274 |
Interest income | 1,058 | 1,490 | 1,647 |
Interest expense | $ 307 | $ 512 | $ 515 |
Segments - Asset Reconciliation
Segments - Asset Reconciliation (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | |||
Assets | $ 155,971 | $ 152,186 | $ 123,382 |
Deferred tax assets | 9,241 | 5,182 | |
Plant, other property and equipment | 9,943 | 9,778 | 10,359 |
Operating right-of-use assets | 4,686 | 4,996 | |
Pension assets | 7,610 | 6,865 | |
Business Segments | |||
Assets | |||
Assets | 120,708 | 125,072 | 99,920 |
Internal transactions | |||
Assets | |||
Assets | (4,685) | (4,317) | (7,143) |
Other | |||
Assets | |||
Assets | 218 | 1,906 | 2,702 |
Unallocated amounts | |||
Assets | |||
Cash and marketable securities | 12,486 | 7,308 | 10,393 |
Notes and accounts receivable | 1,589 | 1,488 | 1,597 |
Deferred tax assets | 9,012 | 4,995 | 5,089 |
Plant, other property and equipment | 2,206 | 2,262 | 2,463 |
Operating right-of-use assets | 3,409 | 3,530 | |
Pension assets | 7,610 | 6,865 | 4,666 |
Other | $ 3,417 | $ 3,077 | $ 3,695 |
Segments - Geographic Informati
Segments - Geographic Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Information | |||
Revenue | $ 73,620 | $ 77,147 | $ 79,591 |
Plant and Other Property - Net | 9,943 | 9,778 | $ 10,359 |
Operating right-of-use assets | $ 4,686 | $ 4,996 | |
Revenue | Major Client | |||
Segment Information | |||
Number of clients representing 10% or more of the company's total revenue | 0 | 0 | 0 |
U.S. | Revenue | Geographic Information | |||
Segment Information | |||
Revenue | $ 26,978 | $ 28,395 | $ 29,078 |
U.S. | Revenue | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | 10.00% |
U.S. | Plant and Other Property - Net | Geographic Information | |||
Segment Information | |||
Plant and Other Property - Net | $ 4,410 | $ 4,485 | $ 4,585 |
U.S. | Plant and Other Property - Net | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | 10.00% |
U.S. | Operating Right-Of-Use Assets - Net | Geographic Information | |||
Segment Information | |||
Operating right-of-use assets | $ 1,243 | $ 1,386 | |
U.S. | Operating Right-Of-Use Assets - Net | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | |
Japan | Revenue | Geographic Information | |||
Segment Information | |||
Revenue | $ 8,694 | $ 8,681 | $ 8,489 |
Japan | Revenue | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | 10.00% |
Japan | Operating Right-Of-Use Assets - Net | Geographic Information | |||
Segment Information | |||
Operating right-of-use assets | $ 606 | $ 659 | |
Japan | Operating Right-Of-Use Assets - Net | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | |
Non-US | Plant and Other Property - Net | Geographic Information | |||
Segment Information | |||
Plant and Other Property - Net | $ 5,533 | $ 5,294 | $ 5,774 |
Other Countries | Revenue | Geographic Information | |||
Segment Information | |||
Revenue | $ 37,949 | $ 40,071 | $ 42,024 |
Other Countries | Revenue | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | 10.00% |
Other Countries | Plant and Other Property - Net | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% | 10.00% |
Other Countries | Operating Right-Of-Use Assets - Net | Geographic Information | |||
Segment Information | |||
Operating right-of-use assets | $ 2,836 | $ 2,951 | |
Other Countries | Operating Right-Of-Use Assets - Net | Geographic Information | Minimum | |||
Segment Information | |||
Concentration Risk, Percentage | 10.00% | 10.00% |
Segments - Revenue by Product o
Segments - Revenue by Product or Service (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue by Classes of Similar Products or Services | |||
Revenue | $ 73,620 | $ 77,147 | $ 79,591 |
Cloud & Cognitive Software | Software | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 19,107 | 18,649 | 17,906 |
Cloud & Cognitive Software | Services | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 4,159 | 4,076 | 3,795 |
Cloud & Cognitive Software | Systems | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 110 | 166 | 156 |
Global Business Services | Software | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 180 | 156 | 151 |
Global Business Services | Services | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 15,896 | 16,527 | 16,439 |
Global Business Services | Systems | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 86 | 115 | 206 |
Global Technology Services | Software | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 399 | 338 | 371 |
Global Technology Services | Services | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 19,632 | 20,768 | 22,222 |
Global Technology Services | Maintenance | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 4,815 | 5,183 | 5,484 |
Global Technology Services | Systems | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 967 | 1,072 | 1,069 |
Systems | Servers | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 3,466 | 3,746 | 3,996 |
Systems | Storage | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 1,801 | 1,920 | 2,114 |
Systems | Software | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 1,359 | 1,528 | 1,499 |
Systems | Services | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 351 | 410 | 425 |
Global Financing | Financing | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | 834 | 1,120 | 1,223 |
Global Financing | Used equipment sales | |||
Revenue by Classes of Similar Products or Services | |||
Revenue | $ 289 | $ 281 | $ 366 |
Acquisitions & Divestitures - (
Acquisitions & Divestitures - (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2020USD ($)item | Dec. 31, 2019USD ($) | |
Acquisitions | ||
Percentage of business acquired (as a percent) | 100.00% | |
Restricted cash | $ 463 | $ 141 |
2020 Acquisitions | ||
Acquisitions | ||
Number of acquisitions | item | 7 | |
Aggregate acquisitions cost | $ 723 | |
Restricted cash | $ 323 |
Acquisitions & Divestitures - P
Acquisitions & Divestitures - Purchase Price Allocation 2020 (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Acquisitions | |||
Goodwill | $ 59,617 | $ 58,222 | $ 36,265 |
2020 Acquisitions | |||
Acquisitions | |||
Current assets | 35 | ||
Property, plant, and equipment/noncurrent assets | 7 | ||
Goodwill | 575 | ||
Total assets acquired | 784 | ||
Current liabilities | 19 | ||
Noncurrent liabilities | 41 | ||
Total liabilities assumed | 61 | ||
Total purchase price | $ 723 | ||
Acquired intangible asset, weighted average useful life | 6 years 9 months 18 days | ||
Goodwill deductible for tax purposes | $ 0 | ||
2020 Acquisitions | Client relationships | |||
Acquisitions | |||
Intangible assets | $ 84 | ||
2020 Acquisitions | Client relationships | Minimum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 5 years | ||
2020 Acquisitions | Client relationships | Maximum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 7 years | ||
2020 Acquisitions | Completed technology | |||
Acquisitions | |||
Intangible assets | $ 73 | ||
2020 Acquisitions | Completed technology | Minimum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 2 years | ||
2020 Acquisitions | Completed technology | Maximum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 7 years | ||
2020 Acquisitions | Trademarks | |||
Acquisitions | |||
Intangible assets | $ 11 | ||
2020 Acquisitions | Trademarks | Minimum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 1 year | ||
2020 Acquisitions | Trademarks | Maximum | |||
Acquisitions | |||
Acquired intangible asset, weighted average useful life | 7 years | ||
Cloud & Cognitive Software | 2020 Acquisitions | |||
Acquisitions | |||
Goodwill | $ 362 | ||
Global Business Services | 2020 Acquisitions | |||
Acquisitions | |||
Goodwill | 205 | ||
Systems | 2020 Acquisitions | |||
Acquisitions | |||
Goodwill | $ 8 |
Acquisitions & Divestitures - 2
Acquisitions & Divestitures - 2019 Acquisitions (Details) $ / shares in Units, $ in Billions | Jul. 09, 2019USD ($)$ / shares | Dec. 31, 2019USD ($)item | Dec. 31, 2020 |
Acquisitions | |||
Percentage of business acquired (as a percent) | 100.00% | ||
2019 Acquisitions | |||
Acquisitions | |||
Aggregate acquisitions cost | $ 35 | ||
Red Hat, Inc. | |||
Acquisitions | |||
Aggregate acquisitions cost | $ 35 | ||
Percentage of business acquired (as a percent) | 100.00% | ||
Cash paid to acquiree shareholders (in dollars per share) | $ / shares | $ 190 | ||
Equity value | $ 34 | ||
Cloud & Cognitive Software | 2019 Acquisitions | |||
Acquisitions | |||
Number of acquisitions | item | 1 |
Acquisitions & Divestitures -_2
Acquisitions & Divestitures - Purchase Price Allocation 2019 (Details) - USD ($) $ in Millions | Jul. 09, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Acquisitions | ||||
Goodwill | $ 59,617 | $ 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. | Client relationships | ||||
Acquisitions | ||||
Intangible assets | $ 7,215 | |||
Acquired intangible asset, weighted average useful life | 10 years | |||
Red Hat, Inc. | Completed technology | ||||
Acquisitions | ||||
Intangible assets | $ 4,571 | |||
Acquired intangible asset, weighted average useful life | 9 years | |||
Red Hat, Inc. | Trademarks | ||||
Acquisitions | ||||
Intangible assets | $ 1,686 | |||
Acquired intangible asset, weighted average useful life | 20 years |
Acquisitions & Divestitures - G
Acquisitions & Divestitures - Goodwill (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Jul. 09, 2019 | Dec. 31, 2018 | |
Acquisitions | ||||
Goodwill | $ 59,617 | $ 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 -_3
Acquisitions & Divestitures - Pro forma information (Details) - Red Hat, Inc. - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Acquisitions | ||
Revenue | $ 79,628 | $ 81,360 |
Net income | $ 9,723 | $ 5,702 |
Acquisitions & Divestitures -_4
Acquisitions & Divestitures - 2018 Acquisitions (Details) - 2018 Acquisitions $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($)item | |
Acquisitions | |
Number of acquisitions | 2 |
Aggregate acquisitions cost | $ | $ 49 |
Cloud & Cognitive Software | |
Acquisitions | |
Number of acquisitions | 1 |
Global Business Services | |
Acquisitions | |
Number of acquisitions | 1 |
Acquisitions & Divestitures - D
Acquisitions & Divestitures - Divestitures (Details) $ in Millions | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($)entity | Dec. 31, 2018entity |
Divestitures | |||||
Number of divestitures | entity | 0 | ||||
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 | 288 | $ 174 | |||
Pre-tax gain on sale of business | 669 | ||||
Period after closing to receive outstanding contingent consideration | 27 months | ||||
Select Marketing Platform and Commerce Offerings | |||||
Divestitures | |||||
Pre-tax gain on sale of business | $ 82 | ||||
Select Marketing Platform and Commerce Offerings | U.S. | |||||
Divestitures | |||||
Contingent 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 | ||||
Select Global Financing, Global Business Services and Other-divested | |||||
Divestitures | |||||
Number of divestitures | entity | 3 |
Research, Development & Engin_2
Research, Development & Engineering (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Research, Development & Engineering | |||
RD&E expense | $ 6,333 | $ 5,989 | $ 5,379 |
Scientific research, application of scientific advances, services and application | 6,039 | 5,657 | 5,027 |
Software-related expenses | 3,732 | 3,541 | 3,050 |
Product-related engineering expenses | $ 295 | $ 334 | $ 352 |
Taxes - Income before Income Ta
Taxes - Income before Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Taxes | |||
U.S. operations | $ (1,726) | $ (315) | $ 627 |
Non-U.S. operations | 6,363 | 10,481 | 10,715 |
Income from continuing operations before income taxes | $ 4,637 | $ 10,166 | $ 11,342 |
Taxes - Provision by Geographic
Taxes - Provision by Geographic Operations (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Taxes | |||
Total continuing operations provision for/(benefit from) income taxes | $ (864) | $ 731 | $ 2,619 |
U.S. | |||
Taxes | |||
Total continuing operations provision for/(benefit from) income taxes | 2,004 | (408) | 1,199 |
Non-US | |||
Taxes | |||
Total continuing operations provision for/(benefit from) income taxes | $ (2,868) | $ 1,139 | $ 1,420 |
Taxes - Provision by Taxing Jur
Taxes - Provision by Taxing Jurisdiction (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
U.S. federal | |||
Current | $ 315 | $ 331 | $ (342) |
Deferred | 1,177 | (839) | 1,377 |
Total | 1,492 | (508) | 1,035 |
U.S. state and local | |||
Current | 316 | (85) | 127 |
Deferred | (315) | (82) | (292) |
Total | 1 | (167) | (165) |
Non-U.S. | |||
Current | 1,827 | 1,829 | 2,135 |
Deferred | (4,184) | (423) | (386) |
Total | (2,357) | 1,406 | 1,749 |
Total continuing operations provision for/(benefit from) income taxes | (864) | 731 | 2,619 |
Discontinued operations provision for/(benefit from) income taxes | (13) | (1) | 2 |
Provision for social security, real estate, personal property and other taxes | 3,199 | 3,304 | 3,322 |
Total taxes included in net income | $ 2,322 | $ 4,034 | $ 5,943 |
Taxes - Tax Rate Reconciliation
Taxes - Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation of the statutory U.S. federal tax rate to the company's effective tax rate from continuing operations | |||
Statutory rate | 21.00% | 21.00% | 21.00% |
Enactment of U.S. tax reform | 1.00% | 18.00% | |
Tax differential on foreign income | (15.00%) | (11.00%) | (9.00%) |
Intra-entity IP sale | (20.00%) | ||
Domestic incentives | (4.00%) | (2.00%) | (3.00%) |
State and local | 0.00% | (1.00%) | (1.00%) |
Other | (1.00%) | (1.00%) | (3.00%) |
Effective rate | (18.60%) | 7.20% | 23.00% |
Taxes - Tax Rate Reconciliati_2
Taxes - Tax Rate Reconciliation Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Effective income tax rate reconciliation, additional disclosures | ||||
U.S. corporate tax rate | 21.00% | 21.00% | 21.00% | |
Measurement period adjustments recognized related to U.S. tax reform | $ 0 | $ 100 | $ 2,000 | |
Effective tax rate (as a percent) | (18.60%) | 7.20% | 23.00% | |
Intangible assets | $ 3,400 | $ 3,540 | $ 592 | |
Increase (decrease) in tax provision from intra-entity sale of intellectual property and impact of U.S. tax reform | $ (900) | |||
Tax benefit due to change in foreign tax law | $ 200 |
Taxes - Deferred Taxes (Details
Taxes - Deferred Taxes (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred Tax Assets | ||||
Retirement benefits | $ 3,946 | $ 3,766 | ||
Leases | 1,525 | 1,729 | ||
Share-based and other compensation | 616 | 637 | ||
Domestic tax loss/credit carryforwards | 1,746 | 1,259 | ||
Deferred income | 712 | 600 | ||
Foreign tax loss/credit carryforwards | 818 | 836 | ||
Bad debt, inventory and warranty reserves | 361 | 298 | ||
Depreciation | 308 | 253 | ||
Hedging losses | 576 | |||
Restructuring charges | 302 | 138 | ||
Accruals | 483 | 368 | ||
Intangible assets | 3,540 | $ 3,400 | 592 | |
Capitalized research and development | 1,387 | 722 | ||
Other | 1,441 | 1,300 | ||
Gross deferred tax assets | 17,761 | 12,498 | ||
Less: valuation allowance | 850 | 608 | $ 915 | |
Net deferred tax assets | 16,911 | 11,890 | ||
Deferred Tax Liabilities | ||||
Goodwill and intangible assets | 2,679 | 3,111 | ||
GILTI deferred taxes | 4,365 | 1,908 | ||
Leases and right of use assets | 1,908 | 2,216 | ||
Depreciation | 709 | 728 | ||
Retirement benefits | 1,221 | 1,002 | ||
Software development costs | 1,007 | 1,075 | ||
Deferred transition costs | 205 | 233 | ||
Undistributed foreign earnings | 307 | 725 | ||
Other | 741 | 940 | ||
Gross deferred tax liabilities | $ 13,142 | $ 11,938 |
Taxes - Carryforwards (Details)
Taxes - Carryforwards (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Loss and tax credit carryforwards | |
Tax effect of foreign and domestic loss carryforwards | $ 661 |
Foreign and domestic tax credit carryforwards | $ 1,903 |
Minimum | |
Loss and tax credit carryforwards | |
Period for which substantially all loss and tax credit carryforwards are available | 2 years |
Period for which the majority of loss and tax credit carryforwards are available | 10 years |
Taxes - Unrecognized Tax Benefi
Taxes - Unrecognized Tax Benefits Reconciliation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Taxes | |||
Increase (decrease) in amount of unrecognized tax benefits | $ 1,422 | ||
Reconciliation of the beginning and ending amount of unrecognized tax benefits | |||
Balance at January 1 | 7,146 | $ 6,759 | $ 7,031 |
Additions based on tax positions related to the current year | 1,690 | 816 | 394 |
Additions for tax positions of prior years | 159 | 779 | 1,201 |
Reductions for tax positions of prior years (including impacts due to a lapse of statute) | (408) | (922) | (1,686) |
Settlements | (19) | (286) | (181) |
Balance at December 31 | $ 8,568 | $ 7,146 | $ 6,759 |
Taxes - Unrecognized Tax Bene_2
Taxes - Unrecognized Tax Benefits Additional Disclosures (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Taxes | ||||
Unrecognized tax benefits | $ 8,568 | $ 7,146 | $ 6,759 | $ 7,031 |
Offsetting tax benefits associated with timing adjustments, U.S. tax credits, potential transfer pricing adjustments, and state income taxes | 574 | |||
Net unrecognized tax benefit amount that, if recognized, would favorably affect the company's effective tax rate | 7,994 | 6,562 | 6,041 | |
Interest expense and penalties, net (benefit)/charge recognized | 117 | 13 | $ (14) | |
Interest and penalties accrued | 843 | $ 819 | ||
Reasonably possible reduction in unrecognized tax benefits within the next 12 months | $ 368 |
Taxes - Income Tax Assessments
Taxes - Income Tax Assessments (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2020USD ($) | |
Income tax examination | |
Possible additional taxable income based on IRS assessment | $ 4,500 |
India Tax Authorities | |
Income tax examination | |
Prepaid income taxes | $ 742 |
Taxes - Undistributed Foreign E
Taxes - Undistributed Foreign Earnings (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Taxes | ||
Deferred tax liability for undistributed foreign earnings not indefinitely reinvested | $ 307 | $ 725 |
Undistributed earnings of foreign subsidiaries indefinitely reinvested in foreign operations | $ 980 |
Earnings Per Share - Computatio
Earnings Per Share - Computation (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Weighted-average number of shares on which earnings per share calculations are based | |||
Weighted-average shares outstanding during period (in shares) | 890,348,679 | 887,235,105 | 912,048,072 |
Add - Incremental shares under stock-based compensation plans (in shares) | 4,802,940 | 4,199,440 | 2,786,316 |
Add - Incremental shares associated with contingently issuable shares (in shares) | 1,412,352 | 1,378,831 | 1,481,326 |
Assuming dilution (in shares) | 896,563,971 | 892,813,376 | 916,315,714 |
Net income on which basic earnings per share is calculated | |||
Income from continuing operations | $ 5,501 | $ 9,435 | $ 8,723 |
Income/(loss) from discontinued operations, net of tax | 89 | (4) | 5 |
Net income on which basic earnings per share is calculated | 5,590 | 9,431 | 8,728 |
Net income on which diluted earnings per share is calculated | |||
Income from continuing operations | 5,501 | 9,435 | 8,723 |
Net income applicable to contingently issuable shares | (2) | 0 | (6) |
Income from continuing operations on which diluted earnings per share is calculated | 5,499 | 9,435 | 8,718 |
Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated | 89 | (4) | 5 |
Net income on which diluted earnings per share is calculated | $ 5,588 | $ 9,431 | $ 8,722 |
Assuming dilution | |||
Continuing operations (in dollars per share) | $ 6.13 | $ 10.57 | $ 9.51 |
Discontinued operations (in dollars per share) | 0.10 | (0.01) | 0.01 |
Total (in dollars per share) (Note H) | 6.23 | 10.56 | 9.52 |
Basic | |||
Continuing operations (in dollars per share) | 6.18 | 10.63 | 9.56 |
Discontinued operations (in dollars per share) | 0.10 | 0 | 0.01 |
Total (in dollars per share) (Note H) | $ 6.28 | $ 10.63 | $ 9.57 |
Earnings Per Share - Antidiluti
Earnings Per Share - Antidilutive Stock Options (Details) - shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock Options | |||
Antidilutive stock options | |||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 1,417,665 | 855,679 | 576,776 |
Financial Assets & Liabilitie_2
Financial Assets & Liabilities - Fair Value Measurements (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | $ 600 | $ 696 |
Potential reduction in net position of total derivative assets | 213 | 194 |
Potential reduction in net position of total derivative liabilities | 213 | 194 |
Recurring | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 8,316 | 4,819 |
Total assets | 9,161 | 5,823 |
Total liabilities | 627 | 673 |
Recurring | Prepaid expenses and other current assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 85 | 149 |
Recurring | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 151 | 94 |
Recurring | Other accrued expenses and liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 587 | 167 |
Recurring | Other liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 40 | 506 |
Recurring | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Equity investments | 2 | 0 |
Recurring | Level 1 | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 148 | 427 |
Recurring | Level 2 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | 600 | 696 |
Debt securities - noncurrent | 7 | 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 | 100 | 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 | 111 | 175 |
Derivatives designated as hedging - Liabilities | 580 | 635 |
Derivatives not designated as hedging - Assets | 13 | 10 |
Derivatives not designated as hedging - Liabilities | 47 | 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 | 7,668 | 4,392 |
Recurring | Level 2 | U.S. government securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 500 | |
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 | $ 12 | 1 |
Derivatives not designated as hedging - Liabilities | $ 4 |
Financial Assets & Liabilitie_3
Financial Assets & Liabilities - Not Measured at Fair Value (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Long-Term Debt | ||
Long-term debt | $ 54,355 | $ 54,102 |
Fair value of long-term debt | $ 61,598 | $ 58,431 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Inventory | ||
Finished goods | $ 190 | $ 220 |
Work in process and raw materials | 1,649 | 1,399 |
Total | $ 1,839 | $ 1,619 |
Financing Receivables - Payment
Financing Receivables - Payment Terms (Details) | 12 Months Ended |
Dec. 31, 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 | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2020 | Dec. 24, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Components of the company's financing receivables | |||||
Financing receivables, gross | $ 18,580 | $ 18,580 | $ 23,504 | ||
Unearned income | (823) | (823) | (1,083) | ||
Residual value | 485 | 485 | |||
Amortized Cost/Recorded Investment | 18,242 | 18,242 | 22,421 | ||
Allowance for credit losses | (263) | (263) | (221) | ||
Unguaranteed residual value | 469 | 469 | 652 | ||
Guaranteed residual value | 53 | ||||
Total financing receivables, net | 17,979 | 17,979 | 22,904 | ||
Current portion | 10,892 | 10,892 | 14,192 | ||
Noncurrent portion | 7,086 | 7,086 | 8,712 | ||
Financing receivables pledged as collateral for borrowings | 482 | 482 | 1,062 | ||
Sold financing receivables | 2,562 | ||||
Lease receivables | |||||
Components of the company's financing receivables | |||||
Financing receivables, gross | 4,001 | 4,001 | 6,077 | ||
Unearned income | (335) | (335) | (509) | ||
Residual value | 485 | 485 | |||
Amortized Cost/Recorded Investment | 4,151 | 4,151 | 5,567 | ||
Allowance for credit losses | (82) | (82) | (72) | $ (99) | |
Unguaranteed residual value | 652 | ||||
Guaranteed residual value | 53 | ||||
Total financing receivables, net | 4,069 | 4,069 | 6,199 | ||
Current portion | 1,525 | 1,525 | 2,334 | ||
Noncurrent portion | 2,544 | 2,544 | 3,865 | ||
Sold financing receivables | 1,152 | ||||
Commercial financing receivables | |||||
Components of the company's financing receivables | |||||
Financing receivables, gross | 2,419 | 2,419 | 3,836 | ||
Unearned income | 0 | 0 | (4) | ||
Amortized Cost/Recorded Investment | 2,419 | 2,419 | 3,831 | ||
Allowance for credit losses | (8) | (8) | (11) | ||
Total financing receivables, net | 2,411 | 2,411 | 3,820 | ||
Current portion | 2,411 | 2,411 | 3,820 | ||
Financing receivables held for sale | 383 | 383 | |||
Loan receivables | |||||
Components of the company's financing receivables | |||||
Financing receivables, gross | 12,159 | 12,159 | 13,592 | ||
Unearned income | (488) | (488) | (570) | ||
Amortized Cost/Recorded Investment | 11,671 | 11,671 | 13,022 | ||
Allowance for credit losses | (173) | (173) | (138) | $ (179) | |
Total financing receivables, net | 11,498 | 11,498 | 12,884 | ||
Current portion | 6,955 | 6,955 | 8,037 | ||
Noncurrent portion | 4,542 | 4,542 | $ 4,847 | ||
Sold financing receivables | $ 1,410 | ||||
Third Party Investor | Commercial financing receivables | |||||
Components of the company's financing receivables | |||||
Sold financing receivables | $ 515 | ||||
Third Party Investor | Maximum | Commercial financing receivables | |||||
Components of the company's financing receivables | |||||
Financing receivables to be sold | $ 3,000 |
Financing Receivables - By Port
Financing Receivables - By Portfolio Segment (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2020USD ($)itemsegment | Dec. 31, 2019USD ($) | |
Financing receivables | ||
Number of portfolio segments | segment | 2 | |
Number of classes of financing receivable | item | 3 | |
Amortized cost/Recorded investment | $ 18,242 | $ 22,421 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 221 | |
Allowance for credit losses, ending balance | 263 | 221 |
Total Client Financing Receivables Portfolio Segment | ||
Financing receivables | ||
Amortized cost/Recorded investment | 15,822 | 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 | (34) | (63) |
Recoveries | 3 | 2 |
Provision additions/(releases) | 34 | (5) |
Other | 1 | (2) |
Allowance for credit losses, ending balance | 255 | 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 | 7,758 | 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 | (28) | (42) |
Recoveries | 0 | 1 |
Provision additions/(releases) | 33 | 5 |
Other | (6) | (1) |
Allowance for credit losses, ending balance | 141 | 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 | 5,023 | 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 | (3) | (3) |
Recoveries | 0 | 0 |
Provision additions/(releases) | 5 | (7) |
Other | 6 | 0 |
Allowance for credit losses, ending balance | 77 | 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 | 3,042 | 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 |
Provision additions/(releases) | (4) | (3) |
Other | 1 | (1) |
Allowance for credit losses, ending balance | 37 | 36 |
Related allowance, collectively evaluated for impairment | 4 | |
Related allowance, individually evaluated for impairment | 32 | |
Lease receivables | ||
Financing receivables | ||
Amortized cost/Recorded investment | 4,151 | 5,567 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 72 | 99 |
Write-offs | (16) | |
Provision additions/(releases) | (6) | |
Allowance for credit losses, ending balance | 82 | 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 | 11,671 | 13,022 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 138 | 179 |
Write-offs | (47) | |
Provision additions/(releases) | 2 | |
Allowance for credit losses, ending balance | 173 | 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 | Dec. 31, 2020 | Dec. 31, 2019 |
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | $ 18,242 | $ 22,421 |
Total Client Financing Receivables Portfolio Segment | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 15,822 | 18,590 |
Amortized cost/Recorded Investment Not Accruing | 223 | 235 |
Impaired financing receivables individually evaluated for impairment with related allowance | 191 | |
Impaired financing receivables, related allowance | 178 | 171 |
Total Client Financing Receivables Portfolio Segment | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 456 | 465 |
Amortized cost/Recorded Investment > 90 Days and Accruing | 241 | 253 |
Billed Invoices > 90 Days and Accruing | 20 | 29 |
Total Client Financing Receivables Portfolio Segment | Americas | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 7,758 | 10,144 |
Amortized cost/Recorded Investment Not Accruing | 96 | |
Total Client Financing Receivables Portfolio Segment | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 295 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 200 | |
Billed Invoices > 90 Days and Accruing | 12 | |
Total Client Financing Receivables Portfolio Segment | EMEA | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 5,023 | 5,087 |
Amortized cost/Recorded Investment Not Accruing | 95 | |
Total Client Financing Receivables Portfolio Segment | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 119 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 28 | |
Billed Invoices > 90 Days and Accruing | 5 | |
Total Client Financing Receivables Portfolio Segment | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 3,042 | 3,359 |
Amortized cost/Recorded Investment Not Accruing | 32 | |
Total Client Financing Receivables Portfolio Segment | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded Investment > 90 Days | 42 | |
Amortized cost/Recorded Investment > 90 Days and Accruing | 12 | |
Billed Invoices > 90 Days and Accruing | 4 | |
Lease receivables | ||
Past Due Financing Receivable | ||
Amortized cost/Recorded investment | 4,151 | 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 | $ 11,671 | 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 | Dec. 31, 2020 | Dec. 31, 2019 |
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
Total Recorded Investment | $ 18,242 | $ 22,421 |
Americas | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 2,818 | |
2019 | 988 | |
2018 | 829 | |
2017 | 285 | |
2016 | 90 | |
2015 and prior | 28 | |
Total Recorded Investment | 5,038 | |
Americas | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,449 | |
2019 | 623 | |
2018 | 360 | |
2017 | 154 | |
2016 | 52 | |
2015 and prior | 81 | |
Total Recorded Investment | 2,720 | |
EMEA | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,513 | |
2019 | 668 | |
2018 | 329 | |
2017 | 70 | |
2016 | 33 | |
2015 and prior | 22 | |
Total Recorded Investment | 2,635 | |
EMEA | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 1,427 | |
2019 | 519 | |
2018 | 245 | |
2017 | 128 | |
2016 | 46 | |
2015 and prior | 22 | |
Total Recorded Investment | 2,387 | |
Asia Pacific | Aaa - Baa3 | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 958 | |
2019 | 564 | |
2018 | 419 | |
2017 | 205 | |
2016 | 114 | |
2015 and prior | 38 | |
Total Recorded Investment | 2,298 | |
Asia Pacific | Ba1 - D | ||
Amortized cost/recorded investment for each class of receivables, by credit quality indicator | ||
2020 | 351 | |
2019 | 123 | |
2018 | 167 | |
2017 | 52 | |
2016 | 33 | |
2015 and prior | 18 | |
Total Recorded Investment | $ 743 |
Financing Receivables - Credi_2
Financing Receivables - Credit Quality Indicators (Details) $ in Millions | Dec. 31, 2019USD ($) |
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 |
Property, Plant & Equipment (De
Property, Plant & Equipment (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
PROPERTY, PLANT AND EQUIPMENT | |||
Property, plant, and equipment, excluding underlying asset - gross | $ 32,911 | $ 31,504 | |
Less: Accumulated depreciation, excluding underlying asset | 22,968 | 21,726 | |
Property, plant, and equipment, excluding underlying asset | 9,943 | 9,778 | $ 10,359 |
Rental machines | 265 | 523 | |
Less: Accumulated depreciation - rental machines | 168 | 292 | |
Rental machines - net | 97 | 232 | |
Property, plant and equipment - net (Note L) | 10,040 | 10,010 | |
Land and land improvements | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, plant, and equipment, excluding underlying asset - gross | 381 | 365 | |
Buildings and building and leasehold improvements | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, plant, and equipment, excluding underlying asset - gross | 9,416 | 9,364 | |
Information technology equipment | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, plant, and equipment, excluding underlying asset - gross | 19,419 | 18,054 | |
Production, engineering, office and other equipment | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, plant, and equipment, excluding underlying asset - gross | $ 3,695 | $ 3,721 |
Leases - Components of Lease Co
Leases - Components of Lease Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Components of lease cost | |||
Finance lease cost | $ 91 | $ 30 | |
Operating lease cost | 1,581 | 1,645 | |
Short-term lease cost | 38 | 38 | |
Variable lease cost | 480 | 534 | |
Sublease income | (31) | (24) | |
Total lease cost | 2,158 | 2,223 | |
Gains on sale and leaseback transactions, net | $ 0 | $ 41 | |
Rental expense | $ 1,944 |
Leases - Cash Flow From Lease T
Leases - Cash Flow From Lease Transactions (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash outflows from finance leases | $ 10 | $ 8 |
Financing cash outflows from finance leases | 85 | 22 |
Operating cash outflows from operating leases | 1,566 | 1,541 |
ROU assets obtained in exchange for new finance lease liabilities | 176 | 209 |
ROU assets obtained in exchange for new operating lease liabilities | $ 1,130 | 6,481 |
ROU assets obtained in exchange for new operating lease liabilities - post adoption | $ 1,679 |
Leases - Weighted-average Lease
Leases - Weighted-average Lease Terms and Discount Rates (Details) | Dec. 31, 2020 | Dec. 31, 2019 |
Leases | ||
Weighted-average remaining lease term - finance leases | 3 years 10 months 24 days | 4 years 9 months 18 days |
Weighted-average discount rate - finance leases | 1.28% | 1.62% |
Weighted-average remaining lease term - operating leases | 5 years | 5 years 4 months 24 days |
Weighted-average discount rate - operating leases | 3.06% | 3.03% |
Leases - Maturity Analysis of U
Leases - Maturity Analysis of Undiscounted Cash Out Flows (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Finance leases | ||
2021 | $ 106 | |
2022 | 90 | |
2023 | 62 | |
2024 | 33 | |
2025 | 16 | |
Thereafter | 36 | |
Imputed Interest | (47) | |
Finance lease obligations | 296 | $ 204 |
Operating leases | ||
2021 | 1,468 | |
2022 | 1,186 | |
2023 | 885 | |
2024 | 683 | |
2025 | 405 | |
Thereafter | 638 | |
Imputed Interest | (334) | |
Operating lease liabilities | 4,930 | |
Amount of leases not yet commenced | $ 376 |
Leases - ROU Assets and Lease L
Leases - ROU Assets and Lease Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Lessee, Lease, Description [Line Items] | ||
Lease liabilities | $ 296 | $ 204 |
Property, plant and equipment | ||
Lessee, Lease, Description [Line Items] | ||
ROU assets | 282 | 187 |
Short-term debt | ||
Lessee, Lease, Description [Line Items] | ||
Lease liabilities | 97 | 52 |
Long-term debt | ||
Lessee, Lease, Description [Line Items] | ||
Lease liabilities | $ 199 | $ 151 |
Leases - Lease Amounts Included
Leases - Lease Amounts Included in Consolidated Income Statement (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Lease income - sales-type and direct financing leases | ||
Sales-type lease selling price | $ 1,357 | $ 1,509 |
Less: Carrying value of underlying assets | 439 | 591 |
Gross profit | 917 | 918 |
Interest income on lease receivables | 249 | 303 |
Total sales-type and direct financing lease income | 1,166 | 1,221 |
Lease income - operating leases | 260 | 324 |
Variable lease income | 115 | 56 |
Total lease income | $ 1,541 | $ 1,601 |
Leases - Maturity Analysis of L
Leases - Maturity Analysis of Lease Payments Due on Sales-type and Direct Financing Leases (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Leases | ||
Unguaranteed residual value of sales-type and direct financing leases | $ 469 | $ 652 |
Maturity analysis of the lease payments due on sales-type and direct financing leases | ||
2021 | 1,766 | |
2022 | 1,233 | |
2023 | 645 | |
2024 | 275 | |
2025 | 74 | |
Thereafter | 7 | |
Total undiscounted cash flows | 4,001 | |
Present value of lease payments (recognized as financing receivables) | 3,666 | |
Difference between undiscounted cash flows and discounted cash flows | $ 335 |
Leases - Maturity Analysis of_2
Leases - Maturity Analysis of Undiscounted Lease Payments on Operating Leases (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Operating leases | ||
Unguaranteed residual value for operating leases | $ 48 | $ 81 |
Maturity analysis of the undiscounted lease payments | ||
2021 | 50 | |
2022 | 15 | |
2023 | 2 | |
2024 | 0 | |
Total undiscounted cash flows | $ 67 |
Intangible Assets Including G_3
Intangible Assets Including Goodwill - Intangible Assets by Class (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Intangible asset balances by major asset class | ||
Gross Carrying Amount | $ 18,874 | $ 19,287 |
Accumulated Amortization | (5,079) | (4,052) |
Net Carrying Amount | 13,796 | 15,235 |
Amount of foreign currency translation increase (decrease) | 279 | (42) |
Capitalized software | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 1,777 | 1,749 |
Accumulated Amortization | (814) | (743) |
Net Carrying Amount | 963 | 1,006 |
Client relationships | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 8,838 | 8,921 |
Accumulated Amortization | (2,056) | (1,433) |
Net Carrying Amount | 6,783 | 7,488 |
Completed technology | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 5,957 | 6,261 |
Accumulated Amortization | (1,671) | (1,400) |
Net Carrying Amount | 4,286 | 4,861 |
Patents/trademarks | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 2,246 | 2,301 |
Accumulated Amortization | (499) | (445) |
Net Carrying Amount | 1,747 | 1,856 |
Other intangible assets | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 56 | 56 |
Accumulated Amortization | (39) | (31) |
Net Carrying Amount | $ 16 | $ 24 |
Intangible Assets Including G_4
Intangible Assets Including Goodwill - Intangible Assets Activity (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Intangible assets | ||
Intangible assets, increase (decrease) | $ (1,439) | |
Impairment of intangible assets | 0 | $ 0 |
Intangible asset amortization expense | 2,468 | 1,850 |
Retirement of fully amortized intangible assets | $ 1,483 | $ 946 |
Intangible Assets Including G_5
Intangible Assets Including Goodwill - Future Amortization (Details) $ in Millions | Dec. 31, 2020USD ($) |
Future amortization expense, by year | |
2021 | $ 2,353 |
2022 | 2,051 |
2023 | 1,546 |
2024 | 1,383 |
2025 | 1,364 |
Thereafter | 5,099 |
Capitalized software | |
Future amortization expense, by year | |
2021 | 544 |
2022 | 305 |
2023 | 114 |
2024 | 0 |
Acquired intangibles | |
Future amortization expense, by year | |
2021 | 1,809 |
2022 | 1,746 |
2023 | 1,432 |
2024 | 1,382 |
2025 | 1,364 |
Thereafter | $ 5,099 |
Intangible Assets Including G_6
Intangible Assets Including Goodwill - Goodwill by Segment (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 58,222 | $ 36,265 |
Goodwill Additions | 575 | 23,102 |
Purchase Price Adjustments | (139) | 24 |
Divestitures | (1,257) | |
Foreign Currency Translation and Other Adjustments | 960 | 87 |
Ending Balance | 59,617 | 58,222 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Business Segments | Cloud & Cognitive Software | ||
Changes in Goodwill Balances | ||
Beginning Balance | 43,037 | 24,463 |
Goodwill Additions | 362 | 18,399 |
Purchase Price Adjustments | (139) | 133 |
Foreign Currency Translation and Other Adjustments | 675 | 41 |
Ending Balance | 43,934 | 43,037 |
Business Segments | Global Business Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 5,775 | 4,711 |
Goodwill Additions | 205 | 1,059 |
Purchase Price Adjustments | 1 | |
Divestitures | (1) | |
Foreign Currency Translation and Other Adjustments | 165 | 5 |
Ending Balance | 6,145 | 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 | 104 | 34 |
Ending Balance | 7,245 | 7,141 |
Business Segments | Systems | ||
Changes in Goodwill Balances | ||
Beginning Balance | 2,270 | 1,847 |
Goodwill Additions | 8 | 525 |
Purchase Price Adjustments | (110) | |
Foreign Currency Translation and Other Adjustments | 15 | 7 |
Ending Balance | $ 2,293 | 2,270 |
Other | Divested businesses | ||
Changes in Goodwill Balances | ||
Beginning Balance | 1,256 | |
Divestitures | $ (1,256) |
Investments & Sundry Assets (De
Investments & Sundry Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Investments & Sundry Assets | ||
Derivatives - noncurrent | $ 151 | $ 94 |
Alliance investments - equity method | 172 | 184 |
Alliance investments - non-equity method | 54 | 38 |
Long-term deposits | 239 | 242 |
Other receivables | 423 | 276 |
Employee benefit-related | 238 | 253 |
Prepaid income taxes | 777 | 664 |
Other assets | 227 | 321 |
Total | $ 2,282 | $ 2,074 |
Borrowings - Short-Term Debt (D
Borrowings - Short-Term Debt (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Short-term debt disclosures | ||
Commercial paper | $ 304 | |
Short-term loans | $ 130 | 971 |
Long-term debt - current maturities | 7,053 | 7,522 |
Short-term Debt, Total | $ 7,183 | $ 8,797 |
Commercial paper | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 1.60% | |
Short-term loans | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 5.70% | 6.10% |
Borrowings - Long-Term Debt, Co
Borrowings - Long-Term Debt, Components (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 61,718 | $ 62,003 |
Finance lease obligations | 296 | 204 |
Long-term debt, gross | 62,013 | 62,207 |
Less: net unamortized discount | 875 | 881 |
Less: net unamortized debt issuance cost | 156 | 142 |
Add: fair value adjustment | 426 | 440 |
Total | 61,408 | 61,624 |
Less: current maturities | 7,053 | 7,522 |
Total long-term debt (excluding current portion) | $ 54,355 | 54,102 |
Finance lease obligations, interest rate | 1.50% | |
U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 41,218 | 44,594 |
Euros | ||
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 18,355 | 14,306 |
Debt instrument, weighted-average interest rate (as a percent) | 1.10% | |
Pound sterling | ||
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 411 | 1,390 |
Debt instrument, weighted-average interest rate (as a percent) | 2.60% | |
Japanese yen | ||
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 1,409 | 1,339 |
Debt instrument, weighted-average interest rate (as a percent) | 0.30% | |
Other | ||
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 324 | 375 |
Debt instrument, weighted-average interest rate (as a percent) | 3.70% | |
Maturing 2020 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | 4,326 | |
Debt instrument, weighted-average interest rate (as a percent) | 2.30% | |
Maturing 2021 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,499 | 8,498 |
Debt instrument, weighted-average interest rate (as a percent) | 1.30% | |
Maturing 2022 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 6,233 | 6,289 |
Debt instrument, weighted-average interest rate (as a percent) | 2.60% | |
Maturing 2023 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,395 | 2,388 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2024 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,029 | 5,045 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2025 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 631 | 636 |
Debt instrument, weighted-average interest rate (as a percent) | 6.80% | |
Maturing 2026 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 4,370 | 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 | 12 Months Ended |
Dec. 31, 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 floating rate notes | |||
Notes Issued | |||
Aggregate amount of debt issued | 20,000 | ||
U.S dollar. fixed rate notes | |||
Notes Issued | |||
Aggregate amount of debt issued | $ 4,000 | ||
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 - Post-Swap Borrowin
Borrowings - Post-Swap Borrowing (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Borrowings | ||
Fixed-rate debt, Amount | $ 53,442 | $ 52,169 |
Floating-rate debt, Amount | 7,966 | 9,455 |
Total | $ 61,408 | $ 61,624 |
Fixed-rate debt, Weighted-average Interest Rate (as a percent) | 2.70% | 2.90% |
Floating-rate debt, Weighted-average Interest Rate (as a percent) | 1.10% | 2.20% |
Interest rate swaps | ||
Borrowings | ||
Notional amount | $ 2,975 | $ 2,975 |
Borrowings - Pre-Swap Obligatio
Borrowings - Pre-Swap Obligations (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Pre-swap annual contractual obligations of long-term debt outstanding | ||
2021 | $ 7,053 | |
2022 | 7,345 | |
2023 | 5,807 | |
2024 | 6,506 | |
2025 | 4,282 | |
Thereafter | 31,020 | |
Total | $ 62,013 | $ 62,207 |
Borrowings - Interest on Debt (
Borrowings - Interest on Debt (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Interest on Debt | |||
Interest capitalized | $ 6 | $ 5 | $ 3 |
Total interest paid and accrued | 1,745 | 1,957 | 1,482 |
Cost of financing | |||
Interest on Debt | |||
Interest paid | 451 | 608 | 757 |
Interest expense | |||
Interest on Debt | |||
Interest paid | $ 1,288 | $ 1,344 | $ 723 |
Borrowings - Lines of Credit (D
Borrowings - Lines of Credit (Details) - USD ($) $ in Millions | Jul. 02, 2020 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Five-Year Credit Agreement | |||||
Lines of Credit | |||||
Amount of credit facility | $ 10,250 | ||||
Credit facility term | 5 years | ||||
Extended Term | 2 years | ||||
Expenses related to the credit facility | $ 8 | $ 7 | $ 7 | ||
Maximum additional amount of commitments under the credit agreement | 1,750 | ||||
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 | ||||
364-Day Credit Agreement and Three-Year Credit Agreement | |||||
Lines of Credit | |||||
Amount of credit facility | 5,000 | ||||
Expenses related to the credit facility | 4 | $ 2 | $ 2 | ||
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 |
Other Liabilities - Components
Other Liabilities - Components (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Other Liabilities | ||
Income tax reserves | $ 5,274 | $ 5,118 |
Excess 401(k) Plus Plan | 1,635 | 1,521 |
Disability benefits | 452 | 478 |
Derivative liabilities | 40 | 506 |
Workforce reductions | 956 | 725 |
Deferred taxes | 5,472 | 5,230 |
Other taxes payable | 253 | 42 |
Environmental accruals | 246 | 254 |
Warranty accruals | 33 | 45 |
Asset retirement obligations | 117 | 94 |
Acquisition related | 60 | 9 |
Divestiture related | 62 | 65 |
Other | 297 | 439 |
Total | $ 14,897 | $ 14,526 |
Other Liabilities - Workforce R
Other Liabilities - Workforce Reduction and Environmental Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Other Liabilities | ||
Total amounts accrued for workforce reductions | $ 3,151 | $ 950 |
Charge for structural actions | 2,036 | |
Total amounts accrued for non-ARO environmental liabilities | 266 | 270 |
Total amounts accrued for ARO liabilities | $ 154 | $ 150 |
Commitments & Contingencies - E
Commitments & Contingencies - Extensions of Credit (Details) - USD ($) $ in Billions | Dec. 31, 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 | $ 2.1 | $ 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 | $ 5.2 | $ 6.3 |
Commitments & Contingencies - S
Commitments & Contingencies - Standard Warranty Liability (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Movement in standard warranty liability | ||
Beginning Balance | $ 113 | $ 118 |
Current period accruals | 83 | 111 |
Accrual adjustments to reflect experience | (16) | (1) |
Charges incurred | (96) | (115) |
Ending Balance | $ 83 | $ 113 |
Commitments & Contingencies -_2
Commitments & Contingencies - Extended Warranty Liability (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Movement in deferred income | ||
Amortization of deferred revenue | $ (10,100) | |
Current portion | 12,833 | $ 12,026 |
Noncurrent portion | 4,301 | 3,851 |
Extended Warranty | ||
Movement in deferred income | ||
Beginning Balance | 477 | 533 |
Revenue deferred for new extended warranty contracts | 166 | 198 |
Amortization of deferred revenue | (224) | (253) |
Other | 6 | (2) |
Ending Balance | 425 | 477 |
Current portion | 204 | 227 |
Noncurrent portion | $ 221 | $ 250 |
Commitments & Contingencies - C
Commitments & Contingencies - Contingencies (Details) $ in Millions | 1 Months Ended | 12 Months Ended | |
May 31, 2015defendant | Dec. 31, 2020USD ($)country | Oct. 30, 2017claim | |
Brazil Tax Matters | |||
Loss Contingencies | |||
Damages sought, value | $ | $ 750 | ||
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 - Stock Repurch
Equity Activity - Stock Repurchases and Other Transactions (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Equity Activity | |||
Common stock, shares authorized (in shares) | 4,687,500,000 | 4,687,500,000 | |
Common stock, par value (in dollars per share) | $ 0.20 | $ 0.20 | |
Common stock, outstanding (in shares) | 892,653,424 | ||
Preferred stock, shares authorized (in shares) | 150,000,000 | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | ||
Preferred stock, shares outstanding (in shares) | 0 | ||
Common stock repurchased (in shares) | 9,979,516 | 32,949,233 | |
Common stock repurchased, value | $ 1,331 | $ 4,447 | |
Common stock repurchase authorization available, value | $ 2,008 | ||
Common stock issued under employee plans (in shares) | 4,972,028 | 4,569,917 | 3,998,245 |
Issue of treasury shares as a result of RSU releases and stock option exercises (in shares) | 2,934,907 | 2,041,347 | 424,589 |
Common stock remitted by employees in order to satisfy tax withholding requirements (in shares) | 2,363,966 | 2,000,704 | 1,173,416 |
Value of common shares remitted by employees in order to satisfy tax withholding requirements | $ 302 | $ 272 | $ 171 |
Equity Activity - Reclassificat
Equity Activity - Reclassifications and Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | $ 38,046 | $ 40,659 | $ 42,655 |
SG&A expense | 23,082 | 20,604 | 19,366 |
Other (income) and expense | 861 | (968) | 1,152 |
Interest expense | 1,288 | 1,344 | 723 |
Provision for/(benefit from) income taxes (Note G) | (864) | 731 | 2,619 |
Net (income) loss | (5,590) | (9,431) | (8,728) |
Other comprehensive income/(loss) | (740) | 893 | (476) |
Services | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | 30,404 | 32,491 | 33,687 |
Sales | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | 6,934 | 7,263 | 7,835 |
Financing | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | 708 | 904 | 1,132 |
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 | (2,638) | (663) | (3,089) |
Reclassification/amortization, Net of Tax Amount | 1,898 | 1,556 | 2,612 |
Other comprehensive income/(loss), Before Tax Amount | (1,206) | 1,029 | (215) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 466 | (136) | (262) |
Other comprehensive income/(loss) | (740) | 893 | (476) |
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 | (965) | (10) | (902) |
Other comprehensive income/(loss), Before Tax Amount | (1,500) | (39) | (730) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 535 | 29 | (172) |
Other comprehensive income/(loss) | (965) | (10) | (902) |
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) | 1 | (2) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 0 | 1 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | 1 | (1) |
Other comprehensive income/(loss), Before Tax Amount | (1) | 1 | (2) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 0 | 0 | 1 |
Other comprehensive income/(loss) | 0 | 1 | (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 | (349) | (689) | (136) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 89 | 167 | 43 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (261) | (522) | (93) |
Reclassification/amortization, Net of Tax Amount | (16) | 59 | 337 |
Other comprehensive income/(loss), Before Tax Amount | (370) | (614) | 313 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 94 | 151 | (69) |
Other comprehensive income/(loss) | (277) | (463) | 244 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
SG&A expense | 0 | (53) | 0 |
Other (income) and expense | (101) | (39) | 341 |
Interest expense | 78 | 197 | 71 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Services | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | (23) | (68) | (30) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Sales | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | (2) | (51) | (8) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Financing | |||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | |||
Cost | 27 | 89 | 75 |
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 (Note G) | 6 | 17 | 8 |
Net (income) loss | (18) | (50) | (22) |
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 (Note G) | 1 | 15 | 3 |
Net (income) loss | (2) | (37) | (5) |
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 (Note G) | (7) | (22) | (19) |
Net (income) loss | 20 | 67 | 56 |
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 (Note G) | 0 | 14 | 0 |
Net (income) loss | 0 | (39) | 0 |
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 (Note G) | 25 | 10 | (86) |
Net (income) loss | (75) | (29) | 255 |
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 (Note G) | (20) | (50) | (18) |
Net (income) loss | 58 | 148 | 53 |
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 | (1,412) | (131) | (2,092) |
Reclassification/amortization, Net of Tax Amount | 1,914 | 1,496 | 2,276 |
Other comprehensive income/(loss), Before Tax Amount | 664 | 1,681 | 204 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (163) | (316) | (21) |
Other comprehensive income/(loss) | 501 | 1,365 | 184 |
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 | (37) | (73) | (182) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 7 | 10 | 31 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (29) | (63) | (151) |
Reclassification/amortization, Before Tax Amount | 13 | (9) | (73) |
Reclassification/amortization, Tax (Expense)/Benefit | (1) | 5 | 5 |
Reclassification/amortization, Net of Tax Amount | 12 | (4) | (68) |
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 | (1,678) | (120) | (2,517) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 295 | 52 | 576 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (1,383) | (68) | (1,941) |
Reclassification/amortization, Before Tax Amount | 2,314 | 1,843 | 2,966 |
Reclassification/amortization, Tax (Expense)/Benefit | (451) | (371) | (632) |
Reclassification/amortization, Net of Tax Amount | 1,863 | 1,471 | 2,334 |
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 | 52 | 41 | 11 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (14) | (12) | (2) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | $ 38 | $ 29 | $ 9 |
Equity Activity - AOCI Rollforw
Equity Activity - AOCI Rollforward (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | $ 20,985 | $ 16,929 | $ 17,725 |
Other comprehensive income/(loss) | (740) | 893 | (476) |
Balance at the End of the Period | 20,727 | 20,985 | 16,929 |
Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the End of the Period | (66) | ||
Accumulated Other Comprehensive Income/(Loss) | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | (28,597) | (29,490) | (26,592) |
Other comprehensive income before reclassifications | (2,638) | (663) | (3,089) |
Amount reclassified from accumulated other comprehensive income | 1,898 | 1,556 | 2,612 |
Other comprehensive income/(loss) | (740) | 893 | (476) |
Balance at the End of the Period | (29,337) | (28,597) | (29,490) |
Accumulated Other Comprehensive Income/(Loss) | Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | (2,422) | ||
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 | 35 |
Other comprehensive income before reclassifications | (261) | (522) | (93) |
Amount reclassified from accumulated other comprehensive income | (16) | 59 | 337 |
Other comprehensive income/(loss) | (277) | (463) | 244 |
Balance at the End of the Period | (456) | (179) | 284 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | 5 | ||
Foreign Currency Translation Adjustments | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | (3,700) | (3,690) | (2,834) |
Other comprehensive income before reclassifications | (965) | (10) | (902) |
Other comprehensive income/(loss) | (965) | (10) | (902) |
Balance at the End of the Period | (4,665) | (3,700) | (3,690) |
Foreign Currency Translation Adjustments | Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | 46 | ||
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) | (23,796) |
Other comprehensive income before reclassifications | (1,412) | (131) | (2,092) |
Amount reclassified from accumulated other comprehensive income | 1,914 | 1,496 | 2,276 |
Other comprehensive income/(loss) | 501 | 1,365 | 184 |
Balance at the End of the Period | (24,216) | (24,718) | (26,083) |
Net Change Retirement-Related Benefit Plans | Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | (2,471) | ||
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 | 3 |
Other comprehensive income before reclassifications | 0 | 1 | (1) |
Other comprehensive income/(loss) | 0 | 1 | (1) |
Balance at the End of the Period | $ 0 | $ 0 | 0 |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | Cumulative Effect, Period of Adoption, Adjustment | |||
Accumulated Other Comprehensive Income (Loss) (net of tax) | |||
Balance at the Beginning of the Period | $ (2) |
Derivative Financial Instrume_3
Derivative Financial Instruments - Offsetting (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Derivative Financial Instruments | ||
Potential reduction in net position of total derivative assets | $ 213 | $ 194 |
Potential reduction in net position of total derivative liabilities | 213 | 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 | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | |
Instruments in net investment hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 7,200 | $ 7,900 | |
Average remaining maturity | 3 months 18 days | 1 month 6 days | |
Interest rate swaps | |||
Derivative Financial Instruments | |||
Notional amount | $ 2,975 | $ 2,975 | |
Interest rate swaps | Derivative instruments in fair value hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 3,000 | $ 3,000 | |
Average remaining maturity | 1 year 2 months 12 days | 2 years 2 months 12 days | |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 6,800 | $ 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 | $ 9,000 | ||
Notional amount | $ 16,400 | 7,300 | |
Foreign exchange forward contracts | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 4 years | ||
Notional amount | $ 8,000 | $ 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 | $ (192) | $ 145 | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (285) | ||
Cross-currency swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 7 years | ||
Increase (decrease) in derivative | $ (6,700) | ||
Notional amount | 1,500 | 8,200 | |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | (236) | $ (185) | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (23) | ||
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 | $ (174) | $ (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 | $ 1,300 | $ 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 | Dec. 31, 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 | $ (1,302) | |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | (2) | |
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 | (2,097) | $ (3,411) |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | (424) | (440) |
Hedging adjustments on discontinued hedging relationships | $ (353) | $ (404) |
Derivative Financial Instrume_6
Derivative Financial Instruments - Effect of Hedge Activity on Income and Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Derivative Instruments, Gain (Loss) | |||
Cost | $ 38,046 | $ 40,659 | $ 42,655 |
SG&A expense | 23,082 | 20,604 | 19,366 |
Other (income) and expense | 861 | (968) | 1,152 |
Interest expense | 1,288 | 1,344 | 723 |
Cost of services | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 23 | 68 | 30 |
Cost of sales | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 2 | 51 | 8 |
Cost of financing | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 12 | (42) | (6) |
SG&A expense | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 141 | 267 | (116) |
Other (income) and expense | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 101 | (15) | (434) |
Interest expense | |||
Derivative Instruments, Gain (Loss) | |||
Gains/(losses) of total hedge activity | 35 | (93) | (6) |
Services | |||
Derivative Instruments, Gain (Loss) | |||
Cost | 30,404 | 32,491 | 33,687 |
Sales | |||
Derivative Instruments, Gain (Loss) | |||
Cost | 6,934 | 7,263 | 7,835 |
Financing | |||
Derivative Instruments, Gain (Loss) | |||
Cost | $ 708 | $ 904 | $ 1,132 |
Derivative Financial Instrume_7
Derivative Financial Instruments - Gains and Losses (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Derivative Instruments, Gain (Loss) | |||
Gain (loss) recognized in earnings on derivatives | $ 220 | $ 302 | $ (327) |
Gain (loss) recognized in earnings attributable to risk being hedged | 14 | (103) | 189 |
Cash flow hedges and net investment hedges | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (2,477) | (784) | 549 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 21 | (75) | (449) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | 60 | 112 | 64 |
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) | (35) | |
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 | (349) | (521) | (101) |
Foreign exchange contracts | Instruments in net investment hedges | |||
Derivative Instruments, Gain (Loss) | |||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | (2,127) | (95) | 686 |
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 | 23 | 68 | 30 |
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 | 2 | 51 | 8 |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedges | |||
Derivative Instruments, Gain (Loss) | |||
Gain (loss) recognized in earnings on derivatives | 20 | 44 | (61) |
Gain (loss) recognized in earnings attributable to risk being hedged | 4 | (32) | 97 |
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 | (5) | (3) | |
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 | (23) | (86) | (75) |
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 | 16 | 35 | 33 |
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 | 0 | 53 | 0 |
SG&A expense | Equity contracts | Not designated as hedging instruments - economic hedges | |||
Derivative Instruments, Gain (Loss) | |||
Gain (loss) recognized in earnings on derivatives | 142 | 214 | (116) |
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 | 101 | 39 | (341) |
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 | 1 | (53) | (93) |
Interest expense | Interest rate contracts | Derivative instruments in fair value hedges | |||
Derivative Instruments, Gain (Loss) | |||
Gain (loss) recognized in earnings on derivatives | 58 | 98 | (58) |
Gain (loss) recognized in earnings attributable to risk being hedged | 11 | (71) | 92 |
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 | (13) | (8) | |
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 | (65) | (190) | (71) |
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 | $ 45 | $ 77 | $ 31 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | $ 937 | $ 679 | $ 510 |
Income tax benefits | (213) | (155) | (116) |
Net stock-based compensation cost | 724 | 524 | 393 |
Unrecognized compensation cost related to non-vested awards | $ 1,400 | ||
Unrecognized compensation cost related to non-vested awards, weighted average period of recognition | 2 years 2 months 12 days | ||
Cost | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | $ 153 | 100 | 82 |
SG&A expense | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | 586 | 453 | 361 |
Research, development and engineering | |||
Stock-based compensation cost, allocation of recognized costs | |||
Pre-tax stock-based compensation cost | $ 198 | $ 126 | $ 67 |
Stock-Based Compensation - Ince
Stock-Based Compensation - Incentive Awards (Details) - Long-term performance plans shares in Millions | 12 Months Ended |
Dec. 31, 2020shares | |
Stock-Based Compensation | |
Shares authorized under existing stock based compensation plans (in shares) | 293 |
Additional shares considered authorized under previous stock based compensation plans (in shares) | 66 |
Unused shares available to be granted (in shares) | 103 |
Stock-Based Compensation - RSU
Stock-Based Compensation - RSU and PSU Activity (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Restricted Stock Units | |||
Weighted Average Grant Price | |||
Beginning balance (in dollars per share) | $ 123 | $ 130 | $ 141 |
Granted (in dollars per share) | 115 | 119 | 121 |
Released (in dollars per share) | 126 | 136 | 148 |
Canceled/forfeited/performance adjusted (in dollars per share) | 121 | 128 | 139 |
Ending balance (in dollars per share) | $ 117 | $ 123 | $ 130 |
Number of Units | |||
Beginning balance (in shares) | 11,326,628 | 9,802,704 | 8,555,263 |
Granted (in shares) | 10,651,955 | 5,650,861 | 4,806,790 |
Released (in shares) | (3,781,240) | (3,145,016) | (2,579,962) |
Canceled/forfeited/performance adjusted (in shares) | (1,300,639) | (981,921) | (979,387) |
Ending balance (in shares) | 16,896,704 | 11,326,628 | 9,802,704 |
Performance Share Units | |||
Weighted Average Grant Price | |||
Beginning balance (in dollars per share) | $ 126 | $ 136 | $ 144 |
Granted (in dollars per share) | 117 | 117 | 130 |
Released (in dollars per share) | 137 | 140 | 152 |
Canceled/forfeited/performance adjusted (in dollars per share) | 125 | 131 | 147 |
Ending balance (in dollars per share) | $ 120 | $ 126 | $ 136 |
Number of Units | |||
Beginning balance (in shares) | 2,856,450 | 2,419,695 | 2,649,313 |
Granted (in shares) | 1,582,666 | 1,395,534 | 909,140 |
Performance adjustments (in shares) | (70,089) | (8,544) | (328,120) |
Released (in shares) | (630,974) | (846,672) | (666,244) |
Canceled/forfeited/performance adjusted (in shares) | (256,642) | (112,107) | (472,514) |
Ending balance (in shares) | 3,551,500 | 2,856,450 | 2,419,695 |
Stock-Based Compensation - RSUs
Stock-Based Compensation - RSUs and PSUs, Other Disclosures (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
RSUs and PSUs | |||
Stock-Based Compensation | |||
Tax benefits realized in connection with vesting and release of awards | $ 139 | $ 131 | $ 117 |
Restricted Stock Units | |||
Stock-Based Compensation | |||
Fair value of stock units granted | 1,220 | 674 | 583 |
Fair value of stock units vested | $ 478 | 428 | 381 |
Performance Share Units | |||
Stock-Based Compensation | |||
Vesting period | 3 years | ||
Fair value of stock units granted | $ 186 | 164 | 118 |
Fair value of stock units vested | $ 86 | $ 118 | $ 101 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Option Activity (Details) $ / shares in Units, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2019shares | Dec. 31, 2018shares | Dec. 31, 2017shares | Dec. 31, 2016itemshares | |
Stock options | |||||
Treasury stock, Shares (in shares) | shares | 1,350,315,580 | 1,350,886,521 | |||
Stock Options | |||||
Number of Shares under Option | |||||
Options granted (in shares) | shares | 0 | 0 | 0 | 0 | |
Stock Options | Granted in 2016 | |||||
Stock options | |||||
Occurrences of stock award options granted | item | 1 | ||||
Number of Shares under Option | |||||
Options granted (in shares) | shares | 1,500,000 | ||||
Exercise Price Range $129 and $154 | Stock Options | |||||
Stock options | |||||
Exercise price, lower range limit (in dollars per share) | $ / shares | $ 129 | ||||
Exercise price, upper range limit (in dollars per share) | $ / shares | 154 | ||||
Options outstanding, weighted average exercise price (in dollars per share) | $ / shares | $ 140 | ||||
Options outstanding, total intrinsic value | $ | $ 0 | ||||
Options outstanding, weighted average remaining contractual life | 5 years 1 month 6 days |
Stock-Based Compensation - Acqu
Stock-Based Compensation - Acquisitions (Details) $ / shares in Units, shares in Millions, $ in Millions | Jul. 09, 2019USD ($)shares | Dec. 31, 2020$ / sharesshares |
Red Hat, Inc. | Stock Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Stock awards issued in connection with the acquisition (in shares) | 6.4 | |
Stock awards issued in connection with the acquisition | $ | $ 845 | |
Share conversion ratio | 1.35 | |
Stock awards outstanding (in shares) | 2.1 | |
Stock awards weighted-average grant price (in dollars per share) | $ / shares | $ 140 | |
Various other acquisition transactions | Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Additional stock options outstanding in connection with acquisitions (in shares) | 0.1 | |
Additional options outstanding, weighted-average exercise price (in dollars per share) | $ / shares | $ 44 |
Stock-Based Compensation - ESPP
Stock-Based Compensation - ESPP (Details) - Employee Stock Purchase Plan - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Stock-Based Compensation | |||
Discount on purchase of common stock (as a percent) | 5.00% | ||
Maximum percentage of payroll deductions on eligible compensation | 10.00% | ||
Maximum stock purchases by employees, value | $ 25,000 | ||
Maximum stock purchases by employees (in shares) | 1,000 | ||
Shares purchased by employees under the ESPP (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
Shares available for purchase (in shares) | 17,800,000 |
Retirement-Related Benefits - D
Retirement-Related Benefits - Defined Benefit Plans (Details) | 12 Months Ended |
Dec. 31, 2020 | |
U.S. | Pension Plans | Personal Pension Plan (PPP) | |
Defined Benefit Plans | |
Period used in final pay formula that determines benefits | 5 years |
Retirement-Related Benefits -_2
Retirement-Related Benefits - Defined Contribution Plans (Details) | 12 Months Ended |
Dec. 31, 2020 | |
IBM 401(k) Plus Plan | |
Defined Contribution Plans | |
Employer's automatic contribution as a percentage of eligible compensation, lowest level defined | 1.00% |
Employer's automatic contribution as a percentage of eligible compensation, second level defined | 2.00% |
Employer's automatic contribution as a percentage of eligible compensation, highest level defined | 4.00% |
Service period after which employees receive automatic and matching contributions | 1 year |
Nonqualified Plans | IBM Excess 401(k) Plus Plan | |
Defined Contribution Plans | |
Service period after which employees receive automatic and matching contributions | 1 year |
Pension Plans | Qualified Plans | IBM 401(k) Plus Plan | |
Defined Contribution Plans | |
Maximum percentage, dollar-for-dollar match by entity to employee contribution of eligible compensation for employees | 5.00% |
Maximum percentage, dollar-for-dollar match by entity to employee contribution of eligible compensation for employees | 6.00% |
Retirement-Related Benefits - A
Retirement-Related Benefits - All Retirement Plans Cost (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | $ 1,058 | $ 1,040 | $ 1,024 |
Total | 2,617 | 2,072 | 3,066 |
Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 1,355 | 813 | 1,843 |
Nonpension Postretirement Benefit Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 203 | 219 | 198 |
U.S. | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 612 | 613 | 612 |
Total | 934 | 624 | 1,319 |
U.S. | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 178 | (142) | 559 |
U.S. | Nonpension Postretirement Benefit Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 145 | 154 | 147 |
Non-U.S. | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 447 | 427 | 412 |
Total | 1,683 | 1,448 | 1,747 |
Non-U.S. | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 1,178 | 955 | 1,284 |
Non-U.S. | Nonpension Postretirement Benefit Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 58 | 65 | 51 |
Personal Pension Plan (PPP) | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 1,345 | 803 | 1,827 |
Personal Pension Plan (PPP) | U.S. | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 167 | (153) | 542 |
Personal Pension Plan (PPP) | Non-U.S. | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 1,178 | 955 | 1,284 |
Retention Plan | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 11 | 11 | 17 |
Retention Plan | U.S. | Pension Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Total defined benefit plans (income)/cost | 11 | 11 | 17 |
IBM 401(k) Plus Plan and Non-U.S. Defined Contribution Plans | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 1,032 | 1,015 | 1,000 |
IBM 401(k) Plus Plan and Non-U.S. Defined Contribution Plans | U.S. | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 585 | 588 | 588 |
IBM 401(k) Plus Plan and Non-U.S. Defined Contribution Plans | Non-U.S. | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 447 | 427 | 412 |
IBM Excess 401(k) Plus Plan | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | 27 | 26 | 24 |
IBM Excess 401(k) Plus Plan | U.S. | |||
RETIREMENT-RELATED BENEFITS | |||
Defined contribution plans cost | $ 27 | $ 26 | $ 24 |
Retirement-Related Benefits - P
Retirement-Related Benefits - PBO, APBO, FV of Plan Assets, Funded Status (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Overfunded plans | |||
Funded status of plan | |||
Benefit Obligations | $ 71,044 | $ 66,861 | |
Fair Value of Plan Assets | 78,654 | 73,726 | |
Funded Status | 7,610 | 6,865 | |
Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 38,747 | 36,399 | |
Fair Value of Plan Assets | 19,632 | 18,445 | |
Funded Status | $ (19,116) | (17,955) | |
Pension Plans | |||
Funded status of plan | |||
Percentage of plan funded | 93.00% | ||
Pension Plans | Qualified Plans | |||
Funded status of plan | |||
Percentage of plan funded | 102.00% | ||
U.S. | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | $ 5,653 | 5,618 | |
Fair Value of Plan Assets | 15 | 3 | |
Funded Status | (5,638) | (5,615) | |
U.S. | Underfunded plans | Personal Pension Plan (PPP) | |||
Funded status of plan | |||
Benefit Obligations | 1,556 | 1,473 | |
Funded Status | (1,556) | (1,473) | |
U.S. | Underfunded plans | Retention Plan | |||
Funded status of plan | |||
Benefit Obligations | 306 | 288 | |
Funded Status | (306) | (288) | |
U.S. | Pension Plans | |||
Funded status of plan | |||
Benefit Obligations | 52,237 | 50,232 | $ 47,812 |
Fair Value of Plan Assets | 54,386 | 51,784 | 48,213 |
Funded Status | $ 2,149 | 1,551 | |
U.S. | Pension Plans | Qualified Plans | Personal Pension Plan (PPP) | |||
Funded status of plan | |||
Percentage of plan funded | 108.00% | ||
U.S. | Pension Plans | Qualified Plans | Overfunded plans | Personal Pension Plan (PPP) | |||
Funded status of plan | |||
Benefit Obligations | $ 50,375 | 48,471 | |
Fair Value of Plan Assets | 54,386 | 51,784 | |
Funded Status | 4,011 | 3,313 | |
U.S. | Nonpension Postretirement Benefit Plans | |||
Funded status of plan | |||
Benefit Obligations | 3,791 | 3,857 | 3,912 |
Fair Value of Plan Assets | 15 | 3 | 29 |
Funded Status | (3,776) | (3,854) | |
U.S. | Nonpension Postretirement Benefit Plans | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 3,791 | 3,857 | |
Fair Value of Plan Assets | 15 | 3 | |
Funded Status | (3,776) | (3,854) | |
Non-U.S. | Overfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 20,670 | 18,390 | |
Fair Value of Plan Assets | 24,269 | 21,942 | |
Funded Status | 3,599 | 3,552 | |
Non-U.S. | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 33,095 | 30,782 | |
Fair Value of Plan Assets | 19,617 | 18,442 | |
Funded Status | (13,478) | (12,340) | |
Non-U.S. | Pension Plans | |||
Funded status of plan | |||
Benefit Obligations | 52,989 | 48,324 | 45,770 |
Fair Value of Plan Assets | 43,832 | 40,319 | 36,758 |
Funded Status | (9,157) | (8,005) | |
Non-U.S. | Pension Plans | Qualified Plans | Overfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 20,649 | 18,371 | |
Fair Value of Plan Assets | 24,246 | 21,921 | |
Funded Status | 3,597 | 3,550 | |
Non-U.S. | Pension Plans | Qualified Plans | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 25,160 | 23,222 | |
Fair Value of Plan Assets | 19,586 | 18,398 | |
Funded Status | (5,574) | (4,824) | |
Non-U.S. | Pension Plans | Nonqualified Plans | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 7,180 | 6,731 | |
Funded Status | (7,180) | (6,731) | |
Non-U.S. | Nonpension Postretirement Benefit Plans | |||
Funded status of plan | |||
Benefit Obligations | 775 | 848 | 705 |
Fair Value of Plan Assets | 53 | 65 | $ 65 |
Funded Status | (722) | (783) | |
Non-U.S. | Nonpension Postretirement Benefit Plans | Overfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 21 | 19 | |
Fair Value of Plan Assets | 22 | 21 | |
Funded Status | 1 | 2 | |
Non-U.S. | Nonpension Postretirement Benefit Plans | Underfunded plans | |||
Funded status of plan | |||
Benefit Obligations | 755 | 828 | |
Fair Value of Plan Assets | 31 | 44 | |
Funded Status | $ (723) | $ (785) |
Retirement-Related Benefits - N
Retirement-Related Benefits - Net Periodic Cost (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 1,355 | $ 813 | $ 1,843 |
Nonpension Postretirement Benefit Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 203 | 219 | 198 |
U.S. | Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Interest cost | $ 1,501 | $ 1,882 | $ 1,719 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (2,169) | $ (2,599) | $ (2,701) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of prior service costs/(credits) | $ 16 | $ 16 | $ 16 |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 829 | $ 559 | $ 1,525 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 178 | $ (142) | $ 559 |
U.S. | Nonpension Postretirement Benefit Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Service cost | 9 | 10 | 13 |
Interest cost | $ 103 | $ 145 | $ 132 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ 0 | ||
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ||
Amortization of prior service costs/(credits) | $ 4 | $ (2) | $ (7) |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 29 | $ 1 | $ 10 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 145 | $ 154 | $ 147 |
Non-U.S. | Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Service cost | 392 | 370 | 413 |
Interest cost | $ 563 | $ 847 | $ 830 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (1,275) | $ (1,588) | $ (1,342) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of transition assets | $ 0 | $ 0 | |
Amortization of transition assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | |
Amortization of prior service costs/(credits) | $ (8) | $ (23) | $ (83) |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 1,406 | $ 1,249 | $ 1,401 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements | $ 52 | $ 41 | $ 11 |
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Multi-employer plans | $ 29 | $ 32 | $ 38 |
Other costs/(credits) | 18 | 28 | 16 |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 1,178 | 955 | 1,284 |
Non-U.S. | Nonpension Postretirement Benefit Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Service cost | 5 | 5 | 5 |
Interest cost | $ 36 | $ 55 | $ 45 |
Interest cost - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Expected return on plan assets | $ (4) | $ (5) | $ (6) |
Expected return on plan assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Amortization of transition assets | $ 0 | $ 0 | |
Amortization of transition assets - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | |
Amortization of prior service costs/(credits) | $ 0 | $ 0 | $ 0 |
Amortization of prior service costs/(credits) - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Recognized actuarial losses | $ 21 | $ 10 | $ 6 |
Recognized actuarial losses - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Curtailments and settlements | $ 0 | $ 0 | $ 0 |
Curtailments and settlements - income statement location | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense | ibm:OtherIncomeAndExpense |
Other costs/(credits) | $ 0 | ||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 58 | $ 65 | $ 51 |
Personal Pension Plan (PPP) | Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 1,345 | 803 | 1,827 |
Personal Pension Plan (PPP) | U.S. | Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 167 | (153) | $ 542 |
Personal Pension Plan (PPP) | U.S. | Pension Plans | Qualified Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Average remaining life expectancy of inactive plan participants | 18 years | ||
Reduction to amortization expense as a result of change | 900 | 900 | |
Impact to the funded status | 0 | 0 | |
Personal Pension Plan (PPP) | Non-U.S. | Pension Plans | |||
Components of net periodic (income)/cost of the retirement-related benefit plans | |||
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 1,178 | $ 955 | $ 1,284 |
Retirement-Related Benefits - C
Retirement-Related Benefits - Changes in Benefit Obligation and Plan Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Pension Plans | U.S. | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | $ 50,232 | $ 47,812 | |
Interest cost | 1,501 | 1,882 | $ 1,719 |
Acquisitions/divestitures, net | 1 | ||
Actuarial losses/(gains) | 4,071 | 4,040 | |
Benefits paid from trust | (3,445) | (3,378) | |
Direct benefit payments | (123) | (124) | |
Amendments/curtailments/settlements/other | 0 | ||
Benefit obligation, balance at end of period | 52,237 | 50,232 | 47,812 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 51,784 | 48,213 | |
Actual return on plan assets | 6,046 | 6,949 | |
Acquisitions/divestitures, net | 1 | ||
Benefits paid from trust | (3,445) | (3,378) | |
Fair value of plan assets, balance at end of period | 54,386 | 51,784 | 48,213 |
Funded status | 2,149 | 1,551 | |
Accumulated benefit obligation | 52,237 | 50,232 | |
Pension Plans | Non-U.S. | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | 48,324 | 45,770 | |
Service cost | 392 | 370 | 413 |
Interest cost | 563 | 847 | 830 |
Plan participants' contributions | 23 | 23 | |
Acquisitions/divestitures, net | 50 | (32) | |
Actuarial losses/(gains) | 2,766 | 3,467 | |
Benefits paid from trust | (1,946) | (1,902) | |
Direct benefit payments | (420) | (403) | |
Foreign exchange impact | 3,283 | 134 | |
Amendments/curtailments/settlements/other | (47) | 50 | |
Benefit obligation, balance at end of period | 52,989 | 48,324 | 45,770 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 40,319 | 36,758 | |
Actual return on plan assets | 2,571 | 4,896 | |
Employer contributions | 182 | 243 | |
Acquisitions/divestitures, net | 97 | (25) | |
Plan participant's contributions | 23 | 23 | |
Benefits paid from trust | (1,946) | (1,902) | |
Foreign exchange impact | 2,599 | 333 | |
Amendments/curtailments/settlements/other | (13) | (7) | |
Fair value of plan assets, balance at end of period | 43,832 | 40,319 | 36,758 |
Funded status | (9,157) | (8,005) | |
Accumulated benefit obligation | 52,513 | 47,645 | |
Nonpension Postretirement Benefit Plans | U.S. | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | 3,857 | 3,912 | |
Service cost | 9 | 10 | 13 |
Interest cost | 103 | 145 | 132 |
Plan participants' contributions | 56 | 57 | |
Actuarial losses/(gains) | 135 | 148 | |
Benefits paid from trust | (369) | (389) | |
Direct benefit payments | 0 | (6) | |
Amendments/curtailments/settlements/other | (21) | ||
Benefit obligation, balance at end of period | 3,791 | 3,857 | 3,912 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 3 | 29 | |
Actual return on plan assets | 0 | 1 | |
Employer contributions | 325 | 304 | |
Plan participant's contributions | 56 | 57 | |
Benefits paid from trust | (369) | (389) | |
Amendments/curtailments/settlements/other | 0 | ||
Fair value of plan assets, balance at end of period | 15 | 3 | 29 |
Funded status | (3,776) | (3,854) | |
Nonpension Postretirement Benefit Plans | Non-U.S. | |||
Changes in benefit obligation | |||
Benefit obligation, balance at beginning of period | 848 | 705 | |
Service cost | 5 | 5 | 5 |
Interest cost | 36 | 55 | 45 |
Acquisitions/divestitures, net | 0 | 0 | |
Actuarial losses/(gains) | (3) | 141 | |
Benefits paid from trust | (4) | (6) | |
Direct benefit payments | (24) | (27) | |
Foreign exchange impact | (82) | (1) | |
Amendments/curtailments/settlements/other | (1) | (23) | |
Benefit obligation, balance at end of period | 775 | 848 | 705 |
Change in plan assets | |||
Fair value of plan assets, balance at beginning of period | 65 | 65 | |
Actual return on plan assets | 4 | 7 | |
Benefits paid from trust | (4) | (6) | |
Foreign exchange impact | (10) | (1) | |
Amendments/curtailments/settlements/other | 0 | 0 | |
Fair value of plan assets, balance at end of period | 53 | 65 | $ 65 |
Funded status | $ (722) | $ (783) |
Retirement-Related Benefits -_3
Retirement-Related Benefits - Net Funded Status (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Net funded status recognized in the Consolidated Balance Sheet | ||
Prepaid pension assets | $ 7,610 | $ 6,865 |
Current liabilities - compensation and benefits | (3,440) | (3,406) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (18,248) | (17,142) |
Pension Plans | U.S. | ||
Net funded status recognized in the Consolidated Balance Sheet | ||
Prepaid pension assets | 4,011 | 3,313 |
Current liabilities - compensation and benefits | (122) | (120) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (1,740) | (1,641) |
Funded Status-net | 2,149 | 1,551 |
Pension Plans | Non-U.S. | ||
Net funded status recognized in the Consolidated Balance Sheet | ||
Prepaid pension assets | 3,597 | 3,550 |
Current liabilities - compensation and benefits | (366) | (313) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (12,388) | (11,242) |
Funded Status-net | (9,157) | (8,005) |
Nonpension Postretirement Benefit Plans | U.S. | ||
Net funded status recognized in the Consolidated Balance Sheet | ||
Prepaid pension assets | 0 | 0 |
Current liabilities - compensation and benefits | (346) | (346) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (3,430) | (3,507) |
Funded Status-net | (3,776) | (3,854) |
Nonpension Postretirement Benefit Plans | Non-U.S. | ||
Net funded status recognized in the Consolidated Balance Sheet | ||
Prepaid pension assets | 1 | 2 |
Current liabilities - compensation and benefits | (34) | (33) |
Noncurrent liabilities - retirement and nonpension postretirement benefit obligations | (690) | (752) |
Funded Status-net | $ (722) | $ (783) |
Retirement-Related Benefits - O
Retirement-Related Benefits - OCI and AOCI (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Changes in AOCI for retirement-related benefits | |||
Current period loss/(gain) | $ 1,678 | $ 120 | $ 2,517 |
Curtailments and settlements | (52) | (41) | (11) |
Amortization of net loss included in net periodic (income)/cost | (2,314) | (1,843) | (2,966) |
Current period prior service costs/(credits) | 37 | 73 | 182 |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | (13) | 9 | 73 |
Pension Plans | U.S. | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 16,608 | 17,476 | |
Current period loss/(gain) | 194 | (309) | |
Amortization of net loss included in net periodic (income)/cost | (829) | (559) | |
Net loss at end of period | 15,972 | 16,608 | 17,476 |
Prior service costs/(credits) at beginning of period | 41 | 57 | |
Amortization of prior service (costs)/credits included in net periodic (income)/cost | (16) | (16) | |
Prior service costs/(credits) at end of period | 24 | 41 | 57 |
Total loss recognized in accumulated other comprehensive income/(loss) | 15,997 | 16,648 | |
Pension Plans | Non-U.S. | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 17,272 | 18,452 | |
Current period loss/(gain) | 1,338 | 109 | |
Curtailments and settlements | (52) | (41) | |
Amortization of net loss included in net periodic (income)/cost | (1,406) | (1,249) | |
Net loss at end of period | 17,151 | 17,272 | 18,452 |
Prior service costs/(credits) at beginning of period | 297 | 172 | |
Current period prior service costs/(credits) | 37 | 102 | |
Curtailments, settlements and other | 0 | ||
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 8 | 23 | |
Prior service costs/(credits) at end of period | 342 | 297 | 172 |
Transition (assets)/liabilities at beginning of period | 0 | 0 | |
Amortization of transition assets/(liabilities) included in net periodic (income)/cost | 0 | 0 | |
Transition (assets)/liabilities at end of period | 0 | 0 | 0 |
Total loss recognized in accumulated other comprehensive income/(loss) | 17,493 | 17,569 | |
Nonpension Postretirement Benefit Plans | U.S. | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 551 | 405 | |
Current period loss/(gain) | 135 | 147 | |
Amortization of net loss included in net periodic (income)/cost | (29) | (1) | |
Net loss at end of period | 656 | 551 | 405 |
Prior service costs/(credits) at beginning of period | 34 | 52 | |
Current period prior service costs/(credits) | (21) | ||
Amortization of prior service (costs)/credits included in net periodic (income)/cost | (4) | 2 | |
Prior service costs/(credits) at end of period | 30 | 34 | 52 |
Total loss recognized in accumulated other comprehensive income/(loss) | 687 | 585 | |
Nonpension Postretirement Benefit Plans | Non-U.S. | |||
Changes in AOCI for retirement-related benefits | |||
Net loss at beginning of period | 287 | 172 | |
Current period loss/(gain) | (2) | 125 | |
Curtailments and settlements | 0 | 0 | |
Amortization of net loss included in net periodic (income)/cost | (21) | (10) | |
Net loss at end of period | 264 | 287 | 172 |
Prior service costs/(credits) at beginning of period | (4) | 4 | |
Current period prior service costs/(credits) | (8) | ||
Amortization of prior service (costs)/credits included in net periodic (income)/cost | 0 | 0 | |
Prior service costs/(credits) at end of period | (4) | (4) | 4 |
Transition (assets)/liabilities at beginning of period | 0 | 0 | |
Amortization of transition assets/(liabilities) included in net periodic (income)/cost | 0 | ||
Transition (assets)/liabilities at end of period | 0 | 0 | 0 |
Total loss recognized in accumulated other comprehensive income/(loss) | $ 260 | $ 283 | |
Lloyds Pension Group Trustees v Lloyds Bank | Pension Plans | UK | |||
Changes in AOCI for retirement-related benefits | |||
Current period prior service costs/(credits) | $ 125 | ||
Increase in PBO recorded as prior service cost, as percentage of total PBO | 1.00% |
Retirement-Related Benefits -_4
Retirement-Related Benefits - Assumptions (Details) | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Pension Plans | ||||
Expected Long-Term Returns on Plan Assets | ||||
Period over which changes in fair value of plan assets recognized | 5 years | |||
Pension Plans | U.S. | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 3.10% | 4.10% | 3.40% | |
Expected long-term returns on plan assets | 4.50% | 5.25% | 5.25% | |
Interest crediting rate | 2.70% | 3.60% | 2.30% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 2.20% | 3.10% | 4.10% | |
Interest crediting rate | 1.10% | 2.70% | 3.60% | |
Pension Plans | U.S. | Expected | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Expected long-term returns on plan assets | 3.75% | |||
Pension Plans | U.S. | Personal Pension Plan (PPP) | ||||
Interest Crediting Rate | ||||
Maturity period of the average interest from August to October | 1 year | |||
Percentage interest rate added to average interest from August to October of the one-year U.S. Treasury Constant Maturity yield for computation of interest crediting rate (as a percent) | 1.00% | |||
Pension Plans | Non-U.S. | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 1.19% | 1.85% | 1.76% | |
Expected long-term returns on plan assets | 3.37% | 4.38% | 3.62% | |
Rate of compensation increase | 2.60% | 2.18% | 2.41% | |
Interest crediting rate | 0.28% | 0.30% | 0.30% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 0.86% | 1.19% | 1.85% | |
Rate of compensation increase | 2.50% | 2.60% | 2.18% | |
Interest crediting rate | 0.26% | 0.28% | 0.30% | |
Pension Plans | Non-U.S. | Expected | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Expected long-term returns on plan assets | 2.86% | |||
Nonpension Postretirement Benefit Plans | U.S. | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 2.80% | 3.90% | 3.30% | |
Interest crediting rate | 2.70% | 3.60% | 2.30% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 1.80% | 2.80% | 3.90% | |
Interest crediting rate | 1.10% | 2.70% | 3.60% | |
Nonpension Postretirement Benefit Plans | Non-U.S. | ||||
Weighted-average assumptions used to measure net periodic (income)/cost for the year ended December 31 | ||||
Discount rate | 4.98% | 7.48% | 7.28% | |
Expected long-term returns on plan assets | 7.51% | 8.64% | 8.91% | |
Weighted-average assumptions used to measure benefit obligations at December 31 | ||||
Discount rate | 4.46% | 4.98% | 7.48% | |
Retiree Health Benefits | ||||
Healthcare Cost Trend Rate | ||||
Health care cost trend rate assumed for next fiscal year | 6.25% | |||
Ultimate healthcare cost trend rate | 5.00% | |||
Period for ultimate trend rate | 6 years |
Retirement-Related Benefits - I
Retirement-Related Benefits - Investment Strategy (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
U.S. | Personal Pension Plan (PPP) | Qualified Plans | Equity securities | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 12.00% | ||
U.S. | Personal Pension Plan (PPP) | Qualified Plans | Fixed-income securities | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 80.00% | ||
U.S. | Personal Pension Plan (PPP) | Qualified Plans | Real estate | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 3.00% | ||
U.S. | Personal Pension Plan (PPP) | Qualified Plans | Other investments | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 5.00% | ||
U.S. | Personal Pension Plan (PPP) | Qualified Plans | Private equities and private real estate investments | |||
Investment Policies And Strategies | |||
Fair Value of plan assets | $ 3,870 | ||
Commitments for future investments in private markets | $ 1,203 | ||
Non-U.S. | Maximum | |||
Investment Policies And Strategies | |||
Percentage of board members, elected by employees and retirees for managing investments (as a percent) | 50.00% | ||
Non-U.S. | Equity securities | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 16.00% | ||
Non-U.S. | Fixed-income securities | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 70.00% | ||
Non-U.S. | Real estate | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 3.00% | ||
Non-U.S. | Other investments | |||
Investment Policies And Strategies | |||
Target allocation (as a percent) | 11.00% | ||
Pension Plans | U.S. | |||
Investment Policies And Strategies | |||
Fair Value of plan assets | $ 54,386 | $ 51,784 | $ 48,213 |
Pension Plans | Non-U.S. | |||
Investment Policies And Strategies | |||
Fair Value of plan assets | $ 43,832 | $ 40,319 | $ 36,758 |
Retirement-Related Benefits -_5
Retirement-Related Benefits - Plan Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
U.S. | Qualified Plans | Personal Pension Plan (PPP) | Level 3 | |||
Retirement-Related Benefits | |||
Fair value of plan assets | $ 518 | $ 363 | |
U.S. | Qualified Plans | Personal Pension Plan (PPP) | Level 3 | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets | $ 542 | 518 | 359 |
U.S. | Qualified Plans | Personal Pension Plan (PPP) | Level 3 | Mortgage and asset-backed securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 4 | ||
Non-U.S. | Level 3 | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 300 | 330 | 341 |
Non-U.S. | Level 3 | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 2 | 2 | 2 |
Non-U.S. | Level 3 | Real estate | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 298 | 328 | 339 |
Pension Plans | U.S. | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 45,128 | 42,271 | |
Investments measured at net asset value using the NAV expedient | 9,579 | 9,519 | |
Other | (321) | (6) | |
Fair value of plan assets | 54,386 | 51,784 | 48,213 |
Pension Plans | U.S. | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 2,714 | 1,943 | |
Pension Plans | U.S. | Equity mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 105 | 85 | |
Pension Plans | U.S. | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 21,375 | 21,134 | |
Pension Plans | U.S. | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 18,759 | 17,185 | |
Value of IBM securities included in plan assets | $ 37 | ||
Percentage of IBM securities included in plan assets | 0.07% | ||
Pension Plans | U.S. | Mortgage and asset-backed securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 612 | $ 630 | |
Pension Plans | U.S. | Fixed income mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 470 | 386 | |
Pension Plans | U.S. | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 1,077 | 903 | |
Pension Plans | U.S. | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 15 | 6 | |
Pension Plans | U.S. | Level 1 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 3,363 | 2,469 | |
Fair value of plan assets | 3,363 | 2,469 | |
Pension Plans | U.S. | Level 1 | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 2,714 | 1,943 | |
Pension Plans | U.S. | Level 1 | Equity mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 105 | 85 | |
Pension Plans | U.S. | Level 1 | Fixed income mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 470 | 386 | |
Pension Plans | U.S. | Level 1 | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 76 | 54 | |
Pension Plans | U.S. | Level 1 | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | (3) | 0 | |
Pension Plans | U.S. | Level 2 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 41,222 | 39,284 | |
Fair value of plan assets | 41,222 | 39,284 | |
Pension Plans | U.S. | Level 2 | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 0 | ||
Pension Plans | U.S. | Level 2 | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 21,375 | 21,134 | |
Pension Plans | U.S. | Level 2 | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 18,217 | 16,666 | |
Pension Plans | U.S. | Level 2 | Mortgage and asset-backed securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 612 | 630 | |
Pension Plans | U.S. | Level 2 | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 1,001 | 848 | |
Pension Plans | U.S. | Level 2 | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 18 | 6 | |
Pension Plans | U.S. | Level 3 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 542 | 518 | |
Fair value of plan assets | 542 | 518 | |
Pension Plans | U.S. | Level 3 | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 542 | 518 | |
Pension Plans | U.S. | Qualified Plans | Personal Pension Plan (PPP) | Equity securities | |||
Retirement-Related Benefits | |||
Value of IBM securities included in plan assets | $ 6 | $ 2 | |
Percentage of IBM securities included in plan assets | 0.01% | 0.004% | |
Pension Plans | Non-U.S. | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | $ 22,559 | $ 18,693 | |
Investments measured at net asset value using the NAV expedient | 21,313 | 21,653 | |
Other | (39) | (26) | |
Fair value of plan assets | 43,832 | 40,319 | 36,758 |
Pension Plans | Non-U.S. | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 474 | 2,209 | |
Value of IBM securities included in plan assets | $ 1 | $ 10 | |
Percentage of IBM securities included in plan assets | 0.003% | 0.02% | |
Pension Plans | Non-U.S. | Equity mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | $ 0 | ||
Pension Plans | Non-U.S. | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 9,762 | $ 10,290 | |
Pension Plans | Non-U.S. | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 3,725 | 2,124 | |
Value of IBM securities included in plan assets | $ 5 | $ 8 | |
Percentage of IBM securities included in plan assets | 0.012% | 0.02% | |
Pension Plans | Non-U.S. | Mortgage and asset-backed securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | $ 3 | $ 19 | |
Pension Plans | Non-U.S. | Insurance contracts | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 6,675 | 1,862 | |
Pension Plans | Non-U.S. | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 1,002 | 849 | |
Pension Plans | Non-U.S. | Real estate | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 298 | 328 | |
Pension Plans | Non-U.S. | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 590 | 987 | |
Pension Plans | Non-U.S. | Other mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 29 | 25 | |
Pension Plans | Non-U.S. | Level 1 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 923 | 2,456 | |
Fair value of plan assets | 923 | 2,456 | |
Pension Plans | Non-U.S. | Level 1 | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 474 | 2,209 | |
Pension Plans | Non-U.S. | Level 1 | Equity mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 0 | ||
Pension Plans | Non-U.S. | Level 1 | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 352 | 204 | |
Pension Plans | Non-U.S. | Level 1 | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 69 | 18 | |
Pension Plans | Non-U.S. | Level 1 | Other mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 29 | 25 | |
Pension Plans | Non-U.S. | Level 2 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 21,335 | 15,907 | |
Fair value of plan assets | 21,335 | 15,907 | |
Pension Plans | Non-U.S. | Level 2 | Equity securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 0 | 0 | |
Pension Plans | Non-U.S. | Level 2 | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 9,760 | 10,288 | |
Pension Plans | Non-U.S. | Level 2 | Corporate bonds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 3,725 | 2,124 | |
Pension Plans | Non-U.S. | Level 2 | Mortgage and asset-backed securities | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 3 | 19 | |
Pension Plans | Non-U.S. | Level 2 | Insurance contracts | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 6,675 | 1,862 | |
Pension Plans | Non-U.S. | Level 2 | Cash and short-term investments | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 651 | 644 | |
Pension Plans | Non-U.S. | Level 2 | Derivatives | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 521 | 969 | |
Pension Plans | Non-U.S. | Level 2 | Other mutual funds | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 0 | ||
Pension Plans | Non-U.S. | Level 3 | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 300 | 330 | |
Fair value of plan assets | 300 | 330 | |
Pension Plans | Non-U.S. | Level 3 | Government and related | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 2 | 2 | |
Pension Plans | Non-U.S. | Level 3 | Real estate | |||
Retirement-Related Benefits | |||
Fair value of plan assets, gross | 298 | 328 | |
Nonpension Postretirement Benefit Plans | U.S. | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 15 | 3 | 29 |
Nonpension Postretirement Benefit Plans | U.S. | Level 1 | |||
Retirement-Related Benefits | |||
Fair value of plan assets | 3 | ||
Nonpension Postretirement Benefit Plans | Non-U.S. | |||
Retirement-Related Benefits | |||
Fair value of plan assets | $ 53 | $ 65 | $ 65 |
Retirement-Related Benefits - L
Retirement-Related Benefits - Level 3 Reconciliation (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
U.S. | Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | $ 51,784 | $ 48,213 |
Fair value of plan assets, balance at end of period | 54,386 | 51,784 |
Non-U.S. | Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 40,319 | 36,758 |
Foreign exchange impact | 2,599 | 333 |
Fair value of plan assets, balance at end of period | 43,832 | 40,319 |
Level 3 | U.S. | Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 518 | |
Fair value of plan assets, balance at end of period | 542 | 518 |
Level 3 | U.S. | Personal Pension Plan (PPP) | Qualified Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 518 | 363 |
Return on assets held at end of year | 40 | |
Return on assets sold during the year | 1 | |
Purchases, sales and settlements, net | 105 | |
Transfers, net | 9 | |
Fair value of plan assets, balance at end of period | 518 | |
Level 3 | U.S. | Personal Pension Plan (PPP) | Qualified Plans | Corporate bonds | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 518 | 359 |
Return on assets held at end of year | 29 | 40 |
Return on assets sold during the year | 0 | 1 |
Purchases, sales and settlements, net | (5) | 105 |
Transfers, net | 0 | 13 |
Fair value of plan assets, balance at end of period | 542 | 518 |
Level 3 | U.S. | Personal Pension Plan (PPP) | Qualified Plans | Mortgage and asset-backed securities | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 4 | |
Return on assets sold during the year | 0 | |
Purchases, sales and settlements, net | 0 | |
Transfers, net | (4) | |
Level 3 | Non-U.S. | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 330 | 341 |
Return on assets held at end of year | (29) | (11) |
Return on assets sold during the year | 2 | 4 |
Purchases, sales and settlements, net | (14) | (18) |
Transfers, net | 4 | |
Foreign exchange impact | 7 | 13 |
Fair value of plan assets, balance at end of period | 300 | 330 |
Level 3 | Non-U.S. | Government and related | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 2 | 2 |
Return on assets held at end of year | 0 | 0 |
Return on assets sold during the year | 0 | |
Purchases, sales and settlements, net | (1) | |
Foreign exchange impact | 0 | 0 |
Fair value of plan assets, balance at end of period | 2 | 2 |
Level 3 | Non-U.S. | Real estate | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 328 | 339 |
Return on assets held at end of year | (29) | (11) |
Return on assets sold during the year | 2 | 4 |
Purchases, sales and settlements, net | (14) | (17) |
Transfers, net | 4 | |
Foreign exchange impact | 7 | 13 |
Fair value of plan assets, balance at end of period | 298 | 328 |
Level 3 | Non-U.S. | Pension Plans | ||
Change in plan assets | ||
Fair value of plan assets, balance at beginning of period | 330 | |
Fair value of plan assets, balance at end of period | $ 300 | $ 330 |
Retirement-Related Benefits -_6
Retirement-Related Benefits - Contributions and Direct Benefit Payments (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Total | $ 2,161 | $ 2,177 |
Contributions by employer - Noncash | 288 | 180 |
Non-U.S. DB plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total | 182 | 243 |
Multi-employer plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total | 29 | 32 |
DC plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total | 1,058 | 1,040 |
Direct Benefit Payments | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total | 567 | 559 |
Nonpension Postretirement Benefit Plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Total | 325 | 304 |
Nonpension Postretirement Benefit Plans | Non-U.S. DB plans | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Contributions by employer - Noncash | $ 452 | $ 455 |
Retirement-Related Benefits -_7
Retirement-Related Benefits - Contributions, Defined Benefit Pension Plans (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Pension Contributions | ||
Contributions by employer - Noncash | $ 288 | $ 180 |
Pension Plans, including Multi-employer Plans, and Nonpension Postretirement Benefits Plans | Non-U.S. | ||
Pension Contributions | ||
Estimated cash contributions to the defined benefit plans in next fiscal year | $ 300 |
Retirement-Related Benefits - E
Retirement-Related Benefits - Expected Benefit Payments (Details) $ in Millions | Dec. 31, 2020USD ($) |
Pension Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | $ 6,102 |
Expected benefit payments, 2022 | 6,091 |
Expected benefit payments, 2023 | 6,073 |
Expected benefit payments, 2024 | 6,040 |
Expected benefit payments, 2025 | 6,012 |
Expected benefit payments, 2026-2030 | 28,078 |
Nonpension Postretirement Benefit Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 405 |
Expected benefit payments, 2022 | 419 |
Expected benefit payments, 2023 | 423 |
Expected benefit payments, 2024 | 408 |
Expected benefit payments, 2025 | 385 |
Expected benefit payments, 2026-2030 | 1,538 |
U.S. | Pension Plans | Qualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 3,522 |
Expected benefit payments, 2022 | 3,490 |
Expected benefit payments, 2023 | 3,451 |
Expected benefit payments, 2024 | 3,393 |
Expected benefit payments, 2025 | 3,333 |
Expected benefit payments, 2026-2030 | 15,062 |
U.S. | Pension Plans | Nonqualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 123 |
Expected benefit payments, 2022 | 122 |
Expected benefit payments, 2023 | 121 |
Expected benefit payments, 2024 | 120 |
Expected benefit payments, 2025 | 118 |
Expected benefit payments, 2026-2030 | 545 |
U.S. | Nonpension Postretirement Benefit Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 364 |
Expected benefit payments, 2022 | 377 |
Expected benefit payments, 2023 | 380 |
Expected benefit payments, 2024 | 363 |
Expected benefit payments, 2025 | 339 |
Expected benefit payments, 2026-2030 | 1,296 |
Non-U.S. | Pension Plans | Qualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 2,093 |
Expected benefit payments, 2022 | 2,124 |
Expected benefit payments, 2023 | 2,140 |
Expected benefit payments, 2024 | 2,160 |
Expected benefit payments, 2025 | 2,189 |
Expected benefit payments, 2026-2030 | 10,529 |
Non-U.S. | Pension Plans | Nonqualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 364 |
Expected benefit payments, 2022 | 354 |
Expected benefit payments, 2023 | 361 |
Expected benefit payments, 2024 | 368 |
Expected benefit payments, 2025 | 373 |
Expected benefit payments, 2026-2030 | 1,943 |
Non-U.S. | Nonpension Postretirement Benefit Plans | Qualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 16 |
Expected benefit payments, 2022 | 17 |
Expected benefit payments, 2023 | 18 |
Expected benefit payments, 2024 | 19 |
Expected benefit payments, 2025 | 20 |
Expected benefit payments, 2026-2030 | 119 |
Non-U.S. | Nonpension Postretirement Benefit Plans | Nonqualified Plans | |
Expected Benefit Payments | |
Expected benefit payments, 2021 | 25 |
Expected benefit payments, 2022 | 26 |
Expected benefit payments, 2023 | 25 |
Expected benefit payments, 2024 | 26 |
Expected benefit payments, 2025 | 25 |
Expected benefit payments, 2026-2030 | $ 123 |
Retirement-Related Benefits -_8
Retirement-Related Benefits - ABO and APBO in Excess of Plan Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Pension Plans | ||
Defined Benefit Plan, Pension and Non-Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets | ||
Plans with PBO in excess of plan assets, Benefit Obligation | $ 34,202 | $ 31,714 |
Plans with PBO in excess of plan assets, Plan Assets | 19,586 | 18,398 |
Plans with ABO in excess of plan assets, Benefit Obligation | 33,051 | 30,882 |
Plans with ABO in excess of plan assets, Plan Assets | 18,956 | 18,127 |
Plans with assets in excess of PBO, Benefit Obligation | 71,024 | 66,842 |
Plans with assets in excess of PBO, Plan Assets | 78,632 | 73,705 |
Nonpension Postretirement Benefit Plans | ||
Defined Benefit Plan, Pension and Non-Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets | ||
Plans with APBO in excess of plan assets, Benefit Obligation | 4,545 | 4,685 |
Plans with APBO in excess of plan assets, Plan Assets | 45 | 47 |
Plans with plan assets in excess of APBO, Benefit Obligation | 21 | 19 |
Plans with plan assets in excess of APBO, Plan Assets | $ 22 | $ 21 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event | Jan. 26, 2021$ / shares |
Subsequent Events | |
Dividend declared, date | Jan. 26, 2021 |
Dividend declared (in dollars per share) | $ 1.63 |
Dividend payable, date | Mar. 10, 2021 |
Shareholders of record, date | Feb. 10, 2021 |
SCHEDULE II VALUATION AND QUA_2
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Allowance for Credit Losses - Current | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | $ 521 | $ 591 | $ 594 |
Additions / (Deductions), charged to expense and cost accounts | 104 | 99 | 69 |
Write-offs | (85) | (174) | (62) |
Other | 23 | 5 | (11) |
Balance at End of Period | 597 | 521 | 591 |
Allowance for Credit Losses - Noncurrent | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | 33 | 48 | 74 |
Additions / (Deductions), charged to expense and cost accounts | 4 | (10) | (3) |
Write-offs | 0 | (4) | (2) |
Other | (13) | (1) | (20) |
Balance at End of Period | 47 | 33 | 48 |
Allowance For Inventory Losses | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | 490 | 530 | 574 |
Additions / (Deductions), charged to expense and cost accounts | 135 | 115 | 136 |
Write-offs | (125) | (166) | (162) |
Other | 15 | 11 | (19) |
Balance at End of Period | 514 | 490 | 530 |
Revenue Based Provisions | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | 498 | 500 | 451 |
Additions / (Deductions), charged to revenue accounts | 774 | 823 | 897 |
Write-offs | (755) | (830) | (828) |
Other | 4 | 5 | (20) |
Balance at End of Period | 522 | 498 | $ 500 |
Cumulative Effect, Period of Adoption, Adjusted Balance | Allowance for Credit Losses - Current | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | 556 | ||
Balance at End of Period | 556 | ||
Cumulative Effect, Period of Adoption, Adjusted Balance | Allowance for Credit Losses - Noncurrent | |||
Movement in Valuation and Qualifying Accounts and Reserves | |||
Balance at Beginning of Period | $ 56 | ||
Balance at End of Period | $ 56 |