Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2021shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Sep. 30, 2021 |
Entity File Number | 1-2360 |
Entity Registrant Name | INTERNATIONAL BUSINESS MACHINES CORPORATION |
Entity Incorporation, State or Country Code | NY |
Entity Tax Identification Number | 13-0871985 |
Entity Address, Address Line One | One New Orchard Road |
Entity Address, City or Town | Armonk |
Entity Address, State or Province | NY |
Entity Address, Postal Zip Code | 10504 |
City Area Code | 914 |
Local Phone Number | 499-1900 |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Central Index Key | 0000051143 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 896,800,350 |
Document Fiscal Year Focus | 2021 |
Document Fiscal Period Focus | Q3 |
New York Stock Exchange | Common Stock | |
Document Information [Line Items] | |
Title of 12(b) Security | Capital stock, par value $.20 per share |
Trading Symbol | IBM |
Security Exchange Name | NYSE |
New York Stock Exchange | 2.625% 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 | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue | $ 17,618 | $ 17,560 | $ 54,093 | $ 53,253 |
Cost | 9,447 | 9,130 | 28,714 | 28,202 |
Gross profit | 8,171 | 8,430 | 25,379 | 25,052 |
Expense and other (income) | ||||
Selling, general and administrative | 4,860 | 4,647 | 15,368 | 15,849 |
Research, development and engineering | 1,621 | 1,515 | 4,907 | 4,722 |
Intellectual property and custom development income | (153) | (134) | (435) | (453) |
Other (income) and expense | 234 | 253 | 911 | 614 |
Interest expense | 291 | 323 | 852 | 971 |
Total expense and other (income) | 6,852 | 6,603 | 21,603 | 21,704 |
Income from continuing operations before income taxes | 1,319 | 1,827 | 3,776 | 3,348 |
Provision for/(benefit from) income taxes | 188 | 128 | 365 | (888) |
Income from continuing operations | 1,130 | 1,698 | 3,411 | 4,237 |
Income/(loss) from discontinued operations, net of tax | (1) | (1) | (2) | |
Net income | $ 1,130 | $ 1,698 | $ 3,410 | $ 4,234 |
Assuming dilution | ||||
Continuing operations (in dollars per share) | $ 1.25 | $ 1.89 | $ 3.77 | $ 4.72 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | |
Total (in dollars per share) | 1.25 | 1.89 | 3.77 | 4.72 |
Basic | ||||
Continuing operations (in dollars per share) | 1.26 | 1.90 | 3.81 | 4.76 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | |
Total (in dollars per share) | $ 1.26 | $ 1.90 | $ 3.81 | $ 4.76 |
Weighted-average number of common shares outstanding | ||||
Assuming dilution (in shares) | 905,953,114 | 897,292,233 | 903,977,539 | 895,756,850 |
Basic (in shares) | 897,097,073 | 891,381,032 | 895,257,004 | 889,595,181 |
Services | ||||
Revenue | $ 11,418 | $ 11,180 | $ 34,307 | $ 33,490 |
Cost | 7,770 | 7,357 | 23,416 | 22,720 |
Sales | ||||
Revenue | 5,978 | 6,106 | 19,079 | 18,918 |
Cost | 1,513 | 1,601 | 4,792 | 4,964 |
Financing | ||||
Revenue | 222 | 275 | 706 | 845 |
Cost | $ 165 | $ 172 | $ 506 | $ 517 |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
Net income | $ 1,130 | $ 1,698 | $ 3,410 | $ 4,234 |
Other comprehensive income/(loss), before tax | ||||
Foreign currency translation adjustments | (114) | (439) | 463 | (1,354) |
Net changes related to available-for-sale securities | ||||
Unrealized gains/(losses) arising during the period | 0 | (1) | 0 | 0 |
Total net changes related to available-for-sale securities | 0 | (1) | 0 | 0 |
Unrealized gains/(losses) on cash flow hedges | ||||
Unrealized gains/(losses) arising during the period | 109 | (32) | 262 | (249) |
Reclassification of (gains)/losses to net income | 32 | (69) | 282 | (37) |
Total unrealized gains/(losses) on cash flow hedges | 141 | (101) | 545 | (285) |
Retirement-related benefit plans | ||||
Prior service costs/(credits) | 0 | (1) | 0 | (5) |
Net (losses)/gains arising during the period | 1 | 0 | 23 | 65 |
Curtailments and settlements | 13 | 21 | 46 | 42 |
Amortization of prior service (credits)/costs | 3 | 0 | 8 | 1 |
Amortization of net (gains)/losses | 638 | 586 | 1,929 | 1,722 |
Total retirement-related benefit plans | 656 | 607 | 2,006 | 1,826 |
Other comprehensive income/(loss), before tax | 683 | 66 | 3,014 | 187 |
Income tax (expense)/benefit related to items of other comprehensive income | (333) | 106 | (978) | (175) |
Other comprehensive income/(loss), net of tax | 350 | 172 | 2,035 | 12 |
Total comprehensive income | $ 1,480 | $ 1,870 | $ 5,446 | $ 4,247 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash and cash equivalents | $ 7,455 | $ 13,212 |
Restricted cash | 352 | 463 |
Marketable securities | 600 | 600 |
Notes and accounts receivable - trade (net of allowances of $277 in 2021 and $351 in 2020) | 6,609 | 7,132 |
Short-term financing receivables (net of allowances of $183 in 2021 and $218 in 2020) | 7,161 | 10,892 |
Other accounts receivable (net of allowances of $26 in 2021 and $28 in 2020) | 899 | 714 |
Inventories, at lower of average cost or net realizable value: | ||
Finished goods | 287 | 190 |
Work in process and raw materials | 1,604 | 1,649 |
Total inventory | 1,891 | 1,839 |
Deferred costs | 2,046 | 2,107 |
Prepaid expenses and other current assets | 2,954 | 2,206 |
Total current assets | 29,967 | 39,165 |
Property, plant and equipment | 32,349 | 33,176 |
Less: Accumulated depreciation | 23,211 | 23,136 |
Property, plant and equipment - net | 9,138 | 10,040 |
Operating right-of-use assets-net | 4,253 | 4,686 |
Long-term financing receivables (net of allowances of $24 in 2021 and $45 in 2020) | 5,046 | 7,086 |
Prepaid pension assets | 8,197 | 7,610 |
Deferred costs | 2,248 | 2,449 |
Deferred taxes | 8,967 | 9,241 |
Goodwill | 61,378 | 59,617 |
Intangible assets-net | 13,025 | 13,796 |
Investments and sundry assets | 1,996 | 2,282 |
Total assets | 144,214 | 155,971 |
Current liabilities | ||
Taxes | 2,159 | 3,301 |
Short-term debt | 7,575 | 7,183 |
Accounts payable | 4,248 | 4,908 |
Compensation and benefits | 3,780 | 3,440 |
Deferred income | 12,264 | 12,833 |
Operating lease liabilities | 1,285 | 1,357 |
Other accrued expenses and liabilities | 4,520 | 6,847 |
Total current liabilities | 35,832 | 39,869 |
Long-term debt | 46,926 | 54,355 |
Retirement and nonpension postretirement benefit obligations | 16,764 | 18,248 |
Deferred income | 3,965 | 4,301 |
Operating lease liabilities | 3,192 | 3,574 |
Other liabilities | 15,179 | 14,897 |
Total liabilities | 121,858 | 135,244 |
IBM stockholders' equity | ||
Common stock, par value $.20 per share, and additional paid-in capital Shares authorized: 4,687,500,000 Shares issued (2021-2,247,465,474; 2020-2,242,969,004) | 57,189 | 56,556 |
Retained earnings | 161,747 | 162,717 |
Treasury stock, at cost (shares: 2021-1,350,665,124; 2020-1,350,315,580) | (169,406) | (169,339) |
Accumulated other comprehensive income/(loss) | (27,302) | (29,337) |
Total IBM stockholders' equity | 22,228 | 20,597 |
Noncontrolling interests | 129 | 129 |
Total equity | 22,357 | 20,727 |
Total liabilities and equity | $ 144,214 | $ 155,971 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
CONSOLIDATED BALANCE SHEET | ||
Notes and accounts receivable - trade, allowances | $ 277 | $ 351 |
Short-term financing receivables, allowances | 183 | 218 |
Other accounts receivable, allowances | 26 | 28 |
Long-term financing receivables, allowances | $ 24 | $ 45 |
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) | 2,247,465,474 | 2,242,969,004 |
Treasury stock, Shares (in shares) | 1,350,665,124 | 1,350,315,580 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities | ||
Net income | $ 3,410 | $ 4,234 |
Adjustments to reconcile net income to cash provided by operating activities | ||
Depreciation | 3,139 | 3,138 |
Amortization of intangibles | 1,897 | 1,858 |
Stock-based compensation | 719 | 658 |
Net (gain)/loss on asset sales and other | (150) | 80 |
Changes in operating assets and liabilities, net of acquisitions/divestitures | 1,238 | 2,370 |
Net cash provided by operating activities | 10,252 | 12,337 |
Cash flows from investing activities | ||
Payments for property, plant and equipment | (1,612) | (1,940) |
Proceeds from disposition of property, plant and equipment | 312 | 147 |
Investment in software | (555) | (469) |
Acquisition of businesses, net of cash acquired | (3,018) | (37) |
Divestiture of businesses, net of cash transferred | 26 | 510 |
Non-operating finance receivables - net | (1) | 29 |
Purchases of marketable securities and other investments | (2,654) | (5,012) |
Proceeds from disposition of marketable securities and other investments | 2,202 | 4,302 |
Net cash provided by/(used in) investing activities | (5,300) | (2,470) |
Cash flows from financing activities | ||
Proceeds from new debt | 394 | 10,337 |
Payments to settle debt | (7,321) | (8,802) |
Short-term borrowings/(repayments) less than 90 days - net | 840 | (467) |
Common stock repurchases for tax withholdings | (252) | (225) |
Financing - other | 71 | 72 |
Cash dividends paid | (4,395) | (4,343) |
Net cash provided by/(used in) financing activities | (10,662) | (3,428) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (159) | (200) |
Net change in cash, cash equivalents and restricted cash | (5,868) | 6,239 |
Cash, cash equivalents and restricted cash at January 1 | 13,675 | 8,314 |
Cash, cash equivalents and restricted cash at September 30 | $ 7,806 | $ 14,553 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total IBM Stockholders' EquityCumulative Effect, Period of Adoption, Adjustment | [1] | Total IBM Stockholders' Equity | Common Stock and Additional Paid-in Capital | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | [1] | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income/(Loss) | Non-Controlling Interests | Cumulative Effect, Period of Adoption, Adjustment | [1] | Total |
Balance at the Beginning of the Period at Dec. 31, 2019 | $ (66) | $ 20,841 | $ 55,895 | $ (66) | $ 162,954 | $ (169,413) | $ (28,597) | $ 144 | $ (66) | $ 20,985 | |||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 4,234 | 4,234 | 4,234 | ||||||||||
Other comprehensive income/(loss) | 12 | 12 | 12 | ||||||||||
Total comprehensive income/(loss) | 4,247 | 4,247 | |||||||||||
Cash dividends paid - common stock | (4,343) | (4,343) | (4,343) | ||||||||||
Common stock issued under employee plans | 471 | 471 | 471 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 59 | 26 | 33 | 59 | |||||||||
Changes in noncontrolling interests | (18) | (18) | |||||||||||
Balance at the End of the Period at Sep. 30, 2020 | 21,208 | 56,366 | 162,806 | (169,380) | (28,584) | 126 | 21,334 | ||||||
Balance at the Beginning of the Period at Jun. 30, 2020 | 20,551 | 56,135 | 162,559 | (169,386) | (28,757) | 137 | 20,688 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 1,698 | 1,698 | 1,698 | ||||||||||
Other comprehensive income/(loss) | 172 | 172 | 172 | ||||||||||
Total comprehensive income/(loss) | 1,870 | 1,870 | |||||||||||
Cash dividends paid - common stock | (1,453) | (1,453) | (1,453) | ||||||||||
Common stock issued under employee plans | 232 | 232 | 232 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 9 | 2 | 7 | 9 | |||||||||
Changes in noncontrolling interests | (11) | (11) | |||||||||||
Balance at the End of the Period at Sep. 30, 2020 | 21,208 | 56,366 | 162,806 | (169,380) | (28,584) | 126 | 21,334 | ||||||
Balance at the Beginning of the Period at Dec. 31, 2020 | 20,597 | 56,556 | 162,717 | (169,339) | (29,337) | 129 | 20,727 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 3,410 | 3,410 | 3,410 | ||||||||||
Other comprehensive income/(loss) | 2,035 | 2,035 | 2,035 | ||||||||||
Total comprehensive income/(loss) | 5,446 | 5,446 | |||||||||||
Cash dividends paid - common stock | (4,395) | (4,395) | (4,395) | ||||||||||
Common stock issued under employee plans | 632 | 632 | 632 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | (52) | 15 | (66) | (52) | |||||||||
Changes in noncontrolling interests | (1) | (1) | |||||||||||
Balance at the End of the Period at Sep. 30, 2021 | 22,228 | 57,189 | 161,747 | (169,406) | (27,302) | 129 | 22,357 | ||||||
Balance at the Beginning of the Period at Jun. 30, 2021 | 21,942 | 56,912 | 162,086 | (169,404) | (27,652) | 125 | 22,067 | ||||||
Net income plus other comprehensive income/(loss): | |||||||||||||
Net income | 1,130 | 1,130 | 1,130 | ||||||||||
Other comprehensive income/(loss) | 350 | 350 | 350 | ||||||||||
Total comprehensive income/(loss) | 1,480 | 1,480 | |||||||||||
Cash dividends paid - common stock | (1,471) | (1,471) | (1,471) | ||||||||||
Common stock issued under employee plans | 277 | 277 | 277 | ||||||||||
Purchases and sales of treasury stock under employee plans - net | 0 | 1 | (2) | 0 | |||||||||
Changes in noncontrolling interests | 4 | 4 | |||||||||||
Balance at the End of the Period at Sep. 30, 2021 | $ 22,228 | $ 57,189 | $ 161,747 | $ (169,406) | $ (27,302) | $ 129 | $ 22,357 | ||||||
[1] | * Reflects the adoption of the FASB guidance on current expected credit losses. Refer to note 2, “Accounting Changes.” |
CONSOLIDATED STATEMENT OF EQU_2
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
CONSOLIDATED STATEMENT OF EQUITY | ||||
Cash dividend per common share | $ 1.64 | $ 1.63 | $ 4.91 | $ 4.88 |
Common stock issued under employee plans (in shares) | 482,632 | 429,304 | 4,496,470 | 3,661,059 |
Purchases of treasury stock under employee plans (in shares) | 124,146 | 110,415 | 1,797,733 | 1,731,915 |
Sales of treasury stock under employee plans (in shares) | 121,792 | 159,479 | 1,448,189 | 2,017,518 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2021 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis o f Presentation: The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances, including the macroeconomic impacts of the COVID-19 pandemic. As a result, actual results may be different from these estimates. On November 3, 2021, the company completed the previously announced separation of its managed infrastructure services unit into a new public company with the distribution of 80.1 percent of the outstanding common stock of Kyndryl Holdings, Inc. (Kyndryl) to IBM stockholders on a pro rata basis. To effect the separation, IBM stockholders received one Effective immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes will impact the company’s reportable segments beginning in the fourth quarter of 2021 but will not impact the company’s Consolidated Financial Statements. Since these organizational changes did not occur until the fourth quarter of 2021, the periods presented in this Form 10-Q are reported under the historical segments. See note 4, "Segments" for additional information. The continuing operations provision for income taxes for the third quarter of 2021 was Noncontrolling interest amounts of $8.3 million and $3.4 million, net of tax, for the three months ended September 30, 2021 and 2020, respectively, and $22.4 million and $14.7 million, net of tax, for the nine months ended September 30, 2021 and 2020, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2020 Annual Report. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior-period amounts have been reclassified to conform to the current-period presentation. This is annotated where applicable. |
Accounting Changes
Accounting Changes | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Changes | |
Accounting Changes | 2. Accounting Changes: New Standards to be Implemented Revenue Contracts with Customers Acquired in a Business Combination Standard/Description Revenue from Contracts with Customers Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Lessors-Certain Leases with Variable Lease Payments Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Reference Rate Reform Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters rate alternative, without any impact to the Consolidated Income Statement. The company has evaluated the replacement of the LIBOR benchmark on its interest rate risk management activities and does not expect it to have a material impact in the consolidated financial results. 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 |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2021 | |
Revenue Recognition | |
Revenue Recognition | 3. Revenue Recognition: Disaggregation of Revenue The following tables provide details of revenue by major products/service offerings and by geography. Revenue by Major Products/Service Offerings Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Cloud & Data Platforms $ 3,046 $ 2,775 $ 9,032 $ 8,108 Cognitive Applications 1,314 1,317 3,938 3,745 Transaction Processing Platforms 1,332 1,461 4,257 4,687 Total Cloud & Cognitive Software $ 5,692 $ 5,553 $ 17,227 $ 16,540 Consulting 2,292 1,966 6,717 5,973 Application Management 1,847 1,758 5,439 5,332 Global Process Services 287 240 846 687 Total Global Business Services $ 4,427 $ 3,965 $ 13,002 $ 11,992 Infrastructure & Cloud Services 4,681 4,933 14,370 14,663 Technology Support Services 1,473 1,528 4,496 4,582 Total Global Technology Services $ 6,154 $ 6,462 $ 18,866 $ 19,245 Systems Hardware 796 919 3,294 3,404 Operating Systems Software 312 338 957 1,074 Total Systems $ 1,107 $ 1,257 $ 4,251 $ 4,477 Global Financing* 220 273 702 837 Other 18 50 45 163 Total revenue $ 17,618 $ 17,560 $ 54,093 $ 53,253 * Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. Revenue by Geography Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Americas $ 8,217 $ 8,139 $ 25,216 $ 24,755 Europe/Middle East/Africa 5,593 5,564 17,272 16,775 Asia Pacific 3,808 3,857 11,605 11,723 Total $ 17,618 $ 17,560 $ 54,093 $ 53,253 Remaining Performance Obligations The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed, such as certain as-a-Service, governmental, term software license and services offerings. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency. At September 30, 2021, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $108 billion. Approximately 60 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 30 percent in the subsequent three Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods For the three and nine months ended September 30, 2021, revenue was reduced by $49 million and $85 million, respectively, 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. Reconciliation of Contract Balances The following table provides information about notes and accounts receivable – trade, contract assets and deferred income balances: At September 30, At December 31, (Dollars in millions) 2021 2020 Notes and accounts receivable — $ 6,609 $ 7,132 Contract assets* 566 497 Deferred income (current) 12,264 12,833 Deferred income (noncurrent) 3,965 4,301 * Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. The amount of revenue recognized during the three and nine months ended September 30, 2021 that was included within the deferred income balance at June 30, 2021 and December 31, 2020 was $5.1 billion and $9.5 billion, respectively, and was primarily related to services and software. The following table provides roll forwards of the notes and accounts receivable – trade allowance for expected credit losses for the nine months ended September 30, 2021 and the year ended December 31, 2020: (Dollars in millions) January 1, 2021 Additions / (Releases) Write-offs Other* September 30, 2021 $ 351 $ (44) $ (30) $ 0 $ 277 January 1, 2020 Additions / (Releases) Write-offs Other* December 31, 2020 $ 316 $ 76 $ (46) $ 5 $ 351 * . The contract assets allowance for expected credit losses was not material in any of the periods presented. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2021 | |
Segments | |
Segments | 4. Segments: The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company. Performance measurement is based on pre-tax income from continuing operations. These results 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. See note 1, "Basis of Presentation" for additional information about the new operating segments, that will be effective in the fourth quarter of 2021. SEGMENT INFORMATION Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the three months ended September 30, 2021: External revenue $ 5,692 $ 4,427 $ 6,154 $ 1,107 $ 220 $ 17,601 Internal revenue 764 53 317 176 153 1,463 Total revenue $ 6,456 $ 4,480 $ 6,471 $ 1,283 $ 373 $ 19,064 Pre-tax income/(loss) from continuing operations $ 1,675 $ 587 $ 383 $ (207) $ 206 $ 2,644 Revenue year-to-year change 0.4 % 11.6 % (4.5) % (14.3) % (22.3) % (0.7) % Pre-tax income year-to-year change (8.7) % 3.0 % (4.1) % nm 5.1 % (10.7) % Pre-tax income/(loss) margin 25.9 % 13.1 % 5.9 % (16.1) % 55.1 % 13.9 % For the three months ended September 30, 2020: External revenue $ 5,553 $ 3,965 $ 6,462 $ 1,257 $ 273 $ 17,510 Internal revenue 875 49 312 240 208 1,683 Total revenue $ 6,428 $ 4,014 $ 6,774 $ 1,497 $ 480 $ 19,193 Pre-tax income/(loss) from continuing operations $ 1,834 $ 570 $ 399 $ (37) $ 196 $ 2,962 Pre-tax income/(loss) margin 28.5 % 14.2 % 5.9 % (2.5) % 40.7 % 15.4 % nm – not meaningful Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended September 30: 2021 2020 Revenue: Total reportable segments $ 19,064 $ 19,193 Other — divested businesses (3) 4 Other revenue 20 46 Eliminations of internal transactions (1,463) (1,683) Total consolidated revenue $ 17,618 $ 17,560 Pre-tax income from continuing operations: Total reportable segments $ 2,644 $ 2,962 Amortization of acquired intangible assets (475) (459) Acquisition-related (charges)/income (4) (1) Non-operating retirement-related (costs)/income (328) (291) Separation-related charges (277) — Elimination of internal transactions (57) (158) Other — divested businesses (10) (20) Unallocated corporate amounts (175) (206) Total pre-tax income from continuing operations $ 1,319 $ 1,827 SEGMENT INFORMATION Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the nine months ended September 30, 2021: External revenue $ 17,227 $ 13,002 $ 18,866 $ 4,251 $ 702 $ 54,047 Internal revenue 2,322 166 956 606 581 4,631 Total revenue $ 19,549 $ 13,168 $ 19,822 $ 4,857 $ 1,283 $ 58,678 Pre-tax income/(loss) from continuing operations $ 4,822 $ 1,349 $ 903 $ (33) $ 618 $ 7,659 Revenue year-to-year change 3.0 % 8.5 % (1.7) % (4.9) % (14.3) % 1.4 % Pre-tax income year-to-year change 7.8 % 12.1 % 91.9 % nm 9.1 % 14.2 % Pre-tax income/(loss) margin 24.7 % 10.2 % 4.6 % (0.7) % 48.1 % 13.1 % For the nine months ended September 30, 2020: External revenue $ 16,540 $ 11,992 $ 19,245 $ 4,477 $ 837 $ 53,090 Internal revenue 2,431 150 911 628 660 4,780 Total revenue $ 18,971 $ 12,142 $ 20,155 $ 5,106 $ 1,497 $ 57,870 Pre-tax income/(loss) from continuing operations $ 4,475 $ 1,203 $ 471 $ (7) $ 566 $ 6,708 Pre-tax income/(loss) margin 23.6 % 9.9 % 2.3 % (0.1) % 37.8 % 11.6 % nm – not meaningful Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2021 2020 Revenue: Total reportable segments $ 58,678 $ 57,870 Other — divested businesses (2) 36 Other revenue 47 127 Eliminations of internal transactions (4,631) (4,780) Total consolidated revenue $ 54,093 $ 53,253 Pre-tax income from continuing operations: Total reportable segments $ 7,659 $ 6,708 Amortization of acquired intangible assets (1,389) (1,404) Acquisition-related (charges)/income (37) (3) Non-operating retirement-related (costs)/income (998) (829) Separation-related charges (513) — Eliminations of internal transactions (269) (334) Other — divested businesses (34) (17) Unallocated corporate amounts (643) (773) Total pre-tax income from continuing operations $ 3,776 $ 3,348 |
Acquisitions & Divestitures
Acquisitions & Divestitures | 9 Months Ended |
Sep. 30, 2021 | |
Acquisitions & Divestitures | |
Acquisitions & Divestitures | 5. Acquisitions & Divestitures: Acquisitions Purchase price consideration for all acquisitions was paid primarily in cash. All acquisitions, except as otherwise stated, were for 100 percent of the acquired business and are reported in the Consolidated Statement of Cash Flows, net of acquired cash and cash equivalents. During the nine months ended September 30, 2021, the company completed ten acquisitions at an aggregate cost of $3,049 million. 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 Nordcloud Global Business Services Consulting company providing services in cloud implementation, application transformation and managed services Taos Mountain, LLC (Taos) Global Business Services Leading cloud professional and managed services provider StackRox Cloud & Cognitive Software Innovator in container and Kubernetes-native security Second Quarter Turbonomic, Inc. (Turbonomic) Cloud & Cognitive Software Application Resource Management and Network Performance Management software provider ECX Copy Data Management business Cloud & Cognitive Software Smart data protection solution from Catalogic Software, Inc. Waeg Global Business Services Leading Salesforce Consulting Partner myInvenio Cloud & Cognitive Software Process mining software company Third Quarter VEVRE Software business from Volta, Inc. Cloud & Cognitive Software Cloud-native virtual routing engine BoxBoat Technologies Global Business Services Premier DevOps consultancy and enterprise Kubernetes certified service provider Bluetab Solutions Group Global Business Services Data solutions service provider The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of September 30, 2021. Amortization Other (Dollars in millions) Life (in years) Turbonomic Acquisitions Current assets $ 126 $ 101 Property, plant and equipment/noncurrent assets — 6 Intangible assets: Goodwill N/A 1,439 912 Client relationships 4 10 290 173 Completed technology 4 7 117 134 Trademarks 1 6 18 29 Total assets acquired $ 1,990 $ 1,356 Current liabilities 49 59 Noncurrent liabilities 113 76 Total liabilities assumed $ 161 $ 135 Total purchase price $ 1,829 $ 1,220 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 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. Turbonomic — Other acquisitions — The 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. In October 2021, the company entered into a definitive agreement to acquire a privately held application development and cloud computing services company. Upon closing, the acquired business will be integrated into the Global Business Services segment. In October 2021, the company also announced it had entered into a definitive agreement with McDonald’s to acquire McD Tech Labs to further accelerate the development and deployment of its Automated Order Taking (AOT) technology. Upon closing, McD Tech Labs will be integrated into the Cloud & Cognitive Software segment. In November 2021, the company announced it had entered into a definitive agreement to acquire ReaQta, a provider of endpoint security solutions designed to leverage AI to automatically identify and manage threats. Upon closing, ReaQta will be integrated into the Cloud & Cognitive Software segment. All acquisitions are expected to close in the fourth quarter of 2021, subject to customary closing conditions, including regulatory clearance. Divestitures In the third quarter of 2021, the company completed the sale of its remaining OEM commercial financing capabilities reported within the Global Financing segment. In addition, IBM completed two divestitures in the Cloud & Cognitive Software segment one in the second quarter and one in the third quarter of 2021. The financial terms related to each of these transactions were not material. In October 2021, the company entered into a definitive agreement to sell certain intelligence analysis capabilities reported within the Cloud & Cognitive Software segment. The transaction is expected to close in the fourth quarter of 2021, subject to the satisfaction of applicable regulatory requirements and customary closing conditions. . |
Earnings Per Share of Common St
Earnings Per Share of Common Stock | 9 Months Ended |
Sep. 30, 2021 | |
Earnings Per Share of Common Stock | |
Earnings Per Share of Common Stock | 6. Earnings Per Share of Common Stock The following tables provide the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2021 and 2020. (Dollars in millions except per share amounts) For the three months ended September 30: 2021 2020 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 897,097,073 891,381,032 Add — Incremental shares under stock-based compensation plans 6,946,467 4,595,327 Add — Incremental shares associated with contingently issuable shares 1,909,573 1,315,874 Number of shares on which diluted earnings per share is calculated 905,953,114 897,292,233 Income from continuing operations $ 1,130 $ 1,698 Income/(loss) from discontinued operations, net of tax — (1) Net income on which basic earnings per share is calculated $ 1,130 $ 1,698 Income from continuing operations $ 1,130 $ 1,698 Net income applicable to contingently issuable shares — — Income from continuing operations on which diluted earnings per share is calculated $ 1,130 $ 1,698 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated — (1) Net income on which diluted earnings per share is calculated $ 1,130 $ 1,698 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 1.25 $ 1.89 Discontinued operations — 0.00 Total $ 1.25 $ 1.89 Basic Continuing operations $ 1.26 $ 1.90 Discontinued operations — 0.00 Total $ 1.26 $ 1.90 Stock options to purchase 750,990 shares and 1,510,886 shares were outstanding as of September 30, 2021 and 2020, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options during the respective period was greater than the average market price of the common shares, and, therefore, the effect would have been antidilutive. (Dollars in millions except per share amounts) For the nine months ended September 30: 2021 2020 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 895,257,004 889,595,181 Add — Incremental shares under stock-based compensation plans 7,000,190 4,875,369 Add — Incremental shares associated with contingently issuable shares 1,720,345 1,286,300 Number of shares on which diluted earnings per share is calculated 903,977,539 895,756,850 Income from continuing operations $ 3,411 $ 4,237 Income/(loss) from discontinued operations, net of tax (1) (2) Net income on which basic earnings per share is calculated $ 3,410 $ 4,234 Income from continuing operations $ 3,411 $ 4,237 Net income applicable to contingently issuable shares — (2) Income from continuing operations on which diluted earnings per share is calculated $ 3,411 $ 4,234 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (1) (2) Net income on which diluted earnings per share is calculated $ 3,410 $ 4,232 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 3.77 $ 4.72 Discontinued operations 0.00 0.00 Total $ 3.77 $ 4.72 Basic Continuing operations $ 3.81 $ 4.76 Discontinued operations 0.00 0.00 Total $ 3.81 $ 4.76 Stock options to purchase 879,289 shares and 1,386,591 shares (average of first, second and third quarter share amounts) were outstanding as of September 30, 2021 and 2020, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options during the respective period was greater than the average market price of the common shares, and, therefore, the effect would have been antidilutive. |
Financial Assets & Liabilities
Financial Assets & Liabilities | 9 Months Ended |
Sep. 30, 2021 | |
Financial Assets & Liabilities | |
Financial Assets & Liabilities | 7. Financial Assets & Liabilities : Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The company classifies certain assets and liabilities based on the following fair value hierarchy: ● Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and ● Level 3 – Unobservable inputs for the asset or liability. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument. In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the “base valuations” calculated using the methodologies described below for several parameters that market participants would consider in determining fair value: ● Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. ● Credit risk adjustments are applied to reflect the company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the company’s own credit risk as observed in the credit default swap market. The company holds investments primarily in time deposits, certificates of deposit, and U.S. government debt that are designated as available-for-sale. The primary objective of the company’s cash and debt investment portfolio is to maintain principal by investing in very liquid and highly rated investment grade securities. The company’s standard practice is to hold all of its debt security investments classified as available-for-sale until maturity. No impairments for credit losses and no material non-credit impairments were recorded for the three and nine months ended September 30, 2021 and 2020, respectively. Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for non-financial assets depend on the type of asset. There were no material impairments of non-financial assets for the three and nine months ended September 30, 2021 and 2020, respectively. The following table presents the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020. Fair Value Hierarchy At September 30, 2021 At December 31, 2020 (Dollars in millions) Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents: (1) Time deposits and certificates of deposit (2) 2 $ 3,030 $ N/A $ 7,668 $ N/A Money market funds 1 130 N/A 148 N/A U.S. government securities (2) 2 — N/A 500 N/A Total cash equivalents $ 3,160 $ N/A $ 8,316 $ N/A Equity investments (3) 1 0 N/A 2 N/A Debt securities-current (2)(4) 2 600 N/A 600 N/A Debt securities-noncurrent (2)(5) 2 6 N/A 7 N/A Derivatives designated as hedging instruments: Interest rate contracts 2 16 — 100 — Foreign exchange contracts 2 367 95 111 580 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 42 38 13 47 Equity contracts (6) 1,2 — 16 12 — Total $ 4,191 $ 149 $ 9,161 $ 627 (1) Included within cash and cash equivalents in the Consolidated Balance Sheet. (2) Available-for-sale debt securities with carrying values that approximate fair value. (3) Included within investments and sundry assets in the Consolidated Balance Sheet. (4) U.S. treasury bills that are reported within marketable securities in the Consolidated Balance Sheet. (5) Primarily includes government debt securities that are reported within investments and sundry assets in the Consolidated Balance Sheet. (6) Level 1 includes immaterial amounts related to equity futures contracts. (7) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Balance Sheet at September 30, 2021 were $373 million and $52 million, respectively, and at December 31, 2020 were $85 million and $151 million, respectively. (8) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2021 were $69 million and $80 million, respectively, and at December 31, 2020 were $587 million and $40 million , respectively. N/A – not applicable Financial Assets and Liabilities Not Measured at Fair Value Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt and including short-term finance lease liabilities) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt which would be classified as Level 2. Loans and Long-Term Receivables Fair values are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remaining maturities. At September 30, 2021 and December 31, 2020, 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 $46,926 million and $54,355 million, and the estimated fair value was $52,150 million and $61,598 million at September 30, 2021 and December 31, 2020, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Financing Receivables
Financing Receivables | 9 Months Ended |
Sep. 30, 2021 | |
Financing Receivables | |
Financing Receivables | 8. Financing Receivables: Financing receivables primarily consist of client loan and installment payment receivables (loans) and investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are generally for terms up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Systems products and are for terms ranging generally from two 30 A summary of the components of the company’s financing receivables is presented as follows: Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At September 30, 2021: (Loans) Leases Receivables Total Financing receivables, gross $ 8,708 $ 3,216 $ 727 $ 12,651 Unearned income (355) (228) 0 (583) Residual value* — 345 — 345 Amortized cost $ 8,353 $ 3,333 $ 727 $ 12,413 Allowance for credit losses (135) (65) (6) (207) Total financing receivables, net $ 8,218 $ 3,268 $ 721 $ 12,207 Current portion $ 5,022 $ 1,419 $ 721 $ 7,161 Noncurrent portion $ 3,196 $ 1,850 $ — $ 5,046 Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) 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. The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties, with enhanced focus due to the current macroeconomic uncertainty. 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 nonrecourse borrowings were $396 million and $482 million at September 30, 2021 and December 31, 2020, respectively. These borrowings are included in note 11, “Borrowings.” Transfer of Financial Assets For the nine months ended September 30, 2021, the company sold $2,970 million of client financing receivables to third parties, consisting of loan and lease receivables of $2,189 million and $781 million, respectively. More than half of the receivables sold were classified as current assets at the time of sale. For the nine months ended September 30, 2020, the company sold $1,610 million of client financing receivables to third parties, consisting of loan and lease receivables of $758 million and $852 million, respectively. 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 $4,465 million of commercial financing receivables under the agreement for the nine months ended September 30, 2021. In addition, the company included $400 million and $383 million of commercial financing receivables classified as held for sale at September 30, 2021 and December 31, 2020, respectively, 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 company did not have any sales of commercial financing receivables for the nine months ended September 30, 2020. The transfers of these receivables qualified as true sales and therefore reduced financing receivables. The cash proceeds from the sales are included in cash flows from operating activities and the impacts to the Consolidated Income Statement, including fees and net gain or loss associated with the transfers of these receivables for the nine months ended September 30, 2021 and September 30, 2020, were not material. Financing Receivables by Portfolio Segment The following tables present the amortized cost basis of client financing receivables at September 30, 2021 and December 31, 2020, 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. (Dollars in millions) At September 30, 2021: Americas EMEA Asia Pacific Total Amortized cost $ 5,966 $ 3,616 $ 2,105 $ 11,687 Allowance for credit losses: Beginning balance at January 1, 2021 $ 141 $ 77 $ 37 $ 255 Write-offs $ (6) $ (1) $ (7) $ (14) Recoveries — — 1 1 Additions/(releases) (20) (10) (6) (36) Other* (2) (3) 0 (5) Ending balance at September 30, 2021 $ 113 $ 64 $ 24 $ 201 (Dollars 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 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 global impacts from the COVID-19 pandemic as well as its impact on external economic models. The company’s allowance for credit losses at September 30, 2021 and December 31, 2020 reflects the qualitative process which is described further in note A, “Significant Accounting Policies” in the company’s 2020 Annual Report. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. Past Due Financing Receivables The company summarizes information about the amortized cost basis of client financing receivables, including amortized cost aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost not accruing. Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Not At September 30, 2021: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 5,966 $ 179 $ 94 $ 15 $ 88 EMEA 3,616 89 3 2 89 Asia Pacific 2,105 28 6 3 22 Total client financing receivables $ 11,687 $ 296 $ 103 $ 20 $ 200 Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) 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 of financing receivables aged greater than 90 days. (2) Of the amortized cost not accruing, there was a related allowance of $161 million and $178 million at September 30, 2021 and December 31, 2020, respectively. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2021, respectively. Credit Quality Indicators The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan. The following tables present the amortized cost basis of client financing receivables by credit quality indicator at September 30, 2021 and December 31, 2020, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduces the risk to IBM. (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2021: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2021 $ 1,667 $ 858 $ 746 $ 614 $ 498 $ 174 2020 1,177 481 663 427 411 102 2019 657 282 335 341 335 60 2018 420 146 229 108 245 74 2017 137 59 23 62 100 23 2016 and prior 25 57 23 42 57 24 Total $ 4,083 $ 1,883 $ 2,020 $ 1,595 $ 1,647 $ 458 (Dollars 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 Troubled Debt Restructurings The company did not have any significant troubled debt restructurings during the nine months ended September 30, 2021 or for the year ended December 31, 2020. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2021 | |
Leases | |
Leases | 9. Leases: Accounting for Leases as a Lessor The following table presents amounts included in the Consolidated Income Statement related to lessor activity: Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Lease income — Sales-type lease selling price $ 120 $ 154 $ 877 $ 733 Less: Carrying value of underlying assets* 49 64 211 258 Gross profit $ 71 $ 90 $ 666 $ 475 Interest income on lease receivables 44 56 142 195 Total sales-type and direct financing lease income $ 115 $ 145 $ 808 $ 670 Lease income — 38 65 137 204 Variable lease income 18 25 97 82 Total lease income $ 171 $ 235 $ 1,042 $ 956 * Excludes unguaranteed residual value. |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 9 Months Ended |
Sep. 30, 2021 | |
Intangible Assets Including Goodwill | |
Intangible Assets Including Goodwill | 10. Intangible Assets Including Goodwill: Intangible Assets The following tables present the company's intangible asset balances by major asset class. At September 30, 2021 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,864 $ (881) $ 983 Client relationships 9,170 (2,746) 6,423 Completed technology 6,077 (2,126) 3,951 Patents/trademarks 2,217 (560) 1,658 Other** 44 (33) 11 Total $ 19,372 $ (6,347) $ 13,025 At December 31, 2020 Gross Carrying Accumulated Net Carrying (Dollars in millions) 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 * Amounts as of September 30, 2021 and December 31, 2020 included a decrease in net intangible asset balances of $179 million and an increase of $279 million, respectively, due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems . The net carrying amount of intangible assets decreased $771 million during the first nine months of 2021, primarily due to intangible asset amortization, partially offset by additions of acquired intangibles and capitalized software. The aggregate intangible asset amortization expense was $646 million and $1,897 million for the third quarter and first nine months of 2021, respectively, compared to $613 million and $1,858 million for the third quarter and first nine months of 2020, respectively. In the first nine months of 2021, the company retired $581 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 was estimated to be the following at September 30, 2021: Capitalized Acquired (Dollars in millions) Software Intangibles Total Remainder of 2021 $ 171 $ 474 $ 645 2022 469 1,830 2,299 2023 268 1,517 1,786 2024 74 1,467 1,541 2025 0 1,444 1,444 Thereafter 0 5,310 5,310 Goodwill The changes in the goodwill balances by segment for the nine months ended September 30, 2021 and for the year ended December 31, 2020 were as follows: Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2021 Additions Adjustments Divestitures Adjustments* 9/30/2021 Cloud & Cognitive Software $ 43,934 $ 1,655 $ 8 $ (13) $ (374) $ 45,210 Global Business Services 6,145 695 (11) — (101) 6,727 Global Technology Services 7,245 2 — — (92) 7,155 Systems 2,293 — 0 — (7) 2,286 Total $ 59,617 $ 2,351 $ (3) $ (13) $ (575) $ 61,378 Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2020 Additions Adjustments Divestitures Adjustments* 12/31/2020 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 * Primarily driven by foreign currency translation. There were no goodwill impairment losses recorded during the first nine months of 2021 or full-year 2020 and the company has no accumulated impairment losses. Purchase price adjustments recorded in the first nine months of 2021 and full-year 2020 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. Net purchase price adjustments recorded in the first nine months of 2021 were not material. In full-year 2020, net purchase price adjustments recorded to noncurrent tax assets and liabilities were related to the Red Hat acquisition. At the date of issuance of the financial statements, the company's annual goodwill impairment analysis which is performed during the fourth quarter is not yet complete. In anticipation of the separation of Kyndryl that occurred on November 3, 2021 and the segment changes immediately prior to the separation, the company began performing the quantitative tests of goodwill impairment for all affected reporting units. Preliminary analysis indicates the fair value of the Infrastructure Services reporting unit which includes Kyndryl and is part of the GTS segment, approximates its carrying amount. This reporting unit had goodwill of $5.8 billion as of September 30, 2021. The final goodwill impairment analysis may differ significantly from the company's preliminary result. Based on the preliminary analysis, all of the other reporting units with goodwill had a fair value that was substantially in excess of its carrying value. |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2021 | |
Borrowings | |
Borrowings | 11. Borrowings: Short-Term Debt At September 30, At December 31, (Dollars in millions) 2021 2020 Commercial paper $ 900 $ — Short-term loans 43 130 Long-term debt — 6,632 7,053 Total $ 7,575 $ 7,183 The weighted-average interest rate for commercial paper at September 30, 2021 was 0.1 percent. The weighted-average interest rate for short-term loans was 3.8 percent and 5.7 percent at September 30, 2021 and December 31, 2020, respectively. Long-Term Debt Pre-Swap Borrowing Balance Balance (Dollars in millions) Maturities 9/30/2021 12/31/2020 U.S. dollar debt (weighted-average interest rate at September 30, 2021):* 0.7% 2021 $ 1,107 $ 5,499 2.6% 2022 5,682 6,233 3.4% 2023 1,589 2,395 3.3% 2024 5,018 5,029 6.9% 2025 617 631 3.3% 2026 4,498 4,370 3.0% 2027 2,222 2,219 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 1,350 5.9% 2032 600 600 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 650 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 750 750 7.1% 2096 316 316 $ 35,575 $ 41,218 Other currencies (weighted-average interest rate at September 30, 2021, in parentheses):* Euro (1.1%) 2023–2040 $ 16,222 $ 18,355 Pound sterling (2.6%) 2022 405 411 Japanese yen (0.3%) 2022–2026 1,304 1,409 Other (7.8%) 2021–2025 354 324 $ 53,859 $ 61,718 Finance lease obligations (1.4%) 2021–2030 357 296 $ 54,216 $ 62,013 Less: net unamortized discount 849 875 Less: net unamortized debt issuance costs 136 156 Add: fair value adjustment** 327 426 $ 53,558 $ 61,408 Less: current maturities 6,632 7,053 Total $ 46,926 $ 54,355 * 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 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 quarter of 2020, the company issued an aggregate of $4.1 billion of Euro fixed-rate notes and the proceeds were primarily used to early redeem outstanding fixed-rate debt which was due in 2021 in the aggregate amount of $2.9 billion. The notes were redeemed at a price equal to 100 percent of the aggregate principal plus a make-whole premium and accrued interest. The company incurred a loss of $49 million upon redemption that was recorded in other (income) and expense in the Consolidated Income Statement. In the first quarter of 2021, IBM Credit LLC early redeemed all of its outstanding fixed-rate debt in the aggregate amount of $1.75 billion with maturity dates ranging from 2021 to 2023 and deregistered with the U.S. Securities and Exchange Commission. The notes were redeemed at a price equal to 100 percent of the aggregate principal plus a make-whole premium and accrued interest. The company incurred a loss of approximately $22 million upon redemption that was recorded in other (income) and expense in the Consolidated Income Statement. Pre-swap annual contractual obligations of long-term debt outstanding at September 30, 2021, were as follows: (Dollars in millions) Total Remainder of 2021 $ 1,189 2022 6,889 2023 4,973 2024 6,497 2025 4,142 Thereafter 30,526 Total $ 54,216 Interest on Debt (Dollars in millions) For the nine months ended September 30: 2021 2020 Cost of financing $ 312 $ 346 Interest expense 852 971 Interest capitalized 3 6 Total interest paid and accrued $ 1,167 $ 1,323 Lines of Credit On June 22, 2021, the company entered into a new $2.5 billion Three-Year Credit Agreement and $7.5 billion Five-Year Credit Agreement to replace the existing $2.5 billion Three-Year and $10.25 billion Five-Year Credit Agreements. The maturity dates for the new Three-Year and Five-Year Credit Agreements (the Credit Agreements) are June 21, 2024, and June 22, 2026, respectively. The Credit Agreements permit the company and its subsidiary borrowers to borrow up to $10 billion on a revolving basis. In connection with entering into the Credit Agreements, the company also terminated its $2.5 billion 364-Day Credit Agreement which was scheduled to expire on July 1, 2021. Subject to certain conditions stated in the Credit Agreements, the company 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 company. 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. At September 30, 2021, there were no borrowings by the company, or its subsidiaries, under these credit facilities. |
Commitments
Commitments | 9 Months Ended |
Sep. 30, 2021 | |
Commitments | |
Commitments | 12. Commitments: The company’s extended lines of credit to third-party entities include unused amounts of $1.7 billion and $2.1 billion at September 30, 2021 and December 31, 2020, 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 $4.5 billion and $5.2 billion at September 30, 2021 and December 31, 2020, respectively. Approximately 35 percent of the future financing commitments reported at September 30, 2021 are in support of IBM’s managed infrastructure services unit, and upon the separation of Kyndryl on November 3, 2021, are no 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 September 30, 2021 and December 31, 2020 was not material. Changes in the company’s warranty liability for standard warranties, which are included in other accrued expenses and liabilities and other liabilities in the Consolidated Balance Sheet, and for extended warranty contracts, which are included in deferred income in the Consolidated Balance Sheet, are presented in the following tables. Standard Warranty Liability (Dollars in millions) 2021 2020 Balance at January 1 $ 83 $ 113 Current period accruals 50 56 Accrual adjustments to reflect actual experience (2) (15) Charges incurred (66) (73) Balance at September 30 $ 66 $ 80 Extended Warranty Liability (Dollars in millions) 2021 2020 Balance at January 1 $ 425 $ 477 Revenue deferred for new extended warranty contracts 71 115 Amortization of deferred revenue (154) (169) Other* (9) (3) Balance at September 30 $ 334 $ 419 Current portion $ 171 $ 196 Noncurrent portion $ 163 $ 223 * Other primarily consists of foreign currency translation adjustments. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2021 | |
Contingencies | |
Contingencies | 13. Contingencies: As a company with a substantial employee population and with clients in more than 175 countries, IBM is involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The company is a leader in the information technology industry and, as such, has been and will continue to be subject to claims challenging its IP rights and associated products and offerings, including claims of copyright and patent infringement and violations of trade secrets and other IP rights. In addition, the company enforces its own IP against infringement, through license negotiations, lawsuits or otherwise. 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 quarter ended September 30, 2021 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. In August 2021, the parties reached an agreement to settle the case, which has been approved by the bankruptcy court. 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 was settled in August 2021. 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. In February 2021, the Technology & Construction Court in London rejected the majority of CISGIL’s claims and ruled in IBM’s favor on its counterclaim. The court’s decision required IBM to pay approximately $20 million in damages, plus interest and litigation costs. CISGIL was granted permission to appeal and the matter is now pending at the Court of Appeal in London. On June 8, 2021, IBM sued GlobalFoundries U.S. Inc. (GF) in New York State Supreme Court for claims including fraud and breach of contract relating to a long-term strategic relationship between IBM and GF for researching, developing, and manufacturing advanced semiconductor chips for IBM. GF walked away from its obligations and IBM is now suing to recover amounts paid to GF, and other compensatory and punitive damages, totaling more than 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 $400 million. The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. |
Equity Activity
Equity Activity | 9 Months Ended |
Sep. 30, 2021 | |
Equity Activity | |
Equity Activity | 14. Equity Activity: Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2021: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (114) $ (120) $ (234) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ 109 $ (28) $ 82 Reclassification of (gains)/losses to: Cost of services (12) 3 (9) Cost of sales (1) 1 (1) Cost of financing 6 (1) 4 SG&A expense 1 0 1 Other (income) and expense 22 (6) 17 Interest expense 16 (4) 12 Total unrealized gains/(losses) on cash flow hedges $ 141 $ (35) $ 106 Retirement-related benefit plans (1): Prior service costs/(credits) $ 0 $ 0 $ 0 Net (losses)/gains arising during the period 1 0 1 Curtailments and settlements 13 (4) 9 Amortization of prior service (credits)/costs 3 0 3 Amortization of net (gains)/losses 638 (174) 464 Total retirement-related benefit plans $ 656 $ (178) $ 478 Other comprehensive income/(loss) $ 683 $ (333) $ 350 (1) These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (439) $ 247 $ (192) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ (1) $ 0 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ (1) Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (32) $ 8 $ (24) Reclassification of (gains)/losses to: Cost of services (10) 2 (7) Cost of sales 4 (1) 3 Cost of financing 6 (2) 5 SG&A expense 5 (1) 4 Other (income) and expense (93) 23 (70) Interest expense 19 (5) 14 Total unrealized gains/(losses) on cash flow hedges $ (101) $ 26 $ (75) Retirement-related benefit plans (1): Prior service costs/(credits) $ (1) $ 0 $ 0 Net (losses)/gains arising during the period 0 0 0 Curtailments and settlements 21 (6) 14 Amortization of prior service (credits)/costs 0 1 1 Amortization of net (gains)/losses 586 (161) 425 Total retirement-related benefit plans $ 607 $ (167) $ 440 Other comprehensive income/(loss) $ 66 $ 106 $ 172 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2021: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 463 $ (304) $ 160 Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ 262 $ (66) $ 196 Reclassification of (gains)/losses to: Cost of services (33) 8 (25) Cost of sales 30 (8) 23 Cost of financing 17 (4) 13 SG&A expense 32 (8) 24 Other (income) and expense 187 (47) 140 Interest expense 48 (12) 36 Total unrealized gains/(losses) on cash flow hedges $ 545 $ (138) $ 407 Retirement-related benefit plans (1): Prior service costs/(credits) $ 0 $ 0 $ 0 Net (losses)/gains arising during the period 23 4 27 Curtailments and settlements 46 (14) 32 Amortization of prior service (credits)/costs 8 0 8 Amortization of net (gains)/losses 1,929 (526) 1,403 Total retirement-related benefit plans $ 2,006 $ (537) $ 1,469 Other comprehensive income/(loss) $ 3,014 $ (978) $ 2,035 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (1,354) $ 260 $ (1,094) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (249) $ 63 $ (186) Reclassification of (gains)/losses to: Cost of services (18) 5 (14) Cost of sales (14) 4 (10) Cost of financing 21 (5) 16 SG&A expense (12) 3 (9) Other (income) and expense (74) 19 (55) Interest expense 60 (15) 45 Total unrealized gains/(losses) on cash flow hedges $ (285) $ 73 $ (212) Retirement-related benefit plans (1): Prior service costs/(credits) $ (5) $ 1 $ (3) Net (losses)/gains arising during the period 65 (24) 41 Curtailments and settlements 42 (12) 30 Amortization of prior service (credits)/costs 1 2 3 Amortization of net (gains)/losses 1,722 (473) 1,249 Total retirement-related benefit plans $ 1,826 $ (507) $ 1,319 Other comprehensive income/(loss) $ 187 $ (175) $ 12 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Accumulated Other Comprehensive Income/(Loss) (net of tax) Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2021 $ (456) $ (4,665) $ (24,216) $ 0 $ (29,337) Other comprehensive income before reclassifications 196 160 26 0 382 Amount reclassified from accumulated other comprehensive income 211 — 1,442 — 1,654 Total change for the period $ 407 $ 160 $ 1,469 $ 0 $ 2,035 September 30, 2021 $ (49) $ (4,505) $ (22,747) $ (1) $ (27,302) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2020 $ (179) $ (3,700) $ (24,718) $ 0 $ (28,597) Other comprehensive income before reclassifications (186) (1,094) 37 0 (1,242) Amount reclassified from accumulated other comprehensive income (27) — 1,281 — 1,255 Total change for the period $ (212) $ (1,094) $ 1,319 $ 0 $ 12 September 30, 2020 $ (391) $ (4,794) $ (23,399) $ 0 $ (28,584) * |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2021 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 15. Derivative Financial Instruments: The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity and commodity price changes and client credit risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the company’s lease and other financial assets and the interest rates associated with its financing debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchange rate fluctuations. In the Consolidated Balance Sheet, the company does not offset derivative assets against liabilities in master netting arrangements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. The amount recognized in accounts payable for the obligation to return cash collateral was $24 million at September 30, 2021 and no amount was recognized at December 31, 2020. No amount was recognized for the right to reclaim cash collateral at September 30, 2021 and December 31, 2020. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in restricted cash in the Consolidated Balance Sheet. No amount was rehypothecated at September 30, 2021 and December 31, 2020. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at September 30, December 31, In its hedging programs, the company may use forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, equity swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments. A brief description of the major hedging programs, categorized by underlying risk, follows. Interest Rate Risk Fixed and Variable Rate Borrowings The company issues debt in the global capital markets to fund its operations and financing business. Access to cost-effective financing can result in interest rate mismatches with the underlying assets. To manage these mismatches and to reduce overall interest cost, the company may use interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). At September 30, 2021 and December 31, 2020, the total notional amount of the company’s interest- rate swaps was $0.4 billion and $3.0 billion, respectively. In the first quarter of 2021, in addition to the scheduled swap maturities, the company terminated $1.25 billion of interest-rate swaps concurrent with the early redemption of the underlying hedged fixed-rate debt. The weighted-average remaining maturity of these instruments at September 30, 2021 and December 31, 2020 was approximately 1.5 years and 1.2 years, respectively. These interest-rate contracts were accounted for as fair value hedges. The company did not have any cash flow hedges relating to this program outstanding at September 30, 2021 and December 31, 2020. 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. There were no instruments outstanding at September 30, 2021 and December 31, 2020. In connection with cash flow hedges of forecasted interest payments related to the company's borrowings, the company recorded net losses of $161 million and $174 million (before taxes) at September 30, 2021 and December 31, 2020, respectively, in AOCI. The company estimates that $18 million (before taxes) of the deferred net losses on derivatives in AOCI at September 30, 2021 will be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying interest payments. Foreign Exchange Risk Long-Term Investments in Foreign Subsidiaries (Net Investment) A large portion of the company’s foreign currency denominated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with respect to the U.S. dollar. At September 30, 2021 and December 31, 2020, the carrying value of debt designated as hedging instruments was $15.5 billion and $16.4 billion, respectively. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. At September 30, 2021 and December 31, 2020, the total notional amount of derivative instruments designated as net investment hedges was $7.5 billion and $7.2 billion, respectively. At September 30, 2021 and December 31, 2020, the weighted-average remaining maturity of these instruments was approximately 0.1 years and 0.3 years, respectively. Anticipated Royalties and Cost Transactions The company’s operations generate significant nonfunctional currency, third-party vendor payments and intercompany payments for royalties and goods and services among the company’s non-U.S. subsidiaries and with the company. In anticipation of these foreign currency cash flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum remaining length of time over which the company hedged its exposure is approximately 2.9 years. At September 30, 2021 and December 31, 2020, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $7.5 billion and $8.0 billion, respectively. At September 30, 2021 and December 31, 2020, the weighted-average remaining maturity of these instruments was approximately 0.6 years and 0.7 years, respectively. At September 30, 2021 and December 31, 2020, in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net gains of $294 million and net losses of $192 million (before taxes), respectively, in AOCI. The company estimates that $216 million (before taxes) of deferred net gains on derivatives in AOCI at September 30, 2021 will be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Foreign Currency Denominated Borrowings The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps are accounted for as cash flow hedges. At September 30, 2021, the maximum length of time remaining over which the company hedged its exposure is approximately 6.4 years. At September 30, 2021 and December 31, 2020, the total notional amount of cross-currency swaps designated as cash flow hedges of foreign currency denominated debt was $1.5 billion at both periods. In connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses of $191 million and $236 million (before taxes) at September 30, 2021 and December 31, 2020, respectively, in AOCI. The company estimates that $25 million (before taxes) of deferred net losses on derivatives in AOCI at September 30, 2021 will be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying exposure. Subsidiary Cash and Foreign Currency Asset/Liability Management The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition, the company uses foreign exchange forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are generally less than one year. The changes in the fair values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Income Statement. At September 30, 2021 and December 31, 2020, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $7.8 billion and $6.8 billion, respectively. Equity Risk Management The company is exposed to market price changes in certain broad market indices and in the company’s own stock primarily related to certain obligations to employees. Changes in the overall value of these employee compensation obligations are recorded in SG&A expense in the Consolidated Income Statement. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Income Statement. At September 30, 2021 and December 31, 2020, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.4 billion and $1.3 billion, respectively. Cumulative Basis Adjustments for Fair Value Hedges At September 30, 2021 and December 31, 2020, the following amounts were recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges: September 30, December 31, (Dollars in millions) 2021 2020 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 $ (752) $ (2,097) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* (327) (424) * The Effect of Derivative Instruments in the Consolidated Income Statement The total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value hedges, cash flow hedges, net investment hedges and derivatives not designated as hedging instruments are recorded and the total effect of hedge activity on these income and expense line items are as follows: Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the three months ended September 30: 2021 2020 2021 2020 Cost of services $ 7,770 $ 7,357 $ 12 $ 10 Cost of sales 1,513 1,601 1 (4) Cost of financing 165 172 (1) 3 SG&A expense 4,860 4,647 (14) 58 Other (income) and expense 234 253 (7) 101 Interest expense 291 323 (2) 8 Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the three months ended September 30: Line Item 2021 2020 2021 2020 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 0 $ 4 $ 7 Interest expense 0 0 11 20 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 15 8 N/A N/A Equity contracts SG&A expense (13) 63 N/A N/A Total $ 3 $ 71 $ 15 $ 27 Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the three months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2021 2020 Line Item 2021 2020 2021 2020 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts 109 (32) Cost of services 12 10 — — Cost of sales 1 (4) — — Cost of financing (5) (5) — — SG&A expense (1) (5) — — Other (income) and expense (22) 93 — — Interest expense (13) (15) — — Instruments in net investment hedges (4): Foreign exchange contracts 477 (983) Cost of financing — — 1 2 Interest expense — — 3 7 Total $ 587 $ (1,015) $ (32) $ 69 $ 5 $ 9 (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 Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the nine months ended September 30: 2021 2020 2021 2020 Cost of services $ 23,416 $ 22,720 $ 33 $ 18 Cost of sales 4,792 4,964 (30) 14 Cost of financing 506 517 1 9 SG&A expense 15,368 15,849 88 24 Other (income) and expense 911 614 (246) 92 Interest expense 852 971 3 24 Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the nine months ended September 30: Line Item 2021 2020 2021 2020 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 20 $ 15 $ (3) Interest expense (1) 57 40 (9) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (59) 18 N/A N/A Equity contracts SG&A expense 120 12 N/A N/A Total $ 59 $ 108 $ 55 $ (13) Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the nine months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2021 2020 Line Item 2021 2020 2021 2020 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (4) $ (3) $ — $ — Interest expense (10) (10) — — Foreign exchange contracts 262 (249) Cost of services 33 18 — — Cost of sales (30) 14 — — Cost of financing (14) (18) — — SG&A expense (32) 12 — — Other (income) and expense (187) 74 — — Interest expense (38) (50) — — Instruments in net investment hedges (4): Foreign exchange contracts 1,207 (1,033) Cost of financing — — 4 13 Interest expense — — 11 37 Total $ 1,470 $ (1,281) $ (282) $ 37 $ 15 $ 50 (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 three and nine months ended September 30, 2021 and 2020, there were no material gains or losses excluded from the assessment of hedge effectiveness (for fair value or cash flow hedges), or associated with an underlying exposure that did not or was not expected to occur (for cash flow hedges); nor are there any anticipated in the normal course of business. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2021 | |
Stock-Based Compensation | |
Stock-Based Compensation | 16. Stock-Based Compensation: Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations. Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Cost $ 45 $ 42 $ 127 $ 109 Selling, general and administrative 156 129 431 401 Research, development and engineering 61 50 160 147 Pre-tax stock-based compensation cost $ 262 $ 222 $ 719 $ 658 Income tax benefits (58) (50) (179) (146) Total net stock-based compensation cost $ 204 $ 172 $ 540 $ 512 Pre-tax stock-based compensation cost for the three months ended September 30, 2021 increased $40 million compared to the corresponding period in the prior year. This was due to increases from performance share units ($21 million), conversion of stock options previously issued by acquired entities ($15 million) and restricted stock units ($4 million). Pre-tax stock-based compensation cost for the nine months ended September 30, 2021 increased $61 million compared to the corresponding period in the prior year. This was due to increases related to performance share units ($29 million), restricted stock units ($19 million) and conversion of stock options previously issued by acquired entities ($13 million). Total unrecognized compensation cost related to non-vested awards at September 30, 2021 was $1.6 billion and is expected to be recognized over a weighted-average period of approximately 2.5 years. Capitalized stock-based compensation cost was not material at September 30, 2021 and 2020. In connection with the separation of Kyndryl, as required by the company’s stock-based incentive award plans, the number of shares underlying remaining unvested stock awards will be adjusted. The company will also adjust the exercise price and number of shares underlying outstanding stock options. All adjustments are made with the intent to preserve the intrinsic value of each award immediately before and after the separation. |
Retirement-Related Benefits
Retirement-Related Benefits | 9 Months Ended |
Sep. 30, 2021 | |
Retirement-Related Benefits | |
Retirement-Related Benefits | 17. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following tables provide the pre-tax cost for all retirement-related plans. Yr. to Yr. (Dollars in millions) Percent For the three months ended September 30: 2021 2020 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 647 $ 610 6.0 % Nonpension postretirement plans — 45 50 (10.5) Total $ 692 $ 660 4.8 % Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2021 2020 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 1,972 $ 1,789 10.2 % Nonpension postretirement plans — 134 151 (11.8) Total $ 2,106 $ 1,941 8.5 % The following tables provide the components of the cost/(income) for the company’s pension plans. Cost/(Income) of Pension Plans (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended September 30: 2021 2020 2021 2020 Service cost $ — $ — $ 94 $ 99 Interest cost (1) 277 375 109 142 Expected return on plan assets (1) (451) (542) (286) (323) Amortization of prior service costs/(credits) (1) 4 4 (2) (5) Recognized actuarial losses (1) 249 207 365 360 Curtailments and settlements (1) — — 13 21 Multi-employer plans — — 3 7 Other costs/(credits) (1) — — 7 6 Total net periodic pension (income)/cost of defined benefit plans $ 80 $ 44 $ 303 $ 307 Cost of defined contribution plans 152 148 112 111 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 232 $ 192 $ 415 $ 418 (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2021 2020 2021 2020 Service cost $ — $ — $ 281 $ 289 Interest cost (1) 832 1,126 332 408 Expected return on plan assets (1) (1,352) (1,627) (867) (943) Amortization of prior service costs/(credits) (1) 12 12 (8) (14) Recognized actuarial losses (1) 747 622 1,110 1,041 Curtailments and settlements (1) — — 46 42 Multi-employer plans — — 17 22 Other costs/(credits) (1) — — 21 20 Total net periodic pension (income)/cost of defined benefit plans $ 239 $ 133 $ 933 $ 865 Cost of defined contribution plans 455 457 345 334 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 694 $ 590 $ 1,278 $ 1,200 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. The following tables provide the components of the cost for the company’s nonpension postretirement plans. Cost of Nonpension Postretirement Plans (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended September 30: 2021 2020 2021 2020 Service cost $ 2 $ 2 $ 1 $ 1 Interest cost (1) 16 26 8 8 Expected return on plan assets (1) — — (1) (1) Amortization of prior service costs/(credits) (1) 1 1 0 0 Recognized actuarial losses (1) 13 7 4 5 Curtailments and settlements (1) — — — — Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 32 $ 36 $ 13 $ 14 (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2021 2020 2021 2020 Service cost $ 5 $ 7 $ 4 $ 4 Interest cost (1) 49 77 25 26 Expected return on plan assets (1) — — (2) (3) Amortization of prior service costs/(credits) (1) 3 3 0 0 Recognized actuarial losses (1) 39 22 12 16 Curtailments and settlements (1) — — 0 0 Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 96 $ 109 $ 38 $ 43 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. The company does not anticipate any significant changes to the expected plan contributions in 2021 from the amounts disclosed in the 2020 Annual Report. The table below includes contributions to the following plans: (Dollars in millions) Plan Contributions For the nine months ended September 30: 2021 2020 U.S. and non-U.S. nonpension postretirement benefit plans $ 269 $ 265 Non-U.S. DB and multi-employer plans * 48 127 Total plan contributions $ 317 $ 392 * Amounts reported net of refunds. During the nine months ended September 30, 2021 and 2020, the company contributed $307 million and $315 million of U.S. Treasury Securities, respectively, to the non-U.S. DB plans and U.S. nonpension postretirement benefit plan. Additionally, during the nine months ended September 30, 2021 and 2020, the company contributed $311 million and $160 million in U.S. Treasury securities, respectively, to the Active Medical Trust. Contributions made with U.S. Treasury securities are considered a non-cash transaction. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2021 | |
Subsequent Events | |
Subsequent Events | 18. Subsequent Events On November 3, 2021, the company completed the separation of its managed infrastructure services business into a new public company, Kyndryl. In addition, immediately preceding the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. Refer to note 1, “Basis of Presentation” for additional information. On October 15, 2021, in preparation for the separation, Kyndryl completed the offering of $2.4 billion in aggregate principal amount of senior unsecured fixed-rate notes with maturities ranging from five On October 26, 2021, the company announced that the Board of Directors approved a quarterly dividend of $1.64 per common share. The dividend is payable December 10, 2021 to shareholders of record on November 10, 2021. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
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). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances, including the macroeconomic impacts of the COVID-19 pandemic. As a result, actual results may be different from these estimates. On November 3, 2021, the company completed the previously announced separation of its managed infrastructure services unit into a new public company with the distribution of 80.1 percent of the outstanding common stock of Kyndryl Holdings, Inc. (Kyndryl) to IBM stockholders on a pro rata basis. To effect the separation, IBM stockholders received one Effective immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes will impact the company’s reportable segments beginning in the fourth quarter of 2021 but will not impact the company’s Consolidated Financial Statements. Since these organizational changes did not occur until the fourth quarter of 2021, the periods presented in this Form 10-Q are reported under the historical segments. See note 4, "Segments" for additional information. The continuing operations provision for income taxes for the third quarter of 2021 was Noncontrolling interest amounts of $8.3 million and $3.4 million, net of tax, for the three months ended September 30, 2021 and 2020, respectively, and $22.4 million and $14.7 million, net of tax, for the nine months ended September 30, 2021 and 2020, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2020 Annual Report. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior-period amounts have been reclassified to conform to the current-period presentation. This is annotated where applicable. |
Accounting Changes | New Standards to be Implemented Revenue Contracts with Customers Acquired in a Business Combination Standard/Description Revenue from Contracts with Customers Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Lessors-Certain Leases with Variable Lease Payments Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Reference Rate Reform Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters rate alternative, without any impact to the Consolidated Income Statement. The company has evaluated the replacement of the LIBOR benchmark on its interest rate risk management activities and does not expect it to have a material impact in the consolidated financial results. 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 |
Revenue | 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 | 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. |
Financial Assets and Liabilities Measured At Fair Value | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The company classifies certain assets and liabilities based on the following fair value hierarchy: ● Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and ● Level 3 – Unobservable inputs for the asset or liability. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument. In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the “base valuations” calculated using the methodologies described below for several parameters that market participants would consider in determining fair value: ● Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. ● Credit risk adjustments are applied to reflect the company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the company’s own credit risk as observed in the credit default swap market. The company holds investments primarily in time deposits, certificates of deposit, and U.S. government debt that are designated as available-for-sale. The primary objective of the company’s cash and debt investment portfolio is to maintain principal by investing in very liquid and highly rated investment grade securities. The company’s standard practice is to hold all of its debt security investments classified as available-for-sale until maturity. No impairments for credit losses and no material non-credit impairments were recorded for the three and nine months ended September 30, 2021 and 2020, respectively. Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for non-financial assets depend on the type of asset. There were no material impairments of non-financial assets for the three and nine months ended September 30, 2021 and 2020, respectively. |
Financial Assets and Liabilities Not Measured At Fair Value | Financial Assets and Liabilities Not Measured at Fair Value Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt and including short-term finance lease liabilities) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt which would be classified as Level 2. Loans and Long-Term Receivables Fair values are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remaining maturities. At September 30, 2021 and December 31, 2020, 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 $46,926 million and $54,355 million, and the estimated fair value was $52,150 million and $61,598 million at September 30, 2021 and December 31, 2020, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Financing Receivables | Financing receivables primarily consist of client loan and installment payment receivables (loans) and investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are generally for terms up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Systems products and are for terms ranging generally from two 30 |
Financing Receivables by Portfolio Segment | The following tables present the amortized cost basis of client financing receivables at September 30, 2021 and December 31, 2020, 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. |
Allowance for Credit Losses - Financing Receivables | IBM continues to monitor the global impacts from the COVID-19 pandemic as well as its impact on external economic models. The company’s allowance for credit losses at September 30, 2021 and December 31, 2020 reflects the qualitative process which is described further in note A, “Significant Accounting Policies” in the company’s 2020 Annual Report. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. |
Impairment | At the date of issuance of the financial statements, the company's annual goodwill impairment analysis which is performed during the fourth quarter is not yet complete. In anticipation of the separation of Kyndryl that occurred on November 3, 2021 and the segment changes immediately prior to the separation, the company began performing the quantitative tests of goodwill impairment for all affected reporting units. Preliminary analysis indicates the fair value of the Infrastructure Services reporting unit which includes Kyndryl and is part of the GTS segment, approximates its carrying amount. This reporting unit had goodwill of $5.8 billion as of September 30, 2021. The final goodwill impairment analysis may differ significantly from the company's preliminary result. |
Commitments | 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” in the company’s 2020 Annual Report 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. |
Contingencies | The company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any recorded liabilities, including any changes to such liabilities for the quarter ended September 30, 2021 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. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in restricted cash in the Consolidated Balance Sheet. |
Derivative Contracts, Swaps and Options | In its hedging programs, the company may use forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, equity swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments. |
Derivatives, Methods of Accounting, Hedge Effectiveness | (3) The company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period. |
Stock-Based Compensation | Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. In connection with the separation of Kyndryl, as required by the company’s stock-based incentive award plans, the number of shares underlying remaining unvested stock awards will be adjusted. The company will also adjust the exercise price and number of shares underlying outstanding stock options. All adjustments are made with the intent to preserve the intrinsic value of each award immediately before and after the separation |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Revenue Recognition | |
Schedule of disaggregation of revenue | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Cloud & Data Platforms $ 3,046 $ 2,775 $ 9,032 $ 8,108 Cognitive Applications 1,314 1,317 3,938 3,745 Transaction Processing Platforms 1,332 1,461 4,257 4,687 Total Cloud & Cognitive Software $ 5,692 $ 5,553 $ 17,227 $ 16,540 Consulting 2,292 1,966 6,717 5,973 Application Management 1,847 1,758 5,439 5,332 Global Process Services 287 240 846 687 Total Global Business Services $ 4,427 $ 3,965 $ 13,002 $ 11,992 Infrastructure & Cloud Services 4,681 4,933 14,370 14,663 Technology Support Services 1,473 1,528 4,496 4,582 Total Global Technology Services $ 6,154 $ 6,462 $ 18,866 $ 19,245 Systems Hardware 796 919 3,294 3,404 Operating Systems Software 312 338 957 1,074 Total Systems $ 1,107 $ 1,257 $ 4,251 $ 4,477 Global Financing* 220 273 702 837 Other 18 50 45 163 Total revenue $ 17,618 $ 17,560 $ 54,093 $ 53,253 * Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. |
Schedule of disaggregation of revenue by geography | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Americas $ 8,217 $ 8,139 $ 25,216 $ 24,755 Europe/Middle East/Africa 5,593 5,564 17,272 16,775 Asia Pacific 3,808 3,857 11,605 11,723 Total $ 17,618 $ 17,560 $ 54,093 $ 53,253 |
Schedule of reconciliation of contract balances | At September 30, At December 31, (Dollars in millions) 2021 2020 Notes and accounts receivable — $ 6,609 $ 7,132 Contract assets* 566 497 Deferred income (current) 12,264 12,833 Deferred income (noncurrent) 3,965 4,301 * Included within prepaid expenses and other current assets in the Consolidated Balance Sheet. |
Schedule of notes and accounts receivable - trade allowance for credit losses | (Dollars in millions) January 1, 2021 Additions / (Releases) Write-offs Other* September 30, 2021 $ 351 $ (44) $ (30) $ 0 $ 277 January 1, 2020 Additions / (Releases) Write-offs Other* December 31, 2020 $ 316 $ 76 $ (46) $ 5 $ 351 * . |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Segments | |
Revenue and Pre-tax Income by Segment | Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the three months ended September 30, 2021: External revenue $ 5,692 $ 4,427 $ 6,154 $ 1,107 $ 220 $ 17,601 Internal revenue 764 53 317 176 153 1,463 Total revenue $ 6,456 $ 4,480 $ 6,471 $ 1,283 $ 373 $ 19,064 Pre-tax income/(loss) from continuing operations $ 1,675 $ 587 $ 383 $ (207) $ 206 $ 2,644 Revenue year-to-year change 0.4 % 11.6 % (4.5) % (14.3) % (22.3) % (0.7) % Pre-tax income year-to-year change (8.7) % 3.0 % (4.1) % nm 5.1 % (10.7) % Pre-tax income/(loss) margin 25.9 % 13.1 % 5.9 % (16.1) % 55.1 % 13.9 % For the three months ended September 30, 2020: External revenue $ 5,553 $ 3,965 $ 6,462 $ 1,257 $ 273 $ 17,510 Internal revenue 875 49 312 240 208 1,683 Total revenue $ 6,428 $ 4,014 $ 6,774 $ 1,497 $ 480 $ 19,193 Pre-tax income/(loss) from continuing operations $ 1,834 $ 570 $ 399 $ (37) $ 196 $ 2,962 Pre-tax income/(loss) margin 28.5 % 14.2 % 5.9 % (2.5) % 40.7 % 15.4 % Cloud & Global Global Cognitive Business Technology Global Total (Dollars in millions) Software Services Services Systems Financing Segments For the nine months ended September 30, 2021: External revenue $ 17,227 $ 13,002 $ 18,866 $ 4,251 $ 702 $ 54,047 Internal revenue 2,322 166 956 606 581 4,631 Total revenue $ 19,549 $ 13,168 $ 19,822 $ 4,857 $ 1,283 $ 58,678 Pre-tax income/(loss) from continuing operations $ 4,822 $ 1,349 $ 903 $ (33) $ 618 $ 7,659 Revenue year-to-year change 3.0 % 8.5 % (1.7) % (4.9) % (14.3) % 1.4 % Pre-tax income year-to-year change 7.8 % 12.1 % 91.9 % nm 9.1 % 14.2 % Pre-tax income/(loss) margin 24.7 % 10.2 % 4.6 % (0.7) % 48.1 % 13.1 % For the nine months ended September 30, 2020: External revenue $ 16,540 $ 11,992 $ 19,245 $ 4,477 $ 837 $ 53,090 Internal revenue 2,431 150 911 628 660 4,780 Total revenue $ 18,971 $ 12,142 $ 20,155 $ 5,106 $ 1,497 $ 57,870 Pre-tax income/(loss) from continuing operations $ 4,475 $ 1,203 $ 471 $ (7) $ 566 $ 6,708 Pre-tax income/(loss) margin 23.6 % 9.9 % 2.3 % (0.1) % 37.8 % 11.6 % |
Reconciliation of segment revenue and pre-tax income to IBM as reported | Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended September 30: 2021 2020 Revenue: Total reportable segments $ 19,064 $ 19,193 Other — divested businesses (3) 4 Other revenue 20 46 Eliminations of internal transactions (1,463) (1,683) Total consolidated revenue $ 17,618 $ 17,560 Pre-tax income from continuing operations: Total reportable segments $ 2,644 $ 2,962 Amortization of acquired intangible assets (475) (459) Acquisition-related (charges)/income (4) (1) Non-operating retirement-related (costs)/income (328) (291) Separation-related charges (277) — Elimination of internal transactions (57) (158) Other — divested businesses (10) (20) Unallocated corporate amounts (175) (206) Total pre-tax income from continuing operations $ 1,319 $ 1,827 Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2021 2020 Revenue: Total reportable segments $ 58,678 $ 57,870 Other — divested businesses (2) 36 Other revenue 47 127 Eliminations of internal transactions (4,631) (4,780) Total consolidated revenue $ 54,093 $ 53,253 Pre-tax income from continuing operations: Total reportable segments $ 7,659 $ 6,708 Amortization of acquired intangible assets (1,389) (1,404) Acquisition-related (charges)/income (37) (3) Non-operating retirement-related (costs)/income (998) (829) Separation-related charges (513) — Eliminations of internal transactions (269) (334) Other — divested businesses (34) (17) Unallocated corporate amounts (643) (773) Total pre-tax income from continuing operations $ 3,776 $ 3,348 |
Acquisitions & Divestitures (Ta
Acquisitions & Divestitures (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
2021 Acquisitions | |
Acquisitions & Divestitures | |
Business acquisition, purchase price allocation | Amortization Other (Dollars in millions) Life (in years) Turbonomic Acquisitions Current assets $ 126 $ 101 Property, plant and equipment/noncurrent assets — 6 Intangible assets: Goodwill N/A 1,439 912 Client relationships 4 10 290 173 Completed technology 4 7 117 134 Trademarks 1 6 18 29 Total assets acquired $ 1,990 $ 1,356 Current liabilities 49 59 Noncurrent liabilities 113 76 Total liabilities assumed $ 161 $ 135 Total purchase price $ 1,829 $ 1,220 |
Earnings Per Share of Common _2
Earnings Per Share of Common Stock (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Earnings Per Share of Common Stock | |
Computation of basic and diluted earnings per share | (Dollars in millions except per share amounts) For the three months ended September 30: 2021 2020 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 897,097,073 891,381,032 Add — Incremental shares under stock-based compensation plans 6,946,467 4,595,327 Add — Incremental shares associated with contingently issuable shares 1,909,573 1,315,874 Number of shares on which diluted earnings per share is calculated 905,953,114 897,292,233 Income from continuing operations $ 1,130 $ 1,698 Income/(loss) from discontinued operations, net of tax — (1) Net income on which basic earnings per share is calculated $ 1,130 $ 1,698 Income from continuing operations $ 1,130 $ 1,698 Net income applicable to contingently issuable shares — — Income from continuing operations on which diluted earnings per share is calculated $ 1,130 $ 1,698 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated — (1) Net income on which diluted earnings per share is calculated $ 1,130 $ 1,698 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 1.25 $ 1.89 Discontinued operations — 0.00 Total $ 1.25 $ 1.89 Basic Continuing operations $ 1.26 $ 1.90 Discontinued operations — 0.00 Total $ 1.26 $ 1.90 (Dollars in millions except per share amounts) For the nine months ended September 30: 2021 2020 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 895,257,004 889,595,181 Add — Incremental shares under stock-based compensation plans 7,000,190 4,875,369 Add — Incremental shares associated with contingently issuable shares 1,720,345 1,286,300 Number of shares on which diluted earnings per share is calculated 903,977,539 895,756,850 Income from continuing operations $ 3,411 $ 4,237 Income/(loss) from discontinued operations, net of tax (1) (2) Net income on which basic earnings per share is calculated $ 3,410 $ 4,234 Income from continuing operations $ 3,411 $ 4,237 Net income applicable to contingently issuable shares — (2) Income from continuing operations on which diluted earnings per share is calculated $ 3,411 $ 4,234 Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated (1) (2) Net income on which diluted earnings per share is calculated $ 3,410 $ 4,232 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ 3.77 $ 4.72 Discontinued operations 0.00 0.00 Total $ 3.77 $ 4.72 Basic Continuing operations $ 3.81 $ 4.76 Discontinued operations 0.00 0.00 Total $ 3.81 $ 4.76 |
Financial Assets & Liabilities
Financial Assets & Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Financial Assets & Liabilities | |
Financial assets and financial liabilities measured at fair value on a recurring basis | Fair Value Hierarchy At September 30, 2021 At December 31, 2020 (Dollars in millions) Level Assets (7) Liabilities (8) Assets (7) Liabilities (8) Cash equivalents: (1) Time deposits and certificates of deposit (2) 2 $ 3,030 $ N/A $ 7,668 $ N/A Money market funds 1 130 N/A 148 N/A U.S. government securities (2) 2 — N/A 500 N/A Total cash equivalents $ 3,160 $ N/A $ 8,316 $ N/A Equity investments (3) 1 0 N/A 2 N/A Debt securities-current (2)(4) 2 600 N/A 600 N/A Debt securities-noncurrent (2)(5) 2 6 N/A 7 N/A Derivatives designated as hedging instruments: Interest rate contracts 2 16 — 100 — Foreign exchange contracts 2 367 95 111 580 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 42 38 13 47 Equity contracts (6) 1,2 — 16 12 — Total $ 4,191 $ 149 $ 9,161 $ 627 (1) Included within cash and cash equivalents in the Consolidated Balance Sheet. (2) Available-for-sale debt securities with carrying values that approximate fair value. (3) Included within investments and sundry assets in the Consolidated Balance Sheet. (4) U.S. treasury bills that are reported within marketable securities in the Consolidated Balance Sheet. (5) Primarily includes government debt securities that are reported within investments and sundry assets in the Consolidated Balance Sheet. (6) Level 1 includes immaterial amounts related to equity futures contracts. (7) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Balance Sheet at September 30, 2021 were $373 million and $52 million, respectively, and at December 31, 2020 were $85 million and $151 million, respectively. (8) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2021 were $69 million and $80 million, respectively, and at December 31, 2020 were $587 million and $40 million , respectively. |
Financing Receivables (Tables)
Financing Receivables (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Financing Receivables | |
Summary of the components of financing receivables | Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) Receivables Direct Financing Financing At September 30, 2021: (Loans) Leases Receivables Total Financing receivables, gross $ 8,708 $ 3,216 $ 727 $ 12,651 Unearned income (355) (228) 0 (583) Residual value* — 345 — 345 Amortized cost $ 8,353 $ 3,333 $ 727 $ 12,413 Allowance for credit losses (135) (65) (6) (207) Total financing receivables, net $ 8,218 $ 3,268 $ 721 $ 12,207 Current portion $ 5,022 $ 1,419 $ 721 $ 7,161 Noncurrent portion $ 3,196 $ 1,850 $ — $ 5,046 Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial (Dollars in millions) 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 |
Schedule of financing receivables and allowance for credit losses by class | (Dollars in millions) At September 30, 2021: Americas EMEA Asia Pacific Total Amortized cost $ 5,966 $ 3,616 $ 2,105 $ 11,687 Allowance for credit losses: Beginning balance at January 1, 2021 $ 141 $ 77 $ 37 $ 255 Write-offs $ (6) $ (1) $ (7) $ (14) Recoveries — — 1 1 Additions/(releases) (20) (10) (6) (36) Other* (2) (3) 0 (5) Ending balance at September 30, 2021 $ 113 $ 64 $ 24 $ 201 (Dollars 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 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. |
Schedule of past due financing receivables | Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Not At September 30, 2021: Cost > 90 Days (1) Accruing (1) Accruing Accruing (2) Americas $ 5,966 $ 179 $ 94 $ 15 $ 88 EMEA 3,616 89 3 2 89 Asia Pacific 2,105 28 6 3 22 Total client financing receivables $ 11,687 $ 296 $ 103 $ 20 $ 200 Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) 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 of financing receivables aged greater than 90 days. (2) Of the amortized cost not accruing, there was a related allowance of $161 million and $178 million at September 30, 2021 and December 31, 2020, respectively. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2021, respectively. |
Schedule of amortized cost by credit quality indicator | (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2021: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2021 $ 1,667 $ 858 $ 746 $ 614 $ 498 $ 174 2020 1,177 481 663 427 411 102 2019 657 282 335 341 335 60 2018 420 146 229 108 245 74 2017 137 59 23 62 100 23 2016 and prior 25 57 23 42 57 24 Total $ 4,083 $ 1,883 $ 2,020 $ 1,595 $ 1,647 $ 458 (Dollars 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 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Leases | |
Schedule of amounts included in the Consolidated Income Statement related to lessor activity | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Lease income — Sales-type lease selling price $ 120 $ 154 $ 877 $ 733 Less: Carrying value of underlying assets* 49 64 211 258 Gross profit $ 71 $ 90 $ 666 $ 475 Interest income on lease receivables 44 56 142 195 Total sales-type and direct financing lease income $ 115 $ 145 $ 808 $ 670 Lease income — 38 65 137 204 Variable lease income 18 25 97 82 Total lease income $ 171 $ 235 $ 1,042 $ 956 * Excludes unguaranteed residual value. |
Intangible Assets Including G_2
Intangible Assets Including Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Intangible Assets Including Goodwill | |
Intangible asset balances by major asset class | At September 30, 2021 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,864 $ (881) $ 983 Client relationships 9,170 (2,746) 6,423 Completed technology 6,077 (2,126) 3,951 Patents/trademarks 2,217 (560) 1,658 Other** 44 (33) 11 Total $ 19,372 $ (6,347) $ 13,025 At December 31, 2020 Gross Carrying Accumulated Net Carrying (Dollars in millions) 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 * Amounts as of September 30, 2021 and December 31, 2020 included a decrease in net intangible asset balances of $179 million and an increase of $279 million, respectively, due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems . |
Intangible assets, future amortization expense | Capitalized Acquired (Dollars in millions) Software Intangibles Total Remainder of 2021 $ 171 $ 474 $ 645 2022 469 1,830 2,299 2023 268 1,517 1,786 2024 74 1,467 1,541 2025 0 1,444 1,444 Thereafter 0 5,310 5,310 |
Changes in goodwill balances by reportable segment | Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2021 Additions Adjustments Divestitures Adjustments* 9/30/2021 Cloud & Cognitive Software $ 43,934 $ 1,655 $ 8 $ (13) $ (374) $ 45,210 Global Business Services 6,145 695 (11) — (101) 6,727 Global Technology Services 7,245 2 — — (92) 7,155 Systems 2,293 — 0 — (7) 2,286 Total $ 59,617 $ 2,351 $ (3) $ (13) $ (575) $ 61,378 Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2020 Additions Adjustments Divestitures Adjustments* 12/31/2020 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 * Primarily driven by foreign currency translation. |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Borrowings | |
Short-Term Debt | At September 30, At December 31, (Dollars in millions) 2021 2020 Commercial paper $ 900 $ — Short-term loans 43 130 Long-term debt — 6,632 7,053 Total $ 7,575 $ 7,183 |
Long-Term Debt | Balance Balance (Dollars in millions) Maturities 9/30/2021 12/31/2020 U.S. dollar debt (weighted-average interest rate at September 30, 2021):* 0.7% 2021 $ 1,107 $ 5,499 2.6% 2022 5,682 6,233 3.4% 2023 1,589 2,395 3.3% 2024 5,018 5,029 6.9% 2025 617 631 3.3% 2026 4,498 4,370 3.0% 2027 2,222 2,219 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 1,350 5.9% 2032 600 600 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 650 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 750 750 7.1% 2096 316 316 $ 35,575 $ 41,218 Other currencies (weighted-average interest rate at September 30, 2021, in parentheses):* Euro (1.1%) 2023–2040 $ 16,222 $ 18,355 Pound sterling (2.6%) 2022 405 411 Japanese yen (0.3%) 2022–2026 1,304 1,409 Other (7.8%) 2021–2025 354 324 $ 53,859 $ 61,718 Finance lease obligations (1.4%) 2021–2030 357 296 $ 54,216 $ 62,013 Less: net unamortized discount 849 875 Less: net unamortized debt issuance costs 136 156 Add: fair value adjustment** 327 426 $ 53,558 $ 61,408 Less: current maturities 6,632 7,053 Total $ 46,926 $ 54,355 * 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. |
Pre-swap annual contractual obligations of long-term debt outstanding | Pre-swap annual contractual obligations of long-term debt outstanding at September 30, 2021, were as follows: (Dollars in millions) Total Remainder of 2021 $ 1,189 2022 6,889 2023 4,973 2024 6,497 2025 4,142 Thereafter 30,526 Total $ 54,216 |
Interest on Debt | (Dollars in millions) For the nine months ended September 30: 2021 2020 Cost of financing $ 312 $ 346 Interest expense 852 971 Interest capitalized 3 6 Total interest paid and accrued $ 1,167 $ 1,323 |
Commitments (Tables)
Commitments (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Commitments | |
Changes in warranty liabilities | Standard Warranty Liability (Dollars in millions) 2021 2020 Balance at January 1 $ 83 $ 113 Current period accruals 50 56 Accrual adjustments to reflect actual experience (2) (15) Charges incurred (66) (73) Balance at September 30 $ 66 $ 80 Extended Warranty Liability (Dollars in millions) 2021 2020 Balance at January 1 $ 425 $ 477 Revenue deferred for new extended warranty contracts 71 115 Amortization of deferred revenue (154) (169) Other* (9) (3) Balance at September 30 $ 334 $ 419 Current portion $ 171 $ 196 Noncurrent portion $ 163 $ 223 * Other primarily consists of foreign currency translation adjustments. |
Equity Activity (Tables)
Equity Activity (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Equity Activity | |
Reclassifications and taxes related to items of other comprehensive income | (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2021: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (114) $ (120) $ (234) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ 109 $ (28) $ 82 Reclassification of (gains)/losses to: Cost of services (12) 3 (9) Cost of sales (1) 1 (1) Cost of financing 6 (1) 4 SG&A expense 1 0 1 Other (income) and expense 22 (6) 17 Interest expense 16 (4) 12 Total unrealized gains/(losses) on cash flow hedges $ 141 $ (35) $ 106 Retirement-related benefit plans (1): Prior service costs/(credits) $ 0 $ 0 $ 0 Net (losses)/gains arising during the period 1 0 1 Curtailments and settlements 13 (4) 9 Amortization of prior service (credits)/costs 3 0 3 Amortization of net (gains)/losses 638 (174) 464 Total retirement-related benefit plans $ 656 $ (178) $ 478 Other comprehensive income/(loss) $ 683 $ (333) $ 350 (1) These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (439) $ 247 $ (192) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ (1) $ 0 $ (1) Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ (1) $ 0 $ (1) Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (32) $ 8 $ (24) Reclassification of (gains)/losses to: Cost of services (10) 2 (7) Cost of sales 4 (1) 3 Cost of financing 6 (2) 5 SG&A expense 5 (1) 4 Other (income) and expense (93) 23 (70) Interest expense 19 (5) 14 Total unrealized gains/(losses) on cash flow hedges $ (101) $ 26 $ (75) Retirement-related benefit plans (1): Prior service costs/(credits) $ (1) $ 0 $ 0 Net (losses)/gains arising during the period 0 0 0 Curtailments and settlements 21 (6) 14 Amortization of prior service (credits)/costs 0 1 1 Amortization of net (gains)/losses 586 (161) 425 Total retirement-related benefit plans $ 607 $ (167) $ 440 Other comprehensive income/(loss) $ 66 $ 106 $ 172 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2021: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 463 $ (304) $ 160 Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ 262 $ (66) $ 196 Reclassification of (gains)/losses to: Cost of services (33) 8 (25) Cost of sales 30 (8) 23 Cost of financing 17 (4) 13 SG&A expense 32 (8) 24 Other (income) and expense 187 (47) 140 Interest expense 48 (12) 36 Total unrealized gains/(losses) on cash flow hedges $ 545 $ (138) $ 407 Retirement-related benefit plans (1): Prior service costs/(credits) $ 0 $ 0 $ 0 Net (losses)/gains arising during the period 23 4 27 Curtailments and settlements 46 (14) 32 Amortization of prior service (credits)/costs 8 0 8 Amortization of net (gains)/losses 1,929 (526) 1,403 Total retirement-related benefit plans $ 2,006 $ (537) $ 1,469 Other comprehensive income/(loss) $ 3,014 $ (978) $ 2,035 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the nine months ended September 30, 2020: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ (1,354) $ 260 $ (1,094) Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ 0 $ 0 $ 0 Reclassification of (gains)/losses to other (income) and expense — — — Total net changes related to available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ (249) $ 63 $ (186) Reclassification of (gains)/losses to: Cost of services (18) 5 (14) Cost of sales (14) 4 (10) Cost of financing 21 (5) 16 SG&A expense (12) 3 (9) Other (income) and expense (74) 19 (55) Interest expense 60 (15) 45 Total unrealized gains/(losses) on cash flow hedges $ (285) $ 73 $ (212) Retirement-related benefit plans (1): Prior service costs/(credits) $ (5) $ 1 $ (3) Net (losses)/gains arising during the period 65 (24) 41 Curtailments and settlements 42 (12) 30 Amortization of prior service (credits)/costs 1 2 3 Amortization of net (gains)/losses 1,722 (473) 1,249 Total retirement-related benefit plans $ 1,826 $ (507) $ 1,319 Other comprehensive income/(loss) $ 187 $ (175) $ 12 (1) These AOCI components are included in the computation of net periodic pension cost. Refer to note 17, “Retirement-Related Benefits,” for additional information. |
Accumulated other comprehensive income/(loss) (net of tax) | Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2021 $ (456) $ (4,665) $ (24,216) $ 0 $ (29,337) Other comprehensive income before reclassifications 196 160 26 0 382 Amount reclassified from accumulated other comprehensive income 211 — 1,442 — 1,654 Total change for the period $ 407 $ 160 $ 1,469 $ 0 $ 2,035 September 30, 2021 $ (49) $ (4,505) $ (22,747) $ (1) $ (27,302) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2020 $ (179) $ (3,700) $ (24,718) $ 0 $ (28,597) Other comprehensive income before reclassifications (186) (1,094) 37 0 (1,242) Amount reclassified from accumulated other comprehensive income (27) — 1,281 — 1,255 Total change for the period $ (212) $ (1,094) $ 1,319 $ 0 $ 12 September 30, 2020 $ (391) $ (4,794) $ (23,399) $ 0 $ (28,584) * |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Derivative Financial Instruments | |
Amounts related to cumulative basis adjustments for fair value hedges | September 30, December 31, (Dollars in millions) 2021 2020 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 $ (752) $ (2,097) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* (327) (424) * |
Effect of derivative instruments in the consolidated income statement | Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the three months ended September 30: 2021 2020 2021 2020 Cost of services $ 7,770 $ 7,357 $ 12 $ 10 Cost of sales 1,513 1,601 1 (4) Cost of financing 165 172 (1) 3 SG&A expense 4,860 4,647 (14) 58 Other (income) and expense 234 253 (7) 101 Interest expense 291 323 (2) 8 Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the three months ended September 30: Line Item 2021 2020 2021 2020 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 0 $ 4 $ 7 Interest expense 0 0 11 20 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense 15 8 N/A N/A Equity contracts SG&A expense (13) 63 N/A N/A Total $ 3 $ 71 $ 15 $ 27 Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the three months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2021 2020 Line Item 2021 2020 2021 2020 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts 109 (32) Cost of services 12 10 — — Cost of sales 1 (4) — — Cost of financing (5) (5) — — SG&A expense (1) (5) — — Other (income) and expense (22) 93 — — Interest expense (13) (15) — — Instruments in net investment hedges (4): Foreign exchange contracts 477 (983) Cost of financing — — 1 2 Interest expense — — 3 7 Total $ 587 $ (1,015) $ (32) $ 69 $ 5 $ 9 (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 Gains/(Losses) of (Dollars in millions) Total Total Hedge Activity For the nine months ended September 30: 2021 2020 2021 2020 Cost of services $ 23,416 $ 22,720 $ 33 $ 18 Cost of sales 4,792 4,964 (30) 14 Cost of financing 506 517 1 9 SG&A expense 15,368 15,849 88 24 Other (income) and expense 911 614 (246) 92 Interest expense 852 971 3 24 Gain (Loss) Recognized in Consolidated Income Statement Consolidated Recognized on Attributable to Risk (Dollars in millions) Income Statement Derivatives Being Hedged (2) For the nine months ended September 30: Line Item 2021 2020 2021 2020 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ 0 $ 20 $ 15 $ (3) Interest expense (1) 57 40 (9) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (59) 18 N/A N/A Equity contracts SG&A expense 120 12 N/A N/A Total $ 59 $ 108 $ 55 $ (13) Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income (Dollars in millions) Consolidated Reclassified Amounts Excluded from For the nine months Recognized in OCI Income Statement from AOCI Effectiveness Testing (3) ended September 30: 2021 2020 Line Item 2021 2020 2021 2020 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (4) $ (3) $ — $ — Interest expense (10) (10) — — Foreign exchange contracts 262 (249) Cost of services 33 18 — — Cost of sales (30) 14 — — Cost of financing (14) (18) — — SG&A expense (32) 12 — — Other (income) and expense (187) 74 — — Interest expense (38) (50) — — Instruments in net investment hedges (4): Foreign exchange contracts 1,207 (1,033) Cost of financing — — 4 13 Interest expense — — 11 37 Total $ 1,470 $ (1,281) $ (282) $ 37 $ 15 $ 50 (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) | 9 Months Ended |
Sep. 30, 2021 | |
Stock-Based Compensation | |
Stock-based compensation cost included in income from continuing operations | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2021 2020 2021 2020 Cost $ 45 $ 42 $ 127 $ 109 Selling, general and administrative 156 129 431 401 Research, development and engineering 61 50 160 147 Pre-tax stock-based compensation cost $ 262 $ 222 $ 719 $ 658 Income tax benefits (58) (50) (179) (146) Total net stock-based compensation cost $ 204 $ 172 $ 540 $ 512 |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Retirement-Related Benefits | |
Pre-tax cost for all retirement-related plans | Yr. to Yr. (Dollars in millions) Percent For the three months ended September 30: 2021 2020 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 647 $ 610 6.0 % Nonpension postretirement plans — 45 50 (10.5) Total $ 692 $ 660 4.8 % Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2021 2020 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 1,972 $ 1,789 10.2 % Nonpension postretirement plans — 134 151 (11.8) Total $ 2,106 $ 1,941 8.5 % |
Components of the cost/(income) for the company's pension plans | (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended September 30: 2021 2020 2021 2020 Service cost $ — $ — $ 94 $ 99 Interest cost (1) 277 375 109 142 Expected return on plan assets (1) (451) (542) (286) (323) Amortization of prior service costs/(credits) (1) 4 4 (2) (5) Recognized actuarial losses (1) 249 207 365 360 Curtailments and settlements (1) — — 13 21 Multi-employer plans — — 3 7 Other costs/(credits) (1) — — 7 6 Total net periodic pension (income)/cost of defined benefit plans $ 80 $ 44 $ 303 $ 307 Cost of defined contribution plans 152 148 112 111 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 232 $ 192 $ 415 $ 418 (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2021 2020 2021 2020 Service cost $ — $ — $ 281 $ 289 Interest cost (1) 832 1,126 332 408 Expected return on plan assets (1) (1,352) (1,627) (867) (943) Amortization of prior service costs/(credits) (1) 12 12 (8) (14) Recognized actuarial losses (1) 747 622 1,110 1,041 Curtailments and settlements (1) — — 46 42 Multi-employer plans — — 17 22 Other costs/(credits) (1) — — 21 20 Total net periodic pension (income)/cost of defined benefit plans $ 239 $ 133 $ 933 $ 865 Cost of defined contribution plans 455 457 345 334 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 694 $ 590 $ 1,278 $ 1,200 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. |
Components of the cost/(income) for the company's nonpension postretirement plans | (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended September 30: 2021 2020 2021 2020 Service cost $ 2 $ 2 $ 1 $ 1 Interest cost (1) 16 26 8 8 Expected return on plan assets (1) — — (1) (1) Amortization of prior service costs/(credits) (1) 1 1 0 0 Recognized actuarial losses (1) 13 7 4 5 Curtailments and settlements (1) — — — — Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 32 $ 36 $ 13 $ 14 (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2021 2020 2021 2020 Service cost $ 5 $ 7 $ 4 $ 4 Interest cost (1) 49 77 25 26 Expected return on plan assets (1) — — (2) (3) Amortization of prior service costs/(credits) (1) 3 3 0 0 Recognized actuarial losses (1) 39 22 12 16 Curtailments and settlements (1) — — 0 0 Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 96 $ 109 $ 38 $ 43 (1) These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. The company does not anticipate any significant changes to the expected plan contributions in 2021 from the amounts disclosed in the 2020 Annual Report. |
Schedule of contributions | (Dollars in millions) Plan Contributions For the nine months ended September 30: 2021 2020 U.S. and non-U.S. nonpension postretirement benefit plans $ 269 $ 265 Non-U.S. DB and multi-employer plans * 48 127 Total plan contributions $ 317 $ 392 |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Millions | Nov. 03, 2021 | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) |
Provision for/(benefit from) income taxes | $ 188 | $ 128 | $ 365 | $ (888) | |
Other (income) and expense | |||||
Noncontrolling interest amounts, net of tax | $ 8.3 | $ 3.4 | $ 22.4 | $ 14.7 | |
Kyndryl Holdings, Inc | |||||
Ownership interest by stockholders (in percent) | 19.90% | ||||
Kyndryl Holdings, Inc | |||||
Total of Kyndryl stock distributed to IBM stockholders of record as of 10/25/2021 (as a percentage) | 80.10% | ||||
Share conversion ratio | 0.2 |
Accounting Changes - Credit Los
Accounting Changes - Credit Losses (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Accounting Changes | |||
Deferred tax assets | $ 8,967 | $ 9,241 | |
Retained earnings | $ 161,747 | $ 162,717 | |
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) |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue by Major Products/Service Offerings (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue by Major Products/Service Offerings | ||||
Total Revenue | $ 17,618 | $ 17,560 | $ 54,093 | $ 53,253 |
External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Total Revenue | 17,601 | 17,510 | 54,047 | 53,090 |
Other revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 18 | 50 | 45 | 163 |
Cloud & Cognitive Software | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 5,692 | 5,553 | 17,227 | 16,540 |
Total Revenue | 5,692 | 5,553 | 17,227 | 16,540 |
Global Business Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 4,427 | 3,965 | 13,002 | 11,992 |
Total Revenue | 4,427 | 3,965 | 13,002 | 11,992 |
Global Technology Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 6,154 | 6,462 | 18,866 | 19,245 |
Total Revenue | 6,154 | 6,462 | 18,866 | 19,245 |
Systems | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 1,107 | 1,257 | 4,251 | 4,477 |
Total Revenue | 1,107 | 1,257 | 4,251 | 4,477 |
Global Financing | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Financial Services Revenue | 220 | 273 | 702 | 837 |
Total Revenue | 220 | 273 | 702 | 837 |
Cloud & Data Platforms | Cloud & Cognitive Software | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 3,046 | 2,775 | 9,032 | 8,108 |
Cognitive Applications | Cloud & Cognitive Software | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 1,314 | 1,317 | 3,938 | 3,745 |
Transaction Processing Platforms | Cloud & Cognitive Software | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 1,332 | 1,461 | 4,257 | 4,687 |
Consulting | Global Business Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 2,292 | 1,966 | 6,717 | 5,973 |
Application Management | Global Business Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 1,847 | 1,758 | 5,439 | 5,332 |
Global Process Services | Global Business Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 287 | 240 | 846 | 687 |
Infrastructure & Cloud Services | Global Technology Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 4,681 | 4,933 | 14,370 | 14,663 |
Technology Support Services | Global Technology Services | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 1,473 | 1,528 | 4,496 | 4,582 |
Systems Hardware | Systems | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | 796 | 919 | 3,294 | 3,404 |
Operating Systems Software | Systems | External Revenue | ||||
Revenue by Major Products/Service Offerings | ||||
Revenue | $ 312 | $ 338 | $ 957 | $ 1,074 |
Revenue Recognition - Disaggr_2
Revenue Recognition - Disaggregation of Revenue by Geography (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue by Geography | ||||
Revenues | $ 17,618 | $ 17,560 | $ 54,093 | $ 53,253 |
Americas | ||||
Revenue by Geography | ||||
Revenues | 8,217 | 8,139 | 25,216 | 24,755 |
EMEA | ||||
Revenue by Geography | ||||
Revenues | 5,593 | 5,564 | 17,272 | 16,775 |
Asia Pacific | ||||
Revenue by Geography | ||||
Revenues | $ 3,808 | $ 3,857 | $ 11,605 | $ 11,723 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligations (Details) - USD ($) $ in Billions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Practical expedient, remaining performance obligations | true | true |
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied | $ 108 |
Revenue Recognition - Remaini_2
Revenue Recognition - Remaining Performance Obligations, Expected Timing of Satisfaction (Details) | Sep. 30, 2021 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 60.00% |
Duration of expected recognition period for remaining performance obligation | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 30.00% |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01 | |
Remaining Performance Obligations | |
Duration of expected recognition period for remaining performance obligation | 3 years |
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01 | |
Remaining Performance Obligations | |
Duration of expected recognition period for remaining performance obligation | 5 years |
Revenue Recognition - Performan
Revenue Recognition - Performance Obligations Satisfied or Partially Satisfied in Prior Periods (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Revenue Recognition | ||
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods | $ (49) | $ (85) |
Revenue Recognition - Reconcili
Revenue Recognition - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2021 | Dec. 31, 2020 | |
Reconciliation of Contract Balances | |||
Notes and accounts receivable - trade (net of allowances of $277 in 2021 and $351 in 2020) | $ 6,609 | $ 6,609 | $ 7,132 |
Notes and accounts receivable - trade, allowances | 277 | 277 | 351 |
Contract assets | 566 | 566 | 497 |
Deferred income (current) | 12,264 | 12,264 | 12,833 |
Deferred income (noncurrent) | 3,965 | 3,965 | $ 4,301 |
Revenue recognized that was included in deferred income at the beginning of the period | $ 5,100 | $ 9,500 |
Revenue Recognition - Trade All
Revenue Recognition - Trade Allowance for Credit Losses (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Roll forward of notes and accounts receivable - trade allowance for credit losses | ||
Allowance for Credit Loss, Beginning Balance | $ 351 | $ 316 |
Additions / (Releases) | (44) | 76 |
Write-offs | (30) | (46) |
Other | 0 | 5 |
Allowance for Credit Loss, Ending Balance | $ 277 | $ 351 |
Segments - Results of Continuin
Segments - Results of Continuing Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Segment Information | ||||
Revenue | $ 17,618 | $ 17,560 | $ 54,093 | $ 53,253 |
Pre-tax income from continuing operations | 1,319 | 1,827 | 3,776 | 3,348 |
External Revenue | ||||
Segment Information | ||||
Revenue | 17,601 | 17,510 | 54,047 | 53,090 |
External Revenue | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | 5,692 | 5,553 | 17,227 | 16,540 |
External Revenue | Global Business Services | ||||
Segment Information | ||||
Revenue | 4,427 | 3,965 | 13,002 | 11,992 |
External Revenue | Global Technology Services | ||||
Segment Information | ||||
Revenue | 6,154 | 6,462 | 18,866 | 19,245 |
External Revenue | Systems | ||||
Segment Information | ||||
Revenue | 1,107 | 1,257 | 4,251 | 4,477 |
External Revenue | Global Financing | ||||
Segment Information | ||||
Revenue | 220 | 273 | 702 | 837 |
Internal transactions | ||||
Segment Information | ||||
Revenue | (1,463) | (1,683) | (4,631) | (4,780) |
Pre-tax income from continuing operations | (57) | (158) | (269) | (334) |
Internal transactions | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | (764) | (875) | (2,322) | (2,431) |
Internal transactions | Global Business Services | ||||
Segment Information | ||||
Revenue | (53) | (49) | (166) | (150) |
Internal transactions | Global Technology Services | ||||
Segment Information | ||||
Revenue | (317) | (312) | (956) | (911) |
Internal transactions | Systems | ||||
Segment Information | ||||
Revenue | (176) | (240) | (606) | (628) |
Internal transactions | Global Financing | ||||
Segment Information | ||||
Revenue | (153) | (208) | (581) | (660) |
Business Segments | ||||
Segment Information | ||||
Revenue | 19,064 | 19,193 | 58,678 | 57,870 |
Pre-tax income from continuing operations | $ 2,644 | $ 2,962 | $ 7,659 | $ 6,708 |
Revenue year-to-year change (as a percent) | (0.70%) | 1.40% | ||
Pre-tax income year-to-year change (as a percent) | (10.70%) | 14.20% | ||
Pre-tax income margin (as a percent) | 13.90% | 15.40% | 13.10% | 11.60% |
Business Segments | Cloud & Cognitive Software | ||||
Segment Information | ||||
Revenue | $ 6,456 | $ 6,428 | $ 19,549 | $ 18,971 |
Pre-tax income from continuing operations | $ 1,675 | $ 1,834 | $ 4,822 | $ 4,475 |
Revenue year-to-year change (as a percent) | 0.40% | 3.00% | ||
Pre-tax income year-to-year change (as a percent) | (8.70%) | 7.80% | ||
Pre-tax income margin (as a percent) | 25.90% | 28.50% | 24.70% | 23.60% |
Business Segments | Global Business Services | ||||
Segment Information | ||||
Revenue | $ 4,480 | $ 4,014 | $ 13,168 | $ 12,142 |
Pre-tax income from continuing operations | $ 587 | $ 570 | $ 1,349 | $ 1,203 |
Revenue year-to-year change (as a percent) | 11.60% | 8.50% | ||
Pre-tax income year-to-year change (as a percent) | 3.00% | 12.10% | ||
Pre-tax income margin (as a percent) | 13.10% | 14.20% | 10.20% | 9.90% |
Business Segments | Global Technology Services | ||||
Segment Information | ||||
Revenue | $ 6,471 | $ 6,774 | $ 19,822 | $ 20,155 |
Pre-tax income from continuing operations | $ 383 | $ 399 | $ 903 | $ 471 |
Revenue year-to-year change (as a percent) | (4.50%) | (1.70%) | ||
Pre-tax income year-to-year change (as a percent) | (4.10%) | 91.90% | ||
Pre-tax income margin (as a percent) | 5.90% | 5.90% | 4.60% | 2.30% |
Business Segments | Systems | ||||
Segment Information | ||||
Revenue | $ 1,283 | $ 1,497 | $ 4,857 | $ 5,106 |
Pre-tax income from continuing operations | $ (207) | $ (37) | $ (33) | $ (7) |
Revenue year-to-year change (as a percent) | (14.30%) | (4.90%) | ||
Pre-tax income margin (as a percent) | (16.10%) | (2.50%) | (0.70%) | (0.10%) |
Business Segments | Global Financing | ||||
Segment Information | ||||
Revenue | $ 373 | $ 480 | $ 1,283 | $ 1,497 |
Pre-tax income from continuing operations | $ 206 | $ 196 | $ 618 | $ 566 |
Revenue year-to-year change (as a percent) | (22.30%) | (14.30%) | ||
Pre-tax income year-to-year change (as a percent) | 5.10% | 9.10% | ||
Pre-tax income margin (as a percent) | 55.10% | 40.70% | 48.10% | 37.80% |
Segments - Revenue Reconciliati
Segments - Revenue Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue | ||||
Revenue | $ 17,618 | $ 17,560 | $ 54,093 | $ 53,253 |
Business Segments | ||||
Revenue | ||||
Revenue | 19,064 | 19,193 | 58,678 | 57,870 |
Other revenue | ||||
Revenue | ||||
Other - divested businesses | (3) | 4 | (2) | 36 |
Other revenue | 20 | 46 | 47 | 127 |
Internal transactions | ||||
Revenue | ||||
Revenue | $ (1,463) | $ (1,683) | $ (4,631) | $ (4,780) |
Segments - Pre-Tax Income Recon
Segments - Pre-Tax Income Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Pre-tax income from continuing operations | ||||
Amortization of acquired intangible assets | $ (475) | $ (459) | $ (1,389) | $ (1,404) |
Acquisition-related (charges)/income | (4) | (1) | (37) | (3) |
Non-operating retirement-related (costs)/income | (328) | (291) | (998) | (829) |
Separation-related charges | (277) | (513) | ||
Other - divested businesses | (10) | (20) | (34) | (17) |
Income from continuing operations before income taxes | 1,319 | 1,827 | 3,776 | 3,348 |
Business Segments | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | 2,644 | 2,962 | 7,659 | 6,708 |
Internal transactions | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | (57) | (158) | (269) | (334) |
Unallocated corporate amounts | ||||
Pre-tax income from continuing operations | ||||
Income from continuing operations before income taxes | $ (175) | $ (206) | $ (643) | $ (773) |
Acquisitions & Divestitures - (
Acquisitions & Divestitures - (Details) - 2021 Acquisitions $ in Millions | 9 Months Ended |
Sep. 30, 2021USD ($)item | |
Acquisitions | |
Percentage of business acquired (as a percent) | 100.00% |
Number of acquisitions | item | 10 |
Aggregate acquisitions cost | $ | $ 3,049 |
Acquisitions & Divestitures - P
Acquisitions & Divestitures - Purchase Price Allocation (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Acquisitions | |||
Goodwill | $ 61,378 | $ 59,617 | $ 58,222 |
2021 Acquisitions | Client relationships | Minimum | |||
Acquisitions | |||
Weighted average useful life | 4 years | ||
2021 Acquisitions | Client relationships | Maximum | |||
Acquisitions | |||
Weighted average useful life | 10 years | ||
2021 Acquisitions | Completed technology | Minimum | |||
Acquisitions | |||
Weighted average useful life | 4 years | ||
2021 Acquisitions | Completed technology | Maximum | |||
Acquisitions | |||
Weighted average useful life | 7 years | ||
2021 Acquisitions | Trademarks | Minimum | |||
Acquisitions | |||
Weighted average useful life | 1 year | ||
2021 Acquisitions | Trademarks | Maximum | |||
Acquisitions | |||
Weighted average useful life | 6 years | ||
Turbonomic | |||
Acquisitions | |||
Current assets | $ 126 | ||
Goodwill | 1,439 | ||
Total assets acquired | 1,990 | ||
Current liabilities | 49 | ||
Noncurrent liabilities | 113 | ||
Total liabilities assumed | 161 | ||
Total purchase price | $ 1,829 | ||
Weighted average useful life | 8 years 10 months 24 days | ||
Turbonomic | Client relationships | |||
Acquisitions | |||
Intangible assets | $ 290 | ||
Turbonomic | Completed technology | |||
Acquisitions | |||
Intangible assets | 117 | ||
Turbonomic | Trademarks | |||
Acquisitions | |||
Intangible assets | 18 | ||
Other Acquisitions 2021 | |||
Acquisitions | |||
Current assets | 101 | ||
Property, plant, and equipment/noncurrent assets | 6 | ||
Goodwill | 912 | ||
Total assets acquired | 1,356 | ||
Current liabilities | 59 | ||
Noncurrent liabilities | 76 | ||
Total liabilities assumed | 135 | ||
Total purchase price | $ 1,220 | ||
Weighted average useful life | 6 years 6 months | ||
Other Acquisitions 2021 | Client relationships | |||
Acquisitions | |||
Intangible assets | $ 173 | ||
Other Acquisitions 2021 | Completed technology | |||
Acquisitions | |||
Intangible assets | 134 | ||
Other Acquisitions 2021 | Trademarks | |||
Acquisitions | |||
Intangible assets | 29 | ||
Cloud & Cognitive Software | Turbonomic | |||
Acquisitions | |||
Goodwill | 1,372 | ||
Cloud & Cognitive Software | Other Acquisitions 2021 | |||
Acquisitions | |||
Goodwill | 283 | ||
Global Business Services | Turbonomic | |||
Acquisitions | |||
Goodwill | 67 | ||
Global Business Services | Other Acquisitions 2021 | |||
Acquisitions | |||
Goodwill | $ 628 |
Acquisitions & Divestitures - G
Acquisitions & Divestitures - Goodwill and Restricted Cash (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Acquisitions | |||
Goodwill | $ 61,378 | $ 59,617 | $ 58,222 |
Turbonomic | |||
Acquisitions | |||
Weighted average useful life | 8 years 10 months 24 days | ||
Goodwill | $ 1,439 | ||
Estimated percent of goodwill deductible for tax purposes | 0.00% | ||
Other Acquisitions 2021 | |||
Acquisitions | |||
Weighted average useful life | 6 years 6 months | ||
Goodwill | $ 912 | ||
Estimated percent of goodwill deductible for tax purposes | 9.00% | ||
Global Business Services | Turbonomic | |||
Acquisitions | |||
Goodwill | $ 67 | ||
Global Business Services | Other Acquisitions 2021 | |||
Acquisitions | |||
Goodwill | 628 | ||
Cloud & Cognitive Software | Turbonomic | |||
Acquisitions | |||
Goodwill | 1,372 | ||
Cloud & Cognitive Software | Other Acquisitions 2021 | |||
Acquisitions | |||
Goodwill | 283 | ||
Global Technology Services | Other Acquisitions 2021 | |||
Acquisitions | |||
Goodwill | $ 2 |
Acquisitions & Divestitures - D
Acquisitions & Divestitures - Divestitures (Details) - item | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2021 | Jun. 30, 2021 | Sep. 30, 2021 | |
Cloud & Cognitive Software | |||
Divestitures | |||
Number of divestitures | 1 | 1 | 2 |
Earnings Per Share of Common _3
Earnings Per Share of Common Stock - Computation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Weighted-average number of shares on which earnings per share calculations are based | ||||
Weighted-average shares outstanding during period (in shares) | 897,097,073 | 891,381,032 | 895,257,004 | 889,595,181 |
Add - Incremental shares under stock-based compensation plans (in shares) | 6,946,467 | 4,595,327 | 7,000,190 | 4,875,369 |
Add - Incremental shares associated with contingently issuable shares (in shares) | 1,909,573 | 1,315,874 | 1,720,345 | 1,286,300 |
Assuming dilution (in shares) | 905,953,114 | 897,292,233 | 903,977,539 | 895,756,850 |
Net income on which basic earnings per share is calculated | ||||
Income from continuing operations | $ 1,130 | $ 1,698 | $ 3,411 | $ 4,237 |
Income/(loss) from discontinued operations, net of tax | (1) | (1) | (2) | |
Net income on which basic earnings per share is calculated | 1,130 | 1,698 | 3,410 | 4,234 |
Net income on which diluted earnings per share is calculated | ||||
Income from continuing operations | 1,130 | 1,698 | 3,411 | 4,237 |
Net income applicable to contingently issuable shares | (2) | |||
Income from continuing operations on which diluted earnings per share is calculated | 1,130 | 1,698 | 3,411 | 4,234 |
Income/(loss) from discontinued operations, net of tax, on which basic and diluted earnings per share is calculated | (1) | (1) | (2) | |
Net income on which diluted earnings per share is calculated | $ 1,130 | $ 1,698 | $ 3,410 | $ 4,232 |
Assuming dilution | ||||
Continuing operations (in dollars per share) | $ 1.25 | $ 1.89 | $ 3.77 | $ 4.72 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | |
Total (in dollars per share) | 1.25 | 1.89 | 3.77 | 4.72 |
Basic | ||||
Continuing operations (in dollars per share) | 1.26 | 1.90 | 3.81 | 4.76 |
Discontinued operations (in dollars per share) | 0 | 0 | 0 | |
Total (in dollars per share) | $ 1.26 | $ 1.90 | $ 3.81 | $ 4.76 |
Earnings Per Share of Common _4
Earnings Per Share of Common Stock - Antidilutive Stock Options (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Stock Options | ||||
Antidilutive stock options | ||||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 750,990 | 1,510,886 | 879,289 | 1,386,591 |
Financial Assets & Liabilitie_2
Financial Assets & Liabilities - Impairment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
Financial Assets & Liabilities | ||
Impairment for credit losses | $ 0 | $ 0 |
Financial Assets & Liabilitie_3
Financial Assets & Liabilities - Fair Value Measurements (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | $ 600 | $ 600 |
Recurring | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 3,160 | 8,316 |
Total assets | 4,191 | 9,161 |
Total liabilities | 149 | 627 |
Recurring | Prepaid expenses and other current assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 373 | 85 |
Recurring | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 52 | 151 |
Recurring | Other accrued expenses and liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 69 | 587 |
Recurring | Other liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 80 | 40 |
Recurring | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Equity investments | 0 | 2 |
Recurring | Level 1 | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 130 | 148 |
Recurring | Level 2 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | 600 | 600 |
Debt securities - noncurrent | 6 | 7 |
Recurring | Level 2 | Interest rate contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 16 | 100 |
Recurring | Level 2 | Foreign exchange contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 367 | 111 |
Derivatives designated as hedging - Liabilities | 95 | 580 |
Derivatives not designated as hedging - Assets | 42 | 13 |
Derivatives not designated as hedging - Liabilities | 38 | 47 |
Recurring | Level 2 | Time deposits and certificates of deposit | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 3,030 | 7,668 |
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 | |
Derivatives not designated as hedging - Liabilities | $ 16 |
Financial Assets & Liabilitie_4
Financial Assets & Liabilities - Not Measured at Fair Value (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Long-Term Debt | ||
Long-term debt | $ 46,926 | $ 54,355 |
Fair value of long-term debt | $ 52,150 | $ 61,598 |
Financing Receivables - Payment
Financing Receivables - Payment Terms (Details) | 9 Months Ended |
Sep. 30, 2021 | |
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 | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 24, 2020 | |
Components of the company's financing receivables | ||||
Financing receivables, gross | $ 12,651 | $ 18,580 | ||
Unearned income | (583) | (823) | ||
Residual value | 345 | 485 | ||
Amortized Cost | 12,413 | 18,242 | ||
Allowance for credit losses | (207) | (263) | ||
Total financing receivables, net | 12,207 | 17,979 | ||
Current portion | 7,161 | 10,892 | ||
Noncurrent portion | 5,046 | 7,086 | ||
Financing receivables pledged as collateral for nonrecourse borrowings | 396 | 482 | ||
Sold financing receivables | 2,970 | $ 1,610 | ||
Loan receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 8,708 | 12,159 | ||
Unearned income | (355) | (488) | ||
Amortized Cost | 8,353 | 11,671 | ||
Allowance for credit losses | (135) | (173) | ||
Total financing receivables, net | 8,218 | 11,498 | ||
Current portion | 5,022 | 6,955 | ||
Noncurrent portion | 3,196 | 4,542 | ||
Sold financing receivables | 2,189 | 758 | ||
Lease receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 3,216 | 4,001 | ||
Unearned income | (228) | (335) | ||
Residual value | 345 | 485 | ||
Amortized Cost | 3,333 | 4,151 | ||
Allowance for credit losses | (65) | (82) | ||
Total financing receivables, net | 3,268 | 4,069 | ||
Current portion | 1,419 | 1,525 | ||
Noncurrent portion | 1,850 | 2,544 | ||
Sold financing receivables | 781 | 852 | ||
Commercial financing receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 727 | 2,419 | ||
Unearned income | 0 | 0 | ||
Amortized Cost | 727 | 2,419 | ||
Allowance for credit losses | (6) | (8) | ||
Total financing receivables, net | 721 | 2,411 | ||
Current portion | 721 | 2,411 | ||
Third Party Investor | Commercial financing receivables | ||||
Components of the company's financing receivables | ||||
Sold financing receivables | 4,465 | $ 0 | ||
Financing receivables held for sale | $ 400 | $ 383 | ||
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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021USD ($)item | Dec. 31, 2020USD ($)item | |
Financing receivables | ||
Number of classes of financing receivable | item | 3 | 3 |
Amortized Cost | $ 12,413 | $ 18,242 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 263 | |
Allowance for credit losses, ending balance | 207 | 263 |
Client Financing Receivables | ||
Financing receivables | ||
Amortized Cost | 11,687 | 15,822 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 255 | 252 |
Write-offs | (14) | (34) |
Recoveries | 1 | 3 |
Additions/(releases) | (36) | 34 |
Other | (5) | 1 |
Allowance for credit losses, ending balance | 201 | 255 |
Client Financing Receivables | Americas | ||
Financing receivables | ||
Amortized Cost | 5,966 | 7,758 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 141 | 142 |
Write-offs | (6) | (28) |
Recoveries | 0 | |
Additions/(releases) | (20) | 33 |
Other | (2) | (6) |
Allowance for credit losses, ending balance | 113 | 141 |
Client Financing Receivables | EMEA | ||
Financing receivables | ||
Amortized Cost | 3,616 | 5,023 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 77 | 69 |
Write-offs | (1) | (3) |
Recoveries | 0 | |
Additions/(releases) | (10) | 5 |
Other | (3) | 6 |
Allowance for credit losses, ending balance | 64 | 77 |
Client Financing Receivables | Asia Pacific | ||
Financing receivables | ||
Amortized Cost | 2,105 | 3,042 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 37 | 41 |
Write-offs | (7) | (3) |
Recoveries | 1 | 2 |
Additions/(releases) | (6) | (4) |
Other | 0 | 1 |
Allowance for credit losses, ending balance | $ 24 | $ 37 |
Financing Receivables - Past Du
Financing Receivables - Past Due (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Past Due Financing Receivable | ||
Amortized Cost | $ 12,413 | $ 18,242 |
Client Financing Receivables | ||
Past Due Financing Receivable | ||
Amortized Cost | 11,687 | 15,822 |
Impaired financing receivables, related allowance | 161 | 178 |
Client Financing Receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 296 | 456 |
Amortized Cost > 90 Days and Accruing | 103 | 241 |
Billed Invoices > 90 Days and Accruing | 20 | 20 |
Client Financing Receivables | Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost Not Accruing | 200 | 223 |
Client Financing Receivables | Due Current and Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost | 11,687 | 15,822 |
Client Financing Receivables | Americas | ||
Past Due Financing Receivable | ||
Amortized Cost | 5,966 | 7,758 |
Client Financing Receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 179 | 295 |
Amortized Cost > 90 Days and Accruing | 94 | 200 |
Billed Invoices > 90 Days and Accruing | 15 | 12 |
Client Financing Receivables | Americas | Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost Not Accruing | 88 | 96 |
Client Financing Receivables | Americas | Due Current and Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost | 5,966 | 7,758 |
Client Financing Receivables | EMEA | ||
Past Due Financing Receivable | ||
Amortized Cost | 3,616 | 5,023 |
Client Financing Receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 89 | 119 |
Amortized Cost > 90 Days and Accruing | 3 | 28 |
Billed Invoices > 90 Days and Accruing | 2 | 5 |
Client Financing Receivables | EMEA | Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost Not Accruing | 89 | 95 |
Client Financing Receivables | EMEA | Due Current and Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost | 3,616 | 5,023 |
Client Financing Receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized Cost | 2,105 | 3,042 |
Client Financing Receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 28 | 42 |
Amortized Cost > 90 Days and Accruing | 6 | 12 |
Billed Invoices > 90 Days and Accruing | 3 | 4 |
Client Financing Receivables | Asia Pacific | Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost Not Accruing | 22 | 32 |
Client Financing Receivables | Asia Pacific | Due Current and Past Due | ||
Past Due Financing Receivable | ||
Amortized Cost | $ 2,105 | $ 3,042 |
Financing Receivables - Credit
Financing Receivables - Credit Quality Year of Origination (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Amortized cost for each class of receivables, by credit quality indicator | ||
Total Amortized Cost | $ 12,413 | $ 18,242 |
Americas | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 1,667 | 2,818 |
Originated in Fiscal Year before Latest Fiscal Year | 1,177 | 988 |
Originated Two Years before Latest Fiscal Year | 657 | 829 |
Originated Three Years before Latest Fiscal Year | 420 | 285 |
Originated Four Years before Latest Fiscal Year | 137 | 90 |
Originated Five or More Years before Latest Fiscal Year | 25 | 28 |
Total Amortized Cost | 4,083 | 5,038 |
Americas | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 858 | 1,449 |
Originated in Fiscal Year before Latest Fiscal Year | 481 | 623 |
Originated Two Years before Latest Fiscal Year | 282 | 360 |
Originated Three Years before Latest Fiscal Year | 146 | 154 |
Originated Four Years before Latest Fiscal Year | 59 | 52 |
Originated Five or More Years before Latest Fiscal Year | 57 | 81 |
Total Amortized Cost | 1,883 | 2,720 |
EMEA | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 746 | 1,513 |
Originated in Fiscal Year before Latest Fiscal Year | 663 | 668 |
Originated Two Years before Latest Fiscal Year | 335 | 329 |
Originated Three Years before Latest Fiscal Year | 229 | 70 |
Originated Four Years before Latest Fiscal Year | 23 | 33 |
Originated Five or More Years before Latest Fiscal Year | 23 | 22 |
Total Amortized Cost | 2,020 | 2,635 |
EMEA | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 614 | 1,427 |
Originated in Fiscal Year before Latest Fiscal Year | 427 | 519 |
Originated Two Years before Latest Fiscal Year | 341 | 245 |
Originated Three Years before Latest Fiscal Year | 108 | 128 |
Originated Four Years before Latest Fiscal Year | 62 | 46 |
Originated Five or More Years before Latest Fiscal Year | 42 | 22 |
Total Amortized Cost | 1,595 | 2,387 |
Asia Pacific | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 498 | 958 |
Originated in Fiscal Year before Latest Fiscal Year | 411 | 564 |
Originated Two Years before Latest Fiscal Year | 335 | 419 |
Originated Three Years before Latest Fiscal Year | 245 | 205 |
Originated Four Years before Latest Fiscal Year | 100 | 114 |
Originated Five or More Years before Latest Fiscal Year | 57 | 38 |
Total Amortized Cost | 1,647 | 2,298 |
Asia Pacific | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 174 | 351 |
Originated in Fiscal Year before Latest Fiscal Year | 102 | 123 |
Originated Two Years before Latest Fiscal Year | 60 | 167 |
Originated Three Years before Latest Fiscal Year | 74 | 52 |
Originated Four Years before Latest Fiscal Year | 23 | 33 |
Originated Five or More Years before Latest Fiscal Year | 24 | 18 |
Total Amortized Cost | $ 458 | $ 743 |
Leases - Lease Amounts Included
Leases - Lease Amounts Included in Consolidated Income Statement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Lease income - sales-type and direct financing leases | ||||
Sales-type lease selling price | $ 120 | $ 154 | $ 877 | $ 733 |
Less: Carrying value of underlying assets | 49 | 64 | 211 | 258 |
Gross profit | 71 | 90 | 666 | 475 |
Interest income on lease receivables | 44 | 56 | 142 | 195 |
Total sales-type and direct financing lease income | 115 | 145 | 808 | 670 |
Lease income - operating leases | 38 | 65 | 137 | 204 |
Variable lease income | 18 | 25 | 97 | 82 |
Total lease income | $ 171 | $ 235 | $ 1,042 | $ 956 |
Intangible Assets Including G_3
Intangible Assets Including Goodwill - Intangible Assets by Class (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Intangible asset balances by major asset class | ||
Gross Carrying Amount | $ 19,372 | $ 18,874 |
Accumulated Amortization | (6,347) | (5,079) |
Net Carrying Amount | 13,025 | 13,796 |
Amount of foreign currency translation increase (decrease) | (179) | 279 |
Capitalized software | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 1,864 | 1,777 |
Accumulated Amortization | (881) | (814) |
Net Carrying Amount | 983 | 963 |
Client relationships | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 9,170 | 8,838 |
Accumulated Amortization | (2,746) | (2,056) |
Net Carrying Amount | 6,423 | 6,783 |
Completed technology | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 6,077 | 5,957 |
Accumulated Amortization | (2,126) | (1,671) |
Net Carrying Amount | 3,951 | 4,286 |
Patents/trademarks | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 2,217 | 2,246 |
Accumulated Amortization | (560) | (499) |
Net Carrying Amount | 1,658 | 1,747 |
Other** | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 44 | 56 |
Accumulated Amortization | (33) | (39) |
Net Carrying Amount | $ 11 | $ 16 |
Intangible Assets Including G_4
Intangible Assets Including Goodwill - Intangible Assets Activity (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Intangible assets | ||||
Intangible assets, increase (decrease) | $ (771) | |||
Intangible asset amortization expense | $ 646 | $ 613 | 1,897 | $ 1,858 |
Retirement of fully amortized intangible assets | $ 581 |
Intangible Assets Including G_5
Intangible Assets Including Goodwill - Future Amortization (Details) $ in Millions | Sep. 30, 2021USD ($) |
Future amortization expense, by year | |
Remainder of 2021 | $ 645 |
2022 | 2,299 |
2023 | 1,786 |
2024 | 1,541 |
2025 | 1,444 |
Thereafter | 5,310 |
Capitalized software | |
Future amortization expense, by year | |
Remainder of 2021 | 171 |
2022 | 469 |
2023 | 268 |
2024 | 74 |
2025 | 0 |
Thereafter | 0 |
Acquired intangibles | |
Future amortization expense, by year | |
Remainder of 2021 | 474 |
2022 | 1,830 |
2023 | 1,517 |
2024 | 1,467 |
2025 | 1,444 |
Thereafter | $ 5,310 |
Intangible Assets Including G_6
Intangible Assets Including Goodwill - Goodwill by Segment (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 59,617 | $ 58,222 |
Goodwill Additions | 2,351 | 575 |
Purchase Price Adjustments | (3) | |
Divestitures | (13) | |
Foreign Currency Translation and Other Adjustments | (575) | 960 |
Ending Balance | 61,378 | 59,617 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Purchase Price Adjustments | (139) | |
Global Technology Services | Infrastructure Services | ||
Changes in Goodwill Balances | ||
Ending Balance | 5,800 | |
Business Segments | Cloud & Cognitive Software | ||
Changes in Goodwill Balances | ||
Beginning Balance | 43,934 | 43,037 |
Goodwill Additions | 1,655 | 362 |
Purchase Price Adjustments | 8 | |
Divestitures | (13) | |
Foreign Currency Translation and Other Adjustments | (374) | 675 |
Ending Balance | 45,210 | 43,934 |
Business Segments | Cloud & Cognitive Software | Red Hat, Inc. | ||
Changes in Goodwill Balances | ||
Purchase Price Adjustments | (139) | |
Business Segments | Global Business Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 6,145 | 5,775 |
Goodwill Additions | 695 | 205 |
Purchase Price Adjustments | (11) | |
Foreign Currency Translation and Other Adjustments | (101) | 165 |
Ending Balance | 6,727 | 6,145 |
Business Segments | Global Technology Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 7,245 | 7,141 |
Goodwill Additions | 2 | |
Foreign Currency Translation and Other Adjustments | (92) | 104 |
Ending Balance | 7,155 | 7,245 |
Business Segments | Systems | ||
Changes in Goodwill Balances | ||
Beginning Balance | 2,293 | 2,270 |
Goodwill Additions | 8 | |
Purchase Price Adjustments | 0 | |
Foreign Currency Translation and Other Adjustments | (7) | 15 |
Ending Balance | $ 2,286 | $ 2,293 |
Borrowings - Short-Term Debt (D
Borrowings - Short-Term Debt (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Short-term debt disclosures | ||
Commercial paper | $ 900 | |
Short-term loans | 43 | $ 130 |
Long-term debt - current maturities | 6,632 | 7,053 |
Short-term Debt, Total | $ 7,575 | $ 7,183 |
Commercial paper | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 0.10% | |
Short-term loans | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 3.80% | 5.70% |
Borrowings - Long-Term Debt, Co
Borrowings - Long-Term Debt, Components (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 53,859 | $ 61,718 |
Finance lease obligations | 357 | 296 |
Long-term debt, gross | 54,216 | 62,013 |
Less: net unamortized discount | 849 | 875 |
Less: net unamortized debt issuance costs | 136 | 156 |
Add: fair value adjustment | 327 | 426 |
Total | 53,558 | 61,408 |
Less: current maturities | 6,632 | 7,053 |
Total long-term debt (excluding current portion) | $ 46,926 | 54,355 |
Finance lease obligations, interest rate (as a percent) | 1.40% | |
U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 35,575 | 41,218 |
Euro | ||
Borrowings | ||
Long-term debt, gross | $ 16,222 | 18,355 |
Debt instrument, weighted-average interest rate (as a percent) | 1.10% | |
Pound sterling | ||
Borrowings | ||
Long-term debt, gross | $ 405 | 411 |
Debt instrument, weighted-average interest rate (as a percent) | 2.60% | |
Japanese yen | ||
Borrowings | ||
Long-term debt, gross | $ 1,304 | 1,409 |
Debt instrument, weighted-average interest rate (as a percent) | 0.30% | |
Other | ||
Borrowings | ||
Long-term debt, gross | $ 354 | 324 |
Debt instrument, weighted-average interest rate (as a percent) | 7.80% | |
Maturing 2021 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,107 | 5,499 |
Debt instrument, weighted-average interest rate (as a percent) | 0.70% | |
Maturing 2022 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,682 | 6,233 |
Debt instrument, weighted-average interest rate (as a percent) | 2.60% | |
Maturing 2023 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,589 | 2,395 |
Debt instrument, weighted-average interest rate (as a percent) | 3.40% | |
Maturing 2024 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,018 | 5,029 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2025 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 617 | 631 |
Debt instrument, weighted-average interest rate (as a percent) | 6.90% | |
Maturing 2026 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 4,498 | 4,370 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2027 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,222 | 2,219 |
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 | 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 | 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 | 750 |
Debt instrument, weighted-average interest rate (as a percent) | 3.00% | |
Maturing 2096 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 316 | $ 316 |
Debt instrument, weighted-average interest rate (as a percent) | 7.10% |
Borrowings - Long-Term Debt, _2
Borrowings - Long-Term Debt, Covenants (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2021USD ($) | |
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 | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Euro fixed-rate notes | ||
Notes Issued | ||
Aggregate amount of debt issued | $ 4,100 | |
Fixed rate debt due in 2021 | ||
Notes Issued | ||
Outstanding debt redeemed | $ 2,900 | |
Aggregate principal redeemed (as a percent) | 100.00% | |
Loss upon redemption on notes | $ (49) | |
IBM Credit LLC | Fixed rate debt due in 2021 to 2023 | ||
Notes Issued | ||
Outstanding debt redeemed | $ 1,750 | |
Aggregate principal redeemed (as a percent) | 100.00% | |
Loss upon redemption on notes | $ (22) |
Borrowings - Pre-Swap Obligatio
Borrowings - Pre-Swap Obligations (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Pre-swap annual contractual obligations of long-term debt outstanding | ||
Remainder of 2021 | $ 1,189 | |
2022 | 6,889 | |
2023 | 4,973 | |
2024 | 6,497 | |
2025 | 4,142 | |
Thereafter | 30,526 | |
Total | $ 54,216 | $ 62,013 |
Borrowings - Interest on Debt (
Borrowings - Interest on Debt (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Interest on Debt | ||
Interest capitalized | $ 3 | $ 6 |
Total interest paid and accrued | 1,167 | 1,323 |
Cost of financing | ||
Interest on Debt | ||
Interest paid | 312 | 346 |
Interest expense | ||
Interest on Debt | ||
Interest paid | $ 852 | $ 971 |
Borrowings - Lines of Credit (D
Borrowings - Lines of Credit (Details) - USD ($) $ in Millions | Jun. 22, 2021 | Jun. 21, 2021 | Sep. 30, 2021 |
Five-Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 7,500 | ||
Credit facility term | 5 years | ||
Three-Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 2,500 | ||
Credit facility term | 3 years | ||
Terminated Credit Agreement 364 Days 2020 | |||
Lines of Credit | |||
Credit facility term | 364 days | ||
Amount of terminated credit facility | $ 2,500 | ||
Prior Three Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 2,500 | ||
Credit facility term | 3 years | ||
Prior Five Year Credit Agreement | |||
Lines of Credit | |||
Amount of credit facility | $ 10,250 | ||
Credit facility term | 5 years | ||
Credit Facilities | |||
Lines of Credit | |||
Amount of credit facility | $ 10,000 | ||
Borrowings outstanding | $ 0 |
Commitments - Extensions of Cre
Commitments - Extensions of Credit (Details) - USD ($) $ in Billions | Nov. 03, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Commitments, guarantees: | |||
Future financing commitments in support of IBM's managed infrastructure services unit (as a percentage) | 35.00% | ||
Commitments extinguished upon separation (as a percent) | 100.00% | ||
Extended lines of credit | |||
Commitments, guarantees: | |||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 1.7 | $ 2.1 | |
Financing for client purchase agreements | |||
Commitments, guarantees: | |||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 4.5 | $ 5.2 |
Commitments - Standard Warranty
Commitments - Standard Warranty Liability (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Movement in standard warranty liability | ||
Beginning Balance | $ 83 | $ 113 |
Current period accruals | 50 | 56 |
Accrual adjustments to reflect experience | (2) | (15) |
Charges incurred | (66) | (73) |
Ending Balance | $ 66 | $ 80 |
Commitments - Extended Warranty
Commitments - Extended Warranty Liability (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Movement in deferred income | ||||
Amortization of deferred revenue | $ (5,100) | $ (9,500) | ||
Current portion | 12,264 | 12,264 | $ 12,833 | |
Noncurrent portion | 3,965 | 3,965 | $ 4,301 | |
Extended Warranty | ||||
Movement in deferred income | ||||
Beginning Balance | 425 | $ 477 | ||
Revenue deferred for new extended warranty contracts | 71 | 115 | ||
Amortization of deferred revenue | (154) | (169) | ||
Other | (9) | (3) | ||
Ending Balance | 334 | 334 | 419 | |
Current portion | 171 | 171 | 196 | |
Noncurrent portion | $ 163 | $ 163 | $ 223 |
Contingencies (Details)
Contingencies (Details) $ in Millions | Jun. 08, 2021USD ($) | Feb. 28, 2021USD ($) | Sep. 30, 2021USD ($)country | Oct. 30, 2017claim |
Brazil Tax Matters | ||||
Loss Contingencies | ||||
Damages sought, value | $ 400 | |||
SCO v. IBM | ||||
Loss Contingencies | ||||
Number of remaining claims | claim | 1 | |||
CISGIL v. IBM UK | ||||
Loss Contingencies | ||||
Amount of award against IBM | $ 20 | |||
Minimum | ||||
Loss Contingencies | ||||
Clients' presence in number of countries | country | 175 | |||
Minimum | IBM v. GF | ||||
Loss Contingencies | ||||
Damages sought, value | $ 1,500 |
Equity Activity - Reclassificat
Equity Activity - Reclassifications and Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | $ 9,447 | $ 9,130 | $ 28,714 | $ 28,202 |
SG&A expense | 4,860 | 4,647 | 15,368 | 15,849 |
Other (income) and expense | 234 | 253 | 911 | 614 |
Interest expense | 291 | 323 | 852 | 971 |
Provision for/(benefit from) income taxes | 188 | 128 | 365 | (888) |
Net (income) loss | (1,130) | (1,698) | (3,410) | (4,234) |
Other comprehensive income/(loss) | 350 | 172 | 2,035 | 12 |
Services | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 7,770 | 7,357 | 23,416 | 22,720 |
Sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 1,513 | 1,601 | 4,792 | 4,964 |
Financing | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 165 | 172 | 506 | 517 |
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 | 382 | (1,242) | ||
Reclassification/amortization, Net of Tax Amount | 1,654 | 1,255 | ||
Other comprehensive income/(loss), Before Tax Amount | 683 | 66 | 3,014 | 187 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (333) | 106 | (978) | (175) |
Other comprehensive income/(loss) | 350 | 172 | 2,035 | 12 |
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 | 160 | (1,094) | ||
Other comprehensive income/(loss), Before Tax Amount | (114) | (439) | 463 | (1,354) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (120) | 247 | (304) | 260 |
Other comprehensive income/(loss) | (234) | (192) | 160 | (1,094) |
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 | 0 | (1) | 0 | 0 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 0 | 0 | 0 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | (1) | 0 | 0 |
Other comprehensive income/(loss), Before Tax Amount | 0 | (1) | 0 | 0 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 0 | 0 | 0 | 0 |
Other comprehensive income/(loss) | 0 | (1) | 0 | 0 |
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 | 109 | (32) | 262 | (249) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (28) | 8 | (66) | 63 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 82 | (24) | 196 | (186) |
Reclassification/amortization, Net of Tax Amount | 211 | (27) | ||
Other comprehensive income/(loss), Before Tax Amount | 141 | (101) | 545 | (285) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (35) | 26 | (138) | 73 |
Other comprehensive income/(loss) | 106 | (75) | 407 | (212) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
SG&A expense | 1 | 5 | 32 | (12) |
Other (income) and expense | 22 | (93) | 187 | (74) |
Interest expense | 16 | 19 | 48 | 60 |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Services | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | (12) | (10) | (33) | (18) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | (1) | 4 | 30 | (14) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Financing | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Cost | 6 | 6 | 17 | 21 |
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 | 3 | 2 | 8 | 5 |
Net (income) loss | (9) | (7) | (25) | (14) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of sales | ||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||
Provision for/(benefit from) income taxes | 1 | (1) | (8) | 4 |
Net (income) loss | (1) | 3 | 23 | (10) |
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 | (1) | (2) | (4) | (5) |
Net (income) loss | 4 | 5 | 13 | 16 |
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 | 0 | (1) | (8) | 3 |
Net (income) loss | 1 | 4 | 24 | (9) |
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 | (6) | 23 | (47) | 19 |
Net (income) loss | 17 | (70) | 140 | (55) |
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 | (4) | (5) | (12) | (15) |
Net (income) loss | 12 | 14 | 36 | 45 |
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 | 26 | 37 | ||
Reclassification/amortization, Net of Tax Amount | 1,442 | 1,281 | ||
Other comprehensive income/(loss), Before Tax Amount | 656 | 607 | 2,006 | 1,826 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (178) | (167) | (537) | (507) |
Other comprehensive income/(loss) | 478 | 440 | 1,469 | 1,319 |
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 | 0 | (1) | 0 | (5) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 0 | 0 | 1 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | 0 | 0 | (3) |
Reclassification/amortization, Before Tax Amount | 3 | 0 | 8 | 1 |
Reclassification/amortization, Tax (Expense)/Benefit | 0 | 1 | 0 | 2 |
Reclassification/amortization, Net of Tax Amount | 3 | 1 | 8 | 3 |
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 | 0 | 23 | 65 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 0 | 4 | (24) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 1 | 0 | 27 | 41 |
Reclassification/amortization, Before Tax Amount | 638 | 586 | 1,929 | 1,722 |
Reclassification/amortization, Tax (Expense)/Benefit | (174) | (161) | (526) | (473) |
Reclassification/amortization, Net of Tax Amount | 464 | 425 | 1,403 | 1,249 |
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 | 13 | 21 | 46 | 42 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (4) | (6) | (14) | (12) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | $ 9 | $ 14 | $ 32 | $ 30 |
Equity Activity - AOCI Rollforw
Equity Activity - AOCI Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | $ 22,067 | $ 20,688 | $ 20,727 | $ 20,985 |
Other comprehensive income/(loss) | 350 | 172 | 2,035 | 12 |
Balance at the End of the Period | 22,357 | 21,334 | 22,357 | 21,334 |
Accumulated Other Comprehensive Income/(Loss) | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (27,652) | (28,757) | (29,337) | (28,597) |
Other comprehensive income before reclassifications | 382 | (1,242) | ||
Amount reclassified from accumulated other comprehensive income | 1,654 | 1,255 | ||
Other comprehensive income/(loss) | 350 | 172 | 2,035 | 12 |
Balance at the End of the Period | (27,302) | (28,584) | (27,302) | (28,584) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (456) | (179) | ||
Other comprehensive income before reclassifications | 82 | (24) | 196 | (186) |
Amount reclassified from accumulated other comprehensive income | 211 | (27) | ||
Other comprehensive income/(loss) | 106 | (75) | 407 | (212) |
Balance at the End of the Period | (49) | (391) | (49) | (391) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (4,665) | (3,700) | ||
Other comprehensive income before reclassifications | 160 | (1,094) | ||
Other comprehensive income/(loss) | (234) | (192) | 160 | (1,094) |
Balance at the End of the Period | (4,505) | (4,794) | (4,505) | (4,794) |
Net Change Retirement-Related Benefit Plans | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (24,216) | (24,718) | ||
Other comprehensive income before reclassifications | 26 | 37 | ||
Amount reclassified from accumulated other comprehensive income | 1,442 | 1,281 | ||
Other comprehensive income/(loss) | 478 | 440 | 1,469 | 1,319 |
Balance at the End of the Period | (22,747) | (23,399) | (22,747) | (23,399) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | 0 | 0 | ||
Other comprehensive income before reclassifications | 0 | (1) | 0 | 0 |
Other comprehensive income/(loss) | 0 | (1) | 0 | 0 |
Balance at the End of the Period | $ (1) | $ 0 | $ (1) | $ 0 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Offsetting (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
Derivative Financial Instruments | ||
Potential reduction in net position of total derivative assets | $ 91 | $ 213 |
Potential reduction in net position of total derivative liabilities | 91 | 213 |
Obligation to return cash collateral | 24 | 0 |
Cash collateral rehypothecated | 0 | 0 |
Other receivables | ||
Derivative Financial Instruments | ||
Right to reclaim cash collateral | $ 0 | $ 0 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Hedging Programs (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | Mar. 31, 2021 | |
Interest rate swaps | Derivative instruments in fair value hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 400 | $ 3,000 | |
Amount of terminated derivative | $ 1,250 | ||
Average remaining maturity | 1 year 6 months | 1 year 2 months 12 days | |
Interest rate swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 0 | $ 0 | |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | |||
Derivative Financial Instruments | |||
Notional amount | $ 7,800 | 6,800 | |
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 | |||
Aggregate amount of debt issued | $ 15,500 | 16,400 | |
Notional amount | $ 7,500 | $ 7,200 | |
Average remaining maturity | 1 month 6 days | 3 months 18 days | |
Foreign exchange forward contracts | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 2 years 10 months 24 days | ||
Notional amount | $ 7,500 | $ 8,000 | |
Average remaining maturity | 7 months 6 days | 8 months 12 days | |
Net gains (losses) before taxes in accumulated other comprehensive income/(loss), cash flow hedges | $ 294 | $ (192) | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 216 | ||
Cross-currency swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Maximum length of time hedged | 6 years 4 months 24 days | ||
Notional amount | $ 1,500 | 1,500 | |
Net gains (losses) before taxes in accumulated other comprehensive income/(loss), cash flow hedges | (191) | $ (236) | |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ (25) | ||
Forward-starting interest rate swaps | Derivative instruments in cash flow hedges | |||
Derivative Financial Instruments | |||
Number of derivative instruments outstanding | 0 | 0 | |
Net gains (losses) before taxes in accumulated other comprehensive income/(loss), cash flow hedges | $ (161) | $ (174) | |
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 | $ 1,400 | $ 1,300 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Cumulative Basis Adjustments for Fair Value Hedges (Details) - USD ($) $ in Millions | Sep. 30, 2021 | Dec. 31, 2020 |
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 | $ (752) | (2,097) |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | (327) | (424) |
Hedging adjustments on discontinued hedging relationships | $ (314) | $ (353) |
Derivative Financial Instrume_6
Derivative Financial Instruments - Effect of Hedge Activity on Income and Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Derivative Instruments, Gain (Loss) | ||||
Cost | $ 9,447 | $ 9,130 | $ 28,714 | $ 28,202 |
SG&A expense | 4,860 | 4,647 | 15,368 | 15,849 |
Other (income) and expense | 234 | 253 | 911 | 614 |
Interest expense | 291 | 323 | 852 | 971 |
Cost of services | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 12 | 10 | 33 | 18 |
Cost of sales | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | 1 | (4) | (30) | 14 |
Cost of financing | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | (1) | 3 | 1 | 9 |
SG&A expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | (14) | 58 | 88 | 24 |
Other (income) and expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | (7) | 101 | (246) | 92 |
Interest expense | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains/(losses) of total hedge activity | (2) | 8 | 3 | 24 |
Services | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | 7,770 | 7,357 | 23,416 | 22,720 |
Sales | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | 1,513 | 1,601 | 4,792 | 4,964 |
Financing | ||||
Derivative Instruments, Gain (Loss) | ||||
Cost | $ 165 | $ 172 | $ 506 | $ 517 |
Derivative Financial Instrume_7
Derivative Financial Instruments - Gains and Losses (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | $ 3 | $ 71 | $ 59 | $ 108 |
Gain (loss) recognized in earnings attributable to risk being hedged | 15 | 27 | 55 | (13) |
Cash flow hedges and net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | 587 | (1,015) | 1,470 | (1,281) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (32) | 69 | (282) | 37 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | 5 | 9 | 15 | 50 |
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 | 109 | (32) | 262 | (249) |
Foreign exchange contracts | Instruments in net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | 477 | (983) | 1,207 | (1,033) |
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 | 12 | 10 | 33 | 18 |
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 | 1 | (4) | (30) | 14 |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 0 | 0 | 0 | 20 |
Gain (loss) recognized in earnings attributable to risk being hedged | 4 | 7 | 15 | (3) |
Cost of financing | Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (1) | (1) | (4) | (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 | (5) | (5) | (14) | (18) |
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 | 1 | 2 | 4 | 13 |
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 | (1) | (5) | (32) | 12 |
SG&A expense | Equity contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | (13) | 63 | 120 | 12 |
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 | (22) | 93 | (187) | 74 |
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 | 15 | 8 | (59) | 18 |
Interest expense | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 0 | 0 | (1) | 57 |
Gain (loss) recognized in earnings attributable to risk being hedged | 11 | 20 | 40 | (9) |
Interest expense | Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (3) | (3) | (10) | (10) |
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 | (13) | (15) | (38) | (50) |
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 | $ 3 | $ 7 | $ 11 | $ 37 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 262 | $ 222 | $ 719 | $ 658 |
Income tax benefits | (58) | (50) | (179) | (146) |
Net stock-based compensation cost | 204 | 172 | 540 | 512 |
Pre-tax stock-based compensation cost increase (decrease) | 40 | 61 | ||
Unrecognized compensation cost related to non-vested awards | 1,600 | $ 1,600 | ||
Unrecognized compensation cost related to non-vested awards, weighted average period of recognition | 2 years 6 months | |||
Performance Share Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 21 | $ 29 | ||
Restricted Stock Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 4 | 19 | ||
Stock Options | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 15 | 13 | ||
Cost | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 45 | 42 | 127 | 109 |
SG&A expense | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 156 | 129 | 431 | 401 |
Research, development and engineering | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 61 | $ 50 | $ 160 | $ 147 |
Retirement-Related Benefits - A
Retirement-Related Benefits - All Retirement Plans Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Retirement-Related Benefits | ||||
Defined benefit and contribution pension plans - cost | $ 647 | $ 610 | $ 1,972 | $ 1,789 |
Nonpension postretirement plans - cost | 45 | 50 | 134 | 151 |
Total | $ 692 | $ 660 | $ 2,106 | $ 1,941 |
Year-to-year percent change, defined benefit and contribution pension plans cost (as a percent) | 6.00% | 10.20% | ||
Year-to-year percent change, nonpension postretirement plans cost (as a percent) | (10.50%) | (11.80%) | ||
Year-to-year percent change, total (as a percent) | 4.80% | 8.50% |
Retirement-Related Benefits - C
Retirement-Related Benefits - Cost of Pension Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Cost/(Income) of Pension Plans | ||||
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | $ 647 | $ 610 | $ 1,972 | $ 1,789 |
U.S. | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Interest cost | $ 277 | $ 375 | $ 832 | $ 1,126 |
Interest cost - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Expected return on plan assets | $ (451) | $ (542) | $ (1,352) | $ (1,627) |
Expected return on plan assets - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Amortization of prior service costs/(credits) | $ 4 | $ 4 | $ 12 | $ 12 |
Amortization of prior service costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Recognized actuarial losses | $ 249 | $ 207 | $ 747 | $ 622 |
Recognized actuarial losses - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Curtailments and settlements - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Other costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 80 | $ 44 | $ 239 | $ 133 |
Cost of defined contribution plans | 152 | 148 | 455 | 457 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | 232 | 192 | 694 | 590 |
Non-U.S. | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Service cost | 94 | 99 | 281 | 289 |
Interest cost | $ 109 | $ 142 | $ 332 | $ 408 |
Interest cost - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Expected return on plan assets | $ (286) | $ (323) | $ (867) | $ (943) |
Expected return on plan assets - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Amortization of prior service costs/(credits) | $ (2) | $ (5) | $ (8) | $ (14) |
Amortization of prior service costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Recognized actuarial losses | $ 365 | $ 360 | $ 1,110 | $ 1,041 |
Recognized actuarial losses - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Curtailments and settlements | $ 13 | $ 21 | $ 46 | $ 42 |
Curtailments and settlements - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Multi-employer plans | $ 3 | $ 7 | $ 17 | $ 22 |
Other costs/(credits) | $ 7 | $ 6 | $ 21 | $ 20 |
Other costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 303 | $ 307 | $ 933 | $ 865 |
Cost of defined contribution plans | 112 | 111 | 345 | 334 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | $ 415 | $ 418 | $ 1,278 | $ 1,200 |
Retirement-Related Benefits - N
Retirement-Related Benefits - Nonpension Postretirement Cost (Details) - Nonpension Postretirement Plans - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
U.S. | ||||
Nonpension postretirement plan cost | ||||
Service cost | $ 2 | $ 2 | $ 5 | $ 7 |
Interest cost | $ 16 | $ 26 | $ 49 | $ 77 |
Interest cost - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Expected return on plan assets - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Amortization of prior service costs/(credits) | $ 1 | $ 1 | $ 3 | $ 3 |
Amortization of prior service costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Recognized actuarial losses | $ 13 | $ 7 | $ 39 | $ 22 |
Recognized actuarial losses - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Curtailments and settlements - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 32 | $ 36 | $ 96 | $ 109 |
Non-U.S. | ||||
Nonpension postretirement plan cost | ||||
Service cost | 1 | 1 | 4 | 4 |
Interest cost | $ 8 | $ 8 | $ 25 | $ 26 |
Interest cost - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Expected return on plan assets | $ (1) | $ (1) | $ (2) | $ (3) |
Expected return on plan assets - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Amortization of prior service costs/(credits) | $ 0 | $ 0 | $ 0 | $ 0 |
Amortization of prior service costs/(credits) - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Recognized actuarial losses | $ 4 | $ 5 | $ 12 | $ 16 |
Recognized actuarial losses - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Curtailments and settlements | $ 0 | $ 0 | ||
Curtailments and settlements - income statement location | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 13 | $ 14 | $ 38 | $ 43 |
Retirement-Related Benefits -_2
Retirement-Related Benefits - Contributions (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Retirement-Related Benefits | ||
Employer contributions | $ 317 | $ 392 |
U.S. and Non-U.S. nonpension postretirement benefit plans | ||
Retirement-Related Benefits | ||
Employer contributions | 269 | 265 |
Non-U.S. DB plans and multi-employer plans | ||
Retirement-Related Benefits | ||
Employer contributions | 48 | 127 |
Pension Plans, Including Multi-employer Plans | ||
Retirement-Related Benefits | ||
Contributions by employer - Noncash | 311 | 160 |
Nonpension Postretirement Plans | Non-U.S. DB plans | ||
Retirement-Related Benefits | ||
Contributions by employer - Noncash | $ 307 | $ 315 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event - USD ($) $ / shares in Units, $ in Millions | Oct. 26, 2021 | Nov. 01, 2021 | Oct. 15, 2021 |
Subsequent Events | |||
Dividend declared, date | Oct. 26, 2021 | ||
Dividend declared (in dollars per share) | $ 1.64 | ||
Dividend payable, date | Dec. 10, 2021 | ||
Shareholders of record, date | Nov. 10, 2021 | ||
Variable-rate term loan | Kyndryl Holdings, Inc | |||
Subsequent Events | |||
Aggregate amount of debt issued | $ 500 | ||
Debt term | 3 years | ||
Senior unsecured fixed-rate note | Kyndryl Holdings, Inc | |||
Subsequent Events | |||
Aggregate amount of debt issued | $ 2,400 | ||
Senior unsecured fixed-rate note | Minimum | Kyndryl Holdings, Inc | |||
Subsequent Events | |||
Debt term | 5 years | ||
Coupon rate (as a percent) | 2.05% | ||
Senior unsecured fixed-rate note | Maximum | Kyndryl Holdings, Inc | |||
Subsequent Events | |||
Debt term | 20 years | ||
Coupon rate (as a percent) | 4.10% |