Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2022 shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Sep. 30, 2022 |
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 | 904,126,363 |
Document Fiscal Year Focus | 2022 |
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 | 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 | 0.875% Notes due 2030 | |
Document Information [Line Items] | |
Title of 12(b) Security | 0.875% Notes due 2030 |
Trading Symbol | IBM 30 |
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 | 1.250% Notes due 2034 | |
Document Information [Line Items] | |
Title of 12(b) Security | 1.250% Notes due 2034 |
Trading Symbol | IBM 34 |
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 | 5.875% Debentures due 2032 | |
Document Information [Line Items] | |
Title of 12(b) Security | 5.875% Debentures due 2032 |
Trading Symbol | IBM 32D |
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, 2022 | Sep. 30, 2021 | [1] | Sep. 30, 2022 | Sep. 30, 2021 | [1] | |||
Revenue | $ 14,107 | $ 13,251 | $ 43,840 | $ 40,656 | ||||
Cost | 6,677 | 6,145 | 20,784 | 18,670 | ||||
Gross profit | 7,430 | 7,106 | 23,055 | 21,985 | ||||
Expense and other (income) | ||||||||
Selling, general and administrative | 4,391 | 4,306 | 13,843 | 13,842 | ||||
Research, development and engineering | 1,611 | 1,606 | 4,963 | 4,863 | ||||
Intellectual property and custom development income | (121) | (153) | (418) | (431) | ||||
Other (income) and expense | 5,755 | 244 | 5,921 | 891 | ||||
Interest expense | 295 | 290 | 903 | 852 | ||||
Total expense and other (income) | 11,931 | 6,293 | 25,212 | 20,017 | ||||
Income/(loss) from continuing operations before income taxes | (4,501) | 813 | (2,156) | 1,968 | ||||
Provision for/(benefit from) income taxes | (1,287) | (224) | (1,070) | (282) | ||||
Income/(loss) from continuing operations | (3,214) | 1,037 | (1,087) | 2,250 | ||||
Income from discontinued operations, net of tax | 18 | 93 | 16 | 1,160 | ||||
Net income/(loss) | $ (3,196) | [2] | $ 1,130 | [3] | $ (1,071) | [2] | $ 3,410 | [3] |
Assuming dilution | ||||||||
Continuing operations (in dollars per share) | $ (3.55) | $ 1.14 | $ (1.21) | $ 2.49 | ||||
Discontinued operations (in dollars per share) | 0.02 | 0.10 | 0.02 | 1.28 | ||||
Total (in dollars per share) | (3.54) | 1.25 | (1.19) | 3.77 | ||||
Basic | ||||||||
Continuing operations (in dollars per share) | (3.55) | 1.16 | (1.21) | 2.51 | ||||
Discontinued operations (in dollars per share) | 0.02 | 0.10 | 0.02 | 1.30 | ||||
Total (in dollars per share) | $ (3.54) | $ 1.26 | $ (1.19) | $ 3.81 | ||||
Weighted-average number of common shares outstanding | ||||||||
Assuming dilution (in shares) | 904,076,831 | 905,953,114 | 901,621,217 | 903,977,539 | ||||
Basic (in shares) | 904,076,831 | 897,097,073 | 901,621,217 | 895,257,004 | ||||
Services. | ||||||||
Revenue | $ 7,365 | $ 7,251 | $ 22,708 | $ 21,549 | ||||
Cost | 5,168 | 4,650 | 15,915 | 14,014 | ||||
Sales | ||||||||
Revenue | 6,565 | 5,814 | [4] | 20,652 | 18,502 | [4] | ||
Cost | 1,389 | 1,363 | [4] | 4,555 | 4,241 | [4] | ||
Financing. | ||||||||
Revenue | 176 | 186 | [4] | 479 | 606 | [4] | ||
Cost | $ 120 | $ 132 | [4] | $ 314 | $ 416 | [4] | ||
[1] Reclassified to reflect discontinued operations presentation. Includes the impact of a one-time, non-cash pension settlement charge. Refer to note 18, "Retirement-Related Benefits," for additional information. Amounts presented have not been recast to exclude discontinued operations. Reclassified to conform to current year presentation. |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Sep. 30, 2021 | [2] | Sep. 30, 2022 | Sep. 30, 2021 | [2] | |||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||
Net income/(loss) | $ (3,196) | [1] | $ 1,130 | [3] | $ (1,071) | [1] | $ 3,410 | [3] |
Other comprehensive income/(loss), before tax | ||||||||
Foreign currency translation adjustments | 143 | (114) | 799 | 463 | ||||
Net changes related to available-for-sale securities | ||||||||
Unrealized gains/(losses) arising during the period | 0 | 0 | (1) | 0 | ||||
Total net changes related to available-for-sale securities | 0 | 0 | (1) | 0 | ||||
Unrealized gains/(losses) on cash flow hedges | ||||||||
Unrealized gains/(losses) arising during the period | 189 | 109 | 449 | 262 | ||||
Reclassification of (gains)/losses to net income | (12) | 32 | 4 | 282 | ||||
Total unrealized gains/(losses) on cash flow hedges | 178 | 141 | 453 | 545 | ||||
Retirement-related benefit plans | ||||||||
Prior service costs/(credits) | 412 | 0 | 408 | 0 | ||||
Net (losses)/gains arising during the period | 53 | 1 | 63 | 23 | ||||
Curtailments and settlements | 5,913 | 13 | 5,931 | 46 | ||||
Amortization of prior service (credits)/costs | 3 | 3 | 16 | 8 | ||||
Amortization of net (gains)/losses | 388 | 638 | 1,305 | 1,929 | ||||
Total retirement-related benefit plans | 6,768 | 656 | 7,722 | 2,006 | ||||
Other comprehensive income/(loss), before tax | 7,089 | 683 | 8,973 | 3,014 | ||||
Income tax (expense)/benefit related to items of other comprehensive income | (2,058) | (333) | (2,877) | (978) | ||||
Other comprehensive income/(loss), net of tax | 5,030 | 350 | 6,096 | 2,035 | ||||
Total comprehensive income | $ 1,834 | $ 1,480 | $ 5,025 | $ 5,446 | ||||
[1] Includes the impact of a one-time, non-cash pension settlement charge. Refer to note 18, "Retirement-Related Benefits," for additional information. Amounts presented have not been recast to exclude discontinued operations. Reclassified to reflect discontinued operations presentation. |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and cash equivalents | $ 7,816 | $ 6,650 |
Restricted cash | 159 | 307 |
Marketable securities | 1,753 | 600 |
Notes and accounts receivable - trade (net of allowances of $214 in 2022 and $218 in 2021) | 5,526 | 6,754 |
Short-term financing receivables, held for investment (net of allowances of $139 in 2022 and $176 in 2021) | 6,280 | 7,221 |
Short-term financing receivables, held for sale | 395 | 793 |
Other accounts receivable (net of allowances of $48 in 2022 and $24 in 2021) | 902 | 1,002 |
Inventories, at lower of average cost or net realizable value: | ||
Finished goods | 209 | 208 |
Work in process and raw materials | 1,585 | 1,442 |
Total inventory | 1,794 | 1,649 |
Deferred costs | 921 | 1,097 |
Prepaid expenses and other current assets | 3,452 | 3,466 |
Total current assets | 28,999 | 29,539 |
Property, plant and equipment | 18,675 | 20,085 |
Less: Accumulated depreciation | 13,525 | 14,390 |
Property, plant and equipment - net | 5,150 | 5,694 |
Operating right-of-use assets-net | 2,740 | 3,222 |
Long-term financing receivables (net of allowances of $20 in 2022 and $25 in 2021) | 4,781 | 5,425 |
Prepaid pension assets | 9,695 | 9,850 |
Deferred costs | 818 | 924 |
Deferred taxes | 6,868 | 7,370 |
Goodwill | 54,218 | 55,643 |
Intangible assets-net | 10,967 | 12,511 |
Investments and sundry assets | 1,614 | 1,823 |
Total assets | 125,850 | 132,001 |
Current liabilities | ||
Taxes | 1,667 | 2,289 |
Short-term debt | 5,937 | 6,787 |
Accounts payable | 3,806 | 3,955 |
Compensation and benefits | 3,369 | 3,204 |
Deferred income | 11,139 | 12,518 |
Operating lease liabilities | 844 | 974 |
Other accrued expenses and liabilities | 3,702 | 3,892 |
Total current liabilities | 30,466 | 33,619 |
Long-term debt | 44,942 | 44,917 |
Retirement and nonpension postretirement benefit obligations | 11,760 | 14,435 |
Deferred income | 3,018 | 3,577 |
Operating lease liabilities | 2,103 | 2,462 |
Other liabilities | 13,413 | 13,996 |
Total liabilities | 105,703 | 113,005 |
IBM stockholders' equity | ||
Common stock, par value $.20 per share, and additional paid-in capital Shares authorized: 4,687,500,000 Shares issued (2022-2,255,410,248; 2021-2,248,577,848) | 58,117 | 57,319 |
Retained earnings | 148,611 | 154,209 |
Treasury stock, at cost (shares: 2022-1,351,283,866; 2021-1,350,509,249) | (169,514) | (169,392) |
Accumulated other comprehensive income/(loss) | (17,138) | (23,234) |
Total IBM stockholders' equity | 20,076 | 18,901 |
Noncontrolling interests | 71 | 95 |
Total equity | 20,147 | 18,996 |
Total liabilities and equity | $ 125,850 | $ 132,001 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
CONSOLIDATED BALANCE SHEET | ||
Notes and accounts receivable - trade, allowances | $ 214 | $ 218 |
Short-term financing receivables, allowances | 139 | 176 |
Other accounts receivable, allowances | 48 | 24 |
Long-term financing receivables, allowances | $ 20 | $ 25 |
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) | 2,255,410,248 | 2,248,577,848 |
Treasury stock, Shares (in shares) | 1,351,283,886 | 1,350,509,249 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities | ||
Net income/(loss) | $ (1,071) | $ 3,410 |
Adjustments to reconcile net income to cash provided by operating activities | ||
Pension settlement charge | 5,894 | |
Depreciation | 1,837 | 3,139 |
Amortization of intangibles | 1,828 | 1,897 |
Stock-based compensation | 739 | 719 |
Net (gain)/loss on asset sales and other | (60) | (150) |
Changes in operating assets and liabilities, net of acquisitions/divestitures | (2,695) | 1,238 |
Net cash provided by operating activities | 6,470 | 10,252 |
Cash flows from investing activities | ||
Payments for property, plant and equipment | (937) | (1,612) |
Proceeds from disposition of property, plant and equipment | 98 | 312 |
Investment in software | (479) | (555) |
Acquisition of businesses, net of cash acquired | (1,020) | (3,018) |
Divestiture of businesses, net of cash transferred | 1,271 | 26 |
Purchases of marketable securities and other investments | (4,474) | (2,655) |
Proceeds from disposition of marketable securities and other investments | 2,655 | 2,202 |
Net cash provided by/(used in) investing activities | (2,883) | (5,300) |
Cash flows from financing activities | ||
Proceeds from new debt | 7,797 | 394 |
Payments to settle debt | (5,446) | (7,321) |
Short-term borrowings/(repayments) less than 90 days - net | 221 | 840 |
Common stock repurchases for tax withholdings | (329) | (252) |
Financing - other | 106 | 71 |
Cash dividends paid | (4,454) | (4,395) |
Net cash provided by/(used in) financing activities | (2,106) | (10,662) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (463) | (159) |
Net change in cash, cash equivalents and restricted cash | 1,018 | (5,868) |
Cash, cash equivalents and restricted cash at January 1 | 6,957 | 13,675 |
Cash, cash equivalents and restricted cash at September 30 | $ 7,975 | $ 7,806 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions | Total IBM Stockholders' Equity | Common Stock and Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income/(Loss) | Non-Controlling Interests | Total |
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/(loss) plus other comprehensive income/(loss): | |||||||
Net income/(loss) | 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/(loss) plus other comprehensive income/(loss): | |||||||
Net income/(loss) | 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 |
Balance at the Beginning of the Period at Dec. 31, 2021 | 18,901 | 57,319 | 154,209 | (169,392) | (23,234) | 95 | 18,996 |
Net income/(loss) plus other comprehensive income/(loss): | |||||||
Net income/(loss) | (1,071) | (1,071) | (1,071) | ||||
Other comprehensive income/(loss) | 6,096 | 6,096 | 6,096 | ||||
Total comprehensive income/(loss) | 5,025 | 5,025 | |||||
Cash dividends paid - common stock | (4,454) | (4,454) | (4,454) | ||||
Common stock issued under employee plans | 736 | 736 | 736 | ||||
Purchases and sales of treasury stock under employee plans - net | (133) | (10) | (122) | (133) | |||
Other equity | 0 | 63 | (63) | 0 | |||
Changes in noncontrolling interests | (23) | (23) | |||||
Balance at the End of the Period at Sep. 30, 2022 | 20,076 | 58,117 | 148,611 | (169,514) | (17,138) | 71 | 20,147 |
Balance at the Beginning of the Period at Jun. 30, 2022 | 19,409 | 57,802 | 153,298 | (169,522) | (22,169) | 67 | 19,476 |
Net income/(loss) plus other comprehensive income/(loss): | |||||||
Net income/(loss) | (3,196) | (3,196) | (3,196) | ||||
Other comprehensive income/(loss) | 5,030 | 5,030 | 5,030 | ||||
Total comprehensive income/(loss) | 1,834 | 1,834 | |||||
Cash dividends paid - common stock | (1,491) | (1,491) | (1,491) | ||||
Common stock issued under employee plans | 315 | 315 | 315 | ||||
Purchases and sales of treasury stock under employee plans - net | 8 | 0 | 8 | 8 | |||
Changes in noncontrolling interests | 4 | 4 | |||||
Balance at the End of the Period at Sep. 30, 2022 | $ 20,076 | $ 58,117 | $ 148,611 | $ (169,514) | $ (17,138) | $ 71 | $ 20,147 |
CONSOLIDATED STATEMENT OF EQU_2
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
CONSOLIDATED STATEMENT OF EQUITY | ||||
Cash dividend per common share | $ 1.65 | $ 1.64 | $ 4.94 | $ 4.91 |
Common stock issued under employee plans (in shares) | 871,676 | 482,632 | 6,832,400 | 4,496,470 |
Purchases of treasury stock under employee plans (in shares) | 103,736 | 124,146 | 2,423,220 | 1,797,733 |
Sales of treasury stock under employee plans (in shares) | 178,069 | 121,792 | 1,648,583 | 1,448,189 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2022 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis o f Presentation: The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. On November 3, 2021, the company completed the 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 all The accounting requirements for reporting the separation of Kyndryl as a discontinued operation were met when the separation was In the first quarter of 2022, the company realigned its management structure to reflect the planned divestiture of its healthcare software assets which was completed in the second quarter of 2022. This change impacted the company’s Software segment and Other–divested businesses category. In the fourth quarter of 2021, immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes impacted the company’s reportable segments but did not impact the Consolidated Financial Statements. Refer to note 5, “Segments,” for additional information on the company’s reportable segments. The segments are reported on a comparable basis for all periods. In September 2022, the IBM Qualified Personal Pension Plan (Qualified PPP) purchased two separate nonparticipating single premium group annuity contracts from The Prudential Insurance Company of America and Metropolitan Life Insurance Company (collectively, the Insurers) and irrevocably transferred to the Insurers approximately $16 billion of the Qualified PPP’s defined benefit pension obligations and related plan assets, thereby reducing the company’s pension obligations and assets by the same amount. The group annuity contracts were purchased using assets of the Qualified PPP and no additional funding contribution was required from the company. As a result of this transaction the company recognized a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax) in the third quarter of 2022, primarily related to the accelerated recognition of accumulated actuarial losses of the Qualified PPP. Refer to note 18, “Retirement-Related Benefits,” for additional information. For the three and nine months ended September 30, 2022, the company reported a benefit from income taxes of $1,287 million and $1,070 million, respectively. The tax benefits were primarily due to the transfer of a portion of the Qualified PPP’s defined benefit pension obligations and related plan assets, as described above. For the three and nine months ended September 30, 2021, the company reported a benefit from income taxes of $224 million and $282 million, respectively. The tax benefits were primarily driven by the resolution of certain tax audits in the first quarter of 2021 as well as third-quarter 2021 events that resulted in additional anticipated utilization of U.S. foreign tax credits. Noncontrolling interest amounts of $3.7 million and $5.5 million, net of tax, for the three months ended September 30, 2022 and 2021, respectively, and $14.2 million and $14.5 million, net of tax, for the nine months ended September 30, 2022 and 2021, 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 2021 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. issued |
Accounting Changes
Accounting Changes | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Changes | |
Accounting Changes | 2. Accounting Changes: New Standards to be Implemented Disclosures of Supplier Finance Program Obligations Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Disclosures about Government Assistance Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Troubled Debt Restructurings and Vintage Disclosures Standard/Description a continuation of an existing loan. The guidance also requires presenting current period gross write-offs by year of origination for financing receivables and net investment in leases. Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Lessors–Certain Leases with Variable Lease Payments Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Revenue Contracts with Customers Acquired in a Business Combination Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters |
Separation of Kyndryl
Separation of Kyndryl | 9 Months Ended |
Sep. 30, 2022 | |
Separation of Kyndryl | |
Separation of Kyndryl | 3. Separation of Kyndryl: On November 3, 2021, the company completed the separation of its managed infrastructure services unit into a new public company with the distribution of 80.1 percent of the outstanding shares of Kyndryl to IBM stockholders on a pro rata basis. The company retained 19.9 percent of the shares of Kyndryl common stock. As of September 30, 2022, the company transferred all The historical results of Kyndryl have been presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The company’s presentation of discontinued operations excludes general corporate overhead costs which were historically allocated to Kyndryl, consistent with the company’s management system, that did not meet the requirements to be presented in discontinued operations in 2021. Such allocations include labor and non-labor expenses related to IBM’s corporate support functions (e.g., finance, accounting, tax, treasury, IT, HR, legal, among others) that historically provided support to Kyndryl and transferred to Kyndryl at separation. In addition, discontinued operations excludes the historical intercompany purchases and sales between IBM and Kyndryl that were eliminated in consolidation. IBM will provide transition services to Kyndryl predominantly consisting of information technology services for a period no longer than two years after the separation. The impact of these transition services on the company’s Consolidated Financial Statements for the three and nine months ended September 30, 2022 was not material. IBM and Kyndryl entered into various commercial agreements pursuant to which Kyndryl will purchase hardware, software and services from IBM and under which IBM will receive hosting and information infrastructure services from Kyndryl. As part of the separation, IBM has also committed to provide upgraded hardware at no cost to Kyndryl over a two-year period after the separation. An estimate of the remaining obligation under the agreement is recorded in other accrued expenses and liabilities in the Consolidated Balance Sheet. The following table presents the major categories of income/(loss) from discontinued operations, net of tax. Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Revenue $ 1 $ 4,367 $ 7 $ 13,437 Cost of sales 2 3,303 19 10,043 Selling, general and administrative expense (24) 554 42 1,527 RD&E and Other (income) and expense 0 4 (70) 59 Income from discontinued operations before income taxes $ 24 $ 506 $ 16 $ 1,807 Provision for income taxes 6 413 1 648 Income from discontinued operations, net of tax $ 18 $ 93 $ 16 $ 1,160 * Excludes intercompany transactions between IBM and Kyndryl and general corporate overhead costs transferred to Kyndryl as discussed above. Income from discontinued operations, net of tax, for the three months ended September 30, 2022 primarily reflects the net impact of changes in separation-related estimates and the settlement of assets and liabilities in accordance with the separation and distribution agreement. Income from discontinued operations, net of tax, for the nine months ended September 30, 2022 reflects the same drivers as above and also includes a joint venture historically managed by Kyndryl, which did not transfer at separation due to the transfer being subject to regulatory approval. Upon receiving regulatory approval in the first quarter of 2022, the company sold its majority shares in the joint venture to Kyndryl, resulting in a pre-tax gain on sale of $68 million. The company did not incur any separation costs during the three months ended September 30, 2022. Separation costs of $543 million incurred during the three months ended September 30, 2021, and $5 million and $739 million incurred during the nine months ended September 30, 2022 and 2021, respectively, are included in income/(loss) from discontinued operations, net of tax, in the Consolidated Income Statement. These charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlement charges and related tax charges. The following table presents selected financial information related to cash flows from discontinued operations. Nine Months Ended September 30, (Dollars in millions) 2022 2021 Net cash provided by/(used in) operating activities $ — $ 2,167 * Net cash provided by/(used in) investing activities $ 48 $ (363) * Excludes intercompany transactions between IBM and Kyndryl and general corporate overhead costs transferred to Kyndryl as discussed above. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2022 | |
Revenue Recognition | |
Revenue Recognition | 4. Revenue Recognition: Disaggregation of Revenue The following tables provide details of revenue by major products/service offerings, hybrid cloud revenue, and revenue by geography. Revenue by Major Products/Service Offerings Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Hybrid Platform & Solutions $ 4,172 $ 4,074 $ 12,641 $ 12,082 Transaction Processing 1,640 1,332 5,107 4,257 Total Software $ 5,811 $ 5,406 $ 17,749 $ 16,339 Business Transformation 2,165 2,068 6,646 6,070 Application Operations 1,593 1,501 4,865 4,489 Technology Consulting 943 889 2,826 2,538 Total Consulting $ 4,700 $ 4,457 $ 14,337 $ 13,098 Hybrid Infrastructure 1,931 1,453 6,392 5,294 Infrastructure Support 1,421 1,468 4,413 4,480 Total Infrastructure $ 3,352 $ 2,921 $ 10,805 $ 9,774 Financing** 174 184 474 601 Other 70 282 475 844 Total revenue $ 14,107 $ 13,251 $ 43,840 $ 40,656 * Recast to reflect segment changes. ** Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. Hybrid Cloud Revenue by Segment Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Software $ 2,186 $ 2,038 $ 6,604 $ 5,797 Consulting 2,221 1,982 6,642 5,605 Infrastructure 768 558 2,661 2,376 Other 2 77 143 246 Total $ 5,176 $ 4,655 $ 16,049 $ 14,024 * Recast to reflect segment changes. Revenue by Geography Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Americas $ 7,416 $ 6,579 $ 22,614 $ 20,178 Europe/Middle East/Africa 3,959 3,939 12,716 12,181 Asia Pacific 2,732 2,734 8,509 8,297 Total $ 14,107 $ 13,251 $ 43,840 $ 40,656 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, 2022, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $53 billion. Approximately 73 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 25 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, 2022, revenue was reduced by $36 million and $60 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) 2022 2021 Notes and accounts receivable — $ 5,526 $ 6,754 Contract assets* $ 522 $ 471 Deferred income (current) $ 11,139 $ 12,518 Deferred income (noncurrent) $ 3,018 $ 3,577 * 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, 2022 that was included within the deferred income balance at June 30, 2022 and December 31, 2021 was $4.3 billion and $8.8 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, 2022 and the year ended December 31, 2021. (Dollars in millions) January 1, 2022 Additions / (Releases) Write-offs Foreign currency and other September 30, 2022 $ 218 $ 43 $ (28) $ (19) $ 214 January 1, 2021 Additions / (Releases) Write-offs Foreign currency and other December 31, 2021 $ 260 $ (15) $ (28) $ 1 $ 218 The contract assets allowance for expected credit losses was not material in any of the periods presented. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2022 | |
Segments | |
Segments | 5. Segments: In January 2022, IBM announced the divestiture of its healthcare software assets which closed in the second quarter of 2022. Refer to note 6, “Acquisitions & Divestitures,” for additional information. The company re-aligned its management structure to manage these assets outside of the Software segment prior to the divestiture. Beginning in the first quarter of 2022, the financial results of these assets are presented in Other–divested businesses. In the fourth quarter of 2021, immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system to align the company’s operating model to its platform-centric approach to hybrid cloud and AI. With these changes, the company revised its reportable segments, but did not impact its Consolidated Financial Statements. The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company, and the prior-year periods have been recast to reflect the company’s segment changes in the first quarter of 2022 and the fourth quarter of 2021 described above. Performance measurement is based on pre-tax income from continuing operations. These results are used by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments. SEGMENT INFORMATION Total (Dollars in millions) Software Consulting Infrastructure Financing Segments For the three months ended September 30, 2022: Revenue $ 5,811 $ 4,700 $ 3,352 $ 174 $ 14,037 Pre-tax income from continuing operations $ 1,306 $ 462 $ 280 $ 79 $ 2,128 Revenue year-to-year change 7.5 % 5.4 % 14.8 % (5.7) % 8.2 % Pre-tax income year-to-year change 31.9 % (0.8) % 34.1 % (40.4) % 18.4 % Pre-tax income margin 22.5 % 9.8 % 8.3 % 45.4 % 15.2 % For the three months ended September 30, 2021*: Revenue $ 5,406 $ 4,457 $ 2,921 $ 184 $ 12,969 Pre-tax income from continuing operations $ 990 $ 466 $ 209 $ 132 $ 1,797 Pre-tax income margin 18.3 % 10.5 % 7.1 % 71.7 % 13.9 % Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended September 30: 2022 2021* Revenue: Total reportable segments $ 14,037 $ 12,969 Other ‒ 3 189 Other revenue 68 93 Total consolidated revenue $ 14,107 $ 13,251 Pre-tax income/(loss) from continuing operations: Total reportable segments $ 2,128 $ 1,797 Amortization of acquired intangible assets (417) (469) Acquisition-related (charges)/income (1) (4) Non-operating retirement-related (costs)/income (6,062) ** (318) Kyndryl-related impacts+ 14 — Eliminations of internal transactions 0 1 Other ‒ 0 (41) Unallocated corporate amounts and other (163) (155) Total pre-tax income/(loss) from continuing operations $ (4,501) $ 813 * Recast to conform to current year presentation. ** Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion. See note 18, “Retirement-Related Benefits,” for additional information. + Refer to note 8, “Financial Assets & Liabilities,” for additional information. SEGMENT INFORMATION Total (Dollars in millions) Software Consulting Infrastructure Financing Segments For the nine months ended September 30, 2022: Revenue $ 17,749 $ 14,337 $ 10,805 $ 474 $ 43,365 Pre-tax income from continuing operations $ 3,816 $ 1,154 $ 1,236 $ 265 $ 6,470 Revenue year-to-year change 8.6 % 9.5 % 10.6 % (21.2) % 8.9 % Pre-tax income year-to-year change 41.0 % 13.9 % 25.0 % (26.8) % 27.6 % Pre-tax income margin 21.5 % 8.0 % 11.4 % 55.9 % 14.9 % For the nine months ended September 30, 2021*: Revenue $ 16,339 $ 13,098 $ 9,774 $ 601 $ 39,812 Pre-tax income from continuing operations $ 2,707 $ 1,013 $ 989 $ 362 $ 5,071 Pre-tax income margin 16.6 % 7.7 % 10.1 % 60.1 % 12.7 % Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2022 2021* Revenue: Total reportable segments $ 43,365 $ 39,812 Other ‒ 319 583 Other revenue 156 261 Total consolidated revenue $ 43,840 $ 40,656 Pre-tax income/(loss) from continuing operations: Total reportable segments $ 6,470 $ 5,071 Amortization of acquired intangible assets (1,337) (1,371) Acquisition-related charges (9) (37) Non-operating retirement-related (costs)/income (6,455) ** (967) Kyndryl-related impacts+ (353) — Eliminations of internal transactions (15) (3) Other ‒ 108 ++ (106) Unallocated corporate amounts (565) (619) Total pre-tax income/(loss) from continuing operations $ (2,156) $ 1,968 * Recast to conform to current year presentation. ** Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion. See note 18, “Retirement-Related Benefits,” for additional information. + Refer to note 8, “Financial Assets & Liabilities,” for additional information. ++ Includes a gain from the sale of the company’s healthcare software assets. Refer to note 6, “Acquisitions & Divestitures.” |
Acquisitions & Divestitures
Acquisitions & Divestitures | 9 Months Ended |
Sep. 30, 2022 | |
Acquisitions & Divestitures | |
Acquisitions & Divestitures | 6. 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, 2022, the company completed six acquisitions at an aggregate cost of $1,102 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 Envizi Software Data and analytics software provider for environmental performance management Sentaca Consulting Telco consulting services and solutions provider specializing in automation, cloud migration, and future networks for telecommunication providers Neudesic Consulting Application development and cloud computing services company Second Quarter Randori Software Leading attack surface management (ASM) and cybersecurity provider Databand.ai Software Proactive data observability platform that isolates data errors and issues to alert relevant stakeholders Third Quarter Omnio Software Developer of software connectors used in the collection of raw data for various Industrial Internet of Things (IoT) applications At September 30, 2022, the remaining cash to be remitted by the company related to certain first half 2022 acquisitions was $90 million, most of which is expected to be paid by the second quarter of 2023. The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of September 30, 2022. Amortization Total (Dollars in millions) Life (in years) Acquisitions Current assets $ 63 Property, plant and equipment/noncurrent assets 3 Intangible assets: Goodwill N/A 857 Client relationships 7 151 Completed technology 4-7 90 Trademarks 2-3 7 Total assets acquired $ 1,171 Current liabilities 48 Noncurrent liabilities 22 Total liabilities assumed $ 69 Total purchase price $ 1,102 N/A – not applicable The goodwill generated is primarily attributable to the assembled workforce of the acquired businesses and the increased synergies expected to be achieved from the integration of the acquired businesses into the company’s various integrated solutions and services, neither of which qualifies as an amortizable intangible asset. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 6.7 years. Goodwill of $432 million and $425 million was assigned to the Software and Consulting segments, respectively. It is expected that 41 percent of the goodwill will be deductible for tax purposes. 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. 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. On October 3, 2022, the company acquired Dialexa, a privately held digital product engineering services firm. Dialexa will be integrated into the Consulting segment. At the date of issuance of the financial statements, the initial purchase accounting for Dialexa was not complete. Divestitures Healthcare Software Assets — In January 2022, IBM and Francisco Partners (Francisco) signed a definitive agreement in which Francisco would acquire IBM’s healthcare data and analytics assets reported within Other ‒ On June 30, 2022, the company received a cash payment of $1,065 million. As of September 30, 2022 a total pre-tax gain of $259 million has been recognized in other (income) and expense in the Consolidated Income Statement. Any pre-tax gains related to the subsequent wave closings are not expected to be material. The total gain on sale may change in the future due to changes in transaction estimates; however, such changes are not expected to be material. Other Divestitures — In the first quarter of 2022, the Infrastructure segment completed one divestiture. The financial terms related to this transaction were not material. |
Earnings_(Loss) Per Share of Co
Earnings/(Loss) Per Share of Common Stock | 9 Months Ended |
Sep. 30, 2022 | |
Earnings/(Loss) Per Share of Common Stock | |
Earnings/(Loss) Per Share of Common Stock | 7. Earnings/(Loss) Per Share of Common Stock The following tables provide the computation of basic and diluted earnings/(loss) per share of common stock for the three and nine months ended September 30, 2022 and 2021. (Dollars in millions except per share amounts) For the three months ended September 30: 2022 2021 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 904,076,831 897,097,073 Add — Incremental shares under stock-based compensation plans — 6,946,467 Add — Incremental shares associated with contingently issuable shares — 1,909,573 Number of shares on which diluted earnings per share is calculated 904,076,831 905,953,114 Income/(loss) from continuing operations $ (3,214) $ 1,037 Income/(loss) from discontinued operations, net of tax 18 93 Net income/(loss) on which basic earnings per share is calculated $ (3,196) $ 1,130 Income/(loss) from continuing operations $ (3,214) $ 1,037 Net income applicable to contingently issuable shares — — Income/(loss) from continuing operations on which diluted earnings per share is calculated $ (3,214) $ 1,037 Income/(loss) from discontinued operations, net of tax, on which diluted earnings per share is calculated 18 93 Net income/(loss) on which diluted earnings per share is calculated $ (3,196) $ 1,130 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ (3.55) $ 1.14 Discontinued operations 0.02 0.10 Total $ (3.54) $ 1.25 Basic Continuing operations $ (3.55) $ 1.16 Discontinued operations 0.02 0.10 Total $ (3.54) $ 1.26 Stock options to purchase 840,544 shares and 750,990 shares were outstanding as of September 30, 2022 and 2021, respectively, but were not included in the computation of diluted earnings/(loss) 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. Due to the net loss for the three months ended September 30, 2022, otherwise dilutive potential shares of common stock under stock-based compensation plans and contingently issuable shares of 6,696,350 and 2,069,742, respectively, have been excluded from the computation of diluted earnings/(loss) per share as the effect would have been antidilutive. (Dollars in millions except per share amounts) For the nine months ended September 30: 2022 2021 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 901,621,217 895,257,004 Add — Incremental shares under stock-based compensation plans — 7,000,190 Add — Incremental shares associated with contingently issuable shares — 1,720,345 Number of shares on which diluted earnings per share is calculated 901,621,217 903,977,539 Income/(loss) from continuing operations $ (1,087) $ 2,250 Income/(loss) from discontinued operations, net of tax 16 1,160 Net income/(loss) on which basic earnings per share is calculated $ (1,071) $ 3,410 Income/(loss) from continuing operations $ (1,087) $ 2,250 Net income applicable to contingently issuable shares — — Income/(loss) from continuing operations on which diluted earnings per share is calculated $ (1,087) $ 2,250 Income/(loss) from discontinued operations, net of tax, on which diluted earnings per share is calculated 16 1,160 Net income/(loss) on which diluted earnings per share is calculated $ (1,071) $ 3,410 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ (1.21) $ 2.49 Discontinued operations 0.02 1.28 Total $ (1.19) $ 3.77 Basic Continuing operations $ (1.21) $ 2.51 Discontinued operations 0.02 1.30 Total $ (1.19) $ 3.81 Stock options to purchase 930,788 shares and 879,289 shares (average of first, second and third quarter share amounts) were outstanding as of September 30, 2022 and 2021, respectively, but were not included in the computation of diluted earnings/(loss) 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. Due to the net loss for the nine months ended September 30, 2022, otherwise dilutive potential shares of common stock under stock-based compensation plans and contingently issuable shares of 7,530,115 and 1,899,113, respectively, have been excluded from the computation of diluted earnings/(loss) per share as the effect would have been antidilutive. |
Financial Assets & Liabilities
Financial Assets & Liabilities | 9 Months Ended |
Sep. 30, 2022 | |
Financial Assets & Liabilities | |
Financial Assets & Liabilities | 8. 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, 2022 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, 2022 and 2021, 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, 2022 and December 31, 2021. Fair Value Hierarchy At September 30, 2022 At December 31, 2021 (Dollars in millions) Level Assets (8) Liabilities (9) Assets (8) Liabilities (9) Cash equivalents: (1) Time deposits and certificates of deposit (2) 2 $ 4,195 $ N/A $ 1,903 $ N/A Money market funds 1 732 N/A 263 N/A U.S. government securities (2) 2 — N/A 599 N/A Total cash equivalents $ 4,927 $ N/A $ 2,766 $ N/A Equity investments (3) 1 — N/A 0 N/A Kyndryl common stock (4) 1 184 N/A 807 N/A Secured borrowing (4) 2 N/A 184 N/A — Debt securities-current (2)(5) 2 1,753 N/A 600 N/A Debt securities-noncurrent (2)(6) 2,3 31 N/A 37 N/A Derivatives designated as hedging instruments: Interest rate contracts 2 1 339 12 — Foreign exchange contracts 2 998 531 359 117 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 13 31 21 42 Equity contracts (7) 1,2 — 178 6 4 Total $ 7,908 $ 1,263 $ 4,608 $ 162 (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) Refer to “Kyndryl Common Stock” below for additional information. (5) U.S. treasury bills and term deposits that are reported within marketable securities in the Consolidated Balance Sheet. (6) Includes corporate and government debt securities that are reported within investments and sundry assets in the Consolidated Balance Sheet. (7) Level 1 includes immaterial amounts related to equity futures contracts. (8) 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, 2022 were $1,008 million and $4 million, respectively, and at December 31, 2021 were $358 million and $40 million, respectively. (9) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2022 were $475 million and $603 million, respectively, and at December 31, 2021 were $60 million and $103 million , respectively. N/A – not applicable Kyndryl Common Stock On November 3, 2021, IBM completed the separation of Kyndryl and retained 19.9 percent of the shares of Kyndryl common stock with the intent to dispose of the shares within twelve months of the separation. On May 18, 2022, the company borrowed an aggregate principal amount of $357 million under a short-term credit facility with a third-party financial institution, the proceeds of which were used to repay certain of the company’s existing indebtedness. On May 23, 2022, the company completed a debt-for-equity exchange where 22.3 million shares of Kyndryl common stock, equal to 9.95 percent or half of the company’s 19.9 percent retained interest (the Shares), were exchanged at a strike price of $13.95 per share to extinguish $311 million of the company’s indebtedness under the short-term credit facility (the May 2022 Exchange). The remaining portion of the short-term credit facility was repaid with $46 million of cash. In connection with the May 2022 Exchange, the company entered into a cash-settled swap with the lender of the short-term credit facility as the counterparty that maintained IBM’s continued economic exposure in the Shares. Upon settlement of the swap, which will occur no later than November 2, 2022, IBM will either receive or pay an amount derived from the difference between the volume-weighted average price (VWAP) of the Kyndryl common stock over the outstanding term of the swap and the strike price of $13.95 per share. As a result, the most significant input into the valuation of the swap is the price of Kyndryl common stock. other As a result of the swap, the transfer of the Shares pursuant to the May 2022 Exchange did not qualify as a true sale, and therefore the Shares remain on the company’s Consolidated Balance Sheet at September 30, 2022. Relatedly, the portion of the company’s indebtedness under the short-term credit facility that was extinguished pursuant to the May 2022 Exchange has been classified as a secured borrowing within short-term debt in the Consolidated Balance Sheet. The company has elected to record the debt at fair value based on changes in the value of the Shares underlying the debt. The fair value of the debt was $184 million at September 30, 2022. In electing the fair value option, the company recognizes changes in fair value of the debt in other (income) and expense, which amounted to $34 million and $127 million for the three and nine months ended September 30, 2022, respectively. The contractual principal balance of the debt was $311 million at September 30, 2022. Both the Shares and the debt are expected to be entirely derecognized from the company’s Consolidated Balance Sheet upon settlement of the swap, which will occur no later than November 2, 2022. On August 5, 2022, the company borrowed an aggregate principal amount of $300 million under a short-term credit facility with a third-party financial institution, the proceeds of which will be used to repay certain of the company’s existing indebtedness. On August 11, 2022, the company completed a debt-for-equity exchange through the transfer of the remaining 22.3 million shares of Kyndryl common stock to extinguish $229 million of the company’s indebtedness under the short-term credit facility (the August 2022 Exchange). The remaining portion of the short-term credit facility was repaid with $71 million of cash. As a result of the August 2022 Exchange, the 22.3 million shares of Kyndryl common stock were derecognized from the company’s Consolidated Balance Sheet. The debt-for-equity exchange associated with the August 2022 Exchange is a non-cash financing activity for purposes of the company’s Consolidated Statement of Cash Flows as of September 30, 2022. The retained interest in the Kyndryl common stock of $184 million and $807 million at September 30, 2022 and December 31, 2021, respectively, is included within prepaid expenses and other current assets in the Consolidated Balance Sheet. For the nine months ended September 30, 2022, the company recorded an unrealized loss of $93 million, net of adjustment for the mark-to-market on the related debt as described above related to the Kyndryl common stock under the May 2022 Exchange. The net mark-to-market impact for the three months ended September 30, 2022 was zero. The company recorded a realized gain of $11 million and a realized loss of $174 million related to the Kyndryl shares under the August 2022 Exchange for the three and nine months ended September 30, 2022, respectively. Gains and losses for both the May and August exchanges as noted above were recorded in other (income) and expense in the Consolidated Income Statement. 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, 2022 and December 31, 2021, 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 $44,942 million and $44,917 million, and the estimated fair value was $40,944 million and $49,465 million at September 30, 2022 and December 31, 2021, 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, 2022 | |
Financing Receivables | |
Financing Receivables | 9. Financing Receivables: Financing receivables primarily consist of client loan and installment payment receivables (loans), 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 Infrastructure 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 Financing Receivables (Dollars in millions) Receivables Direct Financing Held for Held for At September 30, 2022: (Loans) Leases Investment Sale* Total Financing receivables, gross $ 7,777 $ 3,566 $ 169 $ 395 $ 11,907 Unearned income (330) (285) — — (615) Unguaranteed residual value — 323 — — 323 Amortized cost $ 7,447 $ 3,604 $ 169 $ 395 $ 11,616 Allowance for credit losses (101) (53) (5) — (159) Total financing receivables, net $ 7,346 $ 3,551 $ 164 $ 395 $ 11,456 Current portion $ 4,750 $ 1,366 $ 164 $ 395 $ 6,676 Noncurrent portion $ 2,596 $ 2,185 $ — $ — $ 4,781 * The carrying value of the receivables classified as held for sale approximates fair value. Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial Financing Receivables (Dollars in millions) Receivables Direct Financing Held for Held for At December 31, 2021: (Loans) Leases Investment Sale* Total Financing receivables, gross $ 9,303 $ 3,336 $ 450 $ 793 $ 13,881 Unearned income (353) (223) — — (576) Unguaranteed residual value — 335 — — 335 Amortized cost $ 8,949 $ 3,448 $ 450 $ 793 $ 13,640 Allowance for credit losses (131) (64) (6) — (201) Total financing receivables, net $ 8,818 $ 3,384 $ 444 $ 793 $ 13,439 Current portion $ 5,371 $ 1,406 $ 444 $ 793 $ 8,014 Noncurrent portion $ 3,447 $ 1,978 $ — $ — $ 5,425 * The carrying value of the receivables classified as held for sale approximates fair value. The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties. 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 $386 million and $408 million at September 30, 2022 and December 31, 2021, respectively. These borrowings are included in note 12, “Borrowings.” Transfer of Financial Assets The company has an existing agreement with a third-party investor to sell IBM short-term commercial financing receivables on a revolving basis. The company has expanded this agreement to other countries and geographies since commencement in the U.S. and Canada in 2020. In addition, the company enters into agreements with third-party financial institutions to sell certain of its client financing receivables, including both loan and lease receivables, for cash proceeds. In the first nine months of 2022, sales of client financing receivables were largely focused on credit mitigation. During 2021, sales of client financing receivables were utilized as part of the company’s cash and liquidity management as well as for credit mitigation. The following table presents the total amount of client and commercial financing receivables transferred. (Dollars in millions) For the nine months ended September 30: 2022 2021 Client financing receivables: Lease receivables $ 15 $ 781 Loan receivables 2 2,189 Total client financing receivables transferred $ 17 $ 2,970 Commercial financing receivables: Receivables transferred during the period $ 6,091 $ 4,465 Receivables uncollected at end of period* $ 816 $ 707 * Of the total amount of commercial financing receivables sold and derecognized from the Consolidated Balance Sheet, the amounts presented remained uncollected from business partners as of September 30, 2022 and 2021. The transfer 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, 2022 and 2021 were not material. Financing Receivables by Portfolio Segment The following tables present the amortized cost basis for client financing receivables at September 30, 2022 and December 31, 2021, 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, 2022: Americas EMEA Asia Pacific Total Amortized cost $ 6,900 $ 2,731 $ 1,420 $ 11,051 Allowance for credit losses: Beginning balance at January 1, 2022 $ 111 $ 61 $ 23 $ 195 Write-offs $ (20) $ (1) $ (2) $ (23) Recoveries 1 0 4 5 Additions/(releases) (6) (3) (5) (13) Other* 1 (8) (2) (10) Ending balance at September 30, 2022 $ 87 $ 49 $ 18 $ 154 (Dollars in millions) At December 31, 2021: Americas EMEA Asia Pacific Total Amortized cost $ 6,573 $ 3,793 $ 2,031 $ 12,397 Allowance for credit losses: Beginning balance at January 1, 2021 $ 141 $ 77 $ 37 $ 255 Write-offs $ (8) $ (2) $ (7) $ (17) Recoveries 0 0 1 1 Additions/(releases) (19) (11) (7) (38) Other* (3) (3) 0 (7) Ending balance at December 31, 2021 $ 111 $ 61 $ 23 $ 195 * Primarily represents translation adjustments. When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies,” in the company’s 2021 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 for 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, 2022: Cost > 90 Days* Accruing* Accruing Accruing** Americas $ 6,900 $ 266 $ 197 $ 22 $ 70 EMEA 2,731 81 1 0 81 Asia Pacific 1,420 23 6 1 17 Total client financing receivables $ 11,051 $ 369 $ 204 $ 23 $ 168 Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Not At December 31, 2021: Cost > 90 Days* Accruing* Accruing Accruing** Americas $ 6,573 $ 188 $ 100 $ 6 $ 90 EMEA 3,793 99 7 2 95 Asia Pacific 2,031 25 5 2 20 Total client financing receivables $ 12,397 $ 312 $ 112 $ 10 $ 205 * At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. ** Of the amortized cost not accruing, there was a related allowance of $120 million and $153 million at September 30, 2022 and December 31, 2021, respectively. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2022, 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 for client financing receivables by credit quality indicator at September 30, 2022 and December 31, 2021, 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 reduce the risk to IBM. (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2022: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2022 $ 2,475 $ 1,012 $ 716 $ 465 $ 471 $ 83 2021 1,401 387 487 198 210 77 2020 660 265 268 168 213 53 2019 310 119 167 110 133 24 2018 147 40 45 37 87 25 2017 and prior 40 47 15 54 25 18 Total $ 5,031 $ 1,869 $ 1,698 $ 1,033 $ 1,140 $ 280 (Dollars in millions) Americas EMEA Asia Pacific At December 31, 2021: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2021 $ 2,556 $ 1,147 $ 1,181 $ 778 $ 565 $ 226 2020 1,013 392 506 342 381 86 2019 544 236 287 291 297 51 2018 338 117 189 85 211 64 2017 108 50 15 52 74 17 2016 and prior 20 53 21 46 38 20 Total $ 4,579 $ 1,994 $ 2,198 $ 1,595 $ 1,567 $ 464 Troubled Debt Restructurings The company did not have any significant troubled debt restructurings during the nine months ended September 30, 2022 or for the year ended December 31, 2021. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2022 | |
Leases | |
Leases | 10. 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) 2022 2021 2022 2021 Lease income — Sales-type lease selling price $ 99 $ 119 $ 888 $ 870 Less: Carrying value of underlying assets* (57) (48) (195) (205) Gross profit $ 43 $ 70 $ 693 $ 664 Interest income on lease receivables 54 44 144 142 Total sales-type and direct financing lease income $ 97 $ 114 $ 838 $ 806 Lease income — 29 38 86 136 Variable lease income 19 18 75 97 Total lease income $ 145 $ 169 $ 998 $ 1,038 * Excludes unguaranteed residual value. |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 9 Months Ended |
Sep. 30, 2022 | |
Intangible Assets Including Goodwill | |
Intangible Assets Including Goodwill | 11. Intangible Assets Including Goodwill: Intangible Assets The following tables present the company's intangible asset balances by major asset class. At September 30, 2022 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,697 $ (720) $ 977 Client relationships 8,051 (2,763) 5,288 Completed technology 5,490 (2,242) 3,248 Patents/trademarks 2,093 (645) 1,448 Other** 32 (27) 5 Total $ 17,364 $ (6,397) $ 10,967 At December 31, 2021 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,696 $ (751) $ 945 Client relationships 9,021 (2,889) 6,132 Completed technology 6,074 (2,259) 3,815 Patents/trademarks 2,196 (586) 1,610 Other** 44 (35) 9 Total $ 19,031 $ (6,520) $ 12,511 * Amounts as of September 30, 2022 and December 31, 2021 included a decrease in net intangible asset balances of $389 million and $221 million, respectively, due to foreign currency translation. ** Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems . The net carrying amount of intangible assets decreased $1,544 million during the first nine months of 2022, primarily due to intangible asset amortization and the impacts of currency, partially offset by additions of acquired intangibles and capitalized software. The aggregate intangible asset amortization expense was $577 million and $1,828 million for the third quarter and first nine months of 2022, respectively, compared to $640 million and $1,880 million for the third quarter and first nine months of 2021, respectively. In the first nine months of 2022, the company retired $647 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The company also derecognized intangible assets with a gross carrying amount of $1,313 million and $1,149 million of accumulated amortization as part of the divestiture of its healthcare software assets on June 30, 2022. The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at September 30, 2022: Capitalized Acquired (Dollars in millions) Software Intangibles Total Remainder of 2022 $ 157 $ 405 $ 562 2023 472 1,469 1,941 2024 286 1,452 1,737 2025 63 1,434 1,497 2026 — 1,417 1,417 Thereafter — 3,813 3,813 Goodwill The changes in the goodwill balances by segment for the nine months ended September 30, 2022 and for the year ended December 31, 2021 were as follows: Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2022 Additions Adjustments Divestitures Adjustments* 9/30/2022 Software $ 43,966 $ 442 $ (118) $ — $ (1,290) $ 43,001 Consulting 6,797 461 (42) — (343) 6,872 Infrastructure 4,396 — — (1) (50) 4,345 Other** 484 — — (484) — — Total $ 55,643 $ 903 $ (160) $ (485) $ (1,683) $ 54,218 * Primarily driven by foreign currency translation. ** The company derecognized $484 million of goodwill related to the divestiture of its healthcare software assets. Refer to note 6, “Acquisitions & Divestitures,” for additional information. Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2021 Additions Adjustments Divestitures Adjustments* 12/31/2021 Software** $ 42,665 $ 1,836 $ 23 $ (13) $ (545) $ 43,966 Consulting 6,145 713 (21) — (40) 6,797 Infrastructure 4,436 — 0 — (39) 4,396 Other** 520 — — (37) 1 484 Total $ 53,765 $ 2,549 $ 2 $ (50) $ (623) $ 55,643 * Primarily driven by foreign currency translation. ** Recast to conform to current year presentation. There were no goodwill impairment losses recorded during the first nine months of 2022 or full-year 2021 and the company has no accumulated impairment losses. Purchase price adjustments recorded in the first nine months of 2022 and full-year 2021 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 2022 primarily relate to deferred tax assets and liabilities associated with the Turbonomic acquisition. |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2022 | |
Borrowings | |
Borrowings | 12. Borrowings: Short-Term Debt At September 30, At December 31, (Dollars in millions) 2022 2021 Short-term loans $ 196 $ 22 Long-term debt — 5,741 6,764 Total $ 5,937 $ 6,787 Included within short-term debt in the company’s Consolidated Balance Sheet at September 30, 2022 is $184 million of secured borrowings recorded at fair value from the short-term credit facility and the May 2022 Exchange as described in note 8, “Financial Assets & Liabilities.” The weighted-average interest rate for short-term loans excluding the aforementioned secured borrowings was 8.2 percent and 6.7 percent at September 30, 2022 and December 31, 2021, respectively. Long-Term Debt Pre-Swap Borrowing Balance Balance (Dollars in millions) Maturities 9/30/2022 12/31/2021 U.S. dollar debt (weighted-average interest rate at September 30, 2022):* 2.9% 2022 $ 900 $ 5,673 3.4% 2023 1,536 1,573 3.3% 2024 5,011 5,016 5.1% 2025 1,604 608 3.3% 2026 4,352 4,356 3.1% 2027 3,621 2,221 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 1,350 4.4% 2032 1,850 600 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 4.2% 2052 1,400 — 7.1% 2096 316 316 $ 34,516 $ 34,290 Other currencies (weighted-average interest rate at September 30, 2022, in parentheses):* Euro (1.1%) 2023–2040 $ 15,671 $ 15,903 Pound sterling 2022 — 406 Japanese yen (0.3%) 2022–2026 1,005 1,263 Other (16.0%) 2022–2026 397 378 $ 51,590 $ 52,240 Finance lease obligations (2.8%) 2022–2030 159 99 $ 51,749 $ 52,339 Less: net unamortized discount 841 839 Less: net unamortized debt issuance costs 140 130 Add: fair value adjustment** (84) 311 $ 50,684 $ 51,681 Less: current maturities 5,741 6,764 Total $ 44,942 $ 44,917 * 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 2022, the company issued $2.3 billion of Euro fixed-rate notes in tranches with maturities ranging from 8 to 12 years and coupons ranging from 0.875 to 1.25 percent, and $1.8 billion of U.S. dollar fixed-rate notes with maturities ranging from 5 to 30 years and coupons ranging from 2.20 to 3.43 percent. On July 20, 2022, the company issued $3.25 billion of U.S. dollar fixed-rate notes in tranches with maturities ranging from 3 to 30 years and coupons ranging from 4.00 to 4.90 percent. Pre-swap annual contractual obligations of long-term debt outstanding at September 30, 2022, were as follows: (Dollars in millions) Total Remainder of 2022 $ 1,334 2023 4,490 2024 6,246 2025 4,586 2026 4,657 Thereafter 30,436 Total $ 51,749 Interest on Debt (Dollars in millions) For the nine months ended September 30: 2022 2021 Cost of financing $ 264 $ 312 Interest expense 903 852 Interest capitalized 4 3 Total interest paid and accrued $ 1,170 $ 1,167 Lines of Credit The company has a $2.5 billion Three-Year Credit Agreement and a $7.5 billion Five-Year Credit Agreement with maturity dates of June 20, 2025 and June 22, 2027, respectively . |
Commitments
Commitments | 9 Months Ended |
Sep. 30, 2022 | |
Commitments | |
Commitments | 13. Commitments: The company’s extended lines of credit to third-party entities include unused amounts of $1.5 billion and $1.7 billion at September 30, 2022 and December 31, 2021, 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 $2.3 billion and $3.2 billion at September 30, 2022 and December 31, 2021, respectively. 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 2021 Annual Report for additional information. The allowance for these commitments is recorded in other liabilities in the Consolidated Balance Sheet and was not material at September 30, 2022. 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, 2022 and December 31, 2021 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) 2022 2021 Balance at January 1 $ 77 $ 83 Current period accruals 58 50 Accrual adjustments to reflect actual experience (1) (2) Charges incurred (62) (66) Balance at September 30 $ 72 $ 66 Extended Warranty Liability (Dollars in millions) 2022 2021 Balance at January 1 $ 350 $ 425 Revenue deferred for new extended warranty contracts 103 71 Amortization of deferred revenue (148) (154) Other* (21) (9) Balance at September 30 $ 284 $ 334 Current portion $ 139 $ 171 Noncurrent portion $ 145 $ 163 * Other primarily consists of foreign currency translation adjustments. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Contingencies | |
Contingencies | 14. 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 and its clients have been and will continue to be 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, 2022 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. 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. In April 2022, the Court of Appeal awarded CISGIL additional damages of approximately $89 million, plus interest and litigation costs. IBM filed an application for permission to appeal with the UK Supreme Court. 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 $1.5 billion. On September 14, 2021, the court ruled on GF’s motion to dismiss. On April 7, 2022, the Appellate Division unanimously reversed the lower court’s dismissal of IBM’s fraud claim. IBM’s claims for breaches of contract, promissory estoppel, and fraud are proceeding. On April 5, 2022, a putative securities law class action was commenced in the United States District Court for the Southern District of New York alleging that during the period from April 4, 2017 through October 20, 2021, certain strategic imperatives revenues were misclassified. The company, two current IBM senior executives, and two former IBM senior executives are named as defendants. On June 23, 2022, the court entered an order appointing Iron Workers Local 580 Joint Funds as lead plaintiff. On September 21, 2022, the plaintiff voluntarily dismissed the case, without prejudice. On March 25, 2022, the Board of Directors received a shareholder demand letter making similar allegations and demanding that the company’s Board of Directors take action to assert the company’s rights. A special committee of independent directors has been formed to investigate the issues raised in the letter. On June 2, 2022, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York alleging that the IBM Pension Plan miscalculated certain joint and survivor annuity pension benefits by using outdated actuarial tables in violation of the Employee Retirement Income Security Act of 1974. IBM, the Plan Administrator Committee, and the IBM Pension Plan are named as defendants. As disclosed in the Kyndryl Form 10 and subsequent Kyndryl public filings, in 2017 BMC Software, Inc. (BMC) filed suit against IBM in the United States District Court for the Southern District of Texas in a dispute involving IBM’s former managed infrastructure services business. On May 30, 2022, the trial court awarded BMC $718 million in direct damages and $718 million in punitive damages, plus interest and fees. IBM filed a notice of appeal, and BMC cross appealed. IBM does not believe it has any material exposure relating to this litigation. No material liability or related indemnification asset has been recorded by IBM. 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, 2022 | |
Equity Activity | |
Equity Activity | 15. 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, 2022: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 143 $ (301) $ (158) 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 $ 189 $ (49) $ 140 Reclassification of (gains)/losses to: Cost of services (4) 1 (3) Cost of sales (35) 10 (25) Cost of financing 7 (2) 5 SG&A expense (8) 2 (6) Other (income) and expense 6 (2) 5 Interest expense 22 (5) 16 Total unrealized gains/(losses) on cash flow hedges $ 178 $ (45) $ 133 Retirement-related benefit plans*: Prior service costs/(credits) $ 412 $ (104) $ 309 Net (losses)/gains arising during the period 53 (13) 39 Curtailments and settlements 5,913 (1,487) 4,426 Amortization of prior service (credits)/costs 3 (1) 2 Amortization of net (gains)/losses 388 (108) 279 Total retirement-related benefit plans $ 6,768 $ (1,712) $ 5,056 Other comprehensive income/(loss) $ 7,089 $ (2,058) $ 5,030 * These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost and include the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “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, 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*: 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 * These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “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, 2022: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 799 $ (784) $ 14 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 $ 449 $ (118) $ 332 Reclassification of (gains)/losses to: Cost of services (32) 8 (24) Cost of sales (71) 20 (50) Cost of financing 19 (5) 14 SG&A expense (28) 8 (20) Other (income) and expense 51 (13) 38 Interest expense 64 (16) 48 Total unrealized gains/(losses) on cash flow hedges $ 453 $ (116) $ 338 Retirement-related benefit plans*: Prior service costs/(credits) $ 408 $ (99) $ 309 Net (losses)/gains arising during the period 63 (20) 43 Curtailments and settlements 5,931 (1,491) 4,440 Amortization of prior service (credits)/costs 16 (4) 12 Amortization of net (gains)/losses 1,305 (364) 941 Total retirement-related benefit plans $ 7,722 $ (1,978) $ 5,745 Other comprehensive income/(loss) $ 8,973 $ (2,877) $ 6,096 * These AOCI components are included in the computation of net periodic pension cost and include the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “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*: 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 * These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “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, 2022 $ (18) $ (3,362) $ (19,854) $ (1) $ (23,234) Other comprehensive income before reclassifications 332 14 352 (1) 697 Amount reclassified from accumulated other comprehensive income 6 — 5,393 ** — 5,399 Total change for the period $ 338 $ 14 $ 5,745 $ (1) $ 6,096 September 30, 2022 $ 320 $ (3,347) $ (14,110) $ (1) $ (17,138) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. ** Includes the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “Retirement-Related Benefits,” for additional information. 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. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 16. 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. At September 30, 2022 and December 31, 2021, the amount recognized in other accounts receivables for the right to reclaim cash collateral was $191 million and $2 million, respectively. At September 30, 2022 and December 31, 2021, the amount recognized in accounts payable for the obligation to return cash collateral was $222 million and $38 million, respectively. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in restricted cash in the Consolidated Balance Sheet. At September 30, 2022 and December 31, 2021, the amount rehypothecated was $158 million and $2 million, respectively. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at September 30, December 31, On May 19, 2022, in connection with the disposition of 22.3 million shares of Kyndryl common stock, the company entered into a cash-settled swap with the lender of the short-term credit facility as the counterparty that maintained IBM’s continued economic exposure in those shares pursuant to the May 2022 Exchange. Refer to note 8, “Financial Assets & Liabilities,” for additional information. The notional value of the swap is $311 million. Upon settlement of the swap, no later than November 2, 2022, IBM will receive or pay an amount derived from the difference between the VWAP of the Kyndryl common stock over the outstanding term of the swap and the strike price as of May 19, 2022. The fair value of the swap at September 30, 2022 was $85 million and is included within other million, respectively, was recorded in other (income) and expense in the Consolidated Income Statement. 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, 2022 and December 31, 2021, the total notional amount of the company’s interest-rate swaps was $6.2 billion and $0.4 billion, respectively. The weighted-average remaining maturity of these instruments at September 30, 2022 and December 31, 2021 was approximately 6.0 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, 2022 and December 31, 2021. 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, 2022 and December 31, 2021. In connection with cash flow hedges of forecasted interest payments related to the company's borrowings, the company recorded net losses (before taxes) of $144 million and $157 million at September 30, 2022 and December 31, 2021, respectively, in AOCI. The company estimates that $18 million of the deferred net losses (before taxes) on derivatives in AOCI at September 30, 2022 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, 2022 and December 31, 2021, the carrying value of debt designated as hedging instruments was $12.8 billion and $14.1 billion, respectively. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. At September 30, 2022 and December 31, 2021, the total notional amount of derivative instruments designated as net investment hedges was $5.4 billion and $6.8 billion, respectively. At both September 30, 2022 and December 31, 2021, the weighted-average remaining maturity of these instruments was approximately 0.1 year. 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. At September 30, 2022, the maximum remaining length of time over which the company hedged its exposure is approximately two years. At September 30 2022 and December 31, 2021, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.2 billion and $7.2 billion, respectively. At both September 30, 2022 and December 31, 2021, the weighted-average remaining maturity of these instruments was approximately 0.6 years. At September 30, 2022 and December 31, 2021, in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net gains (before taxes) of $693 million and $315 million, respectively, in AOCI. The company estimates that $631 million of deferred net gains (before taxes) on derivatives in AOCI at September 30, 2022 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, 2022, the maximum length of time remaining over which the company hedged its exposure is approximately five years. At September 30, 2022 and December 31, 2021, the total notional amount of cross-currency swaps designated as cash flow hedges of foreign currency denominated debt was $3.0 billion and $2.0 billion, respectively. At September 30, 2022 and December 31, 2021, in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses (before taxes) of $112 million and $174 million, respectively, in AOCI. The company estimates that $17 million of deferred net gains (before taxes) on derivatives in AOCI at September 30, 2022 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, 2022 and December 31, 2021, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $4.3 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, 2022 and December 31, 2021, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.2 billion and $1.4 billion, respectively. Cumulative Basis Adjustments for Fair Value Hedges At September 30, 2022 and December 31, 2021, 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) 2022 2021 Short-term debt: Carrying amount of the hedged item $ (425) $ (227) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* $ 0 $ (2) Long-term debt: Carrying amount of the hedged item $ (5,631) $ (508) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* $ 84 $ (309) * 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: 2022 2021 2022 2021 Cost of services $ 5,168 $ 4,650 $ 4 $ 12 Cost of sales $ 1,389 $ 1,363 * $ 35 $ 1 Cost of financing $ 120 $ 132 * $ 1 $ (1) SG&A expense $ 4,391 $ 4,306 $ (69) $ (14) Other (income) and expense $ 5,755 $ 244 $ (189) $ (7) Interest expense $ 295 $ 290 $ 4 $ (2) * Reclassified to conform to current year presentation. 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 2022 2021 2022 2021 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ (64) $ 0 $ 68 $ 4 Interest expense (191) 0 203 11 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (186) 15 N/A N/A Equity contracts SG&A expense (76) (13) N/A N/A Other (income) and expense 3 — N/A N/A Total $ (514) $ 3 $ 271 $ 15 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: 2022 2021 Line Item 2022 2021 2022 2021 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts 189 109 Cost of services 4 12 — — Cost of sales 35 1 — — Cost of financing (6) (5) — — SG&A expense 8 (1) — — Other (income) and expense (6) (22) — — Interest expense (18) (13) — — Instruments in net investment hedges (4): Foreign exchange contracts 1,198 477 Cost of financing — — 5 1 Interest expense — — 14 3 Total $ 1,387 $ 587 $ 12 $ (32) $ 19 $ 5 (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: 2022 2021 2022 2021 Cost of services $ 15,915 $ 14,014 $ 32 $ 33 Cost of sales $ 4,555 $ 4,241 * $ 71 $ (30) Cost of financing $ 314 $ 416 * $ 0 $ 1 SG&A expense $ 13,843 $ 13,842 $ (291) $ 88 Other (income) and expense $ 5,921 $ 891 $ (730) $ (246) Interest expense $ 903 $ 852 $ 1 $ 3 * Reclassified to conform to current year presentation. 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 2022 2021 2022 2021 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ (76) $ 0 $ 89 $ 15 Interest expense (261) (1) 305 40 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (595) (59) N/A N/A Equity contracts SG&A expense (319) 120 N/A N/A Other (income) and expense (85) — N/A N/A Total $ (1,336) $ 59 $ 395 $ 55 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: 2022 2021 Line Item 2022 2021 2022 2021 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (3) $ (4) $ — $ — Interest expense (10) (10) — — Foreign exchange contracts 449 262 Cost of services 32 33 — — Cost of sales 71 (30) — — Cost of financing (16) (14) — — SG&A expense 28 (32) — — Other (income) and expense (51) (187) — — Interest expense (54) (38) — — Instruments in net investment hedges (4): Foreign exchange contracts 3,118 1,207 Cost of financing — — 6 4 Interest expense — — 22 11 Total $ 3,567 $ 1,470 $ (4) $ (282) $ 28 $ 15 (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, 2022 and 2021, 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, 2022 | |
Stock-Based Compensation | |
Stock-Based Compensation | 17. Stock-Based Compensation: Stock-based compensation cost for stock awards and stock options 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) 2022 2021 2022 2021 Cost $ 40 $ 38 $ 124 $ 106 Selling, general and administrative 138 144 427 399 Research, development and engineering 73 60 188 160 Pre-tax stock-based compensation cost $ 251 $ 242 $ 739 $ 665 Income tax benefits (51) (54) (191) (166) Total net stock-based compensation cost $ 200 $ 188 $ 548 $ 499 Effective April 1, 2022, the company increased the discount for eligible participants under its Employees Stock Purchase Plan (ESPP) from 5 percent to 15 percent off the average market price on the date of purchase. With this change, the ESPP is considered compensatory under the accounting requirements for stock-based compensation. Pre-tax stock-based compensation cost for the three months ended September 30, 2022 increased $10 million compared to the corresponding period in the prior year, including increases in ESPP ($15 million) as a result of the change described above and performance share units ($5 million), partially offset by decreases in stock options ($10 million) primarily due to the conversion of stock options of acquired entities in the prior year. Pre-tax stock-based compensation cost for the nine months ended September 30, 2022 increased $74 million compared to the corresponding period in the prior year, including increases in restricted stock units ($32 million), ESPP ($30 million) and performance share units ($16 million). The increases are driven by the change in ESPP described above and a change in the timing of the company’s executive grant cycle in 2022. Total unrecognized compensation cost related to non-vested awards at September 30, 2022 was $1.6 billion and is expected to be recognized over a weighted-average period of approximately 2.7 years. Capitalized stock-based compensation cost was not material at September 30, 2022 and 2021. |
Retirement-Related Benefits
Retirement-Related Benefits | 9 Months Ended |
Sep. 30, 2022 | |
Retirement-Related Benefits | |
Retirement-Related Benefits | 18. Retirement-Related Benefits: Pre-Tax Cost of Retirement-Related Plans The company offers defined benefit (DB) 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: 2022 2021 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 6,319 * $ 598 nm Nonpension postretirement plans — 31 44 (30.2) % Total $ 6,350 $ 642 nm * Includes the impact of a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion related to the Qualified PPP, as described below. nm - not meaningful Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2022 2021 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 7,252 * $ 1,816 nm Nonpension postretirement plans — 97 133 (26.7) % Total $ 7,350 $ 1,949 nm * Includes the impact of a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion related to the Qualified PPP, as described below. nm – not meaningful Cost/(Income) of Pension Plans The following tables provide the 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: 2022 2021 2022 2021 Service cost $ — $ — $ 57 $ 67 Interest cost* 282 277 124 106 Expected return on plan assets* (432) (451) (246) (274) Amortization of prior service costs/(credits)* 2 4 3 (2) Recognized actuarial losses* 132 249 247 347 Curtailments and settlements* 5,894 ** — 19 13 Multi-employer plans — — 4 2 Other costs/(credits)* — — 8 7 Total net periodic pension (income)/cost of defined benefit plans $ 5,877 $ 80 $ 216 $ 266 Cost of defined contribution plans 134 152 91 100 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 6,012 $ 232 $ 307 $ 366 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. ** Reflects the impact of a one-time, non-cash, pre-tax pension settlement charge related to the Qualified PPP, as described below. (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2022 2021 2022 2021 Service cost $ — $ — $ 180 $ 201 Interest cost* 885 832 394 322 Expected return on plan assets* (1,382) (1,352) (778) (833) Amortization of prior service costs/(credits)* 6 12 10 (9) Recognized actuarial losses* 490 747 784 1,055 Curtailments and settlements* 5,894 ** — 38 46 Multi-employer plans — — 11 13 Other costs/(credits)* — — 24 21 Total net periodic pension (income)/cost of defined benefit plans $ 5,893 $ 239 $ 663 $ 817 Cost of defined contribution plans 416 455 280 306 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 6,309 $ 694 $ 943 $ 1,122 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. ** Reflects the impact of a one-time, non-cash, pre-tax pension settlement charge related to the Qualified PPP, as described below. Cost of Nonpension Postretirement Plans The following tables provide the components of the cost for the company’s nonpension postretirement plans. (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended September 30: 2022 2021 2022 2021 Service cost $ 1 $ 2 $ 1 $ 1 Interest cost* 21 16 8 8 Expected return on plan assets* — — 0 (1) Amortization of prior service costs/(credits)* (2) 1 0 0 Recognized actuarial losses* 1 13 1 4 Curtailments and settlements* — — — — Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 21 $ 32 $ 10 $ 12 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2022 2021 2022 2021 Service cost $ 4 $ 5 $ 2 $ 3 Interest cost* 58 49 26 25 Expected return on plan assets* — — (2) (2) Amortization of prior service costs/(credits)* (1) 3 0 0 Recognized actuarial losses* 6 39 3 11 Curtailments and settlements* — — — 0 Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 67 $ 96 $ 30 $ 37 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. IBM U.S. Pension and Nonpension Postretirement Plan Changes Over the past several years, the company has taken actions to reduce the risk profile of its worldwide retirement-related plans, while at the same time increasing the funded status of the plans. As described in note 1, “Basis of Presentation,” in September 2022, the Qualified PPP irrevocably transferred to the Insurers approximately $16 billion of the Qualified PPP’s defined benefit pension obligations and related plan assets, thereby reducing the company’s pension obligations and assets by the same amount. This transaction further de-risks the company’s retirement-related plans by eliminating the potential for the company to make future cash contributions to fund this portion of pension obligations being transferred to the Insurers. After the transaction, the Qualified PPP remained in an overfunded position as of September 30, 2022. Upon issuance of the group annuity contracts, the Qualified PPP’s benefit obligations and administration for approximately 100,000 of the company’s retirees and beneficiaries (the Transferred Participants) were transferred to the Insurers. Under the group annuity contracts, each Insurer has made an irrevocable commitment, and will be solely responsible, to pay 50 percent of the pension benefits of each Transferred Participant that are due on and after January 1, 2023. The transaction resulted in no changes to the benefits to be received by the Transferred Participants. The company recognized a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax) in the third quarter of 2022 primarily related to the accelerated recognition of actuarial losses included within AOCI in the Consolidated Statement of Equity. As a result of this transaction, the company was required to remeasure the benefit obligations and plan assets of the Qualified PPP. The remeasurement reflects the use of an updated discount rate and actual return on plan assets as of August 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date. In September 2022, the company amended its U.S. Nonpension Postretirement Plan to transition coverage for Medicare-eligible participants to a new IBM-sponsored group Medicare Advantage program administered by UnitedHealthcare, starting January 1, 2023. The changes are intended to provide an enhanced member experience, better value and more comprehensive benefits to IBM participants. As a result of this amendment, the company was required to remeasure the benefit obligation of this plan. The amendment and remeasurement resulted in a decrease in nonpension postretirement benefit obligations and a corresponding decrease in accumulated other comprehensive loss, which is reflected in the changes in benefit obligations from actuarial losses/(gains) in the table below. The remeasurement reflects the use of an updated discount rate and actual return on plan assets as of July 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date. The following table presents the changes in benefit obligations and plan assets of the company’s retirement related benefit plans affected by the interim remeasurements described above for the nine months ended September 30, 2022. Nonpension Qualified PPP Postretirement Plan (Dollars in millions) U.S. Plan U.S. Plan Change in benefit obligation: Benefit obligation at January 1, 2022 $ 46,457 $ 3,404 Service cost — 4 Interest cost 853 58 Plan participants' contributions — 33 Actuarial losses/(gains)* (6,973) (624) Benefits paid from trust (2,376) (285) Direct benefit payments — (2) Amendments/curtailments/settlements/other (16,644) ** — Benefit obligation at September 30, 2022 $ 21,316 $ 2,588 Change in plan assets: Fair value of plan assets at January 1, 2022 $ 51,851 $ 8 Actual return on plan assets (5,746) — Employer contributions — 272 Plan participants' contributions — 33 Benefits paid from trust (2,376) (285) Amendments/curtailments/settlements/other (16,644) ** — Fair value of plan assets at September 30, 2022 $ 27,085 $ 28 Funded status at September 30, 2022 $ 5,769 $ (2,560) Accumulated benefit obligation+ $ 21,316 N/A * Reflects an increase in the discount rate from 2.60 percent at December 31, 2021 to 4.70 percent at the remeasurement date for the Qualified PPP and from 2.30 percent at December 31, 2021 to 4.10 percent at the remeasurement date for the nonpension postretirement plan. ** Primarily represents the transfer of Qualified PPP pension obligations and related plan assets to the Insurers pursuant to group annuity contracts and lump sum payments to plan participants. + Represents the benefit obligation assuming no future participant compensation increases. Plan Contributions The table below includes contributions to the following plans: (Dollars in millions) Plan Contributions For the nine months ended September 30: 2022 2021 U.S. and non-U.S. nonpension postretirement benefit plans $ 272 $ 263 Non-U.S. DB and multi-employer plans* 85 43 Total plan contributions $ 357 $ 306 * Amounts reported net of refunds. During the nine months ended September 30, 2022 and 2021, the company contributed $247 million and $307 million of U.S. Treasury Securities, respectively, to the non-U.S. DB plans and nonpension postretirement benefit plans. Additionally, during the nine months ended September 30, 2022 and 2021, the company contributed $366 million and $311 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. The company does not anticipate any significant changes to the expected plan contributions in 2022 from the amounts disclosed in the 2021 Annual Report. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events | |
Subsequent Events | 19. Subsequent Events On October 25, 2022, the company announced that the Board of Directors approved a quarterly dividend of $1.65 per common share. The dividend is payable December 10, 2022 to shareholders of record on November 10, 2022. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
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. As a result, actual results may be different from these estimates. On November 3, 2021, the company completed the 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 all The accounting requirements for reporting the separation of Kyndryl as a discontinued operation were met when the separation was In the first quarter of 2022, the company realigned its management structure to reflect the planned divestiture of its healthcare software assets which was completed in the second quarter of 2022. This change impacted the company’s Software segment and Other–divested businesses category. In the fourth quarter of 2021, immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes impacted the company’s reportable segments but did not impact the Consolidated Financial Statements. Refer to note 5, “Segments,” for additional information on the company’s reportable segments. The segments are reported on a comparable basis for all periods. In September 2022, the IBM Qualified Personal Pension Plan (Qualified PPP) purchased two separate nonparticipating single premium group annuity contracts from The Prudential Insurance Company of America and Metropolitan Life Insurance Company (collectively, the Insurers) and irrevocably transferred to the Insurers approximately $16 billion of the Qualified PPP’s defined benefit pension obligations and related plan assets, thereby reducing the company’s pension obligations and assets by the same amount. The group annuity contracts were purchased using assets of the Qualified PPP and no additional funding contribution was required from the company. As a result of this transaction the company recognized a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax) in the third quarter of 2022, primarily related to the accelerated recognition of accumulated actuarial losses of the Qualified PPP. Refer to note 18, “Retirement-Related Benefits,” for additional information. For the three and nine months ended September 30, 2022, the company reported a benefit from income taxes of $1,287 million and $1,070 million, respectively. The tax benefits were primarily due to the transfer of a portion of the Qualified PPP’s defined benefit pension obligations and related plan assets, as described above. For the three and nine months ended September 30, 2021, the company reported a benefit from income taxes of $224 million and $282 million, respectively. The tax benefits were primarily driven by the resolution of certain tax audits in the first quarter of 2021 as well as third-quarter 2021 events that resulted in additional anticipated utilization of U.S. foreign tax credits. Noncontrolling interest amounts of $3.7 million and $5.5 million, net of tax, for the three months ended September 30, 2022 and 2021, respectively, and $14.2 million and $14.5 million, net of tax, for the nine months ended September 30, 2022 and 2021, 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 2021 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. issued |
Accounting Changes | New Standards to be Implemented Disclosures of Supplier Finance Program Obligations Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Disclosures about Government Assistance Standard/Description– Effective Date and Adoption Considerations– Effect on Financial Statements or Other Significant Matters– Troubled Debt Restructurings and Vintage Disclosures Standard/Description a continuation of an existing loan. The guidance also requires presenting current period gross write-offs by year of origination for financing receivables and net investment in leases. Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Standards Implemented Lessors–Certain Leases with Variable Lease Payments Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Revenue Contracts with Customers Acquired in a Business Combination Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters Simplifying the Accounting for Income Taxes Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other Significant Matters |
Separation of Kyndryl | The historical results of Kyndryl have been presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The company’s presentation of discontinued operations excludes general corporate overhead costs which were historically allocated to Kyndryl, consistent with the company’s management system, that did not meet the requirements to be presented in discontinued operations in 2021. Such allocations include labor and non-labor expenses related to IBM’s corporate support functions (e.g., finance, accounting, tax, treasury, IT, HR, legal, among others) that historically provided support to Kyndryl and transferred to Kyndryl at separation. In addition, discontinued operations excludes the historical intercompany purchases and sales between IBM and Kyndryl that were eliminated in consolidation. |
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 by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments. |
Financial Assets & Liabilities and Fair Value Measurement | 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, 2022 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, 2022 and 2021, respectively. |
Kyndryl Common Stock | The company has elected to record the debt at fair value based on changes in the value of the Shares underlying the debt. The fair value of the debt was $184 million at September 30, 2022. In electing the fair value option, the company recognizes changes in fair value of the debt in other (income) and expense |
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, 2022 and December 31, 2021, 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 $44,942 million and $44,917 million, and the estimated fair value was $40,944 million and $49,465 million at September 30, 2022 and December 31, 2021, 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), 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 Infrastructure products and are for terms ranging generally from two 30 |
Allowance for Credit Losses - Financing Receivables | When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies,” in the company’s 2021 Annual Report. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods. |
Short-Term Debt | Included within short-term debt in the company’s Consolidated Balance Sheet at September 30, 2022 is $184 million of secured borrowings recorded at fair value from the short-term credit facility and the May 2022 Exchange as described in note 8, “Financial Assets & Liabilities.” |
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 2021 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. |
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 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. |
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 for stock awards and stock options is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. |
Defined Benefit Pension and Nonpension Postretirement Benefit Plans, Defined Contribution Plans | As described in note 1, “Basis of Presentation,” in September 2022, the Qualified PPP irrevocably transferred to the Insurers approximately $16 billion of the Qualified PPP’s defined benefit pension obligations and related plan assets, thereby reducing the company’s pension obligations and assets by the same amount.As a result of this transaction, the company was required to remeasure the benefit obligations and plan assets of the Qualified PPP. The remeasurement reflects the use of an updated discount rate and actual return on plan assets as of August 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date.In September 2022, the company amended its U.S. Nonpension Postretirement Plan to transition coverage for Medicare-eligible participants to a new IBM-sponsored group Medicare Advantage program administered by UnitedHealthcare, starting January 1, 2023.As a result of this amendment, the company was required to remeasure the benefit obligation of this plan.The remeasurement reflects the use of an updated discount rate and actual return on plan assets as of July 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date. |
Separation of Kyndryl (Tables)
Separation of Kyndryl (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Separation of Kyndryl | |
Schedule of discontinued operations | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Revenue $ 1 $ 4,367 $ 7 $ 13,437 Cost of sales 2 3,303 19 10,043 Selling, general and administrative expense (24) 554 42 1,527 RD&E and Other (income) and expense 0 4 (70) 59 Income from discontinued operations before income taxes $ 24 $ 506 $ 16 $ 1,807 Provision for income taxes 6 413 1 648 Income from discontinued operations, net of tax $ 18 $ 93 $ 16 $ 1,160 * Excludes intercompany transactions between IBM and Kyndryl and general corporate overhead costs transferred to Kyndryl as discussed above. Nine Months Ended September 30, (Dollars in millions) 2022 2021 Net cash provided by/(used in) operating activities $ — $ 2,167 * Net cash provided by/(used in) investing activities $ 48 $ (363) * Excludes intercompany transactions between IBM and Kyndryl and general corporate overhead costs transferred to Kyndryl as discussed above. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Revenue Recognition | |
Schedule of disaggregation of revenue | Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Hybrid Platform & Solutions $ 4,172 $ 4,074 $ 12,641 $ 12,082 Transaction Processing 1,640 1,332 5,107 4,257 Total Software $ 5,811 $ 5,406 $ 17,749 $ 16,339 Business Transformation 2,165 2,068 6,646 6,070 Application Operations 1,593 1,501 4,865 4,489 Technology Consulting 943 889 2,826 2,538 Total Consulting $ 4,700 $ 4,457 $ 14,337 $ 13,098 Hybrid Infrastructure 1,931 1,453 6,392 5,294 Infrastructure Support 1,421 1,468 4,413 4,480 Total Infrastructure $ 3,352 $ 2,921 $ 10,805 $ 9,774 Financing** 174 184 474 601 Other 70 282 475 844 Total revenue $ 14,107 $ 13,251 $ 43,840 $ 40,656 * Recast to reflect segment changes. ** Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers. |
Schedule of hybrid cloud revenue by segment | Hybrid Cloud Revenue by Segment Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021* 2022 2021* Software $ 2,186 $ 2,038 $ 6,604 $ 5,797 Consulting 2,221 1,982 6,642 5,605 Infrastructure 768 558 2,661 2,376 Other 2 77 143 246 Total $ 5,176 $ 4,655 $ 16,049 $ 14,024 * Recast to reflect segment changes. |
Schedule of disaggregation of revenue by geography | Revenue by Geography Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Americas $ 7,416 $ 6,579 $ 22,614 $ 20,178 Europe/Middle East/Africa 3,959 3,939 12,716 12,181 Asia Pacific 2,732 2,734 8,509 8,297 Total $ 14,107 $ 13,251 $ 43,840 $ 40,656 |
Schedule of reconciliation of contract balances | At September 30, At December 31, (Dollars in millions) 2022 2021 Notes and accounts receivable — $ 5,526 $ 6,754 Contract assets* $ 522 $ 471 Deferred income (current) $ 11,139 $ 12,518 Deferred income (noncurrent) $ 3,018 $ 3,577 * 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, 2022 Additions / (Releases) Write-offs Foreign currency and other September 30, 2022 $ 218 $ 43 $ (28) $ (19) $ 214 January 1, 2021 Additions / (Releases) Write-offs Foreign currency and other December 31, 2021 $ 260 $ (15) $ (28) $ 1 $ 218 |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segments | |
Revenue and Pre-tax Income by Segment | Total (Dollars in millions) Software Consulting Infrastructure Financing Segments For the three months ended September 30, 2022: Revenue $ 5,811 $ 4,700 $ 3,352 $ 174 $ 14,037 Pre-tax income from continuing operations $ 1,306 $ 462 $ 280 $ 79 $ 2,128 Revenue year-to-year change 7.5 % 5.4 % 14.8 % (5.7) % 8.2 % Pre-tax income year-to-year change 31.9 % (0.8) % 34.1 % (40.4) % 18.4 % Pre-tax income margin 22.5 % 9.8 % 8.3 % 45.4 % 15.2 % For the three months ended September 30, 2021*: Revenue $ 5,406 $ 4,457 $ 2,921 $ 184 $ 12,969 Pre-tax income from continuing operations $ 990 $ 466 $ 209 $ 132 $ 1,797 Pre-tax income margin 18.3 % 10.5 % 7.1 % 71.7 % 13.9 % Total (Dollars in millions) Software Consulting Infrastructure Financing Segments For the nine months ended September 30, 2022: Revenue $ 17,749 $ 14,337 $ 10,805 $ 474 $ 43,365 Pre-tax income from continuing operations $ 3,816 $ 1,154 $ 1,236 $ 265 $ 6,470 Revenue year-to-year change 8.6 % 9.5 % 10.6 % (21.2) % 8.9 % Pre-tax income year-to-year change 41.0 % 13.9 % 25.0 % (26.8) % 27.6 % Pre-tax income margin 21.5 % 8.0 % 11.4 % 55.9 % 14.9 % For the nine months ended September 30, 2021*: Revenue $ 16,339 $ 13,098 $ 9,774 $ 601 $ 39,812 Pre-tax income from continuing operations $ 2,707 $ 1,013 $ 989 $ 362 $ 5,071 Pre-tax income margin 16.6 % 7.7 % 10.1 % 60.1 % 12.7 % |
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: 2022 2021* Revenue: Total reportable segments $ 14,037 $ 12,969 Other ‒ 3 189 Other revenue 68 93 Total consolidated revenue $ 14,107 $ 13,251 Pre-tax income/(loss) from continuing operations: Total reportable segments $ 2,128 $ 1,797 Amortization of acquired intangible assets (417) (469) Acquisition-related (charges)/income (1) (4) Non-operating retirement-related (costs)/income (6,062) ** (318) Kyndryl-related impacts+ 14 — Eliminations of internal transactions 0 1 Other ‒ 0 (41) Unallocated corporate amounts and other (163) (155) Total pre-tax income/(loss) from continuing operations $ (4,501) $ 813 * Recast to conform to current year presentation. ** Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion. See note 18, “Retirement-Related Benefits,” for additional information. + Refer to note 8, “Financial Assets & Liabilities,” for additional information. Reconciliations to IBM as Reported: (Dollars in millions) For the nine months ended September 30: 2022 2021* Revenue: Total reportable segments $ 43,365 $ 39,812 Other ‒ 319 583 Other revenue 156 261 Total consolidated revenue $ 43,840 $ 40,656 Pre-tax income/(loss) from continuing operations: Total reportable segments $ 6,470 $ 5,071 Amortization of acquired intangible assets (1,337) (1,371) Acquisition-related charges (9) (37) Non-operating retirement-related (costs)/income (6,455) ** (967) Kyndryl-related impacts+ (353) — Eliminations of internal transactions (15) (3) Other ‒ 108 ++ (106) Unallocated corporate amounts (565) (619) Total pre-tax income/(loss) from continuing operations $ (2,156) $ 1,968 * Recast to conform to current year presentation. ** Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion. See note 18, “Retirement-Related Benefits,” for additional information. + Refer to note 8, “Financial Assets & Liabilities,” for additional information. ++ Includes a gain from the sale of the company’s healthcare software assets. Refer to note 6, “Acquisitions & Divestitures.” |
Acquisitions & Divestitures (Ta
Acquisitions & Divestitures (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
2022 Acquisitions | |
Acquisitions & Divestitures | |
Business acquisition, purchase price allocation | Amortization Total (Dollars in millions) Life (in years) Acquisitions Current assets $ 63 Property, plant and equipment/noncurrent assets 3 Intangible assets: Goodwill N/A 857 Client relationships 7 151 Completed technology 4-7 90 Trademarks 2-3 7 Total assets acquired $ 1,171 Current liabilities 48 Noncurrent liabilities 22 Total liabilities assumed $ 69 Total purchase price $ 1,102 N/A – not applicable |
Earnings_(Loss) Per Share of _2
Earnings/(Loss) Per Share of Common Stock (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings/(Loss) Per Share of Common Stock | |
Computation of basic and diluted earnings/(loss) per share | (Dollars in millions except per share amounts) For the three months ended September 30: 2022 2021 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 904,076,831 897,097,073 Add — Incremental shares under stock-based compensation plans — 6,946,467 Add — Incremental shares associated with contingently issuable shares — 1,909,573 Number of shares on which diluted earnings per share is calculated 904,076,831 905,953,114 Income/(loss) from continuing operations $ (3,214) $ 1,037 Income/(loss) from discontinued operations, net of tax 18 93 Net income/(loss) on which basic earnings per share is calculated $ (3,196) $ 1,130 Income/(loss) from continuing operations $ (3,214) $ 1,037 Net income applicable to contingently issuable shares — — Income/(loss) from continuing operations on which diluted earnings per share is calculated $ (3,214) $ 1,037 Income/(loss) from discontinued operations, net of tax, on which diluted earnings per share is calculated 18 93 Net income/(loss) on which diluted earnings per share is calculated $ (3,196) $ 1,130 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ (3.55) $ 1.14 Discontinued operations 0.02 0.10 Total $ (3.54) $ 1.25 Basic Continuing operations $ (3.55) $ 1.16 Discontinued operations 0.02 0.10 Total $ (3.54) $ 1.26 (Dollars in millions except per share amounts) For the nine months ended September 30: 2022 2021 Number of shares on which basic earnings per share is calculated: Weighted-average shares outstanding during period 901,621,217 895,257,004 Add — Incremental shares under stock-based compensation plans — 7,000,190 Add — Incremental shares associated with contingently issuable shares — 1,720,345 Number of shares on which diluted earnings per share is calculated 901,621,217 903,977,539 Income/(loss) from continuing operations $ (1,087) $ 2,250 Income/(loss) from discontinued operations, net of tax 16 1,160 Net income/(loss) on which basic earnings per share is calculated $ (1,071) $ 3,410 Income/(loss) from continuing operations $ (1,087) $ 2,250 Net income applicable to contingently issuable shares — — Income/(loss) from continuing operations on which diluted earnings per share is calculated $ (1,087) $ 2,250 Income/(loss) from discontinued operations, net of tax, on which diluted earnings per share is calculated 16 1,160 Net income/(loss) on which diluted earnings per share is calculated $ (1,071) $ 3,410 Earnings/(loss) per share of common stock: Assuming dilution Continuing operations $ (1.21) $ 2.49 Discontinued operations 0.02 1.28 Total $ (1.19) $ 3.77 Basic Continuing operations $ (1.21) $ 2.51 Discontinued operations 0.02 1.30 Total $ (1.19) $ 3.81 |
Financial Assets & Liabilities
Financial Assets & Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Financial Assets & Liabilities | |
Financial assets and financial liabilities measured at fair value on a recurring basis | Fair Value Hierarchy At September 30, 2022 At December 31, 2021 (Dollars in millions) Level Assets (8) Liabilities (9) Assets (8) Liabilities (9) Cash equivalents: (1) Time deposits and certificates of deposit (2) 2 $ 4,195 $ N/A $ 1,903 $ N/A Money market funds 1 732 N/A 263 N/A U.S. government securities (2) 2 — N/A 599 N/A Total cash equivalents $ 4,927 $ N/A $ 2,766 $ N/A Equity investments (3) 1 — N/A 0 N/A Kyndryl common stock (4) 1 184 N/A 807 N/A Secured borrowing (4) 2 N/A 184 N/A — Debt securities-current (2)(5) 2 1,753 N/A 600 N/A Debt securities-noncurrent (2)(6) 2,3 31 N/A 37 N/A Derivatives designated as hedging instruments: Interest rate contracts 2 1 339 12 — Foreign exchange contracts 2 998 531 359 117 Derivatives not designated as hedging instruments: Foreign exchange contracts 2 13 31 21 42 Equity contracts (7) 1,2 — 178 6 4 Total $ 7,908 $ 1,263 $ 4,608 $ 162 (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) Refer to “Kyndryl Common Stock” below for additional information. (5) U.S. treasury bills and term deposits that are reported within marketable securities in the Consolidated Balance Sheet. (6) Includes corporate and government debt securities that are reported within investments and sundry assets in the Consolidated Balance Sheet. (7) Level 1 includes immaterial amounts related to equity futures contracts. (8) 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, 2022 were $1,008 million and $4 million, respectively, and at December 31, 2021 were $358 million and $40 million, respectively. (9) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at September 30, 2022 were $475 million and $603 million, respectively, and at December 31, 2021 were $60 million and $103 million , respectively. N/A – not applicable |
Financing Receivables (Tables)
Financing Receivables (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Financing Receivables | |
Summary of the components of financing receivables | Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial Financing Receivables (Dollars in millions) Receivables Direct Financing Held for Held for At September 30, 2022: (Loans) Leases Investment Sale* Total Financing receivables, gross $ 7,777 $ 3,566 $ 169 $ 395 $ 11,907 Unearned income (330) (285) — — (615) Unguaranteed residual value — 323 — — 323 Amortized cost $ 7,447 $ 3,604 $ 169 $ 395 $ 11,616 Allowance for credit losses (101) (53) (5) — (159) Total financing receivables, net $ 7,346 $ 3,551 $ 164 $ 395 $ 11,456 Current portion $ 4,750 $ 1,366 $ 164 $ 395 $ 6,676 Noncurrent portion $ 2,596 $ 2,185 $ — $ — $ 4,781 * The carrying value of the receivables classified as held for sale approximates fair value. Client Financing Receivables Client Loan and Investment in Installment Payment Sales-Type and Commercial Financing Receivables (Dollars in millions) Receivables Direct Financing Held for Held for At December 31, 2021: (Loans) Leases Investment Sale* Total Financing receivables, gross $ 9,303 $ 3,336 $ 450 $ 793 $ 13,881 Unearned income (353) (223) — — (576) Unguaranteed residual value — 335 — — 335 Amortized cost $ 8,949 $ 3,448 $ 450 $ 793 $ 13,640 Allowance for credit losses (131) (64) (6) — (201) Total financing receivables, net $ 8,818 $ 3,384 $ 444 $ 793 $ 13,439 Current portion $ 5,371 $ 1,406 $ 444 $ 793 $ 8,014 Noncurrent portion $ 3,447 $ 1,978 $ — $ — $ 5,425 * The carrying value of the receivables classified as held for sale approximates fair value. |
Schedule of transfer of client and commercial financing assets | (Dollars in millions) For the nine months ended September 30: 2022 2021 Client financing receivables: Lease receivables $ 15 $ 781 Loan receivables 2 2,189 Total client financing receivables transferred $ 17 $ 2,970 Commercial financing receivables: Receivables transferred during the period $ 6,091 $ 4,465 Receivables uncollected at end of period* $ 816 $ 707 * Of the total amount of commercial financing receivables sold and derecognized from the Consolidated Balance Sheet, the amounts presented remained uncollected from business partners as of September 30, 2022 and 2021. |
Schedule of financing receivables and allowance for credit losses by class | (Dollars in millions) At September 30, 2022: Americas EMEA Asia Pacific Total Amortized cost $ 6,900 $ 2,731 $ 1,420 $ 11,051 Allowance for credit losses: Beginning balance at January 1, 2022 $ 111 $ 61 $ 23 $ 195 Write-offs $ (20) $ (1) $ (2) $ (23) Recoveries 1 0 4 5 Additions/(releases) (6) (3) (5) (13) Other* 1 (8) (2) (10) Ending balance at September 30, 2022 $ 87 $ 49 $ 18 $ 154 (Dollars in millions) At December 31, 2021: Americas EMEA Asia Pacific Total Amortized cost $ 6,573 $ 3,793 $ 2,031 $ 12,397 Allowance for credit losses: Beginning balance at January 1, 2021 $ 141 $ 77 $ 37 $ 255 Write-offs $ (8) $ (2) $ (7) $ (17) Recoveries 0 0 1 1 Additions/(releases) (19) (11) (7) (38) Other* (3) (3) 0 (7) Ending balance at December 31, 2021 $ 111 $ 61 $ 23 $ 195 * 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, 2022: Cost > 90 Days* Accruing* Accruing Accruing** Americas $ 6,900 $ 266 $ 197 $ 22 $ 70 EMEA 2,731 81 1 0 81 Asia Pacific 1,420 23 6 1 17 Total client financing receivables $ 11,051 $ 369 $ 204 $ 23 $ 168 Amortized Billed Amortized Total Amortized Cost Invoices Cost (Dollars in millions) Amortized Cost > 90 Days and > 90 Days and Not At December 31, 2021: Cost > 90 Days* Accruing* Accruing Accruing** Americas $ 6,573 $ 188 $ 100 $ 6 $ 90 EMEA 3,793 99 7 2 95 Asia Pacific 2,031 25 5 2 20 Total client financing receivables $ 12,397 $ 312 $ 112 $ 10 $ 205 * At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. ** Of the amortized cost not accruing, there was a related allowance of $120 million and $153 million at September 30, 2022 and December 31, 2021, respectively. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2022, respectively. |
Schedule of amortized cost by credit quality indicator | (Dollars in millions) Americas EMEA Asia Pacific At September 30, 2022: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2022 $ 2,475 $ 1,012 $ 716 $ 465 $ 471 $ 83 2021 1,401 387 487 198 210 77 2020 660 265 268 168 213 53 2019 310 119 167 110 133 24 2018 147 40 45 37 87 25 2017 and prior 40 47 15 54 25 18 Total $ 5,031 $ 1,869 $ 1,698 $ 1,033 $ 1,140 $ 280 (Dollars in millions) Americas EMEA Asia Pacific At December 31, 2021: Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Aaa – Baa3 Ba1 – D Vintage year: 2021 $ 2,556 $ 1,147 $ 1,181 $ 778 $ 565 $ 226 2020 1,013 392 506 342 381 86 2019 544 236 287 291 297 51 2018 338 117 189 85 211 64 2017 108 50 15 52 74 17 2016 and prior 20 53 21 46 38 20 Total $ 4,579 $ 1,994 $ 2,198 $ 1,595 $ 1,567 $ 464 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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) 2022 2021 2022 2021 Lease income — Sales-type lease selling price $ 99 $ 119 $ 888 $ 870 Less: Carrying value of underlying assets* (57) (48) (195) (205) Gross profit $ 43 $ 70 $ 693 $ 664 Interest income on lease receivables 54 44 144 142 Total sales-type and direct financing lease income $ 97 $ 114 $ 838 $ 806 Lease income — 29 38 86 136 Variable lease income 19 18 75 97 Total lease income $ 145 $ 169 $ 998 $ 1,038 * Excludes unguaranteed residual value. |
Intangible Assets Including G_2
Intangible Assets Including Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Intangible Assets Including Goodwill | |
Intangible asset balances by major asset class | At September 30, 2022 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,697 $ (720) $ 977 Client relationships 8,051 (2,763) 5,288 Completed technology 5,490 (2,242) 3,248 Patents/trademarks 2,093 (645) 1,448 Other** 32 (27) 5 Total $ 17,364 $ (6,397) $ 10,967 At December 31, 2021 Gross Carrying Accumulated Net Carrying (Dollars in millions) Amount Amortization Amount* Intangible asset class: Capitalized software $ 1,696 $ (751) $ 945 Client relationships 9,021 (2,889) 6,132 Completed technology 6,074 (2,259) 3,815 Patents/trademarks 2,196 (586) 1,610 Other** 44 (35) 9 Total $ 19,031 $ (6,520) $ 12,511 * Amounts as of September 30, 2022 and December 31, 2021 included a decrease in net intangible asset balances of $389 million and $221 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 2022 $ 157 $ 405 $ 562 2023 472 1,469 1,941 2024 286 1,452 1,737 2025 63 1,434 1,497 2026 — 1,417 1,417 Thereafter — 3,813 3,813 |
Changes in goodwill balances by reportable segment | Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2022 Additions Adjustments Divestitures Adjustments* 9/30/2022 Software $ 43,966 $ 442 $ (118) $ — $ (1,290) $ 43,001 Consulting 6,797 461 (42) — (343) 6,872 Infrastructure 4,396 — — (1) (50) 4,345 Other** 484 — — (484) — — Total $ 55,643 $ 903 $ (160) $ (485) $ (1,683) $ 54,218 * Primarily driven by foreign currency translation. ** The company derecognized $484 million of goodwill related to the divestiture of its healthcare software assets. Refer to note 6, “Acquisitions & Divestitures,” for additional information. Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price and Other Balance Segment 1/1/2021 Additions Adjustments Divestitures Adjustments* 12/31/2021 Software** $ 42,665 $ 1,836 $ 23 $ (13) $ (545) $ 43,966 Consulting 6,145 713 (21) — (40) 6,797 Infrastructure 4,436 — 0 — (39) 4,396 Other** 520 — — (37) 1 484 Total $ 53,765 $ 2,549 $ 2 $ (50) $ (623) $ 55,643 * Primarily driven by foreign currency translation. ** Recast to conform to current year presentation. |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Borrowings | |
Short-Term Debt | At September 30, At December 31, (Dollars in millions) 2022 2021 Short-term loans $ 196 $ 22 Long-term debt — 5,741 6,764 Total $ 5,937 $ 6,787 |
Long-Term Debt | Balance Balance (Dollars in millions) Maturities 9/30/2022 12/31/2021 U.S. dollar debt (weighted-average interest rate at September 30, 2022):* 2.9% 2022 $ 900 $ 5,673 3.4% 2023 1,536 1,573 3.3% 2024 5,011 5,016 5.1% 2025 1,604 608 3.3% 2026 4,352 4,356 3.1% 2027 3,621 2,221 6.5% 2028 313 313 3.5% 2029 3,250 3,250 2.0% 2030 1,350 1,350 4.4% 2032 1,850 600 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 4.2% 2052 1,400 — 7.1% 2096 316 316 $ 34,516 $ 34,290 Other currencies (weighted-average interest rate at September 30, 2022, in parentheses):* Euro (1.1%) 2023–2040 $ 15,671 $ 15,903 Pound sterling 2022 — 406 Japanese yen (0.3%) 2022–2026 1,005 1,263 Other (16.0%) 2022–2026 397 378 $ 51,590 $ 52,240 Finance lease obligations (2.8%) 2022–2030 159 99 $ 51,749 $ 52,339 Less: net unamortized discount 841 839 Less: net unamortized debt issuance costs 140 130 Add: fair value adjustment** (84) 311 $ 50,684 $ 51,681 Less: current maturities 5,741 6,764 Total $ 44,942 $ 44,917 * 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 | (Dollars in millions) Total Remainder of 2022 $ 1,334 2023 4,490 2024 6,246 2025 4,586 2026 4,657 Thereafter 30,436 Total $ 51,749 |
Interest on Debt | (Dollars in millions) For the nine months ended September 30: 2022 2021 Cost of financing $ 264 $ 312 Interest expense 903 852 Interest capitalized 4 3 Total interest paid and accrued $ 1,170 $ 1,167 |
Commitments (Tables)
Commitments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Commitments | |
Changes in warranty liabilities | Standard Warranty Liability (Dollars in millions) 2022 2021 Balance at January 1 $ 77 $ 83 Current period accruals 58 50 Accrual adjustments to reflect actual experience (1) (2) Charges incurred (62) (66) Balance at September 30 $ 72 $ 66 Extended Warranty Liability (Dollars in millions) 2022 2021 Balance at January 1 $ 350 $ 425 Revenue deferred for new extended warranty contracts 103 71 Amortization of deferred revenue (148) (154) Other* (21) (9) Balance at September 30 $ 284 $ 334 Current portion $ 139 $ 171 Noncurrent portion $ 145 $ 163 * Other primarily consists of foreign currency translation adjustments. |
Equity Activity (Tables)
Equity Activity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 143 $ (301) $ (158) 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 $ 189 $ (49) $ 140 Reclassification of (gains)/losses to: Cost of services (4) 1 (3) Cost of sales (35) 10 (25) Cost of financing 7 (2) 5 SG&A expense (8) 2 (6) Other (income) and expense 6 (2) 5 Interest expense 22 (5) 16 Total unrealized gains/(losses) on cash flow hedges $ 178 $ (45) $ 133 Retirement-related benefit plans*: Prior service costs/(credits) $ 412 $ (104) $ 309 Net (losses)/gains arising during the period 53 (13) 39 Curtailments and settlements 5,913 (1,487) 4,426 Amortization of prior service (credits)/costs 3 (1) 2 Amortization of net (gains)/losses 388 (108) 279 Total retirement-related benefit plans $ 6,768 $ (1,712) $ 5,056 Other comprehensive income/(loss) $ 7,089 $ (2,058) $ 5,030 * These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost and include the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “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, 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*: 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 * These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “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, 2022: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ 799 $ (784) $ 14 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 $ 449 $ (118) $ 332 Reclassification of (gains)/losses to: Cost of services (32) 8 (24) Cost of sales (71) 20 (50) Cost of financing 19 (5) 14 SG&A expense (28) 8 (20) Other (income) and expense 51 (13) 38 Interest expense 64 (16) 48 Total unrealized gains/(losses) on cash flow hedges $ 453 $ (116) $ 338 Retirement-related benefit plans*: Prior service costs/(credits) $ 408 $ (99) $ 309 Net (losses)/gains arising during the period 63 (20) 43 Curtailments and settlements 5,931 (1,491) 4,440 Amortization of prior service (credits)/costs 16 (4) 12 Amortization of net (gains)/losses 1,305 (364) 941 Total retirement-related benefit plans $ 7,722 $ (1,978) $ 5,745 Other comprehensive income/(loss) $ 8,973 $ (2,877) $ 6,096 * These AOCI components are included in the computation of net periodic pension cost and include the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “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*: 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 * These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “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, 2022 $ (18) $ (3,362) $ (19,854) $ (1) $ (23,234) Other comprehensive income before reclassifications 332 14 352 (1) 697 Amount reclassified from accumulated other comprehensive income 6 — 5,393 ** — 5,399 Total change for the period $ 338 $ 14 $ 5,745 $ (1) $ 6,096 September 30, 2022 $ 320 $ (3,347) $ (14,110) $ (1) $ (17,138) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. ** Includes the impact of a one-time, non-cash pension settlement charge of $5.9 billion ( $4.4 billion net of tax) in the third quarter of 2022. Refer to note 18, “Retirement-Related Benefits,” for additional information. 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. |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Derivative Financial Instruments | |
Amounts related to cumulative basis adjustments for fair value hedges | September 30, December 31, (Dollars in millions) 2022 2021 Short-term debt: Carrying amount of the hedged item $ (425) $ (227) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* $ 0 $ (2) Long-term debt: Carrying amount of the hedged item $ (5,631) $ (508) Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)* $ 84 $ (309) * |
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: 2022 2021 2022 2021 Cost of services $ 5,168 $ 4,650 $ 4 $ 12 Cost of sales $ 1,389 $ 1,363 * $ 35 $ 1 Cost of financing $ 120 $ 132 * $ 1 $ (1) SG&A expense $ 4,391 $ 4,306 $ (69) $ (14) Other (income) and expense $ 5,755 $ 244 $ (189) $ (7) Interest expense $ 295 $ 290 $ 4 $ (2) * Reclassified to conform to current year presentation. 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 2022 2021 2022 2021 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ (64) $ 0 $ 68 $ 4 Interest expense (191) 0 203 11 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (186) 15 N/A N/A Equity contracts SG&A expense (76) (13) N/A N/A Other (income) and expense 3 — N/A N/A Total $ (514) $ 3 $ 271 $ 15 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: 2022 2021 Line Item 2022 2021 2022 2021 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (1) $ (1) $ — $ — Interest expense (3) (3) — — Foreign exchange contracts 189 109 Cost of services 4 12 — — Cost of sales 35 1 — — Cost of financing (6) (5) — — SG&A expense 8 (1) — — Other (income) and expense (6) (22) — — Interest expense (18) (13) — — Instruments in net investment hedges (4): Foreign exchange contracts 1,198 477 Cost of financing — — 5 1 Interest expense — — 14 3 Total $ 1,387 $ 587 $ 12 $ (32) $ 19 $ 5 (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: 2022 2021 2022 2021 Cost of services $ 15,915 $ 14,014 $ 32 $ 33 Cost of sales $ 4,555 $ 4,241 * $ 71 $ (30) Cost of financing $ 314 $ 416 * $ 0 $ 1 SG&A expense $ 13,843 $ 13,842 $ (291) $ 88 Other (income) and expense $ 5,921 $ 891 $ (730) $ (246) Interest expense $ 903 $ 852 $ 1 $ 3 * Reclassified to conform to current year presentation. 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 2022 2021 2022 2021 Derivative instruments in fair value hedges (1): Interest rate contracts Cost of financing $ (76) $ 0 $ 89 $ 15 Interest expense (261) (1) 305 40 Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense (595) (59) N/A N/A Equity contracts SG&A expense (319) 120 N/A N/A Other (income) and expense (85) — N/A N/A Total $ (1,336) $ 59 $ 395 $ 55 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: 2022 2021 Line Item 2022 2021 2022 2021 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Cost of financing $ (3) $ (4) $ — $ — Interest expense (10) (10) — — Foreign exchange contracts 449 262 Cost of services 32 33 — — Cost of sales 71 (30) — — Cost of financing (16) (14) — — SG&A expense 28 (32) — — Other (income) and expense (51) (187) — — Interest expense (54) (38) — — Instruments in net investment hedges (4): Foreign exchange contracts 3,118 1,207 Cost of financing — — 6 4 Interest expense — — 22 11 Total $ 3,567 $ 1,470 $ (4) $ (282) $ 28 $ 15 (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, 2022 | |
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) 2022 2021 2022 2021 Cost $ 40 $ 38 $ 124 $ 106 Selling, general and administrative 138 144 427 399 Research, development and engineering 73 60 188 160 Pre-tax stock-based compensation cost $ 251 $ 242 $ 739 $ 665 Income tax benefits (51) (54) (191) (166) Total net stock-based compensation cost $ 200 $ 188 $ 548 $ 499 |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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: 2022 2021 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 6,319 * $ 598 nm Nonpension postretirement plans — 31 44 (30.2) % Total $ 6,350 $ 642 nm * Includes the impact of a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion related to the Qualified PPP, as described below. nm - not meaningful Yr. to Yr. (Dollars in millions) Percent For the nine months ended September 30: 2022 2021 Change Retirement-related plans — Defined benefit and contribution pension plans — $ 7,252 * $ 1,816 nm Nonpension postretirement plans — 97 133 (26.7) % Total $ 7,350 $ 1,949 nm * Includes the impact of a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion related to the Qualified PPP, as described below. nm – not meaningful |
Components of net periodic (income)/cost of the company's retirement-related benefit plans | (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended September 30: 2022 2021 2022 2021 Service cost $ — $ — $ 57 $ 67 Interest cost* 282 277 124 106 Expected return on plan assets* (432) (451) (246) (274) Amortization of prior service costs/(credits)* 2 4 3 (2) Recognized actuarial losses* 132 249 247 347 Curtailments and settlements* 5,894 ** — 19 13 Multi-employer plans — — 4 2 Other costs/(credits)* — — 8 7 Total net periodic pension (income)/cost of defined benefit plans $ 5,877 $ 80 $ 216 $ 266 Cost of defined contribution plans 134 152 91 100 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 6,012 $ 232 $ 307 $ 366 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. ** Reflects the impact of a one-time, non-cash, pre-tax pension settlement charge related to the Qualified PPP, as described below. (Dollars in millions) U.S. Plans Non-U.S. Plans For the nine months ended September 30: 2022 2021 2022 2021 Service cost $ — $ — $ 180 $ 201 Interest cost* 885 832 394 322 Expected return on plan assets* (1,382) (1,352) (778) (833) Amortization of prior service costs/(credits)* 6 12 10 (9) Recognized actuarial losses* 490 747 784 1,055 Curtailments and settlements* 5,894 ** — 38 46 Multi-employer plans — — 11 13 Other costs/(credits)* — — 24 21 Total net periodic pension (income)/cost of defined benefit plans $ 5,893 $ 239 $ 663 $ 817 Cost of defined contribution plans 416 455 280 306 Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement $ 6,309 $ 694 $ 943 $ 1,122 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. ** Reflects the impact of a one-time, non-cash, pre-tax pension settlement charge related to the Qualified PPP, as described below. |
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: 2022 2021 2022 2021 Service cost $ 1 $ 2 $ 1 $ 1 Interest cost* 21 16 8 8 Expected return on plan assets* — — 0 (1) Amortization of prior service costs/(credits)* (2) 1 0 0 Recognized actuarial losses* 1 13 1 4 Curtailments and settlements* — — — — Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 21 $ 32 $ 10 $ 12 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. (Dollars in millions) U.S. Plan Non-U.S. Plans For the nine months ended September 30: 2022 2021 2022 2021 Service cost $ 4 $ 5 $ 2 $ 3 Interest cost* 58 49 26 25 Expected return on plan assets* — — (2) (2) Amortization of prior service costs/(credits)* (1) 3 0 0 Recognized actuarial losses* 6 39 3 11 Curtailments and settlements* — — — 0 Total nonpension postretirement plans cost recognized in the Consolidated Income Statement $ 67 $ 96 $ 30 $ 37 * These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement. |
Changes in plan assets | Nonpension Qualified PPP Postretirement Plan (Dollars in millions) U.S. Plan U.S. Plan Change in benefit obligation: Benefit obligation at January 1, 2022 $ 46,457 $ 3,404 Service cost — 4 Interest cost 853 58 Plan participants' contributions — 33 Actuarial losses/(gains)* (6,973) (624) Benefits paid from trust (2,376) (285) Direct benefit payments — (2) Amendments/curtailments/settlements/other (16,644) ** — Benefit obligation at September 30, 2022 $ 21,316 $ 2,588 Change in plan assets: Fair value of plan assets at January 1, 2022 $ 51,851 $ 8 Actual return on plan assets (5,746) — Employer contributions — 272 Plan participants' contributions — 33 Benefits paid from trust (2,376) (285) Amendments/curtailments/settlements/other (16,644) ** — Fair value of plan assets at September 30, 2022 $ 27,085 $ 28 Funded status at September 30, 2022 $ 5,769 $ (2,560) Accumulated benefit obligation+ $ 21,316 N/A * Reflects an increase in the discount rate from 2.60 percent at December 31, 2021 to 4.70 percent at the remeasurement date for the Qualified PPP and from 2.30 percent at December 31, 2021 to 4.10 percent at the remeasurement date for the nonpension postretirement plan. ** Primarily represents the transfer of Qualified PPP pension obligations and related plan assets to the Insurers pursuant to group annuity contracts and lump sum payments to plan participants. + Represents the benefit obligation assuming no future participant compensation increases. |
Changes in benefit obligations | Nonpension Qualified PPP Postretirement Plan (Dollars in millions) U.S. Plan U.S. Plan Change in benefit obligation: Benefit obligation at January 1, 2022 $ 46,457 $ 3,404 Service cost — 4 Interest cost 853 58 Plan participants' contributions — 33 Actuarial losses/(gains)* (6,973) (624) Benefits paid from trust (2,376) (285) Direct benefit payments — (2) Amendments/curtailments/settlements/other (16,644) ** — Benefit obligation at September 30, 2022 $ 21,316 $ 2,588 Change in plan assets: Fair value of plan assets at January 1, 2022 $ 51,851 $ 8 Actual return on plan assets (5,746) — Employer contributions — 272 Plan participants' contributions — 33 Benefits paid from trust (2,376) (285) Amendments/curtailments/settlements/other (16,644) ** — Fair value of plan assets at September 30, 2022 $ 27,085 $ 28 Funded status at September 30, 2022 $ 5,769 $ (2,560) Accumulated benefit obligation+ $ 21,316 N/A * Reflects an increase in the discount rate from 2.60 percent at December 31, 2021 to 4.70 percent at the remeasurement date for the Qualified PPP and from 2.30 percent at December 31, 2021 to 4.10 percent at the remeasurement date for the nonpension postretirement plan. ** Primarily represents the transfer of Qualified PPP pension obligations and related plan assets to the Insurers pursuant to group annuity contracts and lump sum payments to plan participants. + Represents the benefit obligation assuming no future participant compensation increases. |
Schedule of contributions | (Dollars in millions) Plan Contributions For the nine months ended September 30: 2022 2021 U.S. and non-U.S. nonpension postretirement benefit plans $ 272 $ 263 Non-U.S. DB and multi-employer plans* 85 43 Total plan contributions $ 357 $ 306 * Amounts reported net of refunds. |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2022 USD ($) contract | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Nov. 03, 2021 | |||
Number of annuity contracts entered into by the company relating to the change in PPP | contract | 2 | ||||||||
Pre-tax pension settlement charge | $ 5,900 | $ 5,894 | |||||||
Pension settlement charge, net of tax | 4,400 | ||||||||
Provision for/(benefit from) income taxes | (1,287) | $ (224) | [1] | (1,070) | $ (282) | [1] | |||
Benefit plan obligation and plan assets transferred to insurers | 16,000 | ||||||||
Common Stocks, Including Additional Paid in Capital | 58,117 | 58,117 | $ 57,319 | ||||||
Retained earnings | 148,611 | 148,611 | $ 154,209 | ||||||
Other (income) and expenses | |||||||||
Noncontrolling interest amounts, net of tax | $ 3.7 | $ 5.5 | $ 14.2 | $ 14.5 | |||||
Kyndryl Holdings, Inc | |||||||||
Ownership interest by stockholders (in percent) | 19.90% | ||||||||
Percentage of retained interest in investment transferred | 100% | ||||||||
Revision of Prior Period, Reclassification, Adjustment | |||||||||
Common Stocks, Including Additional Paid in Capital | $ 63 | ||||||||
Retained earnings | $ (63) | ||||||||
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 | ||||||||
Kyndryl Holdings, Inc | Kyndryl Holdings, Inc | |||||||||
Total of Kyndryl stock distributed to IBM stockholders of record as of 10/25/2021 (as a percentage) | 80.10% | ||||||||
[1] Reclassified to reflect discontinued operations presentation. |
Separation of Kyndryl (Details)
Separation of Kyndryl (Details) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||||
May 23, 2022 | May 19, 2022 shares | Mar. 31, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Nov. 03, 2021 | |
Discontinued Operations | |||||||
Numbers shares transferred | shares | 22.3 | ||||||
Kyndryl Holdings, Inc | |||||||
Discontinued Operations | |||||||
Kyndryl stock distributed to IBM stockholders | 80.10% | ||||||
Share conversion ratio | 0.2 | ||||||
Upgraded hardware period | 2 years | ||||||
Kyndryl Holdings, Inc | Maximum | |||||||
Discontinued Operations | |||||||
Transition services period | 2 years | ||||||
Kyndryl Holdings, Inc | |||||||
Discontinued Operations | |||||||
Ownership interest by stockholders (in percent) | 19.90% | ||||||
Amount of retained interest transferred | 9.95% | ||||||
Percentage of retained interest in investment transferred | 100% | ||||||
Pre-tax gain on sale | $ 68 | ||||||
Kyndryl Holdings, Inc | Kyndryl Holdings, Inc | |||||||
Discontinued Operations | |||||||
Kyndryl stock distributed to IBM stockholders | 80.10% | ||||||
Managed infrastructure services unit | Disposed by separation | |||||||
Discontinued Operations | |||||||
Separation costs | $ 543 | $ 5 | $ 739 |
Separation of Kyndryl - Major c
Separation of Kyndryl - Major categories of income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Discontinued Operations | ||||||
Income from discontinued operations, net of tax | $ 18 | $ 93 | [1] | $ 16 | $ 1,160 | [1] |
Managed infrastructure services unit | Disposed by separation | ||||||
Discontinued Operations | ||||||
Revenue | 1 | 4,367 | 7 | 13,437 | ||
Cost of sales | 2 | 3,303 | 19 | 10,043 | ||
Selling, general and administrative | (24) | 554 | 42 | 1,527 | ||
RD&E and Other (income) and expense | 0 | 4 | (70) | 59 | ||
Income from discontinued operations before income taxes | 24 | 506 | 16 | 1,807 | ||
Provision for income taxes | 6 | 413 | 1 | 648 | ||
Income from discontinued operations, net of tax | $ 18 | $ 93 | $ 16 | $ 1,160 | ||
[1] Reclassified to reflect discontinued operations presentation. |
Separation of Kyndryl - Cash fl
Separation of Kyndryl - Cash flows (Details) - Managed infrastructure services unit - Disposed by separation - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Divestitures | ||
Net cash provided by/(used in) operating activities | $ 2,167 | |
Net cash provided by/(used in) investing activities | $ 48 | $ (363) |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue by Major Products and Service Offerings (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Revenue by Major Products/Service Offerings | ||||||
Total Revenue | $ 14,107 | $ 13,251 | [1] | $ 43,840 | $ 40,656 | [1] |
Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Total Revenue | 14,037 | 12,969 | 43,365 | 39,812 | ||
Other | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 70 | 282 | 475 | 844 | ||
Software | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 5,811 | 5,406 | 17,749 | 16,339 | ||
Total Revenue | 5,811 | 5,406 | 17,749 | 16,339 | ||
Consulting | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 4,700 | 4,457 | 14,337 | 13,098 | ||
Total Revenue | 4,700 | 4,457 | 14,337 | 13,098 | ||
Infrastructure | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 3,352 | 2,921 | 10,805 | 9,774 | ||
Total Revenue | 3,352 | 2,921 | 10,805 | 9,774 | ||
Financing | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 174 | 184 | 474 | 601 | ||
Total Revenue | 174 | 184 | 474 | 601 | ||
Hybrid Platform & Solutions | Software | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 4,172 | 4,074 | 12,641 | 12,082 | ||
Transaction Processing | Software | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 1,640 | 1,332 | 5,107 | 4,257 | ||
Business Transformation | Consulting | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 2,165 | 2,068 | 6,646 | 6,070 | ||
Technology Consulting | Consulting | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 943 | 889 | 2,826 | 2,538 | ||
Application Operations | Consulting | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 1,593 | 1,501 | 4,865 | 4,489 | ||
Hybrid Infrastructure | Infrastructure | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | 1,931 | 1,453 | 6,392 | 5,294 | ||
Infrastructure Support | Infrastructure | Business Segments | ||||||
Revenue by Major Products/Service Offerings | ||||||
Revenue | $ 1,421 | $ 1,468 | $ 4,413 | $ 4,480 | ||
[1] Reclassified to reflect discontinued operations presentation. |
Revenue Recognition - Hybrid Cl
Revenue Recognition - Hybrid Cloud Revenue by Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue by Major Products/Service Offerings | ||||
Hybrid cloud revenue | $ 5,176 | $ 4,655 | $ 16,049 | $ 14,024 |
Software | ||||
Revenue by Major Products/Service Offerings | ||||
Hybrid cloud revenue | 2,186 | 2,038 | 6,604 | 5,797 |
Consulting | ||||
Revenue by Major Products/Service Offerings | ||||
Hybrid cloud revenue | 2,221 | 1,982 | 6,642 | 5,605 |
Infrastructure | ||||
Revenue by Major Products/Service Offerings | ||||
Hybrid cloud revenue | 768 | 558 | 2,661 | 2,376 |
Other. | ||||
Revenue by Major Products/Service Offerings | ||||
Hybrid cloud revenue | $ 2 | $ 77 | $ 143 | $ 246 |
Revenue Recognition - Disaggr_2
Revenue Recognition - Disaggregation of Revenue by Geography (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Revenue by Geography | ||||||
Revenues | $ 14,107 | $ 13,251 | [1] | $ 43,840 | $ 40,656 | [1] |
Americas | ||||||
Revenue by Geography | ||||||
Revenues | 7,416 | 6,579 | 22,614 | 20,178 | ||
EMEA | ||||||
Revenue by Geography | ||||||
Revenues | 3,959 | 3,939 | 12,716 | 12,181 | ||
Asia Pacific | ||||||
Revenue by Geography | ||||||
Revenues | $ 2,732 | $ 2,734 | $ 8,509 | $ 8,297 | ||
[1] Reclassified to reflect discontinued operations presentation. |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligations (Details) $ in Billions | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Revenue Recognition | |
Practical expedient, remaining performance obligations | true |
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied | $ 53 |
Revenue Recognition - Remaini_2
Revenue Recognition - Remaining Performance Obligations, Expected Timing of Satisfaction (Details) | Sep. 30, 2022 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 73% |
Duration of expected recognition period for remaining performance obligation | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01 | |
Remaining Performance Obligations | |
Percentage of remaining performance obligation expected to be recognized | 25% |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01 | |
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]: 2024-10-01 | |
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, 2022 | Sep. 30, 2022 | |
Revenue Recognition | ||
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods | $ (36) | $ (60) |
Revenue Recognition - Reconcili
Revenue Recognition - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Reconciliation of Contract Balances | |||
Notes and accounts receivable - trade (net of allowances of $214 in 2022 and $218 in 2021) | $ 5,526 | $ 5,526 | $ 6,754 |
Notes and accounts receivable - trade, allowances | 214 | 214 | 218 |
Contract assets | 522 | 522 | 471 |
Deferred income (current) | 11,139 | 11,139 | 12,518 |
Deferred income (noncurrent) | 3,018 | 3,018 | $ 3,577 |
Revenue recognized that was included in deferred income at the beginning of the period | $ 4,300 | $ 8,800 |
Revenue Recognition - Trade All
Revenue Recognition - Trade Allowance for Credit Losses (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Roll forward of notes and accounts receivable - trade allowance for credit losses | ||
Allowance for Credit Loss, Beginning Balance | $ 218 | $ 260 |
Additions / (Releases) | 43 | (15) |
Write-offs | (28) | (28) |
Foreign currency and other | (19) | 1 |
Allowance for Credit Loss, Ending Balance | $ 214 | $ 218 |
Segments - Results of Continuin
Segments - Results of Continuing Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Segment Information | ||||||
Revenue | $ 14,107 | $ 13,251 | [1] | $ 43,840 | $ 40,656 | [1] |
Pre-tax income from continuing operations | (4,501) | 813 | [1] | (2,156) | 1,968 | [1] |
Business Segments | ||||||
Segment Information | ||||||
Revenue | 14,037 | 12,969 | 43,365 | 39,812 | ||
Pre-tax income from continuing operations | $ 2,128 | $ 1,797 | $ 6,470 | $ 5,071 | ||
Revenue year-to-year change (as a percent) | 8.20% | 8.90% | ||||
Pre-tax income year-to-year change (as a percent) | 18.40% | 27.60% | ||||
Pre-tax income margin (as a percent) | 15.20% | 13.90% | 14.90% | 12.70% | ||
Business Segments | Software | ||||||
Segment Information | ||||||
Revenue | $ 5,811 | $ 5,406 | $ 17,749 | $ 16,339 | ||
Pre-tax income from continuing operations | $ 1,306 | $ 990 | $ 3,816 | $ 2,707 | ||
Revenue year-to-year change (as a percent) | 7.50% | 8.60% | ||||
Pre-tax income year-to-year change (as a percent) | 31.90% | 41% | ||||
Pre-tax income margin (as a percent) | 22.50% | 18.30% | 21.50% | 16.60% | ||
Business Segments | Consulting | ||||||
Segment Information | ||||||
Revenue | $ 4,700 | $ 4,457 | $ 14,337 | $ 13,098 | ||
Pre-tax income from continuing operations | $ 462 | $ 466 | $ 1,154 | $ 1,013 | ||
Revenue year-to-year change (as a percent) | 5.40% | 9.50% | ||||
Pre-tax income year-to-year change (as a percent) | (0.80%) | 13.90% | ||||
Pre-tax income margin (as a percent) | 9.80% | 10.50% | 8% | 7.70% | ||
Business Segments | Infrastructure | ||||||
Segment Information | ||||||
Revenue | $ 3,352 | $ 2,921 | $ 10,805 | $ 9,774 | ||
Pre-tax income from continuing operations | $ 280 | $ 209 | $ 1,236 | $ 989 | ||
Revenue year-to-year change (as a percent) | 14.80% | 10.60% | ||||
Pre-tax income year-to-year change (as a percent) | 34.10% | 25% | ||||
Pre-tax income margin (as a percent) | 8.30% | 7.10% | 11.40% | 10.10% | ||
Business Segments | Financing | ||||||
Segment Information | ||||||
Revenue | $ 174 | $ 184 | $ 474 | $ 601 | ||
Pre-tax income from continuing operations | $ 79 | $ 132 | $ 265 | $ 362 | ||
Revenue year-to-year change (as a percent) | (5.70%) | (21.20%) | ||||
Pre-tax income year-to-year change (as a percent) | (40.40%) | (26.80%) | ||||
Pre-tax income margin (as a percent) | 45.40% | 71.70% | 55.90% | 60.10% | ||
[1] Reclassified to reflect discontinued operations presentation. |
Segments - Revenue Reconciliati
Segments - Revenue Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Revenue | ||||||
Revenue | $ 14,107 | $ 13,251 | [1] | $ 43,840 | $ 40,656 | [1] |
Business Segments | ||||||
Revenue | ||||||
Revenue | 14,037 | 12,969 | 43,365 | 39,812 | ||
Other | ||||||
Revenue | ||||||
Other - divested businesses | 3 | 189 | 319 | 583 | ||
Other revenue | $ 68 | $ 93 | $ 156 | $ 261 | ||
[1] Reclassified to reflect discontinued operations presentation. |
Segments - Pre-Tax Income Recon
Segments - Pre-Tax Income Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Pre-tax income from continuing operations | ||||||
Amortization of acquired intangible assets | $ (417) | $ (469) | $ (1,337) | $ (1,371) | ||
Acquisition-related (charges)/income | (1) | (4) | (9) | (37) | ||
Non-operating retirement-related (costs)/income | (6,062) | (318) | (6,455) | (967) | ||
Kyndryl-related impacts | 14 | (353) | ||||
Other - divested businesses | 0 | (41) | 108 | (106) | ||
Income/(loss) from continuing operations before income taxes | (4,501) | 813 | [1] | (2,156) | 1,968 | [1] |
Pre-tax pension settlement charge | 5,900 | 5,894 | ||||
Business Segments | ||||||
Pre-tax income from continuing operations | ||||||
Income/(loss) from continuing operations before income taxes | 2,128 | 1,797 | 6,470 | 5,071 | ||
Internal transactions | ||||||
Pre-tax income from continuing operations | ||||||
Income/(loss) from continuing operations before income taxes | 0 | 1 | (15) | (3) | ||
Unallocated corporate amounts | ||||||
Pre-tax income from continuing operations | ||||||
Income/(loss) from continuing operations before income taxes | $ (163) | $ (155) | $ (565) | $ (619) | ||
[1] Reclassified to reflect discontinued operations presentation. |
Acquisitions & Divestitures - (
Acquisitions & Divestitures - (Details) - 2022 Acquisitions $ in Millions | 9 Months Ended |
Sep. 30, 2022 USD ($) item | |
Acquisitions | |
Percentage of business acquired (as a percent) | 100% |
Number of acquisitions | item | 6 |
Aggregate acquisitions cost | $ 1,102 |
Cash consideration payable | $ 90 |
Acquisitions & Divestitures - P
Acquisitions & Divestitures - Purchase Price Allocation (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Acquisitions | |||
Goodwill | $ 54,218 | $ 55,643 | $ 53,765 |
2022 Acquisitions | |||
Acquisitions | |||
Current assets | 63 | ||
Property, plant, and equipment/noncurrent assets | 3 | ||
Goodwill | 857 | ||
Total assets acquired | 1,171 | ||
Current liabilities | 48 | ||
Noncurrent liabilities | 22 | ||
Total liabilities assumed | 69 | ||
Total purchase price | $ 1,102 | ||
Weighted average useful life | 6 years 8 months 12 days | ||
Estimated percent of goodwill deductible for tax purposes | 41% | ||
2022 Acquisitions | Client relationships | |||
Acquisitions | |||
Intangible assets | $ 151 | ||
Weighted average useful life | 7 years | ||
2022 Acquisitions | Completed technology | |||
Acquisitions | |||
Intangible assets | $ 90 | ||
2022 Acquisitions | Completed technology | Minimum | |||
Acquisitions | |||
Weighted average useful life | 4 years | ||
2022 Acquisitions | Completed technology | Maximum | |||
Acquisitions | |||
Weighted average useful life | 7 years | ||
2022 Acquisitions | Trademarks | |||
Acquisitions | |||
Intangible assets | $ 7 | ||
2022 Acquisitions | Trademarks | Minimum | |||
Acquisitions | |||
Weighted average useful life | 2 years | ||
2022 Acquisitions | Trademarks | Maximum | |||
Acquisitions | |||
Weighted average useful life | 3 years | ||
Software | |||
Acquisitions | |||
Goodwill | $ 43,001 | 43,966 | 42,665 |
Software | 2022 Acquisitions | |||
Acquisitions | |||
Goodwill | 432 | ||
Consulting | |||
Acquisitions | |||
Goodwill | 6,872 | 6,797 | 6,145 |
Consulting | 2022 Acquisitions | |||
Acquisitions | |||
Goodwill | 425 | ||
Infrastructure | |||
Acquisitions | |||
Goodwill | $ 4,345 | $ 4,396 | $ 4,436 |
Acquisitions & Divestitures - D
Acquisitions & Divestitures - Divestitures (Details) $ in Millions | 3 Months Ended | |||
Jun. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | Mar. 31, 2022 item | Jan. 31, 2022 USD ($) | |
Healthcare software assets divestiture | ||||
Divestitures | ||||
Consideration | $ 1,065 | |||
Cash consideration received | $ 1,065 | |||
Pre-tax gain on sale of business | $ 259 | |||
Other divestitures | Infrastructure | Divested businesses | ||||
Divestitures | ||||
Number of divestitures | item | 1 |
Earnings_(Loss) Per Share of _3
Earnings/(Loss) Per Share of Common Stock - Computation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Number of shares on which basic earnings per share is calculated: | ||||||
Weighted-average shares outstanding during period (in shares) | 904,076,831 | 897,097,073 | [1] | 901,621,217 | 895,257,004 | [1] |
Add - Incremental shares under stock-based compensation plans (in shares) | 6,946,467 | 7,000,190 | ||||
Add - Incremental shares associated with contingently issuable shares (in shares) | 1,909,573 | 1,720,345 | ||||
Number of shares on which diluted earnings per share is calculated (in shares) | 904,076,831 | 905,953,114 | [1] | 901,621,217 | 903,977,539 | [1] |
Net income on which basic earnings per share is calculated | ||||||
Income/(loss) from continuing operations | $ (3,214) | $ 1,037 | $ (1,087) | $ 2,250 | ||
Income/(loss) from discontinued operations, net of tax | 18 | 93 | 16 | 1,160 | ||
Net income/(loss) on which basic earnings per share is calculated | (3,196) | 1,130 | (1,071) | 3,410 | ||
Net income/(loss) on which diluted earnings per share is calculated | ||||||
Income/(loss) from continuing operations | (3,214) | 1,037 | (1,087) | 2,250 | ||
Income/(loss) from continuing operations on which diluted earnings per share is calculated | (3,214) | 1,037 | (1,087) | 2,250 | ||
Income/(loss) from discontinued operations, net of tax, on which diluted earnings per share is calculated | 18 | 93 | 16 | 1,160 | ||
Net income/(loss) on which diluted earnings per share is calculated | $ (3,196) | $ 1,130 | $ (1,071) | $ 3,410 | ||
Assuming dilution | ||||||
Continuing operations (in dollars per share) | $ (3.55) | $ 1.14 | [1] | $ (1.21) | $ 2.49 | [1] |
Discontinued operations (in dollars per share) | 0.02 | 0.10 | [1] | 0.02 | 1.28 | [1] |
Total (in dollars per share) | (3.54) | 1.25 | [1] | (1.19) | 3.77 | [1] |
Basic | ||||||
Continuing operations (in dollars per share) | (3.55) | 1.16 | [1] | (1.21) | 2.51 | [1] |
Discontinued operations (in dollars per share) | 0.02 | 0.10 | [1] | 0.02 | 1.30 | [1] |
Total (in dollars per share) | $ (3.54) | $ 1.26 | [1] | $ (1.19) | $ 3.81 | [1] |
[1] Reclassified to reflect discontinued operations presentation. |
Earnings_(Loss) Per Share of _4
Earnings/(Loss) Per Share of Common Stock - Antidilutive Stock Options (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Stock options | ||||
Antidilutive stock options | ||||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 840,544 | 750,990 | 930,788 | 879,289 |
Stock-based compensation plans | ||||
Antidilutive stock options | ||||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 6,696,350 | 7,530,115 | ||
Contingently issuable shares | ||||
Antidilutive stock options | ||||
Outstanding stock options not included in the computation of diluted earnings per share (in shares) | 2,069,742 | 1,899,113 |
Financial Assets & Liabilitie_2
Financial Assets & Liabilities - Impairment (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
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, 2022 | Dec. 31, 2021 |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - current | $ 1,753 | $ 600 |
Recurring | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 4,927 | 2,766 |
Total assets | 7,908 | 4,608 |
Total liabilities | 1,263 | 162 |
Recurring | Prepaid expenses and other current assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 1,008 | 358 |
Recurring | Investments and sundry assets | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative assets | 4 | 40 |
Recurring | Other accrued expenses and liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 475 | 60 |
Recurring | Other liabilities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivative liabilities | 603 | 103 |
Recurring | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Equity investments | 0 | |
Recurring | Level 1 | Money market funds | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 732 | 263 |
Recurring | Level 2 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Secured borrowing | 184 | |
Debt securities - current | 1,753 | 600 |
Recurring | Level 2 | Interest rate contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 1 | 12 |
Derivatives designated as hedging - Liabilities | 339 | |
Recurring | Level 2 | Foreign exchange contracts | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Derivatives designated as hedging - Assets | 998 | 359 |
Derivatives designated as hedging - Liabilities | 531 | 117 |
Derivatives not designated as hedging - Assets | 13 | 21 |
Derivatives not designated as hedging - Liabilities | 31 | 42 |
Recurring | Level 2 | Time deposits and certificates of deposit | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 4,195 | 1,903 |
Recurring | Level 2 | U.S. government securities | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Cash equivalents | 599 | |
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 | 6 | |
Derivatives not designated as hedging - Liabilities | 178 | 4 |
Recurring | Level 2 And 3 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Debt securities - noncurrent | 31 | 37 |
Recurring | Kyndryl Holdings, Inc | Level 1 | ||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||
Equity investments | $ 184 | $ 807 |
Financial Assets & Liabilitie_4
Financial Assets & Liabilities - Kyndryl Common Stock (Details) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Aug. 11, 2022 USD ($) shares | Aug. 05, 2022 USD ($) | May 23, 2022 USD ($) $ / shares | May 18, 2022 USD ($) | Nov. 03, 2021 | Sep. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Proceeds from short term credit | $ 300 | $ 357 | ||||||
Short-term debt | $ 5,937 | $ 5,937 | $ 6,787 | |||||
Strike price | $ / shares | $ 13.95 | |||||||
Debt converted amount | $ 229 | $ 311 | ||||||
Repayment of debt | $ 71 | $ 46 | ||||||
Fair value of the swap | $ 85 | $ 85 | ||||||
Derivative Liability, Current, Statement of Financial Position [Extensible Enumeration] | Other accrued expenses and liabilities | Other accrued expenses and liabilities | ||||||
Adjustment for the mark-to-market on the related debt | $ 0 | |||||||
Short term debt, fair value | 184 | $ 184 | ||||||
Exchangeable debt | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Short-term debt | 311 | 311 | ||||||
Other (income) and expense | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Unrealized gain (loss) | 3 | (85) | ||||||
Changes in fair value of the debt | (34) | $ (127) | ||||||
Kyndryl Holdings, Inc | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Ownership interest by stockholders (in percent) | 19.90% | |||||||
Amount of retained interest transferred | 9.95% | |||||||
Equity on conversion debt | 22.3 | 22.3 | ||||||
Percentage of retained interest in investment transferred | 100% | |||||||
Equity on debt conversion derecognized | shares | 22.3 | |||||||
Kyndryl Holdings, Inc | Other (income) and expense | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Unrealized loss | $ 93 | |||||||
Realized gain (loss) | 11 | (174) | ||||||
Kyndryl Holdings, Inc | Prepaid expenses and other current assets | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Investment Owned, at Fair Value | $ 184 | $ 184 | $ 807 | |||||
Kyndryl Holdings, Inc | ||||||||
Financial assets and financial liabilities measured at fair value on a recurring basis: | ||||||||
Period in which shares are intended to be disposed of after separation | 12 months |
Financial Assets & Liabilitie_5
Financial Assets & Liabilities - Not Measured at Fair Value (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Long-Term Debt | ||
Long-term debt | $ 44,942 | $ 44,917 |
Fair value of long-term debt | $ 40,944 | $ 49,465 |
Financing Receivables - Payment
Financing Receivables - Payment Terms (Details) | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Components of the company's financing receivables | ||||
Net investment in lease, gross | $ 3,566 | $ 3,336 | ||
Net investment in lease, unearned income | (285) | (223) | ||
Net investment in lease, unguaranteed residual value | 323 | 335 | ||
Net investment in lease, amortized cost | 3,604 | 3,448 | ||
Net investment in lease, allowance for credit loss | (53) | (64) | ||
Total net investment in lease, net | 3,551 | 3,384 | ||
Financing receivable and net investment in lease, gross | 11,907 | 13,881 | ||
Financing receivable and net investment in lease, unearned income | (615) | (576) | ||
Financing receivable and net investment in lease, unguaranteed residual value | 323 | 335 | ||
Financing receivable and net investment in lease, amortized cost | 11,616 | 13,640 | ||
Financing receivable and net investment in lease, allowance for credit loss | (159) | (201) | ||
Financing receivable and net investment in lease, net | 11,456 | 13,439 | ||
Asset Pledged as Collateral | ||||
Components of the company's financing receivables | ||||
Amortized Cost | 386 | 408 | ||
Current Assets | ||||
Components of the company's financing receivables | ||||
Net investment in lease, current | 1,366 | 1,406 | ||
Financing receivable and net investment in lease, net | 6,676 | 8,014 | ||
Noncurrent Assets | ||||
Components of the company's financing receivables | ||||
Net investment in lease, noncurrent | 2,185 | 1,978 | ||
Financing receivable and net investment in lease, net | 4,781 | 5,425 | ||
Loan receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 7,777 | 9,303 | ||
Unearned income | (330) | (353) | ||
Amortized Cost | 7,447 | 8,949 | ||
Allowance for credit losses | (101) | (131) | ||
Total financing receivables, net | 7,346 | 8,818 | ||
Financing receivables transferred | 2 | $ 2,189 | ||
Loan receivables | Current Assets | ||||
Components of the company's financing receivables | ||||
Total financing receivables, net | 4,750 | 5,371 | ||
Loan receivables | Noncurrent Assets | ||||
Components of the company's financing receivables | ||||
Total financing receivables, net | 2,596 | 3,447 | ||
Commercial financing receivables | ||||
Components of the company's financing receivables | ||||
Financing receivables transferred | 6,091 | $ 4,465 | ||
Commercial financing receivables, Held for investment | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 169 | 450 | ||
Amortized Cost | 169 | 450 | ||
Allowance for credit losses | (5) | (6) | ||
Total financing receivables, net | 164 | 444 | ||
Commercial financing receivables, Held for investment | Current Assets | ||||
Components of the company's financing receivables | ||||
Total financing receivables, net | 164 | 444 | ||
Commercial financing receivables, Held for sale | ||||
Components of the company's financing receivables | ||||
Financing receivables, gross | 395 | 793 | ||
Amortized Cost | 395 | 793 | ||
Total financing receivables, net | 395 | 793 | ||
Commercial financing receivables, Held for sale | Current Assets | ||||
Components of the company's financing receivables | ||||
Total financing receivables, net | 395 | 793 | ||
Client Financing Receivables | ||||
Components of the company's financing receivables | ||||
Financing receivable and net investment in lease, amortized cost | 11,051 | 12,397 | ||
Financing receivable and net investment in lease, allowance for credit loss | $ (154) | $ (195) | $ (255) |
Financing Receivables - Transfe
Financing Receivables - Transfer of Financing Assets (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Loans and Leases Receivable Disclosure [Line Items] | ||
Net investment in lease transferred | $ 15 | $ 781 |
Financing receivables and net investment in lease transferred | 17 | 2,970 |
Loan receivables | ||
Loans and Leases Receivable Disclosure [Line Items] | ||
Financing receivables transferred | 2 | 2,189 |
Commercial financing receivables | ||
Loans and Leases Receivable Disclosure [Line Items] | ||
Financing receivables transferred | 6,091 | 4,465 |
Financing receivables transferred and uncollected | $ 816 | $ 707 |
Financing Receivables - By Port
Financing Receivables - By Portfolio Segment (Details) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 USD ($) item | Dec. 31, 2021 USD ($) item | |
Financing receivables | ||
Number of classes of financing receivable | item | 3 | 3 |
Amortized Cost | $ 11,616 | $ 13,640 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 201 | |
Allowance for credit losses, ending balance | 159 | 201 |
Client Financing Receivables | ||
Financing receivables | ||
Amortized Cost | 11,051 | 12,397 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 195 | 255 |
Write-offs | (23) | (17) |
Recoveries | 5 | 1 |
Additions/(releases) | (13) | (38) |
Other | (10) | (7) |
Allowance for credit losses, ending balance | 154 | 195 |
Client Financing Receivables | Americas | ||
Financing receivables | ||
Amortized Cost | 6,900 | 6,573 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 111 | 141 |
Write-offs | (20) | (8) |
Recoveries | 1 | 0 |
Additions/(releases) | (6) | (19) |
Other | 1 | (3) |
Allowance for credit losses, ending balance | 87 | 111 |
Client Financing Receivables | EMEA | ||
Financing receivables | ||
Amortized Cost | 2,731 | 3,793 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 61 | 77 |
Write-offs | (1) | (2) |
Recoveries | 0 | 0 |
Additions/(releases) | (3) | (11) |
Other | (8) | (3) |
Allowance for credit losses, ending balance | 49 | 61 |
Client Financing Receivables | Asia Pacific | ||
Financing receivables | ||
Amortized Cost | 1,420 | 2,031 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 23 | 37 |
Write-offs | (2) | (7) |
Recoveries | 4 | 1 |
Additions/(releases) | (5) | (7) |
Other | (2) | 0 |
Allowance for credit losses, ending balance | $ 18 | $ 23 |
Financing Receivables - Past Du
Financing Receivables - Past Due (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Past Due Financing Receivable | ||
Amortized Cost | $ 11,616 | $ 13,640 |
Client Financing Receivables | ||
Past Due Financing Receivable | ||
Amortized Cost | 11,051 | 12,397 |
Amortized Cost Not Accruing | 168 | 205 |
Impaired financing receivables, related allowance | 120 | 153 |
Client Financing Receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 369 | 312 |
Amortized Cost > 90 Days and Accruing | 204 | 112 |
Billed Invoices > 90 Days and Accruing | 23 | 10 |
Client Financing Receivables | Americas | ||
Past Due Financing Receivable | ||
Amortized Cost | 6,900 | 6,573 |
Amortized Cost Not Accruing | 70 | 90 |
Client Financing Receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 266 | 188 |
Amortized Cost > 90 Days and Accruing | 197 | 100 |
Billed Invoices > 90 Days and Accruing | 22 | 6 |
Client Financing Receivables | EMEA | ||
Past Due Financing Receivable | ||
Amortized Cost | 2,731 | 3,793 |
Amortized Cost Not Accruing | 81 | 95 |
Client Financing Receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 81 | 99 |
Amortized Cost > 90 Days and Accruing | 1 | 7 |
Billed Invoices > 90 Days and Accruing | 0 | 2 |
Client Financing Receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Amortized Cost | 1,420 | 2,031 |
Amortized Cost Not Accruing | 17 | 20 |
Client Financing Receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Amortized Cost | 23 | 25 |
Amortized Cost > 90 Days and Accruing | 6 | 5 |
Billed Invoices > 90 Days and Accruing | $ 1 | $ 2 |
Financing Receivables - Credit
Financing Receivables - Credit Quality Year of Origination (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Amortized cost for each class of receivables, by credit quality indicator | ||
Total Amortized Cost | $ 11,616 | $ 13,640 |
Americas | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 2,475 | 2,556 |
Originated in Fiscal Year before Latest Fiscal Year | 1,401 | 1,013 |
Originated Two Years before Latest Fiscal Year | 660 | 544 |
Originated Three Years before Latest Fiscal Year | 310 | 338 |
Originated Four Years before Latest Fiscal Year | 147 | 108 |
Originated Five or More Years before Latest Fiscal Year | 40 | 20 |
Total Amortized Cost | 5,031 | 4,579 |
Americas | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 1,012 | 1,147 |
Originated in Fiscal Year before Latest Fiscal Year | 387 | 392 |
Originated Two Years before Latest Fiscal Year | 265 | 236 |
Originated Three Years before Latest Fiscal Year | 119 | 117 |
Originated Four Years before Latest Fiscal Year | 40 | 50 |
Originated Five or More Years before Latest Fiscal Year | 47 | 53 |
Total Amortized Cost | 1,869 | 1,994 |
EMEA | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 716 | 1,181 |
Originated in Fiscal Year before Latest Fiscal Year | 487 | 506 |
Originated Two Years before Latest Fiscal Year | 268 | 287 |
Originated Three Years before Latest Fiscal Year | 167 | 189 |
Originated Four Years before Latest Fiscal Year | 45 | 15 |
Originated Five or More Years before Latest Fiscal Year | 15 | 21 |
Total Amortized Cost | 1,698 | 2,198 |
EMEA | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 465 | 778 |
Originated in Fiscal Year before Latest Fiscal Year | 198 | 342 |
Originated Two Years before Latest Fiscal Year | 168 | 291 |
Originated Three Years before Latest Fiscal Year | 110 | 85 |
Originated Four Years before Latest Fiscal Year | 37 | 52 |
Originated Five or More Years before Latest Fiscal Year | 54 | 46 |
Total Amortized Cost | 1,033 | 1,595 |
Asia Pacific | Aaa - Baa3 | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 471 | 565 |
Originated in Fiscal Year before Latest Fiscal Year | 210 | 381 |
Originated Two Years before Latest Fiscal Year | 213 | 297 |
Originated Three Years before Latest Fiscal Year | 133 | 211 |
Originated Four Years before Latest Fiscal Year | 87 | 74 |
Originated Five or More Years before Latest Fiscal Year | 25 | 38 |
Total Amortized Cost | 1,140 | 1,567 |
Asia Pacific | Ba1 - D | ||
Amortized cost for each class of receivables, by credit quality indicator | ||
Originated in Current Fiscal Year | 83 | 226 |
Originated in Fiscal Year before Latest Fiscal Year | 77 | 86 |
Originated Two Years before Latest Fiscal Year | 53 | 51 |
Originated Three Years before Latest Fiscal Year | 24 | 64 |
Originated Four Years before Latest Fiscal Year | 25 | 17 |
Originated Five or More Years before Latest Fiscal Year | 18 | 20 |
Total Amortized Cost | $ 280 | $ 464 |
Leases - Lease Amounts Included
Leases - Lease Amounts Included in Consolidated Income Statement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Lease income - sales-type and direct financing leases | ||||
Sales-type lease selling price | $ 99 | $ 119 | $ 888 | $ 870 |
Less: Carrying value of underlying assets | (57) | (48) | (195) | (205) |
Gross profit | 43 | 70 | 693 | 664 |
Interest income on lease receivables | 54 | 44 | 144 | 142 |
Total sales-type and direct financing lease income | 97 | 114 | 838 | 806 |
Lease income - operating leases | 29 | 38 | 86 | 136 |
Variable lease income | 19 | 18 | 75 | 97 |
Total lease income | $ 145 | $ 169 | $ 998 | $ 1,038 |
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, 2022 | Dec. 31, 2021 | |
Intangible asset balances by major asset class | ||
Gross Carrying Amount | $ 17,364 | $ 19,031 |
Accumulated Amortization | (6,397) | (6,520) |
Net Carrying Amount | 10,967 | 12,511 |
Amount of foreign currency translation increase (decrease) | (389) | (221) |
Capitalized software | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 1,697 | 1,696 |
Accumulated Amortization | (720) | (751) |
Net Carrying Amount | 977 | 945 |
Client relationships | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 8,051 | 9,021 |
Accumulated Amortization | (2,763) | (2,889) |
Net Carrying Amount | 5,288 | 6,132 |
Completed technology | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 5,490 | 6,074 |
Accumulated Amortization | (2,242) | (2,259) |
Net Carrying Amount | 3,248 | 3,815 |
Patents/trademarks | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 2,093 | 2,196 |
Accumulated Amortization | (645) | (586) |
Net Carrying Amount | 1,448 | 1,610 |
Other** | ||
Intangible asset balances by major asset class | ||
Gross Carrying Amount | 32 | 44 |
Accumulated Amortization | (27) | (35) |
Net Carrying Amount | $ 5 | $ 9 |
Intangible Assets Including G_4
Intangible Assets Including Goodwill - Intangible Assets Activity (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Intangible assets | |||||
Intangible assets, increase (decrease) | $ (1,544) | ||||
Intangible asset amortization expense | $ 577 | $ 640 | 1,828 | $ 1,880 | |
Retirement of fully amortized intangible assets | $ 647 | ||||
Divested businesses | Healthcare software assets divestiture | |||||
Intangible assets | |||||
Intangible assets, increase (decrease) | $ (1,313) | ||||
Accumulated amortization, increase (decrease) | $ (1,149) |
Intangible Assets Including G_5
Intangible Assets Including Goodwill - Future Amortization (Details) $ in Millions | Sep. 30, 2022 USD ($) |
Future amortization expense, by year | |
Remainder of 2022 | $ 562 |
2023 | 1,941 |
2024 | 1,737 |
2025 | 1,497 |
2026 | 1,417 |
Thereafter | 3,813 |
Capitalized software | |
Future amortization expense, by year | |
Remainder of 2022 | 157 |
2023 | 472 |
2024 | 286 |
2025 | 63 |
Acquired intangibles | |
Future amortization expense, by year | |
Remainder of 2022 | 405 |
2023 | 1,469 |
2024 | 1,452 |
2025 | 1,434 |
2026 | 1,417 |
Thereafter | $ 3,813 |
Intangible Assets Including G_6
Intangible Assets Including Goodwill - Goodwill by Segment (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 55,643 | $ 53,765 |
Goodwill Additions | 903 | 2,549 |
Purchase Price Adjustments | (160) | 2 |
Divestitures | (485) | (50) |
Foreign Currency Translation and Other Adjustments | (1,683) | (623) |
Ending Balance | 54,218 | 55,643 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Software | ||
Changes in Goodwill Balances | ||
Beginning Balance | 43,966 | 42,665 |
Goodwill Additions | 442 | 1,836 |
Purchase Price Adjustments | (118) | 23 |
Divestitures | (13) | |
Foreign Currency Translation and Other Adjustments | (1,290) | (545) |
Ending Balance | 43,001 | 43,966 |
Consulting | ||
Changes in Goodwill Balances | ||
Beginning Balance | 6,797 | 6,145 |
Goodwill Additions | 461 | 713 |
Purchase Price Adjustments | (42) | (21) |
Foreign Currency Translation and Other Adjustments | (343) | (40) |
Ending Balance | 6,872 | 6,797 |
Infrastructure | ||
Changes in Goodwill Balances | ||
Beginning Balance | 4,396 | 4,436 |
Purchase Price Adjustments | 0 | |
Divestitures | (1) | |
Foreign Currency Translation and Other Adjustments | (50) | (39) |
Ending Balance | 4,345 | 4,396 |
Other. | ||
Changes in Goodwill Balances | ||
Beginning Balance | 484 | 520 |
Divestitures | (484) | (37) |
Foreign Currency Translation and Other Adjustments | 1 | |
Ending Balance | $ 484 | |
Other. | Divested businesses | Healthcare software assets divestiture | ||
Changes in Goodwill Balances | ||
Divestitures | $ (484) |
Borrowings - Short-Term Debt (D
Borrowings - Short-Term Debt (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Short-term debt disclosures | ||
Short-term loans | $ 196 | $ 22 |
Long-term debt - current maturities | 5,741 | 6,764 |
Total | 5,937 | $ 6,787 |
Short term debt, fair value | $ 184 | |
Short-term loans | ||
Short-term debt disclosures | ||
Weighted-average interest rates for short-term debt (as a percent) | 8.20% | 6.70% |
Borrowings - Long-Term Debt, Co
Borrowings - Long-Term Debt, Components (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Borrowings | ||
Long-term debt excluding finance lease obligations | $ 51,590 | $ 52,240 |
Finance lease obligations | 159 | 99 |
Long-term debt, gross | 51,749 | 52,339 |
Less: net unamortized discount | 841 | 839 |
Less: net unamortized debt issuance costs | 140 | 130 |
Add: fair value adjustment | (84) | 311 |
Total | 50,684 | 51,681 |
Less: current maturities | 5,741 | 6,764 |
Total long-term debt (excluding current portion) | $ 44,942 | 44,917 |
Finance lease obligations, interest rate (as a percent) | 2.80% | |
U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 34,516 | 34,290 |
Maturing 2022 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 900 | 5,673 |
Debt instrument, weighted-average interest rate (as a percent) | 2.90% | |
Maturing 2022 | Pound sterling | ||
Borrowings | ||
Long-term debt, gross | 406 | |
Maturing 2023 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,536 | 1,573 |
Debt instrument, weighted-average interest rate (as a percent) | 3.40% | |
Maturing 2024 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 5,011 | 5,016 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2025 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,604 | 608 |
Debt instrument, weighted-average interest rate (as a percent) | 5.10% | |
Maturing 2026 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 4,352 | 4,356 |
Debt instrument, weighted-average interest rate (as a percent) | 3.30% | |
Maturing 2027 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 3,621 | 2,221 |
Debt instrument, weighted-average interest rate (as a percent) | 3.10% | |
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% | |
Maturing 2032 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,850 | 600 |
Debt instrument, weighted-average interest rate (as a percent) | 4.40% | |
Maturing 2038 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 83 | 83 |
Debt instrument, weighted-average interest rate (as a percent) | 8% | |
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% | |
Maturing 2045 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 27 | 27 |
Debt instrument, weighted-average interest rate (as a percent) | 7% | |
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% | |
Maturing 2052 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,400 | |
Debt instrument, weighted-average interest rate (as a percent) | 4.20% | |
Maturing 2096 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 316 | 316 |
Debt instrument, weighted-average interest rate (as a percent) | 7.10% | |
Maturing 2023-2040 | Euro | ||
Borrowings | ||
Long-term debt, gross | $ 15,671 | 15,903 |
Debt instrument, weighted-average interest rate (as a percent) | 1.10% | |
Maturing 2022-2026 | Japanese yen | ||
Borrowings | ||
Long-term debt, gross | $ 1,005 | 1,263 |
Debt instrument, weighted-average interest rate (as a percent) | 0.30% | |
Maturing 2022-2026 | Other currencies | ||
Borrowings | ||
Long-term debt, gross | $ 397 | $ 378 |
Debt instrument, weighted-average interest rate (as a percent) | 16% |
Borrowings - Long-Term Debt, _2
Borrowings - Long-Term Debt, Covenants (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Borrowings | |
Limit based on net tangible assets | 10% |
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 | |
Jul. 20, 2022 | Mar. 31, 2022 | |
U.S dollar. fixed rate notes | ||
Notes Issued | ||
Aggregate amount of debt issued | $ 3,250 | $ 1,800 |
U.S dollar. fixed rate notes | Minimum | ||
Notes Issued | ||
Credit facility term | 3 years | 5 years |
Coupon rate (as a percent) | 4% | 2.20% |
U.S dollar. fixed rate notes | Maximum | ||
Notes Issued | ||
Credit facility term | 30 years | 30 years |
Coupon rate (as a percent) | 4.90% | 3.43% |
Euro fixed-rate notes | ||
Notes Issued | ||
Aggregate amount of debt issued | $ 2,300 | |
Euro fixed-rate notes | Minimum | ||
Notes Issued | ||
Credit facility term | 8 years | |
Coupon rate (as a percent) | 0.875% | |
Euro fixed-rate notes | Maximum | ||
Notes Issued | ||
Credit facility term | 12 years | |
Coupon rate (as a percent) | 1.25% |
Borrowings - Pre-Swap Obligatio
Borrowings - Pre-Swap Obligations (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
Pre-swap annual contractual obligations of long-term debt outstanding | ||
Remainder of 2022 | $ 1,334 | |
2023 | 4,490 | |
2024 | 6,246 | |
2025 | 4,586 | |
2026 | 4,657 | |
Thereafter | 30,436 | |
Total | $ 51,749 | $ 52,339 |
Borrowings - Interest on Debt (
Borrowings - Interest on Debt (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Interest on Debt | ||
Interest capitalized | $ 4 | $ 3 |
Total interest paid and accrued | 1,170 | 1,167 |
Cost of financing | ||
Interest on Debt | ||
Interest paid | 264 | 312 |
Interest expense | ||
Interest on Debt | ||
Interest paid | $ 903 | $ 852 |
Borrowings - Lines of Credit (D
Borrowings - Lines of Credit (Details) $ in Billions | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Five-Year Credit Agreement | |
Lines of Credit | |
Amount of credit facility | $ 7.5 |
Credit facility term | 5 years |
Three-Year Credit Agreement | |
Lines of Credit | |
Amount of credit facility | $ 2.5 |
Credit facility term | 3 years |
Credit Facilities | |
Lines of Credit | |
Amount of credit facility | $ 10 |
Borrowings outstanding | $ 0 |
Commitments - Extensions of Cre
Commitments - Extensions of Credit (Details) - USD ($) $ in Billions | Sep. 30, 2022 | Dec. 31, 2021 |
Extended lines of credit | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 1.5 | $ 1.7 |
Financing for client purchase agreements | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 2.3 | $ 3.2 |
Commitments - Standard Warranty
Commitments - Standard Warranty Liability (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Movement in standard warranty liability | ||
Beginning Balance | $ 77 | $ 83 |
Current period accruals | 58 | 50 |
Accrual adjustments to reflect actual experience | (1) | (2) |
Charges incurred | (62) | (66) |
Ending Balance | $ 72 | $ 66 |
Commitments - Extended Warranty
Commitments - Extended Warranty Liability (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Movement in deferred income | ||||
Amortization of deferred revenue | $ (4,300) | $ (8,800) | ||
Current portion | 11,139 | 11,139 | $ 12,518 | |
Noncurrent portion | 3,018 | 3,018 | $ 3,577 | |
Extended Warranty | ||||
Movement in deferred income | ||||
Beginning Balance | 350 | $ 425 | ||
Revenue deferred for new extended warranty contracts | 103 | 71 | ||
Amortization of deferred revenue | (148) | (154) | ||
Other | (21) | (9) | ||
Ending Balance | 284 | 284 | 334 | |
Current portion | 139 | 139 | 171 | |
Noncurrent portion | $ 145 | $ 145 | $ 163 |
Contingencies (Details)
Contingencies (Details) $ in Millions | 1 Months Ended | 9 Months Ended | ||||
May 30, 2022 USD ($) | Apr. 05, 2022 defendant | Jun. 08, 2021 USD ($) | Apr. 30, 2022 USD ($) | Feb. 28, 2021 USD ($) | Sep. 30, 2022 USD ($) country | |
Brazil Tax Matters | ||||||
Loss Contingencies | ||||||
Damages sought, value | $ 400 | |||||
CISGIL v. IBM UK | ||||||
Loss Contingencies | ||||||
Amount of award against IBM | $ 20 | |||||
Additional damages sought, value | $ 89 | |||||
BMC v. IBM | ||||||
Loss Contingencies | ||||||
Direct damages sought, value | $ 718 | |||||
Punitive damages sought, value | $ 718 | |||||
Putative Securities Class Action | ||||||
Loss Contingencies | ||||||
Number of current executives named as defendants | defendant | 2 | |||||
Number of former executives named as defendants | defendant | 2 | |||||
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, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | $ 6,677 | $ 6,145 | [1] | $ 20,784 | $ 18,670 | [1] | ||
SG&A expense | 4,391 | 4,306 | [1] | 13,843 | 13,842 | [1] | ||
Other (income) and expense | 5,755 | 244 | [1] | 5,921 | 891 | [1] | ||
Interest expense | 295 | 290 | [1] | 903 | 852 | [1] | ||
Provision for/(benefit from) income taxes | (1,287) | (224) | [1] | (1,070) | (282) | [1] | ||
Net (income) loss | 3,196 | [2] | (1,130) | [1],[3] | 1,071 | [2] | (3,410) | [1],[3] |
Other comprehensive income/(loss) | 5,030 | 350 | 6,096 | 2,035 | ||||
Pre-tax pension settlement charge | 5,900 | 5,894 | ||||||
Pension settlement charge, net of tax | 4,400 | |||||||
Services. | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 5,168 | 4,650 | [1] | 15,915 | 14,014 | [1] | ||
Sales | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 1,389 | 1,363 | [1],[4] | 4,555 | 4,241 | [1],[4] | ||
Financing. | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 120 | 132 | [1],[4] | 314 | 416 | [1],[4] | ||
Cost of services | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 5,168 | 4,650 | 15,915 | 14,014 | ||||
Cost of sales | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 1,389 | 1,363 | 4,555 | 4,241 | ||||
Cost of financing | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 120 | 132 | 314 | 416 | ||||
SG&A expense | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
SG&A expense | 4,391 | 4,306 | 13,843 | 13,842 | ||||
Other (income) and expenses | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Other (income) and expense | 5,755 | 244 | 5,921 | 891 | ||||
Interest expense | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Interest expense | 295 | 290 | 903 | 852 | ||||
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 | 697 | 382 | ||||||
Reclassification/amortization, Net of Tax Amount | 5,399 | 1,654 | ||||||
Other comprehensive income/(loss), Before Tax Amount | 7,089 | 683 | 8,973 | 3,014 | ||||
Other comprehensive income/(loss), Tax (Expense)/Benefit | (2,058) | (333) | (2,877) | (978) | ||||
Other comprehensive income/(loss) | 5,030 | 350 | 6,096 | 2,035 | ||||
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 | 14 | 160 | ||||||
Other comprehensive income/(loss), Before Tax Amount | 143 | (114) | 799 | 463 | ||||
Other comprehensive income/(loss), Tax (Expense)/Benefit | (301) | (120) | (784) | (304) | ||||
Other comprehensive income/(loss) | (158) | (234) | 14 | 160 | ||||
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 | 0 | (1) | 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 | 0 | (1) | 0 | ||||
Other comprehensive income/(loss), Before Tax Amount | 0 | 0 | (1) | 0 | ||||
Other comprehensive income/(loss), Tax (Expense)/Benefit | 0 | 0 | 0 | 0 | ||||
Other comprehensive income/(loss) | 0 | 0 | (1) | 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 | 189 | 109 | 449 | 262 | ||||
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (49) | (28) | (118) | (66) | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 140 | 82 | 332 | 196 | ||||
Reclassification/amortization, Net of Tax Amount | 6 | 211 | ||||||
Other comprehensive income/(loss), Before Tax Amount | 178 | 141 | 453 | 545 | ||||
Other comprehensive income/(loss), Tax (Expense)/Benefit | (45) | (35) | (116) | (138) | ||||
Other comprehensive income/(loss) | 133 | 106 | 338 | 407 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
SG&A expense | (8) | 1 | (28) | 32 | ||||
Other (income) and expense | 6 | 22 | 51 | 187 | ||||
Interest expense | 22 | 16 | 64 | 48 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Services. | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | (4) | (12) | (32) | (33) | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Sales | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | (35) | (1) | (71) | 30 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Financing. | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Cost | 7 | 6 | 19 | 17 | ||||
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 | 1 | 3 | 8 | 8 | ||||
Net (income) loss | (3) | (9) | (24) | (25) | ||||
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 | 10 | 1 | 20 | (8) | ||||
Net (income) loss | (25) | (1) | (50) | 23 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of financing | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Provision for/(benefit from) income taxes | (2) | (1) | (5) | (4) | ||||
Net (income) loss | 5 | 4 | 14 | 13 | ||||
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 | 2 | 0 | 8 | (8) | ||||
Net (income) loss | (6) | 1 | (20) | 24 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Other (income) and expenses | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Provision for/(benefit from) income taxes | (2) | (6) | (13) | (47) | ||||
Net (income) loss | 5 | 17 | 38 | 140 | ||||
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Interest expense | ||||||||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||||||||
Provision for/(benefit from) income taxes | (5) | (4) | (16) | (12) | ||||
Net (income) loss | 16 | 12 | 48 | 36 | ||||
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 | 352 | 26 | ||||||
Reclassification/amortization, Net of Tax Amount | 5,393 | 1,442 | ||||||
Other comprehensive income/(loss), Before Tax Amount | 6,768 | 656 | 7,722 | 2,006 | ||||
Other comprehensive income/(loss), Tax (Expense)/Benefit | (1,712) | (178) | (1,978) | (537) | ||||
Other comprehensive income/(loss) | 5,056 | 478 | 5,745 | 1,469 | ||||
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 | 412 | 0 | 408 | 0 | ||||
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (104) | 0 | (99) | 0 | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 309 | 0 | 309 | 0 | ||||
Reclassification/amortization, Before Tax Amount | 3 | 3 | 16 | 8 | ||||
Reclassification/amortization, Tax (Expense)/Benefit | (1) | 0 | (4) | 0 | ||||
Reclassification/amortization, Net of Tax Amount | 2 | 3 | 12 | 8 | ||||
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 | 53 | 1 | 63 | 23 | ||||
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (13) | 0 | (20) | 4 | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 39 | 1 | 43 | 27 | ||||
Reclassification/amortization, Before Tax Amount | 388 | 638 | 1,305 | 1,929 | ||||
Reclassification/amortization, Tax (Expense)/Benefit | (108) | (174) | (364) | (526) | ||||
Reclassification/amortization, Net of Tax Amount | 279 | 464 | 941 | 1,403 | ||||
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 | 5,913 | 13 | 5,931 | 46 | ||||
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (1,487) | (4) | (1,491) | (14) | ||||
Unrealized gains/(losses) arising during the period, Net of Tax Amount | $ 4,426 | $ 9 | $ 4,440 | $ 32 | ||||
[1] Reclassified to reflect discontinued operations presentation. Includes the impact of a one-time, non-cash pension settlement charge. Refer to note 18, "Retirement-Related Benefits," for additional information. Amounts presented have not been recast to exclude discontinued operations. Reclassified to conform to current year presentation. |
Equity Activity - AOCI Rollforw
Equity Activity - AOCI Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | $ 19,476 | $ 22,067 | $ 18,996 | $ 20,727 |
Other comprehensive income/(loss) | 5,030 | 350 | 6,096 | 2,035 |
Balance at the End of the Period | 20,147 | 22,357 | 20,147 | 22,357 |
Pre-tax pension settlement charge | 5,900 | 5,894 | ||
Pension settlement charge, net of tax | 4,400 | |||
Accumulated Other Comprehensive Income/(Loss) | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (22,169) | (27,652) | (23,234) | (29,337) |
Other comprehensive income before reclassifications | 697 | 382 | ||
Amount reclassified from accumulated other comprehensive income | 5,399 | 1,654 | ||
Other comprehensive income/(loss) | 5,030 | 350 | 6,096 | 2,035 |
Balance at the End of the Period | (17,138) | (27,302) | (17,138) | (27,302) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (18) | (456) | ||
Other comprehensive income before reclassifications | 140 | 82 | 332 | 196 |
Amount reclassified from accumulated other comprehensive income | 6 | 211 | ||
Other comprehensive income/(loss) | 133 | 106 | 338 | 407 |
Balance at the End of the Period | 320 | (49) | 320 | (49) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (3,362) | (4,665) | ||
Other comprehensive income before reclassifications | 14 | 160 | ||
Other comprehensive income/(loss) | (158) | (234) | 14 | 160 |
Balance at the End of the Period | (3,347) | (4,505) | (3,347) | (4,505) |
Net Change Retirement-Related Benefit Plans | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (19,854) | (24,216) | ||
Other comprehensive income before reclassifications | 352 | 26 | ||
Amount reclassified from accumulated other comprehensive income | 5,393 | 1,442 | ||
Other comprehensive income/(loss) | 5,056 | 478 | 5,745 | 1,469 |
Balance at the End of the Period | (14,110) | (22,747) | (14,110) | (22,747) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||||
Balance at the Beginning of the Period | (1) | 0 | ||
Other comprehensive income before reclassifications | 0 | 0 | (1) | 0 |
Other comprehensive income/(loss) | 0 | 0 | (1) | 0 |
Balance at the End of the Period | $ (1) | $ (1) | $ (1) | $ (1) |
Derivative Financial Instrume_3
Derivative Financial Instruments - Offsetting (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
May 19, 2022 | Sep. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Derivative Financial Instruments | ||||
Potential reduction in net position of total derivative assets | $ 311 | $ 311 | $ 60 | |
Potential reduction in net position of total derivative liabilities | 311 | 311 | 60 | |
Cash collateral rehypothecated | 158 | 158 | 2 | |
Numbers shares transferred | 22.3 | |||
Fair value of the swap | $ 85 | $ 85 | ||
Derivative Liability, Current, Statement of Financial Position [Extensible Enumeration] | Other accrued expenses and liabilities | Other accrued expenses and liabilities | ||
Other (income) and expense | ||||
Derivative Financial Instruments | ||||
Unrealized gain (loss) | $ 3 | $ (85) | ||
Other receivables | ||||
Derivative Financial Instruments | ||||
Right to reclaim cash collateral | 191 | 191 | 2 | |
Accounts payable | ||||
Derivative Financial Instruments | ||||
Obligation to return cash collateral | $ 222 | $ 222 | $ 38 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Hedging Programs (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Instruments in net investment hedges | ||
Derivative Financial Instruments | ||
Notional amount | $ 5,400 | $ 6,800 |
Average remaining maturity | 1 month 6 days | 1 month 6 days |
Interest rate swaps | Derivative instruments in fair value hedges | ||
Derivative Financial Instruments | ||
Notional amount | $ 6,200 | $ 400 |
Average remaining maturity | 6 years | 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 | $ 4,300 | 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 | ||
Notional amount | $ 12,800 | 14,100 |
Foreign exchange forward contracts | Derivative instruments in cash flow hedges | ||
Derivative Financial Instruments | ||
Maximum length of time hedged | 2 years | |
Notional amount | $ 8,200 | $ 7,200 |
Average remaining maturity | 7 months 6 days | 7 months 6 days |
Net gains (losses) before taxes in accumulated other comprehensive income/(loss), cash flow hedges | $ 693 | $ 315 |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 631 | |
Cross-currency swaps | Derivative instruments in cash flow hedges | ||
Derivative Financial Instruments | ||
Maximum length of time hedged | 5 years | |
Notional amount | $ 3,000 | 2,000 |
Net gains (losses) before taxes in accumulated other comprehensive income/(loss), cash flow hedges | (112) | $ (174) |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 17 | |
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 | $ (144) | $ (157) |
Gains (losses) expected to be reclassified to net income within the next 12 months | (18) | |
Cash-settled swap | ||
Derivative Financial Instruments | ||
Notional amount | 311 | |
Equity contracts hedging employee compensation obligations | Not designated as hedging instruments - economic hedges | ||
Derivative Financial Instruments | ||
Notional amount | $ 1,200 | $ 1,400 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Cumulative Basis Adjustments for Fair Value Hedges (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Dec. 31, 2021 |
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 | $ (425) | $ (227) |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | 0 | (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 | (5,631) | (508) |
Cumulative hedging adjustments included in the carrying amount-assets/(liabilities) | 84 | (309) |
Hedging adjustments on discontinued hedging relationships | $ (263) | $ (302) |
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, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Derivative Instruments, Gain (Loss) | ||||||
Cost | $ 6,677 | $ 6,145 | [1] | $ 20,784 | $ 18,670 | [1] |
SG&A expense | 4,391 | 4,306 | [1] | 13,843 | 13,842 | [1] |
Other (income) and expense | 5,755 | 244 | [1] | 5,921 | 891 | [1] |
Interest expense | 295 | 290 | [1] | 903 | 852 | [1] |
Cost of services | ||||||
Derivative Instruments, Gain (Loss) | ||||||
Cost | 5,168 | 4,650 | 15,915 | 14,014 | ||
Gains/(losses) of total hedge activity | 4 | 12 | 32 | 33 | ||
Cost of sales | ||||||
Derivative Instruments, Gain (Loss) | ||||||
Cost | 1,389 | 1,363 | 4,555 | 4,241 | ||
Gains/(losses) of total hedge activity | 35 | 1 | 71 | (30) | ||
Cost of financing | ||||||
Derivative Instruments, Gain (Loss) | ||||||
Cost | 120 | 132 | 314 | 416 | ||
Gains/(losses) of total hedge activity | 1 | (1) | 0 | 1 | ||
SG&A expense | ||||||
Derivative Instruments, Gain (Loss) | ||||||
SG&A expense | 4,391 | 4,306 | 13,843 | 13,842 | ||
Gains/(losses) of total hedge activity | (69) | (14) | (291) | 88 | ||
Other (income) and expenses | ||||||
Derivative Instruments, Gain (Loss) | ||||||
Other (income) and expense | 5,755 | 244 | 5,921 | 891 | ||
Gains/(losses) of total hedge activity | (189) | (7) | (730) | (246) | ||
Interest expense | ||||||
Derivative Instruments, Gain (Loss) | ||||||
Interest expense | 295 | 290 | 903 | 852 | ||
Gains/(losses) of total hedge activity | $ 4 | $ (2) | $ 1 | $ 3 | ||
[1] Reclassified to reflect discontinued operations presentation. |
Derivative Financial Instrume_7
Derivative Financial Instruments - Gains and Losses (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | $ (514) | $ 3 | $ (1,336) | $ 59 |
Gain (loss) recognized in earnings attributable to risk being hedged | 271 | 15 | 395 | 55 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | 1,387 | 587 | 3,567 | 1,470 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | 12 | (32) | (4) | (282) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing | 19 | 5 | 28 | 15 |
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 | 189 | 109 | 449 | 262 |
Foreign exchange contracts | Instruments in net investment hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI | 1,198 | 477 | 3,118 | 1,207 |
Foreign exchange contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | $ (186) | $ 15 | $ (595) | $ (59) |
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other (income) and expense | Other (income) and expense | Other (income) and expense | Other (income) and expense |
Equity contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | $ (13) | $ 120 | ||
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Selling, general and administrative | Selling, general and administrative | Selling, general and administrative | Selling, general and administrative |
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 | $ 4 | $ 12 | $ 32 | $ 33 |
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 | 35 | 1 | 71 | (30) |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | (64) | 0 | (76) | 0 |
Gain (loss) recognized in earnings attributable to risk being hedged | 68 | 4 | 89 | 15 |
Cost of financing | Interest rate contracts | Derivative instruments in cash flow hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI | (1) | (1) | (3) | (4) |
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 | (6) | (5) | (16) | (14) |
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 | 5 | 1 | 6 | 4 |
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 | 8 | (1) | 28 | (32) |
SG&A expense | Equity contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | (76) | (319) | ||
Other (income) and expenses | 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 | (6) | (22) | (51) | (187) |
Other (income) and expenses | Equity contracts | Not designated as hedging instruments - economic hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | 3 | (85) | ||
Interest expense | Interest rate contracts | Derivative instruments in fair value hedges | ||||
Derivative Instruments, Gain (Loss) | ||||
Gain (loss) recognized in earnings on derivatives | (191) | 0 | (261) | (1) |
Gain (loss) recognized in earnings attributable to risk being hedged | 203 | 11 | 305 | 40 |
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 | (18) | (13) | (54) | (38) |
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 | $ 14 | $ 3 | $ 22 | $ 11 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 251 | $ 242 | $ 739 | $ 665 |
Income tax benefits | (51) | (54) | (191) | (166) |
Net stock-based compensation cost | 200 | 188 | 548 | 499 |
Pre-tax stock-based compensation cost increase (decrease) | 10 | 74 | ||
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 8 months 12 days | |||
Employee Stock Purchase Plan | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 15 | $ 30 | ||
Performance Share Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 5 | 16 | ||
Restricted Stock Units | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | 32 | |||
Stock options | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost increase (decrease) | (10) | |||
Cost | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 40 | 38 | 124 | 106 |
SG&A expense | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | 138 | 144 | 427 | 399 |
Research, development and engineering | ||||
Stock-based compensation cost, allocation of recognized costs | ||||
Pre-tax stock-based compensation cost | $ 73 | $ 60 | $ 188 | $ 160 |
Stock-Based Compensation - ESPP
Stock-Based Compensation - ESPP (Details) | 3 Months Ended | |
Apr. 01, 2022 | Mar. 31, 2022 | |
Employee Stock Purchase Plan | ||
Stock-Based Compensation | ||
Discount on purchase of common stock (as a percent) | 15% | 5% |
Retirement-Related Benefits - A
Retirement-Related Benefits - All Retirement Plans Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Retirement-Related Benefits | ||||
Defined benefit and contribution pension plans - cost | $ 6,319 | $ 598 | $ 7,252 | $ 1,816 |
Nonpension postretirement plans - cost | 31 | 44 | 97 | 133 |
Total | $ 6,350 | 642 | $ 7,350 | 1,949 |
Year-to-year percent change, nonpension postretirement plans cost (as a percent) | (30.20%) | (26.70%) | ||
Pre-tax pension settlement charge | $ 5,900 | $ 5,894 | ||
U.S. | Pension Plans | ||||
Retirement-Related Benefits | ||||
Defined benefit and contribution pension plans - cost | 6,012 | $ 232 | 6,309 | $ 694 |
Qualified Plans | U.S. | Pension Plans | ||||
Retirement-Related Benefits | ||||
Pre-tax pension settlement charge | $ 5,900 | $ 5,900 |
Retirement-Related Benefits - C
Retirement-Related Benefits - Cost of Pension Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Cost/(Income) of Pension Plans | ||||
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | $ 6,319 | $ 598 | $ 7,252 | $ 1,816 |
U.S. | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Interest cost | $ 282 | $ 277 | $ 885 | $ 832 |
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 | $ (432) | $ (451) | $ (1,382) | $ (1,352) |
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 | $ 4 | $ 6 | $ 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 | $ 132 | $ 249 | $ 490 | $ 747 |
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 | $ 5,894 | $ 5,894 | ||
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 | $ 5,877 | $ 80 | $ 5,893 | $ 239 |
Cost of defined contribution plans | 134 | 152 | 416 | 455 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | 6,012 | 232 | 6,309 | 694 |
U.S. | Nonpension Postretirement Plans | ||||
Cost/(Income) of Pension Plans | ||||
Service cost | 1 | 2 | 4 | 5 |
Interest cost | $ 21 | $ 16 | $ 58 | $ 49 |
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) | $ (2) | $ 1 | $ (1) | $ 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 | $ 1 | $ 13 | $ 6 | $ 39 |
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 | $ 21 | $ 32 | $ 67 | $ 96 |
Non-US | Pension Plans | ||||
Cost/(Income) of Pension Plans | ||||
Service cost | 57 | 67 | 180 | 201 |
Interest cost | $ 124 | $ 106 | $ 394 | $ 322 |
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 | $ (246) | $ (274) | $ (778) | $ (833) |
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) | $ 3 | $ (2) | $ 10 | $ (9) |
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 | $ 247 | $ 347 | $ 784 | $ 1,055 |
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 | $ 19 | $ 13 | $ 38 | $ 46 |
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 | $ 4 | $ 2 | $ 11 | $ 13 |
Other costs/(credits) | $ 8 | $ 7 | $ 24 | $ 21 |
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 | $ 216 | $ 266 | $ 663 | $ 817 |
Cost of defined contribution plans | 91 | 100 | 280 | 306 |
Total defined benefit and contribution pension plans cost recognized in the Consolidated Income Statement | 307 | 366 | 943 | 1,122 |
Non-US | Nonpension Postretirement Plans | ||||
Cost/(Income) of Pension Plans | ||||
Service cost | 1 | 1 | 2 | 3 |
Interest cost | $ 8 | $ 8 | $ 26 | $ 25 |
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 | $ 0 | $ (1) | $ (2) | $ (2) |
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 | $ 1 | $ 4 | $ 3 | $ 11 |
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 | |||
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 | $ 10 | $ 12 | $ 30 | $ 37 |
Retirement-Related Benefits - P
Retirement-Related Benefits - Pension and Nonpension Postretirement Plan Changes (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 USD ($) item | Sep. 30, 2022 USD ($) | Sep. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | |
Retirement-Related Benefits | ||||
Benefit plan obligation and plan assets transferred to insurers | $ 16,000 | |||
Pre-tax pension settlement charge | 5,900 | $ 5,894 | ||
Pension settlement charge, net of tax | 4,400 | |||
Accumulated other comprehensive income/(loss) | $ (17,138) | $ (17,138) | $ (17,138) | $ (23,234) |
Qualified Plans | Pension Plans | U.S. | ||||
Retirement-Related Benefits | ||||
Benefit plan obligation and plan assets transferred to insurers | $ 16,000 | |||
Number of participants transferred to insurers | item | 100,000 | |||
Percentage of transferred participant pension benefits each insurer is responsible to pay | 50% | 50% | 50% | |
Pre-tax pension settlement charge | $ 5,900 | $ 5,900 | ||
Pension settlement charge, net of tax | 4,400 | |||
Accumulated benefit obligation | $ 21,316 | $ 21,316 | $ 21,316 |
Retirement-Related Benefits -_2
Retirement-Related Benefits - Changes in Benefit Obligation and Plan Assets (Details) - U.S. - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Aug. 31, 2022 | Jul. 31, 2022 | Dec. 31, 2021 | |
Pension Plans | |||||||
Changes in benefit obligation | |||||||
Interest cost | $ 282 | $ 277 | $ 885 | $ 832 | |||
Pension Plans | Qualified Plans | |||||||
Changes in benefit obligation | |||||||
Benefit obligation, balance at beginning of period | 46,457 | ||||||
Interest cost | 853 | ||||||
Actuarial losses/(gains) | (6,973) | ||||||
Benefits paid from trust | (2,376) | ||||||
Amendments/curtailments/settlements/other | (16,644) | ||||||
Benefit obligation, balance at end of period | 21,316 | 21,316 | |||||
Change in plan assets | |||||||
Fair value of plan assets, balance at beginning of period | 51,851 | ||||||
Actual return on plan assets | (5,746) | ||||||
Benefits paid from trust | (2,376) | ||||||
Amendments/curtailments/settlements/other | (16,644) | ||||||
Fair value of plan assets, balance at end of period | 27,085 | 27,085 | |||||
Funded status | 5,769 | 5,769 | |||||
Accumulated benefit obligation | 21,316 | 21,316 | |||||
Discount rate | 4.70% | 2.60% | |||||
Nonpension Postretirement Plans | |||||||
Changes in benefit obligation | |||||||
Benefit obligation, balance at beginning of period | 3,404 | ||||||
Service cost | 1 | 2 | 4 | 5 | |||
Interest cost | 21 | $ 16 | 58 | $ 49 | |||
Plan participants' contributions | 33 | ||||||
Actuarial losses/(gains) | (624) | ||||||
Benefits paid from trust | (285) | ||||||
Direct benefit payments | (2) | ||||||
Benefit obligation, balance at end of period | 2,588 | 2,588 | |||||
Change in plan assets | |||||||
Fair value of plan assets, balance at beginning of period | 8 | ||||||
Employer contributions | 272 | ||||||
Plan participant's contributions | 33 | ||||||
Benefits paid from trust | (285) | ||||||
Fair value of plan assets, balance at end of period | 28 | 28 | |||||
Funded status | $ (2,560) | $ (2,560) | |||||
Discount rate | 4.10% | 2.30% |
Retirement-Related Benefits -_3
Retirement-Related Benefits - Contributions (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Retirement-Related Benefits | ||
Total plan contributions | $ 357 | $ 306 |
U.S. and Non-U.S. nonpension postretirement benefit plans | ||
Retirement-Related Benefits | ||
Total plan contributions | 272 | 263 |
Non-U.S. DB plans and multi-employer plans | ||
Retirement-Related Benefits | ||
Total plan contributions | 85 | 43 |
Pension Plans, Including Multi-employer Plans | ||
Retirement-Related Benefits | ||
Contributions by employer - Noncash | 366 | 311 |
Nonpension Postretirement Plans | Non-U.S. DB plans | ||
Retirement-Related Benefits | ||
Contributions by employer - Noncash | $ 247 | $ 307 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event | Oct. 25, 2022 $ / shares |
Subsequent Events | |
Dividend declared, date | Oct. 25, 2022 |
Dividend declared (in dollars per share) | $ 1.65 |
Dividend payable, date | Dec. 10, 2022 |
Shareholders of record, date | Nov. 10, 2022 |