Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2017shares | |
Document and Entity Information | |
Entity Registrant Name | INTERNATIONAL BUSINESS MACHINES CORP |
Entity Central Index Key | 51,143 |
Document Type | 10-Q |
Document Period End Date | Mar. 31, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 939,496,884 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | IBM |
CONSOLIDATED STATEMENT OF EARNI
CONSOLIDATED STATEMENT OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue: | ||
Services | $ 12,342 | $ 12,391 |
Sales | 5,404 | 5,879 |
Financing | 409 | 414 |
Total revenue | 18,155 | 18,684 |
Cost: | ||
Services | 8,553 | 8,382 |
Sales | 1,551 | 1,378 |
Financing | 279 | 238 |
Total cost | 10,383 | 9,999 |
Gross profit | 7,772 | 8,686 |
Expense and other (income): | ||
Selling, general and administrative | 5,152 | 6,012 |
Research, development and engineering | 1,533 | 1,458 |
Intellectual property and custom development income | (445) | (217) |
Other (income) and expense | (28) | 253 |
Interest expense | 135 | 147 |
Total expense and other (income) | 6,348 | 7,652 |
Income from continuing operations before income taxes | 1,424 | 1,034 |
Provision for/(benefit from) income taxes | (329) | (983) |
Income from continuing operations | 1,753 | 2,016 |
Loss from discontinued operations, net of tax | (3) | (3) |
Net income | $ 1,750 | $ 2,014 |
Assuming dilution: | ||
Continuing operations (in dollars per share) | $ 1.85 | $ 2.09 |
Discontinued operations (in dollars per share) | 0 | 0 |
Total (in dollars per share) | 1.85 | 2.09 |
Basic: | ||
Continuing operations (in dollars per share) | 1.86 | 2.09 |
Discontinued operations (in dollars per share) | 0 | 0 |
Total (in dollars per share) | $ 1.86 | $ 2.09 |
Weighted-average number of common shares outstanding: | ||
Assuming dilution (in shares) | 947.8 | 964.4 |
Basic (in shares) | 942.4 | 961.7 |
Cash dividend per common share | $ 1.40 | $ 1.30 |
CONSOLIDATED STATEMENT OF COMPR
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||
Net income | $ 1,750 | $ 2,014 |
Other comprehensive income/(loss), before tax: | ||
Foreign currency translation adjustments | 161 | 239 |
Net changes related to available-for-sale securities: | ||
Unrealized gains/(losses) arising during the period | (1) | (36) |
Reclassification of (gains)/losses to net income | 1 | 37 |
Total net changes related to available-for-sale securities | 0 | 1 |
Unrealized gains/(losses) on cash flow hedges: | ||
Unrealized gains/(losses) arising during the period | (33) | (265) |
Reclassification of (gains)/losses to net income | (98) | (91) |
Total unrealized gains/(losses) on cash flow hedges | (130) | (356) |
Retirement-related benefit plans: | ||
Prior service costs/(credits) | 0 | |
Net (losses)/gains arising during the period | 61 | (147) |
Curtailments and settlements | (1) | 5 |
Amortization of prior service (credits)/costs | (21) | (25) |
Amortization of net (gains)/losses | 710 | 690 |
Total retirement-related benefit plans | 748 | 522 |
Other comprehensive income/(loss), before tax | 779 | 406 |
Income tax (expense)/benefit related to items of other comprehensive income | (92) | 202 |
Other comprehensive income/(loss) | 688 | 608 |
Total comprehensive income/(loss) | $ 2,438 | $ 2,622 |
CONSOLIDATED STATEMENT OF FINAN
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 10,096 | $ 7,826 |
Marketable securities | 599 | 701 |
Notes and accounts receivable - trade (net of allowances of $302 in 2017 and $290 in 2016) | 8,377 | 9,182 |
Short-term financing receivables (net of allowances of $351 in 2017 and $337 in 2016) | 16,362 | 19,006 |
Other accounts receivable (net of allowances of $38 in 2017 and $48 in 2016) | 1,130 | 1,057 |
Inventories, at lower of average cost or market: | ||
Finished goods | 423 | 358 |
Work in process and raw materials | 1,186 | 1,195 |
Total inventories | 1,609 | 1,553 |
Prepaid expenses and other current assets | 4,715 | 4,564 |
Total current assets | 42,889 | 43,888 |
Property, plant and equipment | 30,681 | 30,133 |
Less: Accumulated depreciation | 19,816 | 19,303 |
Property, plant and equipment - net | 10,865 | 10,830 |
Long-term financing receivables (net of allowances of $99 in 2017 and $101 in 2016) | 8,502 | 9,021 |
Prepaid pension assets | 3,491 | 3,034 |
Deferred taxes | 6,457 | 5,224 |
Goodwill | 36,307 | 36,199 |
Intangible assets - net | 4,436 | 4,688 |
Investments and sundry assets | 4,549 | 4,585 |
Total assets | 117,495 | 117,470 |
Current liabilities: | ||
Taxes | 2,747 | 3,235 |
Short-term debt | 8,340 | 7,513 |
Accounts payable | 5,324 | 6,209 |
Compensation and benefits | 3,197 | 3,577 |
Deferred income | 12,351 | 11,035 |
Other accrued expenses and liabilities | 4,522 | 4,705 |
Total current liabilities | 36,481 | 36,275 |
Long-term debt | 34,441 | 34,655 |
Retirement and nonpension postretirement benefit obligations | 16,967 | 17,070 |
Deferred income | 3,557 | 3,600 |
Other liabilities | 7,601 | 7,477 |
Total liabilities | 99,047 | 99,078 |
IBM stockholders' equity: | ||
Common stock, par value $0.20 per share, and additional paid-in capital; Shares authorized: 4,687,500,000 Shares issued: 2017 - 2,226,175,975; 2016 - 2,225,116,815 | 54,104 | 53,935 |
Retained earnings | 153,292 | 152,759 |
Treasury stock - at cost Shares: 2017 - 1,286,679,091; 2016 - 1,279,249,412 | (160,359) | (159,050) |
Accumulated other comprehensive income/(loss) | (28,710) | (29,398) |
Total IBM stockholders' equity | 18,327 | 18,246 |
Noncontrolling interests | 121 | 146 |
Total equity | 18,448 | 18,392 |
Total liabilities and equity | $ 117,495 | $ 117,470 |
CONSOLIDATED STATEMENT OF FINA5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
Notes and accounts receivable - trade, allowances | $ 302 | $ 290 |
Short-term financing receivables, allowances | 351 | 337 |
Other accounts receivable, allowances | 38 | 48 |
Long-term financing receivables, allowances | $ 99 | $ 101 |
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) | 2,226,175,975 | 2,225,116,815 |
Treasury stock, Shares (in shares) | 1,286,679,091 | 1,279,249,412 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Cash flows from operating activities: | |||
Net income | $ 1,750 | $ 2,014 | |
Adjustments to reconcile net income to cash provided by operating activities | |||
Depreciation | 709 | 677 | |
Amortization of intangibles | 390 | 347 | |
Stock-based compensation | 129 | 133 | |
Net (gain)/loss on asset sales and other | 13 | 172 | |
Changes in operating assets and liabilities, net of acquisitions/divestitures | 964 | 2,187 | [1],[2] |
Net cash provided by operating activities | 3,955 | 5,530 | [1],[2] |
Cash flows from investing activities: | |||
Payments for property, plant and equipment | (740) | (956) | |
Proceeds from disposition of property, plant and equipment | 58 | 129 | |
Investment in software | (137) | (144) | |
Acquisition of businesses, net of cash acquired | (109) | (2,590) | |
Divestitures of businesses, net of cash transferred | (1) | 47 | |
Non-operating finance receivables - net | 1,570 | 1,500 | [2] |
Purchases of marketable securities and other investments | (1,273) | (1,041) | |
Proceeds from disposition of marketable securities and other investments | 981 | 1,169 | |
Net cash (used in)/provided by investing activities | 350 | (1,886) | [2] |
Cash flows from financing activities: | |||
Proceeds from new debt | 2,887 | 8,085 | |
Payments to settle debt | (1,531) | (2,211) | |
Short-term borrowings/(repayments) less than 90 days - net | (880) | (910) | |
Common stock repurchases | (1,293) | (939) | |
Common stock repurchases for tax withholdings | (50) | (27) | [1] |
Common stock transactions - other | 54 | 59 | |
Cash dividends paid | (1,321) | (1,250) | |
Net cash (used in)/provided by financing activities | (2,134) | 2,806 | [1] |
Effect of exchange rate changes on cash and cash equivalents | 100 | 217 | |
Net change in cash and cash equivalents | 2,270 | 6,668 | |
Cash and cash equivalents at beginning of period | 7,826 | 7,686 | |
Cash and cash equivalents at end of period | $ 10,096 | $ 14,354 | |
[1] | Reclassified to reflect adoption of the FASB guidance on share-based compensation. | ||
[2] | Revised classification of certain financing receivables. |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN 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, 2015 | $ 14,262 | $ 53,262 | $ 146,124 | $ (155,518) | $ (29,607) | $ 162 | $ 14,424 | |
Equity | ||||||||
Net income | 2,014 | 2,014 | 2,014 | |||||
Other comprehensive income/(loss) | 608 | 608 | 608 | |||||
Total comprehensive income/(loss) | 2,622 | 2,622 | ||||||
Cash dividends paid - common stock | (1,250) | (1,250) | (1,250) | |||||
Common stock issued under employee plans (Shares - 1,059,160 and 1,049,083 for the three months ended March31, 2017 and 2016 respectively) | 185 | 185 | 185 | |||||
Purchases (Shares - 289,364 and 216,803) and sales (Shares - 43,179 and 40,129) of treasury stock under employee plans - net, for the three months ended March 31, 2017 and 2016 respectively | (22) | 0 | (22) | (22) | ||||
Other treasury shares purchased, not retired (Shares - 7,183,494 and 6,639,282 for the three months ended March 31, 2017 and 2016 respectively) | (863) | (863) | (863) | |||||
Changes in other equity | (9) | (9) | (9) | |||||
Changes in noncontrolling interests | (14) | (14) | ||||||
Balance at the End of the Period at Mar. 31, 2016 | 14,925 | 53,439 | 146,888 | (156,404) | (28,998) | 147 | 15,072 | |
Balance at the Beginning of the Period at Dec. 31, 2016 | 18,246 | 53,935 | 152,759 | (159,050) | (29,398) | 146 | 18,392 | |
Equity | ||||||||
Cumulative effect of change in accounting principle | [1] | 102 | 102 | 102 | ||||
Net income | 1,750 | 1,750 | 1,750 | |||||
Other comprehensive income/(loss) | 688 | 688 | 688 | |||||
Total comprehensive income/(loss) | 2,438 | 2,438 | ||||||
Cash dividends paid - common stock | (1,321) | (1,321) | (1,321) | |||||
Common stock issued under employee plans (Shares - 1,059,160 and 1,049,083 for the three months ended March31, 2017 and 2016 respectively) | 169 | 169 | 169 | |||||
Purchases (Shares - 289,364 and 216,803) and sales (Shares - 43,179 and 40,129) of treasury stock under employee plans - net, for the three months ended March 31, 2017 and 2016 respectively | (44) | 1 | (45) | (44) | ||||
Other treasury shares purchased, not retired (Shares - 7,183,494 and 6,639,282 for the three months ended March 31, 2017 and 2016 respectively) | (1,264) | (1,264) | (1,264) | |||||
Changes in noncontrolling interests | (25) | (25) | ||||||
Balance at the End of the Period at Mar. 31, 2017 | $ 18,327 | $ 54,104 | $ 153,292 | $ (160,359) | $ (28,710) | $ 121 | $ 18,448 | |
[1] | Reflects the adoption of the FASB guidance on intra-entity transfers of assets. |
CONSOLIDATED STATEMENT OF CHAN8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Parenthetical) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | ||
Common stock issued under employee plans (in shares) | 1,059,160 | 1,049,083 |
Purchases of treasury stock under employee plans (in shares) | 289,364 | 216,803 |
Sales of treasury stock under employee plans (in shares) | 43,179 | 40,129 |
Other treasury shares purchased, not retired (in shares) | 7,183,494 | 6,639,282 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Basis of Presentation: | |
Basis of Presentation: | 1. 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. Refer to the company’s 2016 Annual Report on pages 71 to 74, for a discussion of the company’s critical accounting estimates. The company revised the classification of certain financing receivables for the three months ended March 31, 2016, decreasing net cash provided by operating activities and net cash used in investing activities in the amount of $142 million, which the company concluded to be immaterial to the period presented. The twelve-month revision for the period ended December 31, 2016 was provided in the company’s 2016 Annual Report on page 26. There was no impact to total GAAP cash flows or free cash flow. For the three months ended March 31, 2017, the company’s benefit from income taxes was $329 million, and its effective tax rate was (23.1) percent. This was primarily driven by a discrete tax benefit of $582 million from a first-quarter 2017 transaction accounted for under the new Financial Accounting Standards Board (FASB) guidance related to intra-entity transfers of assets. This benefit was partially offset by a discrete tax charge related to foreign audit activity of $99 million. In the first quarter of 2016, the company reported a benefit from income taxes of $983 million, and its effective tax rate was (95.1) percent, primarily driven by the resolution of a long-standing Japan tax matter in February 2016. Refer to note 2, “Accounting Changes,” and the Taxes section of the Management Discussion for additional information. Noncontrolling interest amounts of $3.6 million and $1.3 million, net of tax, for the three months ended March 31, 2017 and 2016, respectively, are included as a reduction within other (income) and expense in the Consolidated Statement of Earnings. 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 2016 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 year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. |
Accounting Changes
Accounting Changes | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes: | |
Accounting Changes: | 2. Accounting Changes: New Standards to be Implemented In March 2017, the FASB issued guidance that impacts the presentation of net periodic pension and postretirement benefit costs. Under the guidance, the service cost component of net benefit cost will continue to be presented in the same line items as other employee compensation costs, unless eligible for capitalization in the Consolidated Statement of Financial Position. The other components of net benefit costs will be presented separately from service cost as non-operating costs in the Consolidated Statement of Earnings or Notes to the Consolidated Financial Statements. The guidance is effective January 1, 2018 with early adoption permitted. The company will adopt the guidance as of the effective date. The guidance is primarily a change in financial statement presentation and is not expected to have a material impact in the consolidated financial results. In June 2016, the FASB issued guidance for credit impairment based on an expected loss model rather than an incurred loss model. The guidance requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts and their implications for expected credit losses. The guidance is effective January 1, 2020 with a one year early adoption permitted. The company is evaluating the impact of the new guidance. In February 2016, the FASB issued guidance which changes the accounting for leases. The guidance requires lessees to recognize right-of-use assets and lease liabilities for most leases in the Consolidated Statement of Financial Position. The guidance makes some changes to lessor accounting, including the elimination of the use of third-party residual value guarantee insurance in the capital lease test, and overall aligns with the new revenue recognition guidance. The guidance also requires qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective January 1, 2019 and early adoption is permitted. The company will adopt the guidance as of the effective date. A cross-functional implementation team has been established which is evaluating the lease portfolio, system, process and policy change requirements. The company is currently evaluating the impact of the new guidance on its consolidated financial results and expects it will have a material impact on the Consolidated Statement of Financial Position. The company’s operating lease commitments were $6.9 billion at December 31, 2016. In 2016, the use of third-party residual value guarantee insurance resulted in the company recognizing $220 million of sales-type lease revenue that would otherwise have been recognized over the lease period as operating lease revenue. In January 2016, the FASB issued guidance which addresses aspects of recognition, measurement, presentation and disclosure of financial instruments. Certain equity investments will be measured at fair value with changes recognized in net income. The amendment also simplifies the impairment test of equity investments that lack readily determinable fair value. The guidance is effective January 1, 2018 and early adoption is not permitted except for limited provisions. The guidance is not expected to have a material impact in the consolidated financial results. The FASB issued guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance was initially effective January 1, 2017 and early adoption was not permitted. The amended guidance provides for a one-year deferral of the effective date to January 1, 2018, with an option of applying the standard on the original effective date. The company will adopt the guidance on January 1, 2018 and apply the cumulative catch-up transition method. Given the scope of work required to implement the recognition and disclosure requirements under the new standard, the company began its assessment process in 2014 and has since made significant progress, including identification of changes to policy, processes, systems and controls. This also includes the assessment of data availability and presentation necessary to meet the additional disclosure requirements of the guidance in the Notes to the Consolidated Financial Statements. The company expects revenue recognition for its broad portfolio of hardware, software and services offerings to remain largely unchanged. However, the guidance is expected to change the timing of revenue recognition in certain areas, including accounting for certain software licenses. These impacts are not expected to be material. The company expects to continue to recognize revenue for term license (recurring license charge) software arrangements on a monthly basis over the period that the client is entitled to use the license due to the contractual terms in these arrangements. Since the company currently expenses sales commissions as incurred, the requirement in the new standard to capitalize certain in-scope sales commissions is being evaluated to determine its potential impact in the consolidated financial statements in the year of adoption. There will be no impact to cash flows. The company continues to assess all potential impacts of the guidance and given normal ongoing business dynamics, preliminary conclusions are subject to change. Standards Implemented In January 2017, the FASB issued guidance which clarifies the definition of a business. The guidance provides a more robust framework to use in determining when a set of assets and activities acquired or sold is a business. The guidance is effective January 1, 2018 and early adoption is permitted. The company adopted the guidance effective January 1, 2017, and it did not have a material impact in the consolidated financial results. In October 2016, the FASB issued guidance which requires an entity to recognize the income tax consequences of intra-entity transfers of assets, other than inventory, at the time of transfer. Assets within the scope of the guidance include intellectual property and property, plant and equipment. The guidance is effective January 1, 2018 and early adoption is permitted. The company adopted the guidance on January 1, 2017 using the required modified retrospective method. At adoption, $95 million and $47 million were reclassified from investments and sundry assets and prepaid expenses and other current assets, respectively into retained earnings. Additionally, net deferred taxes of $244 million were established in deferred taxes in the Consolidated Statement of Financial Position, resulting in a cumulative-effect net credit to retained earnings of $102 million. In January 2017, the company had one transaction that generated a $582 million benefit to income tax expense, income from continuing operations and net income and a benefit to basic and diluted earnings per share of $0.62 and $0.61 per share, respectively, for the three months ended March 31, 2017. The ongoing impact of this guidance will be dependent on any transaction that is within its scope. In March 2016, the FASB issued guidance which changes the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification in the Consolidated Statement of Cash Flows. The guidance was effective and adopted by the company on January 1, 2017, and it did not have a material impact in the Consolidated Statement of Financial Position. The ongoing impact of the guidance could result in increased volatility in the provision for income taxes and earnings per share in the Consolidated Statement of Earnings, depending on the company’s share price at exercise or vesting of share-based awards compared to grant date, however these impacts are not expected to be material. These impacts are recorded on a prospective basis. See note 5, “Stock-Based Compensation,” for additional information. The company continues to estimate forfeitures in conjunction with measuring stock-based compensation cost. The guidance also requires cash payments on behalf of employees for shares directly withheld for taxes to be presented as financing outflows in the Consolidated Statement of Cash Flows. Prior to adoption, the company reported this activity as an operating cash outflow and as a result, prior periods have been reclassified as required. In September 2015, the FASB issued guidance eliminating the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which the amount of the adjustment is determined. In addition, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. The guidance was effective January 1, 2016 on a prospective basis. The guidance did not have a material impact in the consolidated financial results. In May 2015, the FASB issued guidance which removed the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also removed the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance was effective January 1, 2016. The guidance was a change in disclosure only and did not have an impact in the consolidated financial results. In April 2015, the FASB issued guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a services contract. All software licenses recognized under this guidance will be accounted for consistent with other licenses of intangible assets. The guidance was effective January 1, 2016 and the company adopted it on a prospective basis. The guidance did not have a material impact in the consolidated financial results. |
Financial Instruments
Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Financial Instruments: | |
Financial Instruments: | 3. Financial Instruments: Fair Value Measurements Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the company is required to classify certain assets and liabilities based on the following fair value hierarchy: · Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; · Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and · Level 3—Unobservable inputs for the asset or liability. The guidance requires the use of observable market data if such data is available without undue cost and effort. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items 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. As an example, the fair value of derivatives is derived utilizing a discounted cash flow model that uses observable market inputs such as known notional value amounts, yield curves, spot and forward exchange rates as well as discount rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. Certain financial assets are measured at fair value on a nonrecurring basis. These assets include equity method investments that are recognized at fair value at the measurement date to the extent that they are deemed to be other-than-temporarily impaired. Certain assets that are measured at fair value on a recurring basis can be subject to nonrecurring fair value measurements. These assets include available-for-sale equity investments that are deemed to be other-than-temporarily impaired. In the event of an other-than-temporary impairment of a financial investment, fair value is measured using a model described above. Non-financial assets such as property, plant and equipment, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset. During the three months ended March 31, 2016, a pre-tax impairment charge related to certain property, plant and equipment of $252 million was recorded. There were no material impairments of non-financial assets for the three months ended March 31, 2017. Accounting guidance permits the measurement of eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. This election is irrevocable. The company has not applied the fair value option to any eligible assets or liabilities. The following tables present the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016. (Dollars in millions) At March 31, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ $ — $ Money market funds — — Total — (6) Debt securities - current (2) — — (6) Debt securities - noncurrent (3) — Available-for-sale equity investments (3) — — Derivative assets (4) Interest rate contracts — — Foreign exchange contracts — — Equity contracts — — Total — — (7) Total assets $ $ $ — $ (7) Liabilities: Derivative liabilities (5) Foreign exchange contracts $ — $ $ — $ Equity contracts — — Interest rate contracts — — Total liabilities $ — $ $ — $ (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) U.S. government securities reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at March 31, 2017 were $348 million and $546 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at March 31, 2017 were $130 million and $35 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions each would have been reduced by $122 million. (Dollars in millions) At December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ $ — $ Money market funds — — Total — (6) Debt securities - current (2) — — (6) Debt securities - noncurrent (3) — Available-for-sale equity investments (3) — — Derivative assets (4) Interest rate contracts — — Foreign exchange contracts — — Equity contracts — — Total — — (7) Total assets $ $ $ — $ (7) Liabilities: Derivative liabilities (5) Foreign exchange contracts $ — $ $ — $ Equity contracts — — Interest rate contracts — — Total liabilities $ — $ $ — $ (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) U.S government securities reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2016 were $532 million and $594 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2016 were $145 million and $61 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions each would have been reduced by $116 million. There were no transfers between Levels 1 and 2 for the three months ended March 31, 2017 and the year ended December 31, 2016. Financial Assets and Liabilities Not Measured at Fair Value Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, 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 March 31, 2017 and December 31, 2016, the difference between the carrying amount and estimated fair value for loans and long-term receivables was immaterial. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Long-Term Debt Fair value of publicly-traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. The carrying amount of long-term debt was $34,441 million and $34,655 million, and the estimated fair value was $36,733 million and $36,838 million at March 31, 2017 and December 31, 2016, 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. Debt and Marketable Equity Securities The company’s cash equivalents and current debt securities are considered available-for-sale and recorded at fair value, which is not materially different from carrying value, in the Consolidated Statement of Financial Position. The following tables summarize the company’s noncurrent debt and marketable equity securities which are considered available-for-sale and recorded at fair value in the Consolidated Statement of Financial Position. Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At March 31, 2017: Cost Gains Losses Value Debt securities — noncurrent(1) $ $ $ — $ Available-for-sale equity investments(1) $ $ $ $ (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At December 31, 2016: Cost Gains Losses Value Debt securities — noncurrent(1) $ $ $ — $ Available-for-sale equity investments(1) $ $ $ $ (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. During the fourth quarter of 2014, the company acquired equity securities in conjunction with the sale of the System x business which were classified as available-for-sale securities. Based on an evaluation of available evidence as of December 31, 2015, the company recorded an other-than-temporary impairment loss of $86 million resulting in an adjusted cost basis of $185 million as of December 31, 2015. In the first quarter of 2016, the company recorded a gross realized loss of $37 million (before taxes) related to the sale of all the outstanding shares. The loss on this sale was recorded in other (income) and expense in the Consolidated Statement of Earnings. Sales of debt and available-for-sale equity investments during the period were as follows: (Dollars in millions) For the three months ended March 31: 2017 2016 Proceeds $ $ Gross realized gains (before taxes) — Gross realized losses (before taxes) The after-tax net unrealized holding gains/(losses) on available-for-sale debt and marketable equity securities that have been included in other comprehensive income/(loss) for the period and the after-tax net (gains)/losses reclassified from accumulated other comprehensive income/(loss) to net income were as follows: (Dollars in millions) For the three months ended March 31: 2017 2016 Net unrealized gains/(losses) arising during the period $ ) $ ) Net unrealized (gains)/losses reclassified to net income* * There were no writedowns for the three months ended March 31, 2017 and 2016, respectively. The contractual maturities of substantially all available-for-sale debt securities are less than one year at March 31, 2017. 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. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the company has a policy of only entering into contracts with carefully selected major financial institutions based upon their overall credit profile. The company’s established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangement to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with most of its major derivative counterparties. These arrangements require the company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings received from the major credit agencies. The aggregate fair value of all derivative instruments under these collateralized arrangements that were in a liability position at March 31, 2017 and December 31, 2016 was $4 million and $11 million, respectively, for which no collateral was posted at either date. Full collateralization of these agreements would be required in the event that the company’s credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuant to the terms of the collateral security arrangements. The aggregate fair value of derivative instruments in asset positions as of March 31, 2017 and December 31, 2016 was $894 million and $1,126 million, respectively. This amount represents the maximum exposure to loss at the reporting date if the counterparties failed to perform as contracted. This exposure was reduced by $122 million and $116 million at March 31, 2017 and December 31, 2016, respectively, of liabilities included in master netting arrangements with those counterparties. Additionally, at March 31, 2017 and December 31, 2016, this exposure was reduced by $91 million and $141 million of cash collateral, respectively, and $35 million of non-cash collateral in U.S. Treasury securities at December 31, 2016. There were no non-cash collateral balances in U.S. Treasury securities at March 31, 2017. At March 31, 2017 and December 31, 2016, the net exposure related to derivative assets recorded in the Consolidated Statement of Financial Position was $681 million and $834 million, respectively. At March 31, 2017 and December 31, 2016, the net exposure related to derivative liabilities recorded in the Consolidated Statement of Financial Position was $44 million and $90 million, respectively. In the Consolidated Statement of Financial Position, the company does not offset derivative assets against liabilities in master netting arrangements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. No amount was recognized in other receivables at March 31, 2017 or December 31, 2016 for the right to reclaim cash collateral. The amount recognized in accounts payable for the obligation to return cash collateral was $91 million and $141 million at March 31, 2017 and December 31, 2016, respectively. The company restricts the use of cash collateral received to rehypothecation, and therefore reports it in prepaid expenses and other current assets in the Consolidated Statement of Financial Position. No amount was rehypothecated at March 31, 2017 and December 31, 2016. The company may employ derivative instruments to hedge the volatility in stockholders’ equity resulting from changes in currency exchange rates of significant foreign subsidiaries of the company with respect to the U.S. dollar. These instruments, designated as net investment hedges, expose the company to liquidity risk as the derivatives have an immediate cash flow impact upon maturity which is not offset by a cash flow from the translation of the underlying hedged equity. The company monitors this cash loss potential on an ongoing basis and may discontinue some of these hedging relationships by de-designating or terminating the derivative instrument in order to manage the liquidity risk. Although not designated as accounting hedges, the company may utilize derivatives to offset the changes in the fair value of the de-designated instruments from the date of de-designation until maturity. In its hedging programs, the company uses forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, and options depending upon the underlying 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 uses interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). At March 31, 2017 and December 31, 2016, the total notional amount of the company’s interest rate swaps was $7.3 billion at both periods. The weighted-average remaining maturity of these instruments at March 31, 2017 and December 31, 2016 was approximately 6.0 years and 6.2 years, respectively. Forecasted Debt Issuance The company is exposed to interest rate volatility on future debt issuances. To manage this risk, the company may use forward starting interest-rate swaps to lock in the rate on the interest payments related to the forecasted debt issuance. These swaps are accounted for as cash flow hedges. The company did not have any derivative instruments relating to this program outstanding at March 31, 2017 and December 31, 2016. At March 31, 2017 and December 31, 2016, net gains of less than $1 million (before taxes), respectively, were recorded in accumulated other comprehensive income/(loss) in connection with cash flow hedges of the company’s borrowings. Within these amounts, less than $1 million of gains, respectively, are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying transactions. Foreign Exchange Risk Long-Term Investments in Foreign Subsidiaries (Net Investment) A large portion of the company’s foreign currency 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. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. At March 31, 2017 and December 31, 2016, the total notional amount of derivative instruments designated as net investment hedges was $6.4 billion and $6.7 billion, respectively. At March 31, 2017 and December 31, 2016, the weighted-average remaining maturity of these instruments was approximately 0.2 years at both periods. 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 parent company. In anticipation of these foreign currency cash flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is four years. At March 31, 2017 and December 31, 2016, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.1 billion and $8.3 billion, respectively. The weighted-average remaining maturity of these instruments at March 31, 2017 and December 31, 2016 was 0.7 years at both periods. At March 31, 2017 and December 31, 2016, in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net gains of $342 million and $462 million (before taxes), respectively, in accumulated other comprehensive income/(loss). Within these amounts, $245 million and $397 million of gains, respectively, are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Foreign Currency Denominated Borrowings The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps are accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is approximately nine years. At March 31, 2017 and December 31, 2016, the total notional amount of cross-currency swaps designated as cash flow hedges of foreign currency denominated debt was $1.4 billion at both periods. At March 31, 2017 and December 31, 2016, in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net gains of $19 million and net gains of $29 million (before taxes), respectively, in accumulated other comprehensive income/(loss). Within these amounts, $27 million of gains at both periods are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying exposure. Subsidiary Cash and Foreign Currency Asset/Liability Management The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition, the company uses foreign exchange forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are 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 Statement of Earnings. At March 31, 2017 and December 31, 2016, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $10.1 billion and $12.7 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 selling, general and administrative (SG&A) expense in the Consolidated Statement of Earnings. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Statement of Earnings. At March 31, 2017 and December 31, 2016, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.2 billion at both periods. Other Risks The company may hold warrants to purchase shares of common stock in connection with various investments that are deemed derivatives because they contain net share or net cash settlement provisions. The company records the changes in the fair value of these warrants in other (income) and expense in the Consolidated Statement of Earnings. The company did not have any significant warrants qualifying as derivatives outstanding at March 31, 2017 and December 31, 2016. The company is exposed to a potential loss if a client fails to pay amounts due under contractual terms. The company may utilize credit default swaps to economically hedge its credit exposures. The swaps are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. The company did not have any derivative instruments relating to this program outstanding at March 31, 2017 and December 31, 2016. The company is exposed to market volatility on certain investment securities. The company may utilize options or forwards to economically hedge its market exposure. The derivatives are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. At March 31, 2017 and December 31, 2016, the company did not have any derivative instruments relating to this program outstanding. The following tables provide a quantitative summary of the derivative and non-derivative instrument-related risk management activity as of March 31, 2017 and December 31, 2016, as well as for the three months ended March 31, 2017 and 2016, respectively. Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position As of March 31, 2017 and December 31, 2016 Fair Value of Derivative Assets Fair Value of Derivative Liabilities Balance Sheet Balance Sheet (Dollars in millions) Classification 3/31/2017 12/31/2016 Classification 3/31/2017 12/31/2016 Designated as hedging instruments: Interest rate contracts: Prepaid expenses and other current assets $ — $ — Other accrued expenses and liabilities $ $ — Investments and sundry assets Other liabilities Foreign exchange contracts: Prepaid expenses and other current assets Other accrued expenses and liabilities Investments and sundry assets Other liabilities Fair value of derivative assets $ $ Fair value of derivative liabilities $ $ Not designated as hedging instruments: Foreign exchange contracts: Prepaid expenses and other current assets $ $ Other accrued expenses and liabilities $ $ Investments and sundry assets Other liabilities — Equity contracts: Prepaid expenses and other current assets Other accrued expenses and liabilities Investments and sundry assets — — Other liabilities — — Fair value of derivative assets $ $ Fair value of derivative liabilities $ $ Total debt designated as hedging instruments: Short-term debt N/A N/A $ $ Long-term debt N/A N/A $ $ Total $ $ $ $ N/A - not applicable The Effect of Derivative Instruments in the Consolidated Statement of Earnings For the three months ended March 31, 2017 and 2016 Gain (Loss) Recognized in Earnings Consolidated Recognized on Attributable to Risk (Dollars in millions) Statement of Derivatives Being Hedged(2) For the three months ended March 31: Earnings Line Item 2017 2016 2017 2016 Derivative instruments in fair value hedges (1) (5): Interest rate contracts Cost of financing $ ) $ $ $ ) Interest expense ) ) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense ) N/A N/A Interest rate contracts Other (income) and expense — N/A N/A Equity contracts SG&A expense N/A N/A Other (income) and expense — ) N/A N/A Total $ ) $ $ $ ) Gain (Loss) Recognized in Earnings and Other Comprehensive Income Ineffectiveness and (Dollars in millions) Effective Portion Consolidated Effective Portion Reclassified Amounts Excluded from For the three months Recognized in OCI Statement of from AOCI Effectiveness Testing(3) ended March 31: 2017 2016 Earnings Line Item 2017 2016 2017 2016 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Interest expense $ ) $ ) $ — $ — Foreign exchange contracts ) ) Other (income) and expense Cost of sales* — — Cost of services* ) — — SG&A expense — — Instruments in net investment hedges(4): Foreign exchange contracts ) ) Interest expense — — Total $ ) $ ) $ $ $ $ * Reclassified to conform to 2017 presentation N/A - not applicable Note: OCI represents other comprehensive income/(loss) in the Consolidated Statement of Comprehensive Income and AOCI represents accumulated other comprehensive income/(loss) in the Consolidated Statement of Changes in Equity. (1) The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts. (2) The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period. (3) The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships. (4) Instruments in net investment hedges include derivative and non-derivative instruments. (5) For the three month periods ended March 31, 2017 and March 31, 2016, fair value hedges resulted in a loss of less than $1 million and a gain of $2 million in ineffectiveness, respectively. For the three months ending March 31, 2017 and 2016, there were no significant gains or losses recognized in earnings representing hedge ineffectiveness or excluded from the assessment of hedge effectiveness (for fair value hedges), or associated with an underlying exposure that did not or was not expected to occur (for cash flow hedges); nor are there any anticipated in the normal course of business. |
Financing Receivables
Financing Receivables | 3 Months Ended |
Mar. 31, 2017 | |
Financing Receivables: | |
Financing Receivables: | 4. Financing Receivables: The following table presents financing receivables, net of allowances for credit losses, including residual values. At March 31, At December 31, (Dollars in millions) 2017 2016 Current: Net investment in sales-type and direct financing leases $ $ Commercial financing receivables Client loan and installment payment receivables (loans) Total $ $ Noncurrent: Net investment in sales-type and direct financing leases $ $ Client loan and installment payment receivables (loans) Total $ $ Net investment in sales-type and direct financing leases relates principally to the company’s Systems products and are for terms ranging generally from two to six years. Net investment in sales-type and direct financing leases includes unguaranteed residual values of $574 million and $585 million at March 31, 2017 and December 31, 2016, respectively, and is reflected net of unearned income of $496 million and $513 million, and net of allowance for credit losses of $140 million and $133 million at those dates, respectively. Commercial financing receivables, net of allowance for credit losses of $26 million and $28 million at March 31, 2017 and December 31, 2016, respectively, relate primarily to inventory and accounts receivable financing for dealers and remarketers of IBM and OEM products. Payment terms for inventory and accounts receivable financing generally range from 30 to 90 days. Client loan and installment payment receivables (loans), net of allowance for credit losses of $285 million and $276 million at March 31, 2017 and December 31, 2016, respectively, are loans that are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are generally for terms up to seven years. Client loan and installment payment financing contracts are priced independently at competitive market rates. The company has a history of enforcing the terms of these financing agreements. The company utilizes certain of its financing receivables as collateral for nonrecourse borrowings. Financing receivables pledged as collateral for borrowings were $658 million and $689 million at March 31, 2017 and December 31, 2016, respectively. The company did not have any financing receivables held for sale as of March 31, 2017 and December 31, 2016. Financing Receivables by Portfolio Segment The following tables present financing receivables on a gross basis, excluding the allowance for credit losses and residual value, by portfolio segment and by class, excluding commercial financing receivables and other miscellaneous financing receivables at March 31, 2017 and December 31, 2016. The company determines its allowance for credit losses based on two portfolio segments: lease receivables and loan receivables, and further segments the portfolio into three classes: Americas, Europe/Middle East/Africa (EMEA), and Asia Pacific. This portfolio segmentation was changed from growth markets and major markets in 2017 as the company no longer manages the business under those market delineations. There was no impact to segment reporting or the company’s Consolidated Financial Statements. (Dollars in millions) At March 31, 2017 Americas EMEA Asia Pacific Total Financing receivables Lease receivables $ $ $ $ Loan receivables Ending balance $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ Allowance for credit losses Beginning balance at January 1, 2017 Lease receivables $ $ $ $ Loan receivables Total $ $ $ $ Write-offs $ ) $ $ $ ) Recoveries Provision ) Other Ending balance at March 31, 2017 $ $ $ $ Lease receivables $ $ $ $ Loan receivables $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ (Dollars in millions) At December 31, 2016:* Americas EMEA Asia Pacific Total Financing receivables: Lease receivables $ $ $ $ Loan receivables Ending balance $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ Allowance for credit losses Beginning balance at January 1, 2016 Lease receivables $ $ $ $ Loan receivables Total $ $ $ $ Write-offs $ ) $ ) $ ) $ ) Recoveries Provision ) ) Other ) ) ) Ending balance at December 31, 2016 $ $ $ $ Lease receivables $ $ $ $ Loan receivables $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ * Reclassified to conform to 2017 presentation. When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For individually evaluated receivables, the company determines the expected cash flow for the receivable and calculates an estimate of the potential loss and the probability of loss. For those accounts in which the loss is probable, the company records a specific reserve. In addition, the company records an unallocated reserve that is determined by applying a reserve rate to its different portfolios, excluding accounts that have been specifically reserved. This reserve rate is based upon credit rating, probability of default, term, characteristics (lease/loan) and loss history. Financing Receivables on Non-Accrual Status The following table presents the recorded investment in financing receivables which were on non-accrual status at March 31, 2017 and December 31, 2016. At March 31, At December 31, (Dollars in millions) 2017 2016* Americas $ $ EMEA Asia Pacific Total lease receivables $ $ Americas $ $ EMEA Asia Pacific Total loan receivables $ $ Total receivables $ $ * Reclassified to conform to 2017 presentation. Impaired Receivables The company considers any receivable with an individually evaluated reserve as an impaired receivable. Depending on the level of impairment, receivables will also be placed on non-accrual status. The following tables present impaired receivables. This presentation now includes both loan and lease receivables. At March 31, 2017 At December 31, 2016* Recorded Related Recorded Related (Dollars in millions) Investment Allowance Investment Allowance Americas $ $ $ $ EMEA Asia Pacific Total $ $ $ $ * Reclassified to conform to 2017 presentation. Interest Average Interest Income (Dollars in millions) Recorded Income Recognized on For the three months ended March 31, 2017: Investment Recognized Cash Basis Americas $ $ $ — EMEA — Asia Pacific — Total $ $ $ — Interest Average Interest Income (Dollars in millions) Recorded Income Recognized on For the three months ended March 31, 2016:* Investment Recognized Cash Basis Americas $ $ $ — EMEA — Asia Pacific — Total $ $ $ — * Reclassified to conform to 2017 presentation. 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 following tables present the net recorded investment for each class of receivables, by credit quality indicator, at March 31, 2017 and December 31, 2016. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators do not reflect mitigation actions that the company takes to transfer credit risk to third parties. Lease Receivables Loan Receivables (Dollars in millions) Asia Asia At March 31, 2017: Americas EMEA Pacific Americas EMEA Pacific Credit Ratings: Aaa — Aa3 $ $ $ $ $ $ A1 — A3 Baa1 — Baa3 Ba1 — Ba2 Ba3 — B1 B2 — B3 Caa — D Total $ $ $ $ $ $ At March 31, 2017, the industries which made up Global Financing’s receivables portfolio consisted of: Financial (35 percent), Government (14 percent), Manufacturing (14 percent), Services (11 percent), Retail (8 percent), Communications (7 percent), Healthcare (6 percent) and Other (6 percent). Lease Receivables Loan Receivables (Dollars in millions) Asia Asia At December 31, 2016:* Americas EMEA Pacific Americas EMEA Pacific Credit Ratings: Aaa — Aa3 $ $ $ $ $ $ A1 — A3 Baa1 — Baa3 Ba1 — Ba2 Ba3 — B1 B2 — B3 Caa — D Total $ $ $ $ $ $ * Reclassified to conform to 2017 presentation. At December 31, 2016, the industries which made up Global Financing’s receivables portfolio consisted of: Financial (34 percent), Government (14 percent), Manufacturing (13 percent), Services (12 percent), Retail (8 percent), Communications (7 percent), Healthcare (6 percent) and Other (6 percent). Past Due Financing Receivables Fully <90 Days Recorded Total Reserved or Unbilled Total Investment (Dollars in millions) Past Due Financing Financing Financing > 90 Days and At March 31, 2017: > 90 days (1) Receivables Receivables Receivables Accruing (2) Americas $ $ $ $ $ EMEA Asia Pacific Total lease receivables $ $ $ $ $ Americas $ $ $ $ $ EMEA Asia Pacific Total loan receivables $ $ $ $ $ Total $ $ $ $ $ (1) Only the portion of a financing receivable which is greater than 90 days past due, excluding amounts that are fully reserved. (2) At a contract level, which includes total billed and unbilled amounts for aged financing receivables greater than 90 days. Fully <90 Days Recorded Total Reserved or Unbilled Total Investment (Dollars in millions) Past Due Financing Financing Financing > 90 Days and At December 31, 2016:* > 90 days (1) Receivables Receivables Receivables Accruing (2) Americas $ $ $ $ $ EMEA Asia Pacific Total lease receivables $ $ $ $ $ Americas $ $ $ $ $ EMEA Asia Pacific Total loan receivables $ $ $ $ $ Total $ $ $ $ $ (1) Only the portion of a financing receivable which is greater than 90 days past due, excluding amounts that are fully reserved. (2) At a contract level, which includes total billed and unbilled amounts for aged financing receivables greater than 90 days. * Reclassified to conform with 2017 presentation. Troubled Debt Restructurings The company did not have any significant troubled debt restructurings during the three months ended March 31, 2017 or for the year ended December 31, 2016. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Stock-Based Compensation: | |
Stock-Based Compensation: | 5. Stock-Based Compensation: Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations. (Dollars in millions) For the three months ended March 31: 2017 2016 Cost $ $ Selling, general and administrative Research, development and engineering Pre-tax stock-based compensation cost Income tax benefits ) ) Total net stock-based compensation cost $ $ Pre-tax stock-based compensation cost for the three months ended March 31, 2017 decreased $4 million compared to the corresponding period in the prior year. This was due to decreases in performance share units ($14 million) and the conversion of stock-based awards previously issued by acquired entities ($6 million), partially offset by increases related to restricted stock units ($16 million). Income tax benefits for the three months ended March 31, 2017 include an $8 million benefit which resulted from the implementation of the new FASB guidance for share-based payment transactions. Refer to note 2, “Accounting Changes,” for additional information. The amount of stock-based compensation cost included in discontinued operations, net of tax, was immaterial in all periods presented. As of March 31, 2017, the total unrecognized compensation cost of $804 million related to non-vested awards was expected to be recognized over a weighted-average period of approximately 2.5 years. There was no significant capitalized stock-based compensation cost at March 31, 2017 and 2016. |
Segments
Segments | 3 Months Ended |
Mar. 31, 2017 | |
Segments: | |
Segments: | 6. Segments: The table on page 27 reflects the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company. Performance measurement is based on operating pre-tax income from continuing operations. The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. SEGMENT INFORMATION Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total (Dollars in millions) Solutions Services Platforms Systems Financing Segments For the three months ended March 31, 2017: External revenue $ $ $ $ $ $ Internal revenue Total revenue $ $ $ $ $ $ Pre-tax income from continuing operations $ $ $ $ ) $ $ Revenue year-to-year change % )% )% )% )% )% Pre-tax income year-to-year change % % % nm )% % Pre-tax income margin % % % )% % % For the three months ended March 31, 2016: External revenue $ $ $ $ $ $ Internal revenue Total revenue $ $ $ $ $ $ Pre-tax income from continuing operations $ $ $ $ ) $ $ Pre-tax income margin % % % )% % % nm - not meaningful Reconciliations to IBM as Reported: (Dollars in millions) For the three months ended March 31: 2017 2016 Revenue: Total reportable segments $ $ Eliminations of internal transactions ) ) Other revenue Total consolidated revenue $ $ Pre-tax income from continuing operations: Total reportable segments $ $ Amortization of acquired intangible assets ) ) Acquisition-related (charges)/income ) Non-operating retirement-related (costs)/income ) ) Eliminations of internal transactions ) ) Unallocated corporate amounts ) ) Total pre-tax income from continuing operations $ $ |
Equity Activity
Equity Activity | 3 Months Ended |
Mar. 31, 2017 | |
Equity Activity: | |
Equity Activity: | 7. 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 March 31, 2017: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ $ $ Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to other (income) and expense Total net changes related to available-for-sale securities $ $ $ Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to: Cost of sales ) ) Cost of services ) ) SG&A expense ) ) Other (income) and expense ) ) Interest expense ) Total unrealized gains/(losses) on cash flow hedges $ ) $ $ ) Retirement-related benefit plans(1): Prior service costs/(credits) $ $ $ Net (losses)/gains arising during the period ) Curtailments and settlements ) ) Amortization of prior service (credits)/costs ) ) Amortization of net (gains)/losses ) Total retirement-related benefit plans $ $ ) $ Other comprehensive income/(loss) $ $ ) $ (1) These AOCI components are included in the computation of net periodic pension cost. (See note 8, “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 March 31, 2016: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ $ $ Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to other (income) and expense ) Total net changes related to available-for-sale securities $ $ $ Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to: Cost of sales* ) ) Cost of services* ) SG&A expense ) ) Other (income) and expense ) ) Interest expense ) Total unrealized gains/(losses) on cash flow hedges $ ) $ $ ) Retirement-related benefit plans(1): Net (losses)/gains arising during the period $ ) $ $ ) Curtailments and settlements ) Amortization of prior service (credits)/costs ) ) Amortization of net (gains)/losses ) Total retirement-related benefit plans $ $ ) $ Other comprehensive income/(loss) $ $ $ * Reclassified to conform to 2017 presentation. (1) These AOCI components are included in the computation of net periodic pension cost. (See note 8, “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, 2017 $ $ ) $ ) $ $ ) Other comprehensive income before reclassifications ) ) Amount reclassified from accumulated other comprehensive income ) Total change for the period ) March 31, 2017 $ $ ) $ ) $ $ ) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in Millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2016 $ $ ) $ ) $ $ ) Other comprehensive income before reclassifications ) ) ) Amount reclassified from accumulated other comprehensive income ) Total change for the period ) March 31, 2016 $ ) $ ) $ ) $ $ ) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. |
Retirement-Related Benefits
Retirement-Related Benefits | 3 Months Ended |
Mar. 31, 2017 | |
Retirement-Related Benefits: | |
Retirement-Related Benefits: | 8. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following table provides the pre-tax cost for all retirement-related plans. Yr. to Yr. (Dollars in millions) Percent For the three months ended March 31: 2017 2016 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ $ % Nonpension postretirement plans — cost Total $ $ % The following table provides the components of the cost/(income) for the company’s pension plans. Cost/(Income) of Pension Plans (Dollars in millions) U.S. Plans Non-U.S. Plans For the three months ended March 31: 2017 2016 2017 2016 Service cost $ — $ — $ $ Interest cost Expected return on plan assets ) ) ) ) Amortization of prior service costs/(credits) ) ) Recognized actuarial losses Curtailments and settlements — — ) Multi-employer plans/other costs — — Total net periodic pension (income)/cost of defined benefit plans ) Cost of defined contribution plans Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings $ $ $ $ In March 2017, the company initiated a change to the investment strategy of its U.S. defined benefit plan. The 2017 target asset allocation was modified by reducing equity securities from 20 percent to 12 percent, increasing debt securities from 70 percent to 79 percent and other investments largely remained unchanged at 10 percent of total plan assets. This change is designed to reduce the risk associated with the potential negative impact that equity markets might have on the funded status of the U.S. defined benefit plan. The change is expected to reduce the 2018 expected long-term rate of return on assets from 5.75 percent to approximately 5.25 percent. See note S, “Retirement-Related Benefits,” on page 144 in the company’s 2016 Annual Report for additional information regarding the company’s investment strategy. In 2017, the company expects to contribute approximately $500 million to its non-U.S. defined benefit and multi-employer plans, the largest of which will be contributed to the defined benefit pension plans in Japan, Spain and the UK. This amount generally represents the legally mandated minimum contribution. Total contributions to the non-U.S. plans in the first three months of 2017 were $182 million, of which $40 million was in cash and $142 million in U.S. Treasury securities. Total net contributions to the non-U.S. plans in the first three months of 2016 were $107 million, of which $65 million was in cash and $42 million in U.S. Treasury securities. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows. The following table provides the components of the cost/(income) for the company’s nonpension postretirement plans. Cost of Nonpension Postretirement Plans (Dollars in millions) U.S. Plan Non-U.S. Plans For the three months ended March 31: 2017 2016 2017 2016 Service cost $ $ $ $ Interest cost Expected return on plan assets — — ) ) Amortization of prior service costs/(credits) ) ) ) Recognized actuarial losses Curtailments and settlements — — — Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings $ $ $ $ The company contributed $135 million to the U.S. nonpension postretirement benefit plan in U.S. Treasury securities during the three months ended March 31, 2017, and $100 million in U.S. Treasury securities during the three months ended March 31, 2016. The contribution of U.S. Treasury securities is considered a non-cash transaction in the Consolidated Statement of Cash Flows. |
Acquisitions_Divestitures
Acquisitions/Divestitures | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions/Divestitures: | |
Acquisitions/Divestitures: | 9. Acquisitions/Divestitures: Acquisitions: During the three months ended March 31, 2017, the company completed the acquisition of 100 percent of Agile 3 Solutions, LLC (Agile 3 Solutions), a privately held business, for cash consideration of $14 million. Agile 3 Solutions is a developer of software used by C-Suite and senior executives to better visualize, understand and manage risks associated with the protection of sensitive data and adds capabilities to the company’s security portfolio. Goodwill of $8 million has been assigned to the Technology Services & Cloud Platforms and Cognitive Solutions segments. The acquisition was accounted for as a business combination using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity were recorded at their estimated fair values at the date of acquisition. The acquisition did not have a material impact in the Consolidated Financial Statements. Divestitures: Microelectronics — On October 20, 2014, IBM and GLOBALFOUNDRIES announced a definitive agreement in which GLOBALFOUNDRIES would acquire the company’s Microelectronics business, including existing semiconductor manufacturing assets and operations in East Fishkill, NY and Essex Junction, VT. The commercial OEM business acquired by GLOBALFOUNDRIES includes custom logic and specialty foundry, manufacturing and related operations. The transaction closed on July 1, 2015. At September 30, 2014, the company concluded that the Microelectronics business met the criteria for discontinued operations reporting. The disposal group constituted a component under accounting guidance. The continuing cash inflows and outflows with the discontinued component are related to the manufacturing sourcing arrangement and the transition, packaging and test services. These cash flows are not direct cash flows as they are not significant and the company has no significant continuing involvement. All assets and liabilities of the business, classified as held for sale at June 30, 2015, were transferred at closing. The company transferred $515 million of net cash to GLOBALFOUNDRIES in the third quarter of 2015. This amount included $750 million of cash consideration, adjusted by the amount of working capital due from GLOBALFOUNDRIES and other miscellaneous items. A second cash payment in the amount of $500 million was transferred in December 2016. The remaining cash consideration of $250 million is expected to be transferred in December 2017. Summarized financial information for discontinued operations is shown in the following table. Three Months Ended March 31, (Dollars in millions) 2017 2016 Total revenue $ — $ — Income/(loss) from discontinued operations $ ) $ ) Gain/(loss) on disposal, before tax Total loss from discontinued operations, before income taxes $ ) $ ) Provision for/(benefit from) income taxes ) ) Loss from discontinued operations, net of tax $ ) $ ) Industry Standard Server — On January 23, 2014, IBM and Lenovo Group Limited (Lenovo) announced a definitive agreement in which Lenovo would acquire the company’s industry standard server portfolio (System x) for an adjusted purchase price of $2.1 billion, consisting of approximately $1.8 billion in cash, with the balance in Lenovo common stock. The stock represented less than 5 percent equity ownership in Lenovo. The company sold to Lenovo its System x, BladeCenter and Flex System blade servers and switches, x86-based Flex integrated systems, NeXtScale and iDataPlex servers and associated software, blade networking and maintenance operations. As of March 31, 2016, all Lenovo common stock was sold. The initial closing was completed on October 1, 2014. A subsequent closing occurred in most other countries in which there was a large business footprint on December 31, 2014. The remaining countries closed on March 31, 2015. An assessment of the ongoing contractual terms of the transaction resulted in the recognition of pre-tax gains of $63 million, $57 million and $9 million in 2015, 2016 and first three months of 2017, respectively. Overall, the company expects to recognize a total pre-tax gain on the sale of approximately $1.6 billion, which does not include associated costs related to transition and performance-based costs. Net of these charges, the pre-tax gain was approximately $1.3 billion, of which the cumulative gain recorded as of March 31, 2017 is $1.2 billion. The balance of the gain is expected to be recognized in 2019 upon conclusion of the maintenance agreement. Others — In the first quarter of 2017, the company completed one research-related divestiture. The financial terms related to this transaction were not material. |
Intangible Assets Including Goo
Intangible Assets Including Goodwill | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets Including Goodwill: | |
Intangible Assets Including Goodwill: | 10. Intangible Assets Including Goodwill: The following table details the company’s intangible asset balances by major asset class: At March 31, 2017 (Dollars in millions) Gross Carrying Accumulated Net Carrying Intangible asset class Amount Amortization Amount Capitalized software $ $ ) $ Client relationships ) Completed technology ) Patents/trademarks ) Other* ) Total $ $ ) $ * Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems. At December 31, 2016 (Dollars in millions) Gross Carrying Accumulated Net Carrying Intangible asset class Amount Amortization Amount Capitalized software $ $ ) $ Client relationships ) Completed technology ) Patents/trademarks ) Other* ) Total $ $ ) $ * Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems. The net carrying amount of intangible assets decreased $252 million during the first quarter of 2017, primarily due to intangible asset amortization, partially offset by additions resulting from capitalized software. The aggregate intangible amortization expense was $390 million and $347 million for the quarters ended March 31, 2017 and 2016, respectively. In addition, in the first three months of 2017, the company retired $289 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The amortization expense for each of the five succeeding years relating to intangible assets currently recorded in the Consolidated Statement of Financial Position is estimated to be the following at March 31, 2017: Capitalized Acquired (Dollars in millions) Software Intangibles Total 2017 (for Q2 - Q4) $ $ $ 2018 2019 2020 2021 — The change in the goodwill balances by reportable segment, for the three months ended March 31, 2017 and for the year ended December 31, 2016 are as follows: Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 01/01/17 Additions Adjustments Divestitures Adjustments* 3/31/17 Cognitive Solutions $ $ $ $ — $ $ Global Business Services — — Technology Services & Cloud Platforms ) — Systems — — — Total $ $ $ $ — $ $ * Primarily driven by foreign currency translation. Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 01/01/16 Additions Adjustments Divestitures Adjustments* 12/31/16 Cognitive Solutions $ $ $ $ ) $ $ Global Business Services ) ) Technology Services & Cloud Platforms ) ) ) Systems — ) — Total $ $ $ ) $ ) $ ) $ * Primarily driven by foreign currency translation. There were no goodwill impairment losses recorded during the first three months of 2017 or the full year of 2016 and the company has no accumulated impairment losses. Purchase price adjustments recorded in the first three months of 2017 and full year 2016 were related to acquisitions that were completed on or prior to December 31, 2016 or September 30, 2016, respectively, and were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. Net purchase price adjustments of $3 million were recorded during the first three months of 2017, with the primary driver being deferred tax assets. Net purchase price adjustments of $7 million were recorded during 2016, with the primary drivers being deferred tax assets, accounts receivable, deferred income, inventory and other current liabilities. |
Borrowings
Borrowings | 3 Months Ended |
Mar. 31, 2017 | |
Borrowings: | |
Borrowings: | 11. Borrowings: Short-Term Debt At March 31, At December 31, (Dollars in millions) 2017 2016 Commercial paper $ — $ Short-term loans Long-term debt — current maturities Total $ $ The weighted-average interest rate for commercial paper at December 31, 2016 was 0.7 percent. The weighted-average interest rate for short-term loans was 7.7 percent and 9.5 percent at March 31, 2017 and December 31, 2016, respectively. Long-Term Debt Pre-Swap Borrowing Balance Balance (Dollars in millions) Maturities 3/31/2017 12/31/2016 U.S. dollar debt (average interest rate at March 31, 2017):* 4.69% $ $ 3.24% 2018-2019 1.86% 2020-2021 1.54% 3.38% 3.63% 7.00% 3.45% 3.01% 6.50% 5.88% 8.00% 5.60% 4.00% 7.00% 4.70% 7.13% $ $ Other currencies (average interest rate at March 31, 2017, in parentheses):* Euros (1.6%) 2019-2028 $ $ Pound sterling (2.7%) 2020-2022 Japanese yen (0.9%) 2017-2026 Canadian (2.2%) — Other (10.0%) 2017-2020 $ $ Less: net unamortized discount Less: net unamortized debt issuance costs Add: fair value adjustment** $ $ Less: current maturities Total $ $ * Includes notes, debentures, bank loans, securitized borrowings and capital lease obligations. ** The portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Statement of Financial Position as an amount equal to the sum of the debt’s carrying value plus a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. There are no debt securities issued and outstanding by IBM International Group Capital LLC, which is an indirect, 100 percent owned finance subsidiary of International Business Machines Corporation, the parent. Any debt securities issued by IBM International Group Capital LLC, would be fully and unconditionally guaranteed by the parent. The company’s indenture governing its debt securities and its various credit facilities each contain significant covenants which obligate the company to promptly pay principal and interest, limit the aggregate amount of secured indebtedness and sale and leaseback transactions to 10 percent of the company’s consolidated net tangible assets, and restrict the company’s ability to merge or consolidate unless certain conditions are met. The credit facilities also include a covenant on the company’s consolidated net interest expense ratio, which cannot be less than 2.20 to 1.0, as well as a cross default provision with respect to other defaulted indebtedness of at least $500 million. The company is in compliance with all of its significant debt covenants and provides periodic certifications to its lenders. The failure to comply with its debt covenants could constitute an event of default with respect to the debt to which such provisions apply. If certain events of default were to occur, the principal and interest on the debt to which such event of default applied would become immediately due and payable. Pre-swap annual contractual maturities of long-term debt outstanding at March 31, 2017, are as follows: (Dollars in millions) Total 2017 (for Q2 - Q4) $ 2018 2019 2020 2021 2022 and beyond Total $ Interest on Debt (Dollars in millions) For the three months ended March 31: 2017 2016 Cost of financing $ $ Interest expense Net investment derivative activity ) ) Interest capitalized Total interest paid and accrued $ $ |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Contingencies: | |
Contingencies: | 12. Contingencies: As a company with a substantial employee population and with clients in more than 175 countries, IBM is involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The company is a leader in the information technology industry and, as such, has been and will continue to be subject to claims challenging its IP rights and associated products and offerings, including claims of copyright and patent infringement and violations of trade secrets and other IP rights. In addition, the company enforces its own IP against infringement, through license negotiations, lawsuits or otherwise. Also, as is typical for companies of IBM’s scope and scale, the company is party to actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the company’s pension, retirement and other benefit plans), as well as actions with respect to contracts, product liability, securities, foreign operations, competition law and environmental matters. These actions may be commenced by a number of different parties, including competitors, clients, current or former employees, government and regulatory agencies, stockholders and representatives of the locations in which the company does business. Some of the actions to which the company is party may involve particularly complex technical issues, and some actions may raise novel questions under the laws of the various jurisdictions in which these matters arise. The company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any recorded liabilities, including any changes to such liabilities for the quarter ended March 31, 2017 were not material to the Consolidated Financial Statements. In accordance with the relevant accounting guidance, the company provides disclosures of matters for which the likelihood of material loss is at least reasonably possible. In addition, the company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer and employee relations considerations. With respect to certain of the claims, suits, investigations and proceedings discussed herein, the company believes at this time that the likelihood of any material loss is remote, given, for example, the procedural status, court rulings, and/or the strength of the company’s defenses in those matters. With respect to the remaining claims, suits, investigations and proceedings discussed in this note, except as specifically discussed herein, the company is unable to provide estimates of reasonably possible losses or range of losses, including losses in excess of amounts accrued, if any, for the following reasons. Claims, suits, investigations and proceedings are inherently uncertain, and it is not possible to predict the ultimate outcome of these matters. It is the company’s experience that damage amounts claimed in litigation against it are unreliable and unrelated to possible outcomes, and as such are not meaningful indicators of the company’s potential liability. Further, the company is unable to provide such an estimate due to a number of other factors with respect to these claims, suits, investigations and proceedings, including considerations of the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. The company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses (individually or in the aggregate), to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter. Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including: the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the Consolidated Financial Statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. While the company will continue to defend itself vigorously, it is possible that the company’s business, financial condition, results of operations or cash flows could be affected in any particular period by the resolution of one or more of these matters. The following is a summary of the more significant legal matters involving the company. The company is a defendant in an action filed on March 6, 2003 in state court in Salt Lake City, Utah by the SCO Group (SCO v. IBM). The company removed the case to Federal Court in Utah. Plaintiff is an alleged successor in interest to some of AT&T’s UNIX IP rights, and alleges copyright infringement, unfair competition, interference with contract and breach of contract with regard to the company’s distribution of AIX and Dynix and contribution of code to Linux and the company has asserted counterclaims. On September 14, 2007, plaintiff filed for bankruptcy protection, and all proceedings in this case were stayed. The court in another suit, the SCO Group, Inc. v. Novell, Inc., held a trial in March 2010. The jury found that Novell is the owner of UNIX and UnixWare copyrights; the judge subsequently ruled that SCO is obligated to recognize Novell’s waiver of SCO’s claims against IBM and Sequent for breach of UNIX license agreements. On August 30, 2011, the Tenth Circuit Court of Appeals affirmed the district court’s ruling and denied SCO’s appeal of this matter. In June 2013, the Federal Court in Utah granted SCO’s motion to reopen the SCO v. IBM case. In February 2016, the Federal Court ruled in favor of IBM on all of SCO’s remaining claims, and in March 2016, SCO filed a notice of appeal to the Tenth Circuit Court of Appeals. On May 13, 2010, IBM and the State of Indiana (acting on behalf of the Indiana Family and Social Services Administration) sued one another in a dispute over a 2006 contract regarding the modernization of social service program processing in Indiana. After six weeks of trial, on July 18, 2012, the Indiana Superior Court in Marion County rejected the State’s claims in their entirety and awarded IBM $52 million plus interest and costs. On February 13, 2014, the Indiana Court of Appeals reversed portions of the trial judge’s findings, found IBM in material breach, and ordered the case remanded to the trial judge to determine the State’s damages, if any. The Indiana Court of Appeals also affirmed approximately $50 million of the trial court’s award of damages to IBM. On March 22, 2016, the Indiana Supreme Court affirmed the outcome of the Indiana Court of Appeals and remanded the case to the Indiana Superior Court. On March 9, 2017, the Commonwealth of Pennsylvania’s Department of Labor and Industry sued IBM in Pennsylvania state court regarding a 2006 contract for the development of a custom software system to manage the Commonwealth’s unemployment insurance benefits programs. The matter is pending in a Pennsylvania court. On October 29, 2013, Bridgestone Americas, Inc. (Bridgestone) sued IBM regarding a 2009 contract for the implementation of an SAP-based, enterprise-wide order management system. IBM counterclaimed against Bridgestone and its parent, Bridgestone Corp. The case is pending in the Middle District of Tennessee. On April 16, 2014, Iusacell SA de C.V. (Iusacell) sued IBM, claiming that IBM made fraudulent misrepresentations that induced Iusacell to enter into an agreement with IBM Mexico. Iusacell claims damages for lost profits. Iusacell’s complaint relates to a contractual dispute in Mexico, which is the subject of a pending arbitration proceeding in Mexico initiated by IBM Mexico against Iusacell for breach of the underlying agreement. On November 14, 2014, the District Court in the Southern District of New York granted IBM’s motion to stay Iusacell’s action against the company pending the arbitration in Mexico between Iusacell and IBM Mexico. IBM United Kingdom Limited (IBM UK) initiated legal proceedings in May 2010 before the High Court in London against the IBM UK Pensions Trust (the UK Trust) and two representative beneficiaries of the UK Trust membership. IBM UK is seeking a declaration that it acted lawfully both in notifying the Trustee of the UK Trust that it was closing its UK defined benefit plans to future accruals for most participants and in implementing the company’s new retirement policy. In April 2014, the High Court acknowledged that the changes made to its UK defined benefit plans were within IBM’s discretion, but ruled that IBM breached its implied duty of good faith both in implementing these changes and in the manner in which it consulted with employees. Proceedings to determine remedies were held in July 2014, and in February 2015 the High Court held that for IBM to make changes to accruals under the plan would require a new consultation of the participants, but other changes (including to early retirement policy) would not require such consultation. IBM UK has appealed both the breach and remedies judgments. If the appeal is unsuccessful, the Court’s rulings would require IBM to reverse the changes made to the UK defined benefit plans retroactive to their effective dates. This could result in an estimated non-operating one-time pre-tax charge of approximately $290 million, plus ongoing defined benefit related accruals. In addition, IBM UK is a defendant in approximately 290 individual actions brought since early 2010 by participants of the defined benefits plans who left IBM UK. These actions, which allege constructive dismissal and age discrimination, are pending before the Employment Tribunal in Southampton UK. In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Corruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM is cooperating with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Department of Justice (DOJ) is also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ is also seeking information regarding the company’s global FCPA compliance program and its public sector business. The company is cooperating with the DOJ in this matter. In May 2015, a putative class action was commenced in the United States District Court for the Southern District of New York related to the company’s October 2014 announcement that it was divesting its global commercial semiconductor technology business, alleging violations of the Employee Retirement Income Security Act (“ERISA”). The company, management’s Retirement Plans Committee, and three current or former IBM executives were named as defendants. On September 7, 2016, the Court granted the company’s motion to dismiss the plaintiffs’ claims. On October 21, 2016, the plaintiffs filed an amended complaint, dropping the company as a defendant. The matter remains pending in the United States District Court. In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the U.S., UK and Ireland. The company is cooperating with the SEC in this matter. 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 $1 billion, with the increase since the last quarter driven primarily by currency fluctuations and interest. The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability. |
Commitments
Commitments | 3 Months Ended |
Mar. 31, 2017 | |
Commitments: | |
Commitments: | 13. Commitments: The company’s extended lines of credit to third-party entities include unused amounts of $7,860 million and $6,542 million at March 31, 2017 and December 31, 2016, 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 approximately $2,341 million and $2,463 million at March 31, 2017 and December 31, 2016, respectively. The company has applied the guidance requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the company is the 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 (IP) rights, specified environmental matters, third-party performance of nonfinancial contractual obligations and certain income taxes. In each of these circumstances, payment by the company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, the procedures of which typically allow the company to challenge the other party’s claims. While typically indemnification provisions do not include a contractual maximum on the company’s payment, the company’s obligations under these agreements may be limited in terms of time and/or nature of claim, and in some instances, the company may have recourse against third parties for certain payments made by the company. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the company under these agreements have not had a material effect on the company’s business, financial condition or results of operations. In addition, the company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees was $23 million and $34 million at March 31, 2017 and December 31, 2016, respectively. The fair value of the guarantees recognized in the Consolidated Statement of Financial Position is not material. Changes in the company’s warranty liability for standard warranties and deferred income for extended warranty contracts are presented in the following tables. Standard Warranty Liability (Dollars in millions) 2017 2016 Balance at January 1 $ $ Current period accruals Accrual adjustments to reflect actual experience ) Charges incurred ) ) Balance at March 31 $ $ Extended Warranty Liability (Dollars in millions) 2017 2016 Aggregate deferred revenue at January 1 $ $ Revenue deferred for new extended warranty contracts Amortization of deferred revenue ) ) Other* Aggregate deferred revenue at March 31 $ $ Current portion $ $ Noncurrent portion $ $ * Other primarily consists of foreign currency translation adjustments. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events: | |
Subsequent Events: | 14. Subsequent Events : On April 25, 2017, the company announced that the Board of Directors approved a quarterly dividend of $1.50 per common share. The dividend is payable June 10, 2017 to shareholders of record on May 10, 2017. The dividend declaration represents an increase of $0.10 per common share, which is 7 percent higher than the prior quarterly dividend of $1.40 per common share. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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. Refer to the company’s 2016 Annual Report on pages 71 to 74, for a discussion of the company’s critical accounting estimates. 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 2016 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 year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable. |
Accounting Changes | New Standards to be Implemented In March 2017, the FASB issued guidance that impacts the presentation of net periodic pension and postretirement benefit costs. Under the guidance, the service cost component of net benefit cost will continue to be presented in the same line items as other employee compensation costs, unless eligible for capitalization in the Consolidated Statement of Financial Position. The other components of net benefit costs will be presented separately from service cost as non-operating costs in the Consolidated Statement of Earnings or Notes to the Consolidated Financial Statements. The guidance is effective January 1, 2018 with early adoption permitted. The company will adopt the guidance as of the effective date. The guidance is primarily a change in financial statement presentation and is not expected to have a material impact in the consolidated financial results. In June 2016, the FASB issued guidance for credit impairment based on an expected loss model rather than an incurred loss model. The guidance requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts and their implications for expected credit losses. The guidance is effective January 1, 2020 with a one year early adoption permitted. The company is evaluating the impact of the new guidance. In February 2016, the FASB issued guidance which changes the accounting for leases. The guidance requires lessees to recognize right-of-use assets and lease liabilities for most leases in the Consolidated Statement of Financial Position. The guidance makes some changes to lessor accounting, including the elimination of the use of third-party residual value guarantee insurance in the capital lease test, and overall aligns with the new revenue recognition guidance. The guidance also requires qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective January 1, 2019 and early adoption is permitted. The company will adopt the guidance as of the effective date. A cross-functional implementation team has been established which is evaluating the lease portfolio, system, process and policy change requirements. The company is currently evaluating the impact of the new guidance on its consolidated financial results and expects it will have a material impact on the Consolidated Statement of Financial Position. The company’s operating lease commitments were $6.9 billion at December 31, 2016. In 2016, the use of third-party residual value guarantee insurance resulted in the company recognizing $220 million of sales-type lease revenue that would otherwise have been recognized over the lease period as operating lease revenue. In January 2016, the FASB issued guidance which addresses aspects of recognition, measurement, presentation and disclosure of financial instruments. Certain equity investments will be measured at fair value with changes recognized in net income. The amendment also simplifies the impairment test of equity investments that lack readily determinable fair value. The guidance is effective January 1, 2018 and early adoption is not permitted except for limited provisions. The guidance is not expected to have a material impact in the consolidated financial results. The FASB issued guidance on the recognition of revenue from contracts with customers in May 2014 with amendments in 2015 and 2016. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The guidance was initially effective January 1, 2017 and early adoption was not permitted. The amended guidance provides for a one-year deferral of the effective date to January 1, 2018, with an option of applying the standard on the original effective date. The company will adopt the guidance on January 1, 2018 and apply the cumulative catch-up transition method. Given the scope of work required to implement the recognition and disclosure requirements under the new standard, the company began its assessment process in 2014 and has since made significant progress, including identification of changes to policy, processes, systems and controls. This also includes the assessment of data availability and presentation necessary to meet the additional disclosure requirements of the guidance in the Notes to the Consolidated Financial Statements. The company expects revenue recognition for its broad portfolio of hardware, software and services offerings to remain largely unchanged. However, the guidance is expected to change the timing of revenue recognition in certain areas, including accounting for certain software licenses. These impacts are not expected to be material. The company expects to continue to recognize revenue for term license (recurring license charge) software arrangements on a monthly basis over the period that the client is entitled to use the license due to the contractual terms in these arrangements. Since the company currently expenses sales commissions as incurred, the requirement in the new standard to capitalize certain in-scope sales commissions is being evaluated to determine its potential impact in the consolidated financial statements in the year of adoption. There will be no impact to cash flows. The company continues to assess all potential impacts of the guidance and given normal ongoing business dynamics, preliminary conclusions are subject to change. Standards Implemented In January 2017, the FASB issued guidance which clarifies the definition of a business. The guidance provides a more robust framework to use in determining when a set of assets and activities acquired or sold is a business. The guidance is effective January 1, 2018 and early adoption is permitted. The company adopted the guidance effective January 1, 2017, and it did not have a material impact in the consolidated financial results. In October 2016, the FASB issued guidance which requires an entity to recognize the income tax consequences of intra-entity transfers of assets, other than inventory, at the time of transfer. Assets within the scope of the guidance include intellectual property and property, plant and equipment. The guidance is effective January 1, 2018 and early adoption is permitted. The company adopted the guidance on January 1, 2017 using the required modified retrospective method. At adoption, $95 million and $47 million were reclassified from investments and sundry assets and prepaid expenses and other current assets, respectively into retained earnings. Additionally, net deferred taxes of $244 million were established in deferred taxes in the Consolidated Statement of Financial Position, resulting in a cumulative-effect net credit to retained earnings of $102 million. In January 2017, the company had one transaction that generated a $582 million benefit to income tax expense, income from continuing operations and net income and a benefit to basic and diluted earnings per share of $0.62 and $0.61 per share, respectively, for the three months ended March 31, 2017. The ongoing impact of this guidance will be dependent on any transaction that is within its scope. In March 2016, the FASB issued guidance which changes the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification in the Consolidated Statement of Cash Flows. The guidance was effective and adopted by the company on January 1, 2017, and it did not have a material impact in the Consolidated Statement of Financial Position. The ongoing impact of the guidance could result in increased volatility in the provision for income taxes and earnings per share in the Consolidated Statement of Earnings, depending on the company’s share price at exercise or vesting of share-based awards compared to grant date, however these impacts are not expected to be material. These impacts are recorded on a prospective basis. See note 5, “Stock-Based Compensation,” for additional information. The company continues to estimate forfeitures in conjunction with measuring stock-based compensation cost. The guidance also requires cash payments on behalf of employees for shares directly withheld for taxes to be presented as financing outflows in the Consolidated Statement of Cash Flows. Prior to adoption, the company reported this activity as an operating cash outflow and as a result, prior periods have been reclassified as required. In September 2015, the FASB issued guidance eliminating the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which the amount of the adjustment is determined. In addition, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. The guidance was effective January 1, 2016 on a prospective basis. The guidance did not have a material impact in the consolidated financial results. In May 2015, the FASB issued guidance which removed the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also removed the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance was effective January 1, 2016. The guidance was a change in disclosure only and did not have an impact in the consolidated financial results. In April 2015, the FASB issued guidance about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a services contract. All software licenses recognized under this guidance will be accounted for consistent with other licenses of intangible assets. The guidance was effective January 1, 2016 and the company adopted it on a prospective basis. The guidance did not have a material impact in the consolidated financial results. |
Fair Value Measurements | Fair Value Measurements Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the company is required to classify certain assets and liabilities based on the following fair value hierarchy: · Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; · Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and · Level 3—Unobservable inputs for the asset or liability. The guidance requires the use of observable market data if such data is available without undue cost and effort. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items 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. As an example, the fair value of derivatives is derived utilizing a discounted cash flow model that uses observable market inputs such as known notional value amounts, yield curves, spot and forward exchange rates as well as discount rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. Certain financial assets are measured at fair value on a nonrecurring basis. These assets include equity method investments that are recognized at fair value at the measurement date to the extent that they are deemed to be other-than-temporarily impaired. Certain assets that are measured at fair value on a recurring basis can be subject to nonrecurring fair value measurements. These assets include available-for-sale equity investments that are deemed to be other-than-temporarily impaired. In the event of an other-than-temporary impairment of a financial investment, fair value is measured using a model described above. Non-financial assets such as property, plant and equipment, land, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset. During the three months ended March 31, 2016, a pre-tax impairment charge related to certain property, plant and equipment of $252 million was recorded. There were no material impairments of non-financial assets for the three months ended March 31, 2017. Accounting guidance permits the measurement of eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. This election is irrevocable. The company has not applied the fair value option to any eligible assets or liabilities. |
Fair Value of Financial Instruments | Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, 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. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Long-Term Debt Fair value of publicly-traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. |
Debt and Marketable Equity Securities | The company’s cash equivalents and current debt securities are considered available-for-sale and recorded at fair value, which is not materially different from carrying value, in the Consolidated Statement of Financial Position. |
Derivative Financial Instruments | 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. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the company has a policy of only entering into contracts with carefully selected major financial institutions based upon their overall credit profile. The company’s established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangement to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with most of its major derivative counterparties. These arrangements require the company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings received from the major credit agencies. Full collateralization of these agreements would be required in the event that the company’s credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuant to the terms of the collateral security arrangements. In the Consolidated Statement of Financial Position, the company does not offset derivative assets against liabilities in master netting 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 prepaid expenses and other current assets in the Consolidated Statement of Financial Position. The company may employ derivative instruments to hedge the volatility in stockholders’ equity resulting from changes in currency exchange rates of significant foreign subsidiaries of the company with respect to the U.S. dollar. These instruments, designated as net investment hedges, expose the company to liquidity risk as the derivatives have an immediate cash flow impact upon maturity which is not offset by a cash flow from the translation of the underlying hedged equity. The company monitors this cash loss potential on an ongoing basis and may discontinue some of these hedging relationships by de-designating or terminating the derivative instrument in order to manage the liquidity risk. Although not designated as accounting hedges, the company may utilize derivatives to offset the changes in the fair value of the de-designated instruments from the date of de-designation until maturity. In its hedging programs, the company uses forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments. 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 uses interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). The company is exposed to interest rate volatility on future debt issuances. To manage this risk, the company may use forward starting interest-rate swaps to lock in the rate on the interest payments related to the forecasted debt issuance. These swaps are accounted for as cash flow hedges. 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. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose. 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 parent company. In anticipation of these foreign currency cash flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is four years. The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps are accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is approximately nine years. The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition, the company uses foreign exchange forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are 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 Statement of Earnings. 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 selling, general and administrative (SG&A) expense in the Consolidated Statement of Earnings. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Statement of Earnings. The company may hold warrants to purchase shares of common stock in connection with various investments that are deemed derivatives because they contain net share or net cash settlement provisions. The company records the changes in the fair value of these warrants in other (income) and expense in the Consolidated Statement of Earnings. The company is exposed to a potential loss if a client fails to pay amounts due under contractual terms. The company may utilize credit default swaps to economically hedge its credit exposures. The swaps are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. The company is exposed to market volatility on certain investment securities. The company may utilize options or forwards to economically hedge its market exposure. The derivatives are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. |
Financing Receivables | The company determines its allowance for credit losses based on two portfolio segments: lease receivables and loan receivables, and further segments the portfolio into three classes: Americas, Europe/Middle East/Africa (EMEA), and Asia Pacific. When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For individually evaluated receivables, the company determines the expected cash flow for the receivable and calculates an estimate of the potential loss and the probability of loss. For those accounts in which the loss is probable, the company records a specific reserve. In addition, the company records an unallocated reserve that is determined by applying a reserve rate to its different portfolios, excluding accounts that have been specifically reserved. This reserve rate is based upon credit rating, probability of default, term, characteristics (lease/loan) and loss history. |
Impaired Loans and Credit Quality Indicators | The company considers any receivable with an individually evaluated reserve as an impaired receivable. Depending on the level of impairment, receivables will also be placed on non-accrual status. The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators do not reflect mitigation actions that the company takes to transfer credit risk to third parties. |
Stock-Based Compensation | Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. |
Segments | Performance measurement is based on operating pre-tax income from continuing operations. The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. |
Acquisitions | The acquisition was accounted for as a business combination using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity were recorded at their estimated fair values at the date of acquisition. |
Commitments and 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. 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. |
Financial Instruments (Tables)
Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Financial Instruments: | |
Financial assets and financial liabilities measured at fair value on a recurring basis | (Dollars in millions) At March 31, 2017 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ $ — $ Money market funds — — Total — (6) Debt securities - current (2) — — (6) Debt securities - noncurrent (3) — Available-for-sale equity investments (3) — — Derivative assets (4) Interest rate contracts — — Foreign exchange contracts — — Equity contracts — — Total — — (7) Total assets $ $ $ — $ (7) Liabilities: Derivative liabilities (5) Foreign exchange contracts $ — $ $ — $ Equity contracts — — Interest rate contracts — — Total liabilities $ — $ $ — $ (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) U.S. government securities reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at March 31, 2017 were $348 million and $546 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at March 31, 2017 were $130 million and $35 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions each would have been reduced by $122 million. (Dollars in millions) At December 31, 2016 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ $ — $ Money market funds — — Total — (6) Debt securities - current (2) — — (6) Debt securities - noncurrent (3) — Available-for-sale equity investments (3) — — Derivative assets (4) Interest rate contracts — — Foreign exchange contracts — — Equity contracts — — Total — — (7) Total assets $ $ $ — $ (7) Liabilities: Derivative liabilities (5) Foreign exchange contracts $ — $ $ — $ Equity contracts — — Interest rate contracts — — Total liabilities $ — $ $ — $ (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) U.S government securities reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2016 were $532 million and $594 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2016 were $145 million and $61 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions each would have been reduced by $116 million. |
Noncurrent debt and marketable equity securities available-for-sale and recorded at fair value | Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At March 31, 2017: Cost Gains Losses Value Debt securities — noncurrent(1) $ $ $ — $ Available-for-sale equity investments(1) $ $ $ $ (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At December 31, 2016: Cost Gains Losses Value Debt securities — noncurrent(1) $ $ $ — $ Available-for-sale equity investments(1) $ $ $ $ (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. |
Sales of debt and available-for-sale equity investments | (Dollars in millions) For the three months ended March 31: 2017 2016 Proceeds $ $ Gross realized gains (before taxes) — Gross realized losses (before taxes) |
Unrealized gains/(losses) on available-for-sale debt and equity securities | (Dollars in millions) For the three months ended March 31: 2017 2016 Net unrealized gains/(losses) arising during the period $ ) $ ) Net unrealized (gains)/losses reclassified to net income* * There were no writedowns for the three months ended March 31, 2017 and 2016, respectively. |
Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position | Fair Value of Derivative Assets Fair Value of Derivative Liabilities Balance Sheet Balance Sheet (Dollars in millions) Classification 3/31/2017 12/31/2016 Classification 3/31/2017 12/31/2016 Designated as hedging instruments: Interest rate contracts: Prepaid expenses and other current assets $ — $ — Other accrued expenses and liabilities $ $ — Investments and sundry assets Other liabilities Foreign exchange contracts: Prepaid expenses and other current assets Other accrued expenses and liabilities Investments and sundry assets Other liabilities Fair value of derivative assets $ $ Fair value of derivative liabilities $ $ Not designated as hedging instruments: Foreign exchange contracts: Prepaid expenses and other current assets $ $ Other accrued expenses and liabilities $ $ Investments and sundry assets Other liabilities — Equity contracts: Prepaid expenses and other current assets Other accrued expenses and liabilities Investments and sundry assets — — Other liabilities — — Fair value of derivative assets $ $ Fair value of derivative liabilities $ $ Total debt designated as hedging instruments: Short-term debt N/A N/A $ $ Long-term debt N/A N/A $ $ Total $ $ $ $ N/A - not applicable |
Effect of Derivative Instruments in the Consolidated Statement of Earnings | Gain (Loss) Recognized in Earnings Consolidated Recognized on Attributable to Risk (Dollars in millions) Statement of Derivatives Being Hedged(2) For the three months ended March 31: Earnings Line Item 2017 2016 2017 2016 Derivative instruments in fair value hedges (1) (5): Interest rate contracts Cost of financing $ ) $ $ $ ) Interest expense ) ) Derivative instruments not designated as hedging instruments: Foreign exchange contracts Other (income) and expense ) N/A N/A Interest rate contracts Other (income) and expense — N/A N/A Equity contracts SG&A expense N/A N/A Other (income) and expense — ) N/A N/A Total $ ) $ $ $ ) Gain (Loss) Recognized in Earnings and Other Comprehensive Income Ineffectiveness and (Dollars in millions) Effective Portion Consolidated Effective Portion Reclassified Amounts Excluded from For the three months Recognized in OCI Statement of from AOCI Effectiveness Testing(3) ended March 31: 2017 2016 Earnings Line Item 2017 2016 2017 2016 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Interest expense $ ) $ ) $ — $ — Foreign exchange contracts ) ) Other (income) and expense Cost of sales* — — Cost of services* ) — — SG&A expense — — Instruments in net investment hedges(4): Foreign exchange contracts ) ) Interest expense — — Total $ ) $ ) $ $ $ $ * Reclassified to conform to 2017 presentation N/A - not applicable Note: OCI represents other comprehensive income/(loss) in the Consolidated Statement of Comprehensive Income and AOCI represents accumulated other comprehensive income/(loss) in the Consolidated Statement of Changes in Equity. (1) The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts. (2) The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period. (3) The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships. (4) Instruments in net investment hedges include derivative and non-derivative instruments. (5) For the three month periods ended March 31, 2017 and March 31, 2016, fair value hedges resulted in a loss of less than $1 million and a gain of $2 million in ineffectiveness, respectively. |
Financing Receivables (Tables)
Financing Receivables (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Financing Receivables: | |
Financing receivables, net of allowances for credit losses, including residual values | At March 31, At December 31, (Dollars in millions) 2017 2016 Current: Net investment in sales-type and direct financing leases $ $ Commercial financing receivables Client loan and installment payment receivables (loans) Total $ $ Noncurrent: Net investment in sales-type and direct financing leases $ $ Client loan and installment payment receivables (loans) Total $ $ |
Schedule of financing receivables and allowance for credit losses by portfolio segment | (Dollars in millions) At March 31, 2017 Americas EMEA Asia Pacific Total Financing receivables Lease receivables $ $ $ $ Loan receivables Ending balance $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ Allowance for credit losses Beginning balance at January 1, 2017 Lease receivables $ $ $ $ Loan receivables Total $ $ $ $ Write-offs $ ) $ $ $ ) Recoveries Provision ) Other Ending balance at March 31, 2017 $ $ $ $ Lease receivables $ $ $ $ Loan receivables $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ (Dollars in millions) At December 31, 2016:* Americas EMEA Asia Pacific Total Financing receivables: Lease receivables $ $ $ $ Loan receivables Ending balance $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ Allowance for credit losses Beginning balance at January 1, 2016 Lease receivables $ $ $ $ Loan receivables Total $ $ $ $ Write-offs $ ) $ ) $ ) $ ) Recoveries Provision ) ) Other ) ) ) Ending balance at December 31, 2016 $ $ $ $ Lease receivables $ $ $ $ Loan receivables $ $ $ $ Collectively evaluated for impairment $ $ $ $ Individually evaluated for impairment $ $ $ $ * Reclassified to conform to 2017 presentation. |
Schedule of recorded investment in financing receivables which are on non-accrual status | At March 31, At December 31, (Dollars in millions) 2017 2016* Americas $ $ EMEA Asia Pacific Total lease receivables $ $ Americas $ $ EMEA Asia Pacific Total loan receivables $ $ Total receivables $ $ * Reclassified to conform to 2017 presentation. |
Schedule of impaired client loan and lease receivables | At March 31, 2017 At December 31, 2016* Recorded Related Recorded Related (Dollars in millions) Investment Allowance Investment Allowance Americas $ $ $ $ EMEA Asia Pacific Total $ $ $ $ * Reclassified to conform to 2017 presentation. Interest Average Interest Income (Dollars in millions) Recorded Income Recognized on For the three months ended March 31, 2017: Investment Recognized Cash Basis Americas $ $ $ — EMEA — Asia Pacific — Total $ $ $ — Interest Average Interest Income (Dollars in millions) Recorded Income Recognized on For the three months ended March 31, 2016:* Investment Recognized Cash Basis Americas $ $ $ — EMEA — Asia Pacific — Total $ $ $ — * Reclassified to conform to 2017 presentation. |
Schedule of net recorded investment by credit quality indicator | Lease Receivables Loan Receivables (Dollars in millions) Asia Asia At March 31, 2017: Americas EMEA Pacific Americas EMEA Pacific Credit Ratings: Aaa — Aa3 $ $ $ $ $ $ A1 — A3 Baa1 — Baa3 Ba1 — Ba2 Ba3 — B1 B2 — B3 Caa — D Total $ $ $ $ $ $ Lease Receivables Loan Receivables (Dollars in millions) Asia Asia At December 31, 2016:* Americas EMEA Pacific Americas EMEA Pacific Credit Ratings: Aaa — Aa3 $ $ $ $ $ $ A1 — A3 Baa1 — Baa3 Ba1 — Ba2 Ba3 — B1 B2 — B3 Caa — D Total $ $ $ $ $ $ * Reclassified to conform to 2017 presentation. |
Schedule of past due financing receivables | Fully <90 Days Recorded Total Reserved or Unbilled Total Investment (Dollars in millions) Past Due Financing Financing Financing > 90 Days and At March 31, 2017: > 90 days (1) Receivables Receivables Receivables Accruing (2) Americas $ $ $ $ $ EMEA Asia Pacific Total lease receivables $ $ $ $ $ Americas $ $ $ $ $ EMEA Asia Pacific Total loan receivables $ $ $ $ $ Total $ $ $ $ $ (1) Only the portion of a financing receivable which is greater than 90 days past due, excluding amounts that are fully reserved. (2) At a contract level, which includes total billed and unbilled amounts for aged financing receivables greater than 90 days. Fully <90 Days Recorded Total Reserved or Unbilled Total Investment (Dollars in millions) Past Due Financing Financing Financing > 90 Days and At December 31, 2016:* > 90 days (1) Receivables Receivables Receivables Accruing (2) Americas $ $ $ $ $ EMEA Asia Pacific Total lease receivables $ $ $ $ $ Americas $ $ $ $ $ EMEA Asia Pacific Total loan receivables $ $ $ $ $ Total $ $ $ $ $ (1) Only the portion of a financing receivable which is greater than 90 days past due, excluding amounts that are fully reserved. (2) At a contract level, which includes total billed and unbilled amounts for aged financing receivables greater than 90 days. * Reclassified to conform with 2017 presentation. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stock-Based Compensation: | |
Stock-based compensation cost included in income from continuing operations | (Dollars in millions) For the three months ended March 31: 2017 2016 Cost $ $ Selling, general and administrative Research, development and engineering Pre-tax stock-based compensation cost Income tax benefits ) ) Total net stock-based compensation cost $ $ |
Segments (Tables)
Segments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segments: | |
Revenue and Pre-tax Income by Segment | Cognitive Solutions & Industry Services Technology Global Services & Cognitive Business Cloud Global Total (Dollars in millions) Solutions Services Platforms Systems Financing Segments For the three months ended March 31, 2017: External revenue $ $ $ $ $ $ Internal revenue Total revenue $ $ $ $ $ $ Pre-tax income from continuing operations $ $ $ $ ) $ $ Revenue year-to-year change % )% )% )% )% )% Pre-tax income year-to-year change % % % nm )% % Pre-tax income margin % % % )% % % For the three months ended March 31, 2016: External revenue $ $ $ $ $ $ Internal revenue Total revenue $ $ $ $ $ $ Pre-tax income from continuing operations $ $ $ $ ) $ $ Pre-tax income margin % % % )% % % nm - not meaningful |
Reconciliation of segment revenue to IBM as reported | (Dollars in millions) For the three months ended March 31: 2017 2016 Revenue: Total reportable segments $ $ Eliminations of internal transactions ) ) Other revenue Total consolidated revenue $ $ |
Reconciliation of segment pre-tax income to IBM as reported | (Dollars in millions) For the three months ended March 31: 2017 2016 Pre-tax income from continuing operations: Total reportable segments $ $ Amortization of acquired intangible assets ) ) Acquisition-related (charges)/income ) Non-operating retirement-related (costs)/income ) ) Eliminations of internal transactions ) ) Unallocated corporate amounts ) ) Total pre-tax income from continuing operations $ $ |
Equity Activity (Tables)
Equity Activity (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ $ $ Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to other (income) and expense Total net changes related to available-for-sale securities $ $ $ Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to: Cost of sales ) ) Cost of services ) ) SG&A expense ) ) Other (income) and expense ) ) Interest expense ) Total unrealized gains/(losses) on cash flow hedges $ ) $ $ ) Retirement-related benefit plans(1): Prior service costs/(credits) $ $ $ Net (losses)/gains arising during the period ) Curtailments and settlements ) ) Amortization of prior service (credits)/costs ) ) Amortization of net (gains)/losses ) Total retirement-related benefit plans $ $ ) $ Other comprehensive income/(loss) $ $ ) $ (1) These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.) (Dollars in millions) Before Tax Tax (Expense)/ Net of Tax For the three months ended March 31, 2016: Amount Benefit Amount Other comprehensive income/(loss): Foreign currency translation adjustments $ $ $ Net changes related to available-for-sale securities: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to other (income) and expense ) Total net changes related to available-for-sale securities $ $ $ Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ ) $ $ ) Reclassification of (gains)/losses to: Cost of sales* ) ) Cost of services* ) SG&A expense ) ) Other (income) and expense ) ) Interest expense ) Total unrealized gains/(losses) on cash flow hedges $ ) $ $ ) Retirement-related benefit plans(1): Net (losses)/gains arising during the period $ ) $ $ ) Curtailments and settlements ) Amortization of prior service (credits)/costs ) ) Amortization of net (gains)/losses ) Total retirement-related benefit plans $ $ ) $ Other comprehensive income/(loss) $ $ $ * Reclassified to conform to 2017 presentation. (1) These AOCI components are included in the computation of net periodic pension cost. (See note 8, “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, 2017 $ $ ) $ ) $ $ ) Other comprehensive income before reclassifications ) ) Amount reclassified from accumulated other comprehensive income ) Total change for the period ) March 31, 2017 $ $ ) $ ) $ $ ) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. Net Change Net Unrealized Net Unrealized Foreign Retirement- Gains/(Losses) Accumulated Gains/(Losses) Currency Related on Available- Other on Cash Flow Translation Benefit For-Sale Comprehensive (Dollars in Millions) Hedges Adjustments* Plans Securities Income/(Loss) January 1, 2016 $ $ ) $ ) $ $ ) Other comprehensive income before reclassifications ) ) ) Amount reclassified from accumulated other comprehensive income ) Total change for the period ) March 31, 2016 $ ) $ ) $ ) $ $ ) * Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax. |
Retirement-Related Benefits (Ta
Retirement-Related Benefits (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Retirement-Related Benefits: | |
Pre-tax cost for all retirement-related plans | Yr. to Yr. (Dollars in millions) Percent For the three months ended March 31: 2017 2016 Change Retirement-related plans — cost Defined benefit and contribution pension plans — cost $ $ % Nonpension postretirement plans — cost Total $ $ % |
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 March 31: 2017 2016 2017 2016 Service cost $ — $ — $ $ Interest cost Expected return on plan assets ) ) ) ) Amortization of prior service costs/(credits) ) ) Recognized actuarial losses Curtailments and settlements — — ) Multi-employer plans/other costs — — Total net periodic pension (income)/cost of defined benefit plans ) Cost of defined contribution plans Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings $ $ $ $ |
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 March 31: 2017 2016 2017 2016 Service cost $ $ $ $ Interest cost Expected return on plan assets — — ) ) Amortization of prior service costs/(credits) ) ) ) Recognized actuarial losses Curtailments and settlements — — — Total nonpension postretirement plan cost recognized in Consolidated Statement of Earnings $ $ $ $ |
Acquisitions_Divestitures (Tabl
Acquisitions/Divestitures (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Acquisitions/Divestitures: | |
Discontinued operation, summarized financial information | Three Months Ended March 31, (Dollars in millions) 2017 2016 Total revenue $ — $ — Income/(loss) from discontinued operations $ ) $ ) Gain/(loss) on disposal, before tax Total loss from discontinued operations, before income taxes $ ) $ ) Provision for/(benefit from) income taxes ) ) Loss from discontinued operations, net of tax $ ) $ ) |
Intangible Assets Including G31
Intangible Assets Including Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Intangible Assets Including Goodwill: | |
Intangible asset balances by major asset class | At March 31, 2017 (Dollars in millions) Gross Carrying Accumulated Net Carrying Intangible asset class Amount Amortization Amount Capitalized software $ $ ) $ Client relationships ) Completed technology ) Patents/trademarks ) Other* ) Total $ $ ) $ * Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems. At December 31, 2016 (Dollars in millions) Gross Carrying Accumulated Net Carrying Intangible asset class Amount Amortization Amount Capitalized software $ $ ) $ Client relationships ) Completed technology ) Patents/trademarks ) Other* ) Total $ $ ) $ * 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 2017 (for Q2 - Q4) $ $ $ 2018 2019 2020 2021 — |
Changes in goodwill balances by reportable segment | Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 01/01/17 Additions Adjustments Divestitures Adjustments* 3/31/17 Cognitive Solutions $ $ $ $ — $ $ Global Business Services — — Technology Services & Cloud Platforms ) — Systems — — — Total $ $ $ $ — $ $ * Primarily driven by foreign currency translation. Foreign Currency Purchase Translation (Dollars in millions) Balance Goodwill Price And Other Balance Segment 01/01/16 Additions Adjustments Divestitures Adjustments* 12/31/16 Cognitive Solutions $ $ $ $ ) $ $ Global Business Services ) ) Technology Services & Cloud Platforms ) ) ) Systems — ) — Total $ $ $ ) $ ) $ ) $ * Primarily driven by foreign currency translation. |
Borrowings (Tables)
Borrowings (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Borrowings: | |
Short-Term Debt | At March 31, At December 31, (Dollars in millions) 2017 2016 Commercial paper $ — $ Short-term loans Long-term debt — current maturities Total $ $ |
Long-Term Debt | Balance Balance (Dollars in millions) Maturities 3/31/2017 12/31/2016 U.S. dollar debt (average interest rate at March 31, 2017):* 4.69% $ $ 3.24% 2018-2019 1.86% 2020-2021 1.54% 3.38% 3.63% 7.00% 3.45% 3.01% 6.50% 5.88% 8.00% 5.60% 4.00% 7.00% 4.70% 7.13% $ $ Other currencies (average interest rate at March 31, 2017, in parentheses):* Euros (1.6%) 2019-2028 $ $ Pound sterling (2.7%) 2020-2022 Japanese yen (0.9%) 2017-2026 Canadian (2.2%) — Other (10.0%) 2017-2020 $ $ Less: net unamortized discount Less: net unamortized debt issuance costs Add: fair value adjustment** $ $ Less: current maturities Total $ $ * Includes notes, debentures, bank loans, securitized borrowings and capital lease obligations. ** The portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Statement of Financial Position as an amount equal to the sum of the debt’s carrying value plus a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. There are no debt securities issued and outstanding by IBM International Group Capital LLC, which is an indirect, 100 percent owned finance subsidiary of International Business Machines Corporation, the parent. Any debt securities issued by IBM International Group Capital LLC, would be fully and unconditionally guaranteed by the parent. |
Pre-swap annual contractual maturities of long-term debt outstanding | (Dollars in millions) Total 2017 (for Q2 - Q4) $ 2018 2019 2020 2021 2022 and beyond Total $ |
Interest on Debt | (Dollars in millions) For the three months ended March 31: 2017 2016 Cost of financing $ $ Interest expense Net investment derivative activity ) ) Interest capitalized Total interest paid and accrued $ $ |
Commitments (Tables)
Commitments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments: | |
Changes in warranty liabilities | Standard Warranty Liability (Dollars in millions) 2017 2016 Balance at January 1 $ $ Current period accruals Accrual adjustments to reflect actual experience ) Charges incurred ) ) Balance at March 31 $ $ Extended Warranty Liability (Dollars in millions) 2017 2016 Aggregate deferred revenue at January 1 $ $ Revenue deferred for new extended warranty contracts Amortization of deferred revenue ) ) Other* Aggregate deferred revenue at March 31 $ $ Current portion $ $ Noncurrent portion $ $ * Other primarily consists of foreign currency translation adjustments. |
Basis of Presentation - Reclass
Basis of Presentation - Reclassification (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Net cash provided by operating activities | $ 3,955 | $ 5,530 | [1],[2] |
Net cash (used in)/provided by investing activities | 350 | (1,886) | [2] |
Total cash flows | $ 2,270 | 6,668 | |
Reclassification of certain financing receivables | |||
Net cash provided by operating activities | (142) | ||
Net cash (used in)/provided by investing activities | 142 | ||
Total cash flows | $ 0 | ||
[1] | Reclassified to reflect adoption of the FASB guidance on share-based compensation. | ||
[2] | Revised classification of certain financing receivables. |
Basis of Presentation - Income
Basis of Presentation - Income Taxes and Noncontrolling Interest (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Provision for/(benefit from) income taxes | $ (329) | $ (983) |
Effective tax rate (as a percent) | (23.10%) | (95.10%) |
Discrete tax charge related to foreign audit activity | $ 99 | |
Other (income) and expense | ||
Noncontrolling interest amounts, net of tax | 3.6 | $ 1.3 |
Accounting Standards Update 2016-16, Intra-Entity Transfers of Assets Other Than Inventory | Early adoption | ||
Provision for/(benefit from) income taxes | $ (582) |
Accounting Changes (Details)
Accounting Changes (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Jan. 31, 2017item | Mar. 31, 2017USD ($)$ / shares | Mar. 31, 2016USD ($)$ / shares | Dec. 31, 2018USD ($) | Dec. 31, 2016USD ($) | Jan. 01, 2017USD ($) | |
Accounting Changes | ||||||
Operating lease commitments | $ 6,900 | |||||
Sales-type lease revenue recognized based on use of residual value guarantee insurance | 220 | |||||
Impact to cash flows | $ 2,270 | $ 6,668 | ||||
Investments and sundry assets | 4,549 | 4,585 | ||||
Prepaid expenses and other current assets | 4,715 | 4,564 | ||||
Deferred tax assets | 6,457 | 5,224 | ||||
Retained earnings | 153,292 | $ 152,759 | ||||
Provision for/(benefit from) income taxes | (329) | (983) | ||||
Income from continuing operations | 1,753 | 2,016 | ||||
Net income | $ 1,750 | $ 2,014 | ||||
Earnings per share, basic (in dollars per share) | $ / shares | $ 1.86 | $ 2.09 | ||||
Earnings per share, diluted (in dollars per share) | $ / shares | $ 1.85 | $ 2.09 | ||||
Accounting Standards Update 2016-16, Intra-Entity Transfers of Assets Other Than Inventory | Early adoption | ||||||
Accounting Changes | ||||||
Investments and sundry assets | $ (95) | |||||
Prepaid expenses and other current assets | (47) | |||||
Deferred tax assets | 244 | |||||
Retained earnings | $ 102 | |||||
Number of transactions within scope of new guidance | item | 1 | |||||
Provision for/(benefit from) income taxes | $ (582) | |||||
Income from continuing operations | 582 | |||||
Net income | $ 582 | |||||
Earnings per share, basic (in dollars per share) | $ / shares | $ 0.62 | |||||
Earnings per share, diluted (in dollars per share) | $ / shares | $ 0.61 | |||||
Accounting Standards Update 2014-09, Revenue from Contracts with Customers | Expected | ||||||
Accounting Changes | ||||||
Impact to cash flows | $ 0 |
Financial Instruments - Fair Va
Financial Instruments - Fair Value Measurements (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2017 | Dec. 31, 2016 | |
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Pre-tax impairment charge related to certain property, plant and equipment | $ 252 | ||
Debt securities - noncurrent | $ 7 | $ 8 | |
Available-for-sale equity investments | 5 | 7 | |
Derivative assets | 894 | 1,126 | |
Potential reduction in net position of total derivative assets | 122 | 116 | |
Fair value assets, Level 2 to Level 1 transfer | 0 | 0 | |
Fair value assets, Level 1 to Level 2 transfer | 0 | 0 | |
Fair value liabilities, Level 2 to Level 1 transfer | 0 | 0 | |
Fair value liabilities, Level 1 to Level 2 transfer | 0 | 0 | |
Recurring | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 7,160 | 4,832 | |
Debt securities - current | 599 | 699 | |
Debt securities - noncurrent | 7 | 8 | |
Available-for-sale equity investments | 5 | 7 | |
Derivative assets | 894 | 1,126 | |
Total Assets | 8,665 | 6,672 | |
Total Liabilities | 166 | 206 | |
Potential reduction in net position of total derivative assets | 122 | 116 | |
Potential reduction in net position of total derivative liabilities | 122 | 116 | |
Recurring | Prepaid expenses and other current assets | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 348 | 532 | |
Recurring | Investments and sundry assets | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 546 | 594 | |
Recurring | Other accrued expenses and liabilities | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative liabilities | 130 | 145 | |
Recurring | Other liabilities | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative liabilities | 35 | 61 | |
Recurring | Interest rate contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 498 | 555 | |
Derivative liabilities | 5 | 8 | |
Recurring | Foreign exchange contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 389 | 560 | |
Derivative liabilities | 155 | 188 | |
Recurring | Equity contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 6 | 11 | |
Derivative liabilities | 6 | 10 | |
Recurring | Time deposits and certificates of deposit | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 5,720 | 3,629 | |
Recurring | Money market funds | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 1,440 | 1,204 | |
Recurring | Level 1 | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 1,440 | 1,204 | |
Debt securities - noncurrent | 1 | 1 | |
Available-for-sale equity investments | 5 | 7 | |
Total Assets | 1,447 | 1,212 | |
Recurring | Level 1 | Money market funds | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 1,440 | 1,204 | |
Recurring | Level 2 | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | 5,720 | 3,629 | |
Debt securities - current | 599 | 699 | |
Debt securities - noncurrent | 6 | 6 | |
Derivative assets | 894 | 1,126 | |
Total Assets | 7,218 | 5,460 | |
Total Liabilities | 166 | 206 | |
Recurring | Level 2 | Interest rate contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 498 | 555 | |
Derivative liabilities | 5 | 8 | |
Recurring | Level 2 | Foreign exchange contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 389 | 560 | |
Derivative liabilities | 155 | 188 | |
Recurring | Level 2 | Equity contracts | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Derivative assets | 6 | 11 | |
Derivative liabilities | 6 | 10 | |
Recurring | Level 2 | Time deposits and certificates of deposit | |||
Financial assets and financial liabilities measured at fair value on a recurring basis: | |||
Cash equivalents | $ 5,720 | $ 3,629 |
Financial Instruments - Not Mea
Financial Instruments - Not Measured at Fair Value (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Long-Term Debt | ||
Carrying amount of long-term debt | $ 34,441 | $ 34,655 |
Fair value of long-term debt | $ 36,733 | $ 36,838 |
Financial Instruments - Debt an
Financial Instruments - Debt and Equity Securities (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | |
Debt and Marketable Equity Securities | ||||
Debt securities - noncurrent, Adjusted Cost | $ 5 | $ 5 | ||
Debt securities - noncurrent, Gross Unrealized Gains | 2 | 3 | ||
Debt securities - noncurrent, Fair Value | 7 | 8 | ||
Available-for-sale equity investments, Adjusted Cost | 1 | 3 | ||
Available-for-sale equity investments, Gross Unrealized Gains | 4 | 5 | ||
Available-for-sale equity investments, Gross Unrealized Losses | 0 | 0 | ||
Available-for-sale equity investments, Fair Value | 5 | $ 7 | ||
Sales of debt and available-for-sale equity investments | ||||
Proceeds | 5 | $ 148 | ||
Gross realized gains (before taxes) | 1 | |||
Gross realized losses (before taxes) | 2 | 37 | ||
Unrealized holding gains/(losses) on available-for-sale debt and marketable equity securities | ||||
Net unrealized gains/(losses) arising during the period | (1) | (22) | ||
Net unrealized (gains)/losses reclassified to net income | 1 | 23 | ||
Writedowns included in net income for the period | $ 0 | 0 | ||
Maximum contractual maturities of substantially all available-for-sale debt securities | 1 year | |||
Lenovo's common stock | ||||
Debt and Marketable Equity Securities | ||||
Available-for-sale equity investments, Adjusted Cost | $ 185 | |||
Other-than-temporary impairment loss | $ 86 | |||
Sales of debt and available-for-sale equity investments | ||||
Gross realized losses (before taxes) | $ 37 |
Financial Instruments - Derivat
Financial Instruments - Derivatives, Offsetting (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Derivative Financial Instruments | ||
Fair value of derivative instruments under collateralized arrangements in a liability position | $ 4 | $ 11 |
Collateral posted on derivative instruments | $ 0 | 0 |
Maximum spread on credit default swap agreements before full collateralization is required | 2.50% | |
Fair value of total derivative instruments, Assets | $ 894 | 1,126 |
Liabilities included in master netting arrangements | 122 | 116 |
Obligation to return cash collateral | 91 | 141 |
Non-cash collateral received | 0 | 35 |
Net exposure related to derivative assets recorded in the Statement of Financial Position | 681 | 834 |
Net exposure related to derivative liabilities recorded in the Statement of Financial Position | 44 | 90 |
Cash collateral rehypothecated | 0 | 0 |
Other receivables | ||
Derivative Financial Instruments | ||
Right to reclaim cash collateral | 0 | 0 |
Accounts payable | ||
Derivative Financial Instruments | ||
Obligation to return cash collateral | $ 91 | $ 141 |
Financial Instruments - Deriv41
Financial Instruments - Derivatives, Other Information (Details) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($)instrument | Dec. 31, 2016USD ($)instrument | |
Derivative instruments in cash flow hedging relationships | Forward-starting interest rate swaps | ||
Derivative Financial Instruments | ||
Number of derivative instruments outstanding | instrument | 0 | 0 |
Derivative instruments in cash flow hedging relationships | Forward-starting interest rate swaps | Maximum | ||
Derivative Financial Instruments | ||
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | $ 1 | $ 1 |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 1 | 1 |
Derivative instruments in cash flow hedging relationships | Foreign exchange forward contracts | ||
Derivative Financial Instruments | ||
Maximum length of time hedged | 4 years | |
Notional amount | $ 8,100 | $ 8,300 |
Average remaining maturity | 8 months 12 days | 8 months 12 days |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | $ 342 | $ 462 |
Gains (losses) expected to be reclassified to net income within the next 12 months | $ 245 | 397 |
Derivative instruments in cash flow hedging relationships | Cross-currency swaps | ||
Derivative Financial Instruments | ||
Maximum length of time hedged | 9 years | |
Notional amount | $ 1,400 | 1,400 |
Net gains (losses) before taxes in other comprehensive income/(loss), cash flow hedges | 19 | 29 |
Gains (losses) expected to be reclassified to net income within the next 12 months | 27 | 27 |
Net investment hedge | ||
Derivative Financial Instruments | ||
Notional amount | $ 6,400 | $ 6,700 |
Average remaining maturity | 2 months 12 days | 2 months 12 days |
Designated as hedging instruments | Interest rate swaps | ||
Derivative Financial Instruments | ||
Notional amount | $ 7,300 | $ 7,300 |
Average remaining maturity | 6 years | 6 years 2 months 12 days |
Derivative instruments not designated as hedging instruments | Foreign exchange contracts | ||
Derivative Financial Instruments | ||
Notional amount | $ 10,100 | $ 12,700 |
Derivative instruments not designated as hedging instruments | Foreign exchange contracts | Maximum | ||
Derivative Financial Instruments | ||
Term of contract | 1 year | |
Derivative instruments not designated as hedging instruments | Economic hedge of compensation obligations | ||
Derivative Financial Instruments | ||
Notional amount | $ 1,200 | $ 1,200 |
Derivative instruments not designated as hedging instruments | Warrants qualifying as derivatives | ||
Derivative Financial Instruments | ||
Number of derivative instruments outstanding | instrument | ||
Derivative instruments not designated as hedging instruments | Credit default swaps | ||
Derivative Financial Instruments | ||
Number of derivative instruments outstanding | instrument | 0 | 0 |
Derivative instruments not designated as hedging instruments | Economic hedge of investment securities | ||
Derivative Financial Instruments | ||
Number of derivative instruments outstanding | instrument | 0 | 0 |
Financial Instruments - Deriv42
Financial Instruments - Derivatives, Fair Value (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | $ 894 | $ 1,126 |
Short-term debt | 8,340 | 7,513 |
Long-term debt (excluding current portion) | 34,441 | 34,655 |
Fair value of total derivative liabilities and debt | 8,931 | 9,175 |
Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 841 | 993 |
Fair value of total derivative instruments, Liabilities | 97 | 89 |
Designated as hedging instruments | Net investment hedge | ||
Fair Values of Derivative Instruments | ||
Short-term debt | 788 | 1,125 |
Long-term debt (excluding current portion) | 7,977 | 7,844 |
Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 53 | 133 |
Fair value of total derivative instruments, Liabilities | 68 | 117 |
Prepaid expenses and other current assets | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 295 | 421 |
Prepaid expenses and other current assets | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 47 | 100 |
Prepaid expenses and other current assets | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 6 | 11 |
Investments and sundry assets | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 498 | 555 |
Investments and sundry assets | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 47 | 17 |
Investments and sundry assets | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Assets | 0 | 22 |
Other accrued expenses and liabilities | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 1 | |
Other accrued expenses and liabilities | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 61 | 46 |
Other accrued expenses and liabilities | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 63 | 89 |
Other accrued expenses and liabilities | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 6 | 10 |
Other liabilities | Interest rate contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | 4 | 8 |
Other liabilities | Foreign exchange contracts | Designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | $ 31 | 35 |
Other liabilities | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Fair Values of Derivative Instruments | ||
Fair value of total derivative instruments, Liabilities | $ 18 |
Financial Instruments - Deriv43
Financial Instruments - Derivatives, Gains and Losses (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | $ (32) | $ 426 |
Gain (loss) recognized in earnings attributable to risk being hedged | 42 | (233) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | (315) | (959) |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 98 | 91 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 20 | 11 |
Gain (loss) on fair value hedges ineffectiveness | 2 | |
Gains (losses) excluded from the assessment of hedge effectiveness for fair value hedges | ||
Gains (losses) associated with underlying exposure that did not occur or was not expected to occur for cash flow hedges | ||
Maximum | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) on fair value hedges ineffectiveness | (1) | |
Foreign exchange contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | (33) | (265) |
Foreign exchange contracts | Net investment hedge | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Recognized in OCI | (282) | (693) |
Cost of financing | Interest rate contracts | Derivative instruments in fair value hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | (1) | 137 |
Gain (loss) recognized in earnings attributable to risk being hedged | 23 | (112) |
Interest expense | Interest rate contracts | Derivative instruments in fair value hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | (1) | 147 |
Gain (loss) recognized in earnings attributable to risk being hedged | 20 | (120) |
Interest expense | Interest rate contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | (7) | (2) |
Interest expense | Foreign exchange contracts | Net investment hedge | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 19 | 10 |
SG&A expense | Foreign exchange contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 20 | 3 |
SG&A expense | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | 46 | 21 |
Other (income) and expense | Interest rate contracts | Derivative instruments not designated as hedging instruments | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | 0 | |
Other (income) and expense | Foreign exchange contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 65 | 87 |
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, (Ineffectiveness) and Amounts Excluded from Effectiveness Testing | 1 | 1 |
Other (income) and expense | Foreign exchange contracts | Derivative instruments not designated as hedging instruments | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | (76) | 121 |
Other (income) and expense | Equity contracts | Derivative instruments not designated as hedging instruments | ||
Derivative Instruments, Gain (Loss) | ||
Gain (loss) recognized in earnings on derivatives | (1) | |
Cost of sales | Foreign exchange contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | 11 | 9 |
Cost of services | Foreign exchange contracts | Derivative instruments in cash flow hedging relationships | ||
Derivative Instruments, Gain (Loss) | ||
Gain (Loss) Recognized in Earnings and Other Comprehensive Income, Effective Portion Reclassified from AOCI to Earnings | $ 8 | $ (6) |
Financing Receivables - Net of
Financing Receivables - Net of Allowances (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Financing receivables | |||
Financing receivables, net, current | $ 16,362 | $ 19,006 | |
Financing receivables, net, noncurrent | 8,502 | 9,021 | |
Lease receivables | |||
Financing receivables | |||
Financing receivables, net, current | 2,875 | 2,909 | |
Financing receivables, net, noncurrent | 3,733 | 3,950 | |
Sales-type and direct financing leases, unguaranteed residual value | 574 | 585 | |
Sales-type and direct financing leases, unearned income | 496 | 513 | |
Allowance for credit losses | $ 140 | 133 | $ 213 |
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 | |||
Financing receivables | |||
Financing receivables, net, current | $ 7,460 | 9,706 | |
Allowance for credit losses | $ 26 | 28 | |
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 | |||
Financing receivables | |||
Financing receivables, net, current | $ 6,027 | 6,390 | |
Financing receivables, net, noncurrent | 4,769 | 5,071 | |
Allowance for credit losses | $ 285 | $ 276 | $ 377 |
Loan receivables | Maximum | |||
Financing receivables | |||
Financing receivable, payment terms | 7 years |
Financing Receivables - By Port
Financing Receivables - By Portfolio Segment (Details) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | |
Financing receivables | ||
Financing receivables pledged as collateral for borrowings | $ 658 | $ 689 |
Financing receivables held for sale | $ 0 | 0 |
Total Lease Receivable and Loan Receivable Portfolio Segments | ||
Financing receivables | ||
Number of portfolio segments | item | 2 | |
Number of classes of financing receivable | item | 3 | |
Financing receivables on a gross basis | $ 17,179 | 18,073 |
Collectively evaluated for impairment | 16,811 | 17,726 |
Individually evaluated for impairment | 368 | 347 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 410 | 590 |
Write-offs | (9) | (237) |
Recoveries | 0 | 2 |
Provision | 12 | 58 |
Other | 11 | (3) |
Allowance for credit losses, ending balance | 424 | 410 |
Collectively evaluated for impairment | 80 | 90 |
Individually evaluated for impairment | 344 | 320 |
Total Lease Receivable and Loan Receivable Portfolio Segments | Americas | ||
Financing receivables | ||
Financing receivables on a gross basis | 9,428 | 10,015 |
Collectively evaluated for impairment | 9,250 | 9,847 |
Individually evaluated for impairment | 179 | 168 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 223 | 175 |
Write-offs | (9) | (36) |
Recoveries | 0 | 2 |
Provision | 6 | 65 |
Other | 2 | 17 |
Allowance for credit losses, ending balance | 223 | 223 |
Collectively evaluated for impairment | 54 | 62 |
Individually evaluated for impairment | 169 | 161 |
Total Lease Receivable and Loan Receivable Portfolio Segments | EMEA | ||
Financing receivables | ||
Financing receivables on a gross basis | 4,216 | 4,480 |
Collectively evaluated for impairment | 4,190 | 4,460 |
Individually evaluated for impairment | 26 | 20 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 22 | 72 |
Write-offs | 0 | (48) |
Recoveries | 0 | 0 |
Provision | 7 | (1) |
Other | 1 | (1) |
Allowance for credit losses, ending balance | 29 | 22 |
Collectively evaluated for impairment | 11 | 13 |
Individually evaluated for impairment | 18 | 9 |
Total Lease Receivable and Loan Receivable Portfolio Segments | Asia Pacific | ||
Financing receivables | ||
Financing receivables on a gross basis | 3,535 | 3,578 |
Collectively evaluated for impairment | 3,371 | 3,419 |
Individually evaluated for impairment | 164 | 159 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 165 | 343 |
Write-offs | 0 | (154) |
Recoveries | 0 | 0 |
Provision | (1) | (6) |
Other | 8 | (18) |
Allowance for credit losses, ending balance | 172 | 165 |
Collectively evaluated for impairment | 14 | 15 |
Individually evaluated for impairment | 157 | 150 |
Lease receivables | ||
Financing receivables | ||
Financing receivables on a gross basis | 6,098 | 6,336 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 133 | 213 |
Allowance for credit losses, ending balance | 140 | 133 |
Lease receivables | Americas | ||
Financing receivables | ||
Financing receivables on a gross basis | 3,602 | 3,830 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 54 | 52 |
Allowance for credit losses, ending balance | 61 | 54 |
Lease receivables | EMEA | ||
Financing receivables | ||
Financing receivables on a gross basis | 1,154 | 1,171 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 4 | 17 |
Allowance for credit losses, ending balance | 4 | 4 |
Lease receivables | Asia Pacific | ||
Financing receivables | ||
Financing receivables on a gross basis | 1,342 | 1,335 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 76 | 143 |
Allowance for credit losses, ending balance | 75 | 76 |
Loan receivables | ||
Financing receivables | ||
Financing receivables on a gross basis | 11,081 | 11,737 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 276 | 377 |
Allowance for credit losses, ending balance | 285 | 276 |
Loan receivables | Americas | ||
Financing receivables | ||
Financing receivables on a gross basis | 5,826 | 6,185 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 169 | 122 |
Allowance for credit losses, ending balance | 162 | 169 |
Loan receivables | EMEA | ||
Financing receivables | ||
Financing receivables on a gross basis | 3,062 | 3,309 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 18 | 55 |
Allowance for credit losses, ending balance | 26 | 18 |
Loan receivables | Asia Pacific | ||
Financing receivables | ||
Financing receivables on a gross basis | 2,193 | 2,243 |
Allowance for credit losses: | ||
Allowance for credit losses, beginning balance | 89 | 200 |
Allowance for credit losses, ending balance | $ 97 | $ 89 |
Financing Receivables - Non-Acc
Financing Receivables - Non-Accrual Status (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Total Lease Receivable and Loan Receivable Portfolio Segments | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | $ 241 | $ 185 |
Lease receivables | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 68 | 40 |
Lease receivables | Americas | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 28 | 23 |
Lease receivables | EMEA | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 27 | 2 |
Lease receivables | Asia Pacific | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 14 | 14 |
Loan receivables | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 172 | 145 |
Loan receivables | Americas | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 133 | 128 |
Loan receivables | EMEA | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | 31 | 5 |
Loan receivables | Asia Pacific | ||
Financing Receivables on Non-accrual Status | ||
Total Receivables | $ 8 | $ 12 |
Financing Receivables - Impaire
Financing Receivables - Impaired Loans (Details) - Total Lease Receivable and Loan Receivable Portfolio Segments - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Impaired client loan receivables | |||
Recorded Investment | $ 368 | $ 347 | |
Related Allowance | 344 | 320 | |
Average Recorded Investment | 357 | $ 544 | |
Interest Income Recognized | 1 | 0 | |
Americas | |||
Impaired client loan receivables | |||
Recorded Investment | 179 | 168 | |
Related Allowance | 169 | 161 | |
Average Recorded Investment | 173 | 133 | |
Interest Income Recognized | 0 | 0 | |
EMEA | |||
Impaired client loan receivables | |||
Recorded Investment | 26 | 20 | |
Related Allowance | 18 | 9 | |
Average Recorded Investment | 23 | 69 | |
Interest Income Recognized | 0 | 0 | |
Asia Pacific | |||
Impaired client loan receivables | |||
Recorded Investment | 164 | 159 | |
Related Allowance | 157 | $ 150 | |
Average Recorded Investment | 161 | 342 | |
Interest Income Recognized | $ 1 | $ 0 |
Financing Receivables - Credit
Financing Receivables - Credit Quality Indicators (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Lease receivables | Americas | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | $ 3,541 | $ 3,776 |
Lease receivables | Americas | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 397 | 447 |
Lease receivables | Americas | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 703 | 782 |
Lease receivables | Americas | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 699 | 772 |
Lease receivables | Americas | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 776 | 822 |
Lease receivables | Americas | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 547 | 574 |
Lease receivables | Americas | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 354 | 297 |
Lease receivables | Americas | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 65 | 83 |
Lease receivables | EMEA | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 1,150 | 1,167 |
Lease receivables | EMEA | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 48 | 51 |
Lease receivables | EMEA | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 99 | 113 |
Lease receivables | EMEA | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 355 | 366 |
Lease receivables | EMEA | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 355 | 350 |
Lease receivables | EMEA | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 207 | 208 |
Lease receivables | EMEA | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 74 | 71 |
Lease receivables | EMEA | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 12 | 9 |
Lease receivables | Asia Pacific | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 1,267 | 1,259 |
Lease receivables | Asia Pacific | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 57 | 53 |
Lease receivables | Asia Pacific | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 550 | 486 |
Lease receivables | Asia Pacific | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 313 | 330 |
Lease receivables | Asia Pacific | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 180 | 185 |
Lease receivables | Asia Pacific | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 88 | 106 |
Lease receivables | Asia Pacific | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 62 | 84 |
Lease receivables | Asia Pacific | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 17 | 15 |
Loan receivables | Americas | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 5,664 | 6,016 |
Loan receivables | Americas | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 635 | 712 |
Loan receivables | Americas | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 1,125 | 1,246 |
Loan receivables | Americas | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 1,117 | 1,230 |
Loan receivables | Americas | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 1,241 | 1,309 |
Loan receivables | Americas | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 875 | 914 |
Loan receivables | Americas | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 566 | 472 |
Loan receivables | Americas | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 104 | 133 |
Loan receivables | EMEA | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 3,036 | 3,291 |
Loan receivables | EMEA | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 127 | 143 |
Loan receivables | EMEA | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 261 | 318 |
Loan receivables | EMEA | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 937 | 1,032 |
Loan receivables | EMEA | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 937 | 987 |
Loan receivables | EMEA | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 546 | 585 |
Loan receivables | EMEA | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 197 | 201 |
Loan receivables | EMEA | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 32 | 25 |
Loan receivables | Asia Pacific | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 2,096 | 2,154 |
Loan receivables | Asia Pacific | Aaa - Aa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 95 | 90 |
Loan receivables | Asia Pacific | A1 - A3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 910 | 832 |
Loan receivables | Asia Pacific | Baa1 - Baa3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 517 | 565 |
Loan receivables | Asia Pacific | Ba1 - Ba2 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 297 | 316 |
Loan receivables | Asia Pacific | Ba3 - B1 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 146 | 182 |
Loan receivables | Asia Pacific | B2 - B3 | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | 103 | 143 |
Loan receivables | Asia Pacific | Caa - D | ||
Net recorded investment for each class of receivables, by credit quality indicator | ||
Financing receivables, net recorded investment | $ 28 | $ 25 |
Financing Receivables - Industr
Financing Receivables - Industries (Details) - Global Financing - Financing Receivable Portfolio | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Financial Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 35.00% | 34.00% |
Government Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 14.00% | 14.00% |
Manufacturing Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 14.00% | 13.00% |
Services Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 11.00% | 12.00% |
Retail Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 8.00% | 8.00% |
Communications Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 7.00% | 7.00% |
Healthcare Industry | ||
Financing receivables | ||
Financing receivables (as a percent) | 6.00% | 6.00% |
Other industries | ||
Financing receivables | ||
Financing receivables (as a percent) | 6.00% | 6.00% |
Financing Receivables - Past Du
Financing Receivables - Past Due (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Past Due Financing Receivable | ||
Troubled debt restructurings of financing receivables | ||
Total Lease Receivable and Loan Receivable Portfolio Segments | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 300 | 271 |
Less than 90 Days or Unbilled Financing Receivables | 16,794 | 17,740 |
Total Financing Receivables | 17,179 | 18,073 |
Recorded Investment > 90 Days and Accruing | 321 | 253 |
Total Lease Receivable and Loan Receivable Portfolio Segments | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 85 | 62 |
Total Lease Receivable and Loan Receivable Portfolio Segments | Americas | ||
Past Due Financing Receivable | ||
Total Financing Receivables | 9,428 | 10,015 |
Total Lease Receivable and Loan Receivable Portfolio Segments | EMEA | ||
Past Due Financing Receivable | ||
Total Financing Receivables | 4,216 | 4,480 |
Total Lease Receivable and Loan Receivable Portfolio Segments | Asia Pacific | ||
Past Due Financing Receivable | ||
Total Financing Receivables | 3,535 | 3,578 |
Lease receivables | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 100 | 89 |
Less than 90 Days or Unbilled Financing Receivables | 5,961 | 6,216 |
Total Financing Receivables | 6,098 | 6,336 |
Recorded Investment > 90 Days and Accruing | 130 | 111 |
Lease receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 38 | 31 |
Lease receivables | Americas | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 27 | 20 |
Less than 90 Days or Unbilled Financing Receivables | 3,554 | 3,793 |
Total Financing Receivables | 3,602 | 3,830 |
Recorded Investment > 90 Days and Accruing | 102 | 66 |
Lease receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 21 | 17 |
Lease receivables | EMEA | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 8 | 10 |
Less than 90 Days or Unbilled Financing Receivables | 1,140 | 1,159 |
Total Financing Receivables | 1,154 | 1,171 |
Recorded Investment > 90 Days and Accruing | 13 | 6 |
Lease receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 6 | 2 |
Lease receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 64 | 59 |
Less than 90 Days or Unbilled Financing Receivables | 1,267 | 1,264 |
Total Financing Receivables | 1,342 | 1,335 |
Recorded Investment > 90 Days and Accruing | 16 | 40 |
Lease receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 11 | 12 |
Loan receivables | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 200 | 182 |
Less than 90 Days or Unbilled Financing Receivables | 10,833 | 11,524 |
Total Financing Receivables | 11,081 | 11,737 |
Recorded Investment > 90 Days and Accruing | 191 | 141 |
Loan receivables | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 47 | 31 |
Loan receivables | Americas | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 97 | 90 |
Less than 90 Days or Unbilled Financing Receivables | 5,704 | 6,075 |
Total Financing Receivables | 5,826 | 6,185 |
Recorded Investment > 90 Days and Accruing | 141 | 80 |
Loan receivables | Americas | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 25 | 19 |
Loan receivables | EMEA | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 10 | 5 |
Less than 90 Days or Unbilled Financing Receivables | 3,037 | 3,299 |
Total Financing Receivables | 3,062 | 3,309 |
Recorded Investment > 90 Days and Accruing | 34 | 15 |
Loan receivables | EMEA | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | 15 | 5 |
Loan receivables | Asia Pacific | ||
Past Due Financing Receivable | ||
Fully Reserved Financing Receivables | 93 | 87 |
Less than 90 Days or Unbilled Financing Receivables | 2,093 | 2,150 |
Total Financing Receivables | 2,193 | 2,243 |
Recorded Investment > 90 Days and Accruing | 16 | 46 |
Loan receivables | Asia Pacific | Total Past Due > 90 days | ||
Past Due Financing Receivable | ||
Total Past Due > 90 days | $ 8 | $ 6 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost | $ 129 | $ 133 |
Income tax benefits | (48) | (43) |
Total net stock-based compensation cost | 81 | 90 |
Pre-tax stock-based compensation cost increase (decrease) | (4) | |
Pre-tax stock-based compensation cost increase related to conversion of stock-based awards of acquired entities | (6) | |
Stock-based compensation cost, unrecognized, related to non-vested awards | $ 804 | |
Stock-based compensation cost, unrecognized, related to non-vested awards, weighted average period of recognition | 2 years 6 months | |
Accounting Standards Update 2016-09, Stock Compensation | ||
Stock-based compensation cost, allocation of recognized costs | ||
Income tax benefits | $ (8) | |
Performance Share Units | ||
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost increase (decrease) | (14) | |
Restricted Stock Units | ||
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost increase (decrease) | 16 | |
Cost | ||
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost | 23 | 21 |
SG&A expense | ||
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost | 91 | 99 |
Research, development and engineering | ||
Stock-based compensation cost, allocation of recognized costs | ||
Pre-tax stock-based compensation cost | $ 15 | $ 13 |
Segments - Results of Continuin
Segments - Results of Continuing Operations (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | $ 18,083 | $ 18,619 |
Revenue | 18,155 | 18,684 |
Pre-tax income from continuing operations | 1,424 | 1,034 |
Cognitive Solutions | ||
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | 4,062 | 3,979 |
Global Business Services | ||
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | 4,006 | 4,131 |
Technology Services & Cloud Platforms | ||
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | 8,216 | 8,424 |
Systems | ||
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | 1,395 | 1,675 |
Global Financing | ||
Segment Information | ||
Revenue (excluding other revenue not allocated to segments) | 405 | 410 |
Business Segments | ||
Segment Information | ||
Revenue | 19,576 | 20,264 |
Pre-tax income from continuing operations | $ 2,377 | $ 1,837 |
Revenue year-to-year change (as a percent) | (3.40%) | |
Pre-tax income year-to-year change (as a percent) | 29.40% | |
Pre-tax income margin (as a percent) | 12.10% | 9.10% |
Business Segments | Cognitive Solutions | ||
Segment Information | ||
Revenue | $ 4,778 | $ 4,647 |
Pre-tax income from continuing operations | $ 1,274 | $ 1,013 |
Revenue year-to-year change (as a percent) | 2.80% | |
Pre-tax income year-to-year change (as a percent) | 25.70% | |
Pre-tax income margin (as a percent) | 26.70% | 21.80% |
Business Segments | Global Business Services | ||
Segment Information | ||
Revenue | $ 4,092 | $ 4,245 |
Pre-tax income from continuing operations | $ 291 | $ 190 |
Revenue year-to-year change (as a percent) | (3.60%) | |
Pre-tax income year-to-year change (as a percent) | 53.40% | |
Pre-tax income margin (as a percent) | 7.10% | 4.50% |
Business Segments | Technology Services & Cloud Platforms | ||
Segment Information | ||
Revenue | $ 8,376 | $ 8,589 |
Pre-tax income from continuing operations | $ 687 | $ 258 |
Revenue year-to-year change (as a percent) | (2.50%) | |
Pre-tax income year-to-year change (as a percent) | 166.10% | |
Pre-tax income margin (as a percent) | 8.20% | 3.00% |
Business Segments | Systems | ||
Segment Information | ||
Revenue | $ 1,562 | $ 1,888 |
Pre-tax income from continuing operations | $ (186) | $ (10) |
Revenue year-to-year change (as a percent) | (17.30%) | |
Pre-tax income margin (as a percent) | (11.90%) | (0.50%) |
Business Segments | Global Financing | ||
Segment Information | ||
Revenue | $ 768 | $ 896 |
Pre-tax income from continuing operations | $ 311 | $ 386 |
Revenue year-to-year change (as a percent) | (14.30%) | |
Pre-tax income year-to-year change (as a percent) | (19.50%) | |
Pre-tax income margin (as a percent) | 40.50% | 43.10% |
Internal transactions | ||
Segment Information | ||
Revenue | $ (1,492) | $ (1,645) |
Pre-tax income from continuing operations | (227) | (355) |
Internal transactions | Cognitive Solutions | ||
Segment Information | ||
Revenue | (716) | (668) |
Internal transactions | Global Business Services | ||
Segment Information | ||
Revenue | (86) | (113) |
Internal transactions | Technology Services & Cloud Platforms | ||
Segment Information | ||
Revenue | (160) | (165) |
Internal transactions | Systems | ||
Segment Information | ||
Revenue | (167) | (212) |
Internal transactions | Global Financing | ||
Segment Information | ||
Revenue | $ (363) | $ (486) |
Segments - Revenue Reconciliati
Segments - Revenue Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue | ||
Revenue | $ 18,155 | $ 18,684 |
Business Segments | ||
Revenue | ||
Revenue | 19,576 | 20,264 |
Internal transactions | ||
Revenue | ||
Revenue | (1,492) | (1,645) |
Other revenue | ||
Revenue | ||
Revenue | $ 71 | $ 66 |
Segments - Pre-Tax Income Recon
Segments - Pre-Tax Income Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Pre-tax Income from continuing operations | ||
Amortization of acquired intangible assets | $ (249) | $ (211) |
Acquisition-related (charges)/income | (13) | 27 |
Non-operating retirement-related (costs)/income | (378) | (142) |
Income from continuing operations before income taxes | 1,424 | 1,034 |
Business Segments | ||
Pre-tax Income from continuing operations | ||
Income from continuing operations before income taxes | 2,377 | 1,837 |
Internal transactions | ||
Pre-tax Income from continuing operations | ||
Income from continuing operations before income taxes | (227) | (355) |
Unallocated corporate amounts | ||
Pre-tax Income from continuing operations | ||
Income from continuing operations before income taxes | $ (87) | $ (122) |
Equity Activity - Reclassificat
Equity Activity - Reclassifications and Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Cost of sales | $ 1,551 | $ 1,378 |
Cost of services | 8,553 | 8,382 |
SG&A expense | 5,152 | 6,012 |
Other (income) and expense | (28) | 253 |
Interest expense | 135 | 147 |
Provision for/(benefit from) income taxes | (329) | (983) |
Net (income) loss | (1,750) | (2,014) |
Other comprehensive income/(loss) | 688 | 608 |
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 | 284 | 218 |
Reclassification/amortization, Net of Tax Amount | 404 | 391 |
Other comprehensive income/(loss), Before Tax Amount | 779 | 406 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (92) | 202 |
Other comprehensive income/(loss) | 688 | 608 |
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 | 270 | 505 |
Reclassification/amortization, Net of Tax Amount | 0 | 0 |
Other comprehensive income/(loss), Before Tax Amount | 161 | 239 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 108 | 266 |
Other comprehensive income/(loss) | 270 | 505 |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Unrealized gains/(losses) arising during the period, Before Tax Amount | (1) | (36) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | 14 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (1) | (22) |
Reclassification/amortization, Net of Tax Amount | 1 | 23 |
Other comprehensive income/(loss), Before Tax Amount | 0 | 1 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 0 | 0 |
Other comprehensive income/(loss) | 0 | 0 |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | Reclassifications | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Other (income) and expense | 1 | 37 |
Provision for/(benefit from) income taxes | 0 | (14) |
Net (income) loss | 1 | 23 |
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 | (33) | (265) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 8 | 91 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | (25) | (174) |
Reclassification/amortization, Net of Tax Amount | (64) | (58) |
Other comprehensive income/(loss), Before Tax Amount | (130) | (356) |
Other comprehensive income/(loss), Tax (Expense)/Benefit | 41 | 124 |
Other comprehensive income/(loss) | (89) | (232) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Cost of sales | (11) | (9) |
Cost of services | (8) | 6 |
SG&A expense | (20) | (3) |
Other (income) and expense | (65) | (87) |
Interest expense | 7 | 2 |
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 | 3 | 2 |
Net (income) loss | (8) | (7) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Cost of services | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Provision for/(benefit from) income taxes | 3 | (3) |
Net (income) loss | (5) | 4 |
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 | 5 | 0 |
Net (income) loss | (15) | (3) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | Reclassifications | Other (income) and expense | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Provision for/(benefit from) income taxes | 25 | 33 |
Net (income) loss | (40) | (53) |
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 | (3) | (1) |
Net (income) loss | 5 | 1 |
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 | 40 | (91) |
Reclassification/amortization, Net of Tax Amount | 466 | 426 |
Other comprehensive income/(loss), Before Tax Amount | 748 | 522 |
Other comprehensive income/(loss), Tax (Expense)/Benefit | (241) | (187) |
Other comprehensive income/(loss) | 507 | 335 |
Retirement-Related Benefit Plans, Prior Service Costs/(Credits) | ||
Reclassifications and Taxes Related to Items of Other Comprehensive Income | ||
Unrealized gains/(losses) arising during the period, Before Tax Amount | 0 | |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 0 | |
Reclassification/amortization, Before Tax Amount | (21) | (25) |
Reclassification/amortization, Tax (Expense)/Benefit | 7 | 9 |
Reclassification/amortization, Net of Tax Amount | (15) | (16) |
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 | 61 | (147) |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | (20) | 53 |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | 41 | (94) |
Reclassification/amortization, Before Tax Amount | 710 | 690 |
Reclassification/amortization, Tax (Expense)/Benefit | (229) | (248) |
Reclassification/amortization, Net of Tax Amount | 481 | 442 |
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 | (1) | 5 |
Unrealized gains/(losses) arising during the period, Tax (Expense)/Benefit | 0 | (2) |
Unrealized gains/(losses) arising during the period, Net of Tax Amount | $ (1) | $ 3 |
Equity Activity - AOCI Rollforw
Equity Activity - AOCI Rollforward (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | $ 18,392 | $ 14,424 |
Other comprehensive income/(loss) | 688 | 608 |
Balance at the End of the Period | 18,448 | 15,072 |
Accumulated Other Comprehensive Income/(Loss) | ||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | (29,398) | (29,607) |
Other comprehensive income before reclassifications | 284 | 218 |
Amount reclassified from accumulated other comprehensive income | 404 | 391 |
Other comprehensive income/(loss) | 688 | 608 |
Balance at the End of the Period | (28,710) | (28,998) |
Net Unrealized Gains/(Losses) on Cash Flow Hedges | ||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | 319 | 100 |
Other comprehensive income before reclassifications | (25) | (174) |
Amount reclassified from accumulated other comprehensive income | (64) | (58) |
Other comprehensive income/(loss) | (89) | (232) |
Balance at the End of the Period | 230 | (133) |
Foreign Currency Translation Adjustments | ||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | (3,603) | (3,463) |
Other comprehensive income before reclassifications | 270 | 505 |
Amount reclassified from accumulated other comprehensive income | 0 | 0 |
Other comprehensive income/(loss) | 270 | 505 |
Balance at the End of the Period | (3,333) | (2,958) |
Net Change Retirement-Related Benefit Plans | ||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | (26,116) | (26,248) |
Other comprehensive income before reclassifications | 40 | (91) |
Amount reclassified from accumulated other comprehensive income | 466 | 426 |
Other comprehensive income/(loss) | 507 | 335 |
Balance at the End of the Period | (25,609) | (25,913) |
Net Unrealized Gains/(Losses) on Available-For-Sale Securities | ||
Accumulated Other Comprehensive Income (Loss) (net of tax) | ||
Balance at the Beginning of the Period | 2 | 5 |
Other comprehensive income before reclassifications | (1) | (22) |
Amount reclassified from accumulated other comprehensive income | 1 | 23 |
Other comprehensive income/(loss) | 0 | 0 |
Balance at the End of the Period | $ 2 | $ 5 |
Retirement-Related Benefits - A
Retirement-Related Benefits - All Retirement Plans Cost (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Retirement-Related Benefits: | ||
Defined benefit and contribution pension plans - cost | $ 664 | $ 439 |
Nonpension postretirement plans - cost | 61 | 60 |
Total | $ 725 | $ 499 |
Year-to-year percent change, defined benefit and contribution pension plans cost (as a percent) | 51.30% | |
Year-to-year percent change, nonpension postretirement plans cost (as a percent) | 2.30% | |
Year-to-year percent change, total (as a percent) | 45.40% |
Retirement-Related Benefits - C
Retirement-Related Benefits - Cost of Pension Plans (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cost/(Income) of Pension Plans | ||
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings | $ 664 | $ 439 |
U.S. | ||
Cost/(Income) of Pension Plans | ||
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings | 228 | 91 |
Non-U.S. | ||
Cost/(Income) of Pension Plans | ||
Total defined benefit and contribution plans cost recognized in the Consolidated Statement of Earnings | 436 | 348 |
U.S. Pension Plans | ||
Cost/(Income) of Pension Plans | ||
Cost of defined contribution plans | 162 | 165 |
Non-US Pension Plans | ||
Cost/(Income) of Pension Plans | ||
Cost of defined contribution plans | 101 | 106 |
U.S. Pension Plans | ||
Cost/(Income) of Pension Plans | ||
Interest cost | 479 | 513 |
Expected return on plan assets | (754) | (922) |
Amortization of prior service costs/(credits) | 4 | 3 |
Recognized actuarial losses | 337 | 333 |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 67 | (74) |
Non-US Pension Plans | ||
Cost/(Income) of Pension Plans | ||
Service cost | 101 | 104 |
Interest cost | 201 | 262 |
Expected return on plan assets | (317) | (470) |
Amortization of prior service costs/(credits) | (24) | (25) |
Recognized actuarial losses | 361 | 347 |
Curtailments and settlements | (1) | 5 |
Multi-employer plans/other costs | 14 | 18 |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 335 | $ 241 |
Retirement-Related Benefits - I
Retirement-Related Benefits - Investment Strategy (Details) - U.S. Pension Plans | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Expected | ||||
Retirement-Related Benefits | ||||
Expected long-term returns on plan assets | 5.25% | 5.75% | ||
Equity securities | ||||
Retirement-Related Benefits | ||||
Target allocation (as a percent) | 12.00% | 20.00% | ||
Debt securities | ||||
Retirement-Related Benefits | ||||
Target allocation (as a percent) | 79.00% | 70.00% | ||
Other investments | ||||
Retirement-Related Benefits | ||||
Target allocation (as a percent) | 10.00% | 10.00% |
Retirement-Related Benefits - N
Retirement-Related Benefits - Non-US and Multi-Employer Contributions (Details) - Non-U.S. Defined Benefit and Multi-employer Plans - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Retirement-Related Benefits | ||
Expected current year contributions to non-U.S. defined benefit plans | $ 500 | |
Total net contributions by employer | 182 | $ 107 |
Contributions by employer - Cash | 40 | 65 |
Contributions by employer - Noncash | $ 142 | $ 42 |
Retirement-Related Benefits -61
Retirement-Related Benefits - Nonpension Postretirement Cost (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
U.S. Nonpension Postretirement Benefit Plan | ||
Retirement-related plans cost | ||
Service cost | $ 4 | $ 5 |
Interest cost | 38 | 41 |
Amortization of prior service costs/(credits) | (2) | (2) |
Recognized actuarial losses | 5 | 5 |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | 46 | 49 |
Non-U.S. Nonpension Postretirement Benefit Plans | ||
Retirement-related plans cost | ||
Service cost | 1 | 1 |
Interest cost | 14 | 10 |
Expected return on plan assets | (2) | (1) |
Amortization of prior service costs/(credits) | 0 | (1) |
Recognized actuarial losses | 2 | 2 |
Curtailments and settlements | 0 | |
Total net periodic pension / nonpension (income)/cost of defined benefit plans | $ 16 | $ 11 |
Retirement-Related Benefits -62
Retirement-Related Benefits - Nonpension Postretirement Contributions (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
U.S. Nonpension Postretirement Benefit Plan | ||
Retirement-Related Benefits | ||
Contributions by employer - Noncash | $ 135 | $ 100 |
Acquisitions_Divestitures - Bus
Acquisitions/Divestitures - Businesses Acquired (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
ACQUISITIONS | |||
Goodwill | $ 36,307 | $ 36,199 | $ 32,021 |
Agile 3 Solutions | |||
ACQUISITIONS | |||
Percentage of business acquired (as a percent) | 100.00% | ||
Businesses acquired, cash consideration | $ 14 | ||
Goodwill | $ 8 |
Acquisitions_Divestitures - Mic
Acquisitions/Divestitures - Microelectronics Disposal Group (Details) - Microelectronics business - Discontinued Operations, Disposed of by Means Other than Sale - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2015 | |
Discontinued Operations | |||
Net cash transferred | $ 500 | $ 515 | |
Cash consideration transferred, before adjustments | $ 750 | ||
Expected | |||
Discontinued Operations | |||
Net cash transferred | $ 250 |
Acquisitions_Divestitures - Dis
Acquisitions/Divestitures - Discontinued Operations Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement Disclosures | ||
Loss from discontinued operations, net of tax | $ (3) | $ (3) |
Microelectronics business | Discontinued Operations, Disposed of by Means Other than Sale | ||
Income Statement Disclosures | ||
Income/(loss) from discontinued operations | (6) | (5) |
Gain/(loss) on disposal, before tax | 2 | 1 |
Total loss from discontinued operations, before income taxes | (4) | (5) |
Provision for/(benefit from) income taxes | (2) | (2) |
Loss from discontinued operations, net of tax | $ (3) | $ (3) |
Acquisitions_Divestitures - Oth
Acquisitions/Divestitures - Other Disposal Groups (Details) $ in Millions | Jan. 23, 2014USD ($) | Mar. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Industry Standard x86 Server Portfolio | Disposal group disposed of by sale, not discontinued operations | ||||
Divestitures | ||||
Transaction price for sale of business | $ 2,100 | |||
Approximate amount of transaction price received in cash | $ 1,800 | |||
Pre-tax gain on sale of business | $ 9 | $ 57 | $ 63 | |
Expected pre-tax gain on sale of business | 1,600 | |||
Disposal group expected total gain on sale, net of associated costs | 1,300 | |||
Cumulative gain on sale of business, net of transition and performance-based costs | $ 1,200 | |||
Industry Standard x86 Server Portfolio | Maximum | Disposal group disposed of by sale, not discontinued operations | ||||
Divestitures | ||||
Disposal group equity consideration ownership (as a percent) | 5.00% | |||
Others | ||||
Divestitures | ||||
Number of divestitures | item | 1 |
Intangible Assets Including G67
Intangible Assets Including Goodwill - Intangible Assets by Class (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | $ 8,314 | $ 8,466 |
Accumulated Amortization | (3,879) | (3,778) |
Net Carrying Amount | 4,436 | 4,688 |
Capitalized software | ||
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | 1,557 | 1,537 |
Accumulated Amortization | (691) | (661) |
Net Carrying Amount | 865 | 876 |
Client relationships | ||
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | 2,751 | 2,831 |
Accumulated Amortization | (1,254) | (1,228) |
Net Carrying Amount | 1,497 | 1,602 |
Completed technology | ||
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | 3,231 | 3,322 |
Accumulated Amortization | (1,688) | (1,668) |
Net Carrying Amount | 1,542 | 1,654 |
Patents/trademarks | ||
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | 725 | 730 |
Accumulated Amortization | (228) | (205) |
Net Carrying Amount | 496 | 525 |
Other intangible assets | ||
Intangible asset balances by major asset class: | ||
Gross Carrying Amount | 52 | 46 |
Accumulated Amortization | (17) | (15) |
Net Carrying Amount | $ 35 | $ 31 |
Intangible Assets Including G68
Intangible Assets Including Goodwill - Intangible Assets Activity (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Intangible Assets Including Goodwill: | ||
Net carrying amount decrease | $ 252 | |
Intangible asset amortization expense | 390 | $ 347 |
Retirement of fully amortized intangible assets | $ 289 |
Intangible Assets Including G69
Intangible Assets Including Goodwill - Future Amortization (Details) $ in Millions | Mar. 31, 2017USD ($) |
Future amortization expense, by year | |
2017 (for Q2 - Q4) | $ 1,098 |
2,018 | 1,158 |
2,019 | 768 |
2,020 | 557 |
2,021 | 437 |
Capitalized software | |
Future amortization expense, by year | |
2017 (for Q2 - Q4) | 391 |
2,018 | 347 |
2,019 | 119 |
2,020 | 8 |
Acquired Intangibles | |
Future amortization expense, by year | |
2017 (for Q2 - Q4) | 707 |
2,018 | 811 |
2,019 | 648 |
2,020 | 549 |
2,021 | $ 437 |
Intangible Assets Including G70
Intangible Assets Including Goodwill - Goodwill by Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Changes in Goodwill Balances | ||
Beginning Balance | $ 36,199 | $ 32,021 |
Goodwill Additions | 8 | 4,244 |
Purchase Price Adjustments | 3 | (7) |
Divestitures | (18) | |
Foreign Currency Translation and Other Adjustments | 97 | (42) |
Ending Balance | 36,307 | 36,199 |
Goodwill impairment losses | 0 | 0 |
Goodwill accumulated impairment losses | 0 | 0 |
Cognitive Solutions | ||
Changes in Goodwill Balances | ||
Beginning Balance | 19,484 | 15,621 |
Goodwill Additions | 3 | 3,821 |
Purchase Price Adjustments | 4 | 5 |
Divestitures | (12) | |
Foreign Currency Translation and Other Adjustments | 26 | 48 |
Ending Balance | 19,518 | 19,484 |
Global Business Services | ||
Changes in Goodwill Balances | ||
Beginning Balance | 4,607 | 4,396 |
Goodwill Additions | 303 | |
Purchase Price Adjustments | 2 | 4 |
Divestitures | (1) | |
Foreign Currency Translation and Other Adjustments | 35 | (95) |
Ending Balance | 4,643 | 4,607 |
Technology Services & Cloud Platforms | ||
Changes in Goodwill Balances | ||
Beginning Balance | 10,258 | 10,156 |
Goodwill Additions | 5 | 119 |
Purchase Price Adjustments | (3) | (12) |
Divestitures | (5) | |
Foreign Currency Translation and Other Adjustments | 35 | (1) |
Ending Balance | 10,295 | 10,258 |
Systems | ||
Changes in Goodwill Balances | ||
Beginning Balance | 1,850 | 1,848 |
Purchase Price Adjustments | (4) | |
Foreign Currency Translation and Other Adjustments | 1 | 5 |
Ending Balance | $ 1,851 | $ 1,850 |
Borrowings - Short-Term Debt (D
Borrowings - Short-Term Debt (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Short-term debt disclosures | ||
Long-term debt - current maturities | $ 8,055 | $ 6,239 |
Total short-term debt | 8,340 | 7,513 |
Commercial paper | ||
Short-term debt disclosures | ||
Short-term debt | $ 899 | |
Weighted-average interest rates for short-term loans (as a percent) | 0.70% | |
Short-term loans | ||
Short-term debt disclosures | ||
Short-term debt | $ 285 | $ 375 |
Weighted-average interest rates for short-term loans (as a percent) | 7.70% | 9.50% |
Borrowings - Long-Term Debt, Co
Borrowings - Long-Term Debt, Components (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Borrowings | ||
Long-term debt, gross | $ 42,792 | $ 41,145 |
Less: net unamortized discount | 838 | 839 |
Less: net unamortized debt issuance cost | 84 | 82 |
Add: fair value adjustment | 627 | 669 |
Long-term debt (including current maturities) | 42,498 | 40,893 |
Less: current maturities | 8,055 | 6,239 |
Long-term debt (excluding current portion) | 34,441 | 34,655 |
IBM International Group Capital, LLC | ||
Borrowings | ||
Long-term debt, gross | $ 0 | |
Ownership interest in subsidiary (as a percent) | 100.00% | |
U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 32,309 | 30,563 |
Euros | ||
Borrowings | ||
Long-term debt, gross | $ 7,217 | 7,122 |
Debt instrument, average interest rate percentage (as a percent) | 1.60% | |
Pound sterling | ||
Borrowings | ||
Long-term debt, gross | $ 1,312 | 1,296 |
Debt instrument, average interest rate percentage (as a percent) | 2.70% | |
Japanese yen | ||
Borrowings | ||
Long-term debt, gross | $ 1,649 | 1,576 |
Debt instrument, average interest rate percentage (as a percent) | 0.90% | |
Canadian | ||
Borrowings | ||
Long-term debt, gross | $ 373 | |
Debt instrument, average interest rate percentage (as a percent) | 2.20% | |
Other | ||
Borrowings | ||
Long-term debt, gross | $ 305 | $ 215 |
Debt instrument, average interest rate percentage (as a percent) | 10.00% | |
Maturing 2017 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 3,980 | 5,104 |
Debt instrument, average interest rate percentage (as a percent) | 4.69% | |
Maturing 2018 Through 2019 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 8,967 | 8,856 |
Debt instrument, average interest rate percentage (as a percent) | 3.24% | |
Maturing 2020 Through 2021 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 6,198 | 4,941 |
Debt instrument, average interest rate percentage (as a percent) | 1.86% | |
Maturing 2022 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,903 | 1,901 |
Debt instrument, average interest rate percentage (as a percent) | 1.54% | |
Maturing 2023 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,500 | 1,500 |
Debt instrument, average interest rate percentage (as a percent) | 3.38% | |
Maturing 2024 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 2,000 | 2,000 |
Debt instrument, average interest rate percentage (as a percent) | 3.63% | |
Maturing 2025 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 600 | 600 |
Debt instrument, average interest rate percentage (as a percent) | 7.00% | |
Maturing 2026 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,350 | 1,350 |
Debt instrument, average interest rate percentage (as a percent) | 3.45% | |
Maturing 2027 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 969 | 469 |
Debt instrument, average interest rate percentage (as a percent) | 3.01% | |
Maturing 2028 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 313 | 313 |
Debt instrument, average interest rate percentage (as a percent) | 6.50% | |
Maturing 2032 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 600 | 600 |
Debt instrument, average interest rate percentage (as a percent) | 5.88% | |
Maturing 2038 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 83 | 83 |
Debt instrument, average interest rate percentage (as a percent) | 8.00% | |
Maturing 2039 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 745 | 745 |
Debt instrument, average interest rate percentage (as a percent) | 5.60% | |
Maturing 2042 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 1,107 | 1,107 |
Debt instrument, average interest rate percentage (as a percent) | 4.00% | |
Maturing 2045 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 27 | 27 |
Debt instrument, average interest rate percentage (as a percent) | 7.00% | |
Maturing 2046 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 650 | 650 |
Debt instrument, average interest rate percentage (as a percent) | 4.70% | |
Maturing 2096 | U.S. dollars | ||
Borrowings | ||
Long-term debt, gross | $ 316 | $ 316 |
Debt instrument, average interest rate percentage (as a percent) | 7.13% |
Borrowings - Long-Term Debt, 73
Borrowings - Long-Term Debt, Covenants (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Borrowings: | |
Limit based on net tangible assets | 10.00% |
Minimum net interest expense ratio | 2.20 |
Default provision on credit facility | $ 500 |
Borrowings - Pre-Swap Maturitie
Borrowings - Pre-Swap Maturities (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Pre-swap annual contractual maturities of long-term debt outstanding | ||
2017 (for Q2 - Q4) | $ 4,845 | |
2,018 | 4,995 | |
2,019 | 5,256 | |
2,020 | 5,889 | |
2,021 | 3,933 | |
2022 and beyond | 17,875 | |
Total | $ 42,792 | $ 41,145 |
Borrowings - Interest on Debt (
Borrowings - Interest on Debt (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Interest on Debt | ||
Cost of financing | $ 158 | $ 138 |
Interest expense | 155 | 157 |
Net investment derivative activity | (19) | (10) |
Interest capitalized | 0 | 1 |
Total interest paid and accrued | $ 293 | $ 286 |
Contingencies (Details)
Contingencies (Details) $ in Millions | Feb. 13, 2014USD ($) | Jul. 18, 2012USD ($) | May 31, 2015defendant | May 31, 2010defendant | Mar. 31, 2017USD ($)countryclaim |
IBM v. State Of Indiana | |||||
Loss Contingencies | |||||
Duration of trial | 42 days | ||||
Amount of settlement to be (paid)/received | $ 50 | $ 52 | |||
IBM United Kingdom Limited vs. IBM UK Pension Trusts | |||||
Loss Contingencies | |||||
Number of representative beneficiaries of the UK Trust membership | defendant | 2 | ||||
Loss contingency, estimate of possible loss | $ 290 | ||||
Individual Participants Of Defined Benefit Plans vs. IBM United Kingdom | |||||
Loss Contingencies | |||||
Claims pending | claim | 290 | ||||
Litigation Case In United States District Court regarding divesting Microelectronics business, alleging violations of the Employee Retirement Income Security Act | |||||
Loss Contingencies | |||||
Number of officers or executives named as defendants | defendant | 3 | ||||
Brazil Tax Matters | |||||
Loss Contingencies | |||||
Damages sought, value | $ 1,000 | ||||
Minimum | |||||
Loss Contingencies | |||||
Clients' presence in number of countries | country | 175 |
Commitments - Extensions of Cre
Commitments - Extensions of Credit (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Extended lines of credit | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 7,860 | $ 6,542 |
Financing for client purchase agreements | ||
Commitments, guarantees: | ||
Unused amounts in lines of credit to third-party entities and commitments for future financing to clients | $ 2,341 | $ 2,463 |
Commitments - Financial Guarant
Commitments - Financial Guarantees (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Financial guarantees | ||
Guarantor obligations | ||
Guarantor obligations, maximum exposure | $ 23 | $ 34 |
Commitments - Standard Warranty
Commitments - Standard Warranty Liability (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Movement in standard warranty liability | ||
Beginning Balance | $ 156 | $ 181 |
Current period accruals | 32 | 27 |
Accrual adjustments to reflect actual experience | 1 | (2) |
Charges incurred | (41) | (41) |
Ending Balance | $ 147 | $ 164 |
Commitments - Extended Warranty
Commitments - Extended Warranty Liability (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Deferred revenue: | |||
Current portion | $ 12,351 | $ 11,035 | |
Noncurrent portion | 3,557 | $ 3,600 | |
Extended Warranty Liability (Deferred Income) | |||
Movement in extended warranty liability | |||
Beginning Balance | 531 | $ 538 | |
Revenue deferred for new extended warranty contracts | 58 | 49 | |
Amortization of deferred revenue | (68) | (66) | |
Other | 7 | 9 | |
Ending Balance | 528 | 531 | |
Deferred revenue: | |||
Current portion | 250 | 247 | |
Noncurrent portion | $ 278 | $ 284 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Apr. 25, 2017 | Jan. 31, 2017 |
Subsequent Events: | ||
Dividend declared (in dollars per share) | $ 1.40 | |
Subsequent events | ||
Subsequent Events: | ||
Dividend declared (in dollars per share) | $ 1.50 | |
Dividend declared, date | Apr. 25, 2017 | |
Dividend payable, date | Jun. 10, 2017 | |
Shareholders of record, date | May 10, 2017 | |
Dividend per share increase (in dollars per share) | $ 0.10 | |
Dividend per share increase (as a percent) | 7.00% |