Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2018

Revenue by Major Products/Service Offerings

					Technology
			Global		Services &
	Cognitive		Business		Cloud				Global				Total
(Dollars in millions)	Solutions		Services		Platforms		Systems		Financing		Other		Revenue
For the three months ended March 31, 2018:

Solutions Software	$	2,957	$	—	$	—	$	—	$	—	$	—	$	2,957
Transaction Processing Software	1,341		—		—		—		—		—		1,341

Consulting	—		1,867		—		—		—		—		1,867
Global Process Services	—		305		—		—		—		—		305
Application Management	—		2,002		—		—		—		—		2,002

Infrastructure Services	—		—		5,825		—		—		—		5,825
Technical Support Services	—		—		1,782		—		—		—		1,782
Integration Software	—		—		1,019		—		—		—		1,019

Systems Hardware	—		—		—		1,093		—		—		1,093
Operating Systems Software	—		—		—		407		—		—		407

Global Financing*	—		—		—		—		405		—		405

Other Revenue	—		—		—		—		—		69		69

Total	$	4,299	$	4,174	$	8,625	$	1,500	$	405	$	69	$	19,072

*Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers.

Revenue by Geography

	Total
(Dollars in millions)	Revenue
For the three months ended March 31, 2018:
Americas	$	8,707
Europe/Middle East/Africa	6,176
Asia Pacific	4,188

Total	$	19,072

Schedule of reconciliation of contract balances

	At March 31,		At January 1,
(Dollars in millions)	2018		2018 (as adjusted)
Notes and accounts receivable-trade (net of allowances of $307 and $297 at March 31, 2018 and January 1, 2018, respectively)	$	7,778	$	8,295
Contract assets (1)	582		557
Deferred income (current)	13,059		11,493
Deferred income (non-current)	3,852		3,758

(1)

Included within prepaid expenses and other current assets in the Consolidated Statement of Financial Position.

Schedule of deferred contract costs

	At March 31,
(Dollars in millions)	2018
Capitalized costs to obtain a contract	$	719
Deferred costs to fulfill a contract:
Deferred setup costs	2,149
Other deferred fulfillment costs	2,138

Total deferred costs (1)	$	5,006

(1)

Of the total, $2,413 million is current and $2,593 million is noncurrent. In prior periods, the current and noncurrent balance of deferred costs were included within prepaid expenses and other current assets and investments and sundry assets, respectively.

Accounting Standards Update 2014-09, Revenue from Contracts with Customers

Revenue Recognition

Schedule of transition disclosures

Consolidated Statement of Earnings Impacts

	As reported under			Adjustments to			Adjusted
(Dollars in millions except per share amounts)	new revenue			convert to			amounts under
For the three months ended March 31, 2018:	standard			prior GAAP			prior GAAP
Revenue	$	19,072		$	(52	)	$	19,020
Cost	10,825			(25		)	10,800
Gross profit	8,247			(28		)	8,220
Selling, general and administrative expense	5,445			(21		)	5,424
Income from continuing operations before income taxes	1,136			(7		)	1,129
Provision for/(benefit from) income taxes	(540		)	(2		)	(542		)
Net income	$	1,679		$	(5	)	$	1,674
Earnings/(loss) per share of common stock:
Assuming dilution	$	1.81		$	0.00		$	1.81
Basic	$	1.82		$	(0.01	)	$	1.81

Consolidated Statement of Financial Position Impacts

	As reported under		Adjustments to			Adjusted
(Dollars in millions)	new revenue		convert to			amounts under
At March 31, 2018:	standard		prior GAAP			prior GAAP
Assets:
Notes and accounts receivable - trade (net of allowances)	$	7,778	$	640		$	8,418
Deferred costs (current)	2,413		(340		)	2,073
Prepaid expenses and other current assets	2,573		(582		)	1,991
Deferred taxes	5,111		186			5,297
Deferred costs (noncurrent)	2,593		(351		)	2,242
Investments and sundry assets	2,942		—			2,942
Total assets	$	125,285	$	(447	)	$	124,838
Liabilities:
Taxes	$	2,918	$	—		$	2,918
Deferred income (current)	13,059		89			13,148
Deferred income (noncurrent)	3,852		(8		)	3,844
Total liabilities	$	106,995	$	81		$	107,076
Equity:
Retained earnings	$	156,371	$	(528	)	$	155,843
Total stockholders’ equity	18,290		(528		)	17,762
Total liabilities and stockholders’ equity	$	125,285	$	(447	)	$	124,838

Consolidated Statement of Cash Flows Impacts

	As reported under		Adjustments to			Adjusted
(Dollars in millions)	new revenue		convert to			amounts under
For the three months ended March 31, 2018:	standard		prior GAAP			prior GAAP
Cash flows from operating activities:
Net income	$	1,679	$	(5	)	$	1,674
Adjustments to reconcile net income to cash provided by operating activities
Changes in operating assets and liabilities, net of acquisitions/divestitures	1,658		5			1,663
Net cash provided by operating activities	$	4,602	$	—		$	4,602