Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Financial Instruments

Amounts related to cumulative basis adjustments for fair value hedges

(Dollars in millions)
Line Item in the Consolidated Balance Sheet	At June 30,		At December 31,
in which the Hedged Item is Included:	2020		2019
Debt:
Carrying amount of the hedged item	$	(2,625)	$	(2,574)
Cumulative hedging adjustments included in the carrying amount - assets/(liabilities)		(77)		(28)

Effect of Derivative Instruments in the Consolidated Statement of Earnings

					Gains/(Losses) of
(Dollars in millions)	Total				Total Hedge Activity
For the three months ended June 30:	2020		2019		2020		2019
Financing cost	$	73	$	137	$	10	$	2

	Gain/(Loss) Recognized in Consolidated Income Statement
	Consolidated	Recognized on				Attributable to Risk
(Dollars in millions)	Income Statement	Derivatives				Being Hedged (2)
For the three months ended June 30:	Line Item	2020		2019		2020		2019
Derivative instruments in fair value hedges (1):
Interest rate contracts with IBM	Financing cost	$	8	$	32	$	(1)	$	(37)
Total		$	8	$	32	$	(1)	$	(37)

	Gain/(Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
					Consolidated
					Income	Reclassified				Amounts Excluded from
(Dollars in millions)	Recognized in OCI				Statement	from AOCI				Effectiveness Testing (3)
For the three months ended June 30:	2020		2019		Line Item	2020		2019		2020		2019
Derivative instruments in net investment hedges:
Foreign exchange contracts with IBM	$	(56)	$	(8)	Financing cost	$	—	$	—	$	2	$	7
Total	$	(56)	$	(8)		$	—	$	—	$	2	$	7

(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.

(3) The company's policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period.

					Gains/(Losses) of
(Dollars in millions)	Total				Total Hedge Activity
For the six months ended June 30:	2020		2019		2020		2019
Financing cost	$	178	$	297	$	19	$	7

	Gain/(Loss) Recognized in Consolidated Income Statement
	Consolidated	Recognized				Attributable to Risk
(Dollars in millions)	Income Statement	on Derivatives				Being Hedged (2)
For the six months ended June 30:	Line Item	2020		2019		2020		2019
Derivative instruments in fair value hedges (1):
Interest rate contracts with IBM	Financing cost	$	60	$	52	$	(49)	$	(62)
Total		$	60	$	52	$	(49)	$	(62)

	Gain/(Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
					Consolidated
					Income					Amounts Excluded from
(Dollars in millions)	Recognized in OCI				Statement	Reclassified from AOCI				Effectiveness Testing (3)
For the six months ended June 30:	2020		2019		Line Item	2020		2019		2020		2019
Derivative instruments in net investment hedges:
Foreign exchange contracts with IBM	$	11	$	(18)	Financing cost	$	—	$	—	$	9	$	17
Total	$	11	$	(18)		$	—	$	—	$	9	$	17

(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.

(3) The company's policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period.