REVENUE RECOGNITION

12 Months Ended

Mar. 31, 2025

REVENUE RECOGNITION

REVENUE RECOGNITION

NOTE 3. REVENUE RECOGNITION

Disaggregation of Revenue

The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 – Segments.

Remaining Performance Obligations

The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed. The customer is not considered committed when it is able to terminate for convenience without payment of a substantive penalty. The RPO also includes estimates of variable consideration. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.

At March 31, 2025, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $34.7 billion. Approximately 57 percent of the amount is expected to be recognized as revenue in the next two years, approximately 37 percent in the subsequent three years, and the balance thereafter.

Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods

For the year ended March 31, 2025, revenue increased by $59 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates.

Contract Balances

The following table provides information about accounts receivable, contract assets and deferred income balances:

	At March 31,
(Dollars in millions)	2025		2024
Accounts receivable (net of allowances for credit losses of $13 at March 31, 2025 and $22 at March 31, 2024) *	$	1,345	$	1,599
Contract assets †		50		30
Deferred income (current)		746		825
Deferred income (noncurrent)		341		314

* Including unbilled receivable balances of $425 million at March 31, 2025 and $377 million at March 31, 2024.

† Contract assets represent services performed by the Company prior to billing the client, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance. They are included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

The amount of revenue recognized during the year ended March 31, 2025 that was included within the deferred income balance at March 31, 2024 was $754 million.

The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the years ended March 31, 2025, 2024 and 2023:

	Year Ended March 31,
(Dollars in millions)	2025		2024		2023
Beginning balance	$	22	$	32	$	44
Additions (releases)		(7)		4		6
Write-offs		(1)		(4)		(13)
Other *		(1)		(9)		(5)
Ending balance	$	13	$	22	$	32

* Primarily represents translation adjustments.

The contract assets allowance for expected credit losses was not material in any of the periods presented.

Major Clients

No single client represented more than 10 percent of the Company’s total revenue during the years ended March 31, 2025, 2024 and 2023. No single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2025. Other than receivables with the former Parent, no single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2024.

Deferred Costs

The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31, 2025 and 2024:

	At March 31,
(Dollars in millions)	2025		2024
Deferred transition costs	$	697	$	753
Prepaid software costs		876		770
Capitalized costs to fulfill contracts		195		212
Capitalized costs to obtain contracts		281		265
Total deferred costs *	$	2,049	$	2,000

* Of the total deferred costs, $1,009 million was current and $1,040 million was noncurrent at March 31, 2025, and $1,081 million was current and $920 million was noncurrent at March 31, 2024.

The amount of total deferred costs amortized during the year ended March 31, 2025 was $1.7 billion, composed of $291 million of amortization of deferred transition costs, $986 million of amortization of prepaid software and $420 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2024 was $1.8 billion, composed of $335 million of amortization of deferred transition costs, $921 million of amortization of prepaid software and $531 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2023 was $1.7 billion, composed of $342 million of amortization of deferred transition costs, $857 million of amortization of prepaid software and $472 million of amortization of capitalized contract costs. There were no material impairment losses incurred in any period. Refer to Note 1 – Significant Accounting Policies for additional information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract.