Financing receivables primarily consist of client loan and installment payment receivables (loans), investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are for terms up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Infrastructure products and are for terms ranging generally from two to six years. Commercial financing receivables, which consist of both held-for-investment and held-for-sale receivables, relate primarily to working capital financing for dealers and remarketers of IBM products. Payment terms for working capital financing generally range from 30 to 90 days.


	Client Financing Receivables
	Client Loan and Installment Payment Receivables		Investment in Sales-Type and Direct Financing
					Commercial Financing Receivables
(Dollars in millions)					Held for		Held for
At September 30, 2023	(Loans)		Leases		Investment		Sale*		Total
Financing receivables, gross	$	6,398	$	3,628	$	313	$	593	$	10,932
Unearned income	(406)		(355)		—		—		(761)
Unguaranteed residual value	—		403		—		—		403
Amortized cost	$	5,992	$	3,676	$	313	$	593	$	10,573
Allowance for credit losses	(95)		(59)		(5)		—		(159)
Total financing receivables, net	$	5,897	$	3,617	$	308	$	593	$	10,414
Current portion	$	3,337	$	1,387	$	308	$	593	$	5,625
Noncurrent portion	$	2,560	$	2,230	$	—	$	—	$	4,789


	Client Financing Receivables
	Client Loan and Installment Payment Receivables		Investment in Sales-Type and Direct Financing
					Commercial Financing Receivables
(Dollars in millions)					Held for		Held for
At December 31, 2022	(Loans)		Leases		Investment		Sale*		Total
Financing receivables, gross	$	8,875	$	4,023	$	299	$	939	$	14,136
Unearned income	(439)		(351)		—		—		(790)
Unguaranteed residual value	—		422		—		—		422
Amortized cost	$	8,437	$	4,094	$	299	$	939	$	13,769
Allowance for credit losses	(108)		(60)		(5)		—		(173)
Total financing receivables, net	$	8,329	$	4,034	$	293	$	939	$	13,596
Current portion	$	5,073	$	1,485	$	293	$	939	$	7,790
Noncurrent portion	$	3,256	$	2,549	$	—	$	—	$	5,806

The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties. These actions may include credit insurance, financial guarantees, nonrecourse secured borrowings, transfers of receivables recorded as true sales in accordance with accounting guidance or sales of equipment under operating lease. Sale of receivables arrangements are also utilized in the normal course of business as part of the company’s cash and liquidity management.

Financing receivables pledged as collateral for secured borrowings were $294 million and $349 million at September 30, 2023 and December 31, 2022, respectively. These borrowings are included in note 12, “Borrowings.”

The company has an existing agreement with a third-party investor to sell IBM short-term commercial financing receivables on a revolving basis. In addition, the company enters into agreements with third-party financial institutions to sell certain of its client financing receivables, including both loan and lease receivables, for cash proceeds. There were no material client financing receivables transferred for the nine months ended September 30, 2023 and 2022.


(Dollars in millions)
For the nine months ended September 30:	2023		2022




Commercial financing receivables:
Receivables transferred during the period	$	6,453	$	6,091
Receivables uncollected at end of period*	$	836	$	816

*Of the total amount of commercial financing receivables sold and derecognized from the Consolidated Balance Sheet, the amounts presented remained uncollected from business partners as of September 30, 2023 and 2022.

The transfer of these receivables qualified as true sales and therefore reduced financing receivables. The cash proceeds from the sales are included in cash flows from operating activities. For the nine months ended September 30, 2023 and 2022, the net loss, including fees, associated with the transfer of commercial financial receivables was $69 million and $38 million, respectively, and is included in other (income) and expense in the Consolidated Income Statement.

The following tables present the amortized cost basis for client financing receivables at September 30, 2023 and December 31, 2022, further segmented by three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material.


(Dollars in millions)
At September 30, 2023:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	5,841	$	2,636	$	1,190	$	9,668
Allowance for credit losses:
Beginning balance at January 1, 2023	$	88	$	60	$	20	$	168
Write-offs	$	(9)	$	0	$	0	$	(9)
Recoveries	0		0		3		3
Additions/(releases)	6		(14)		(4)		(11)
Other*	6		(1)		(1)		3
Ending balance at September 30, 2023	$	92	$	44	$	18	$	154


(Dollars in millions)
At December 31, 2022:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	7,281	$	3,546	$	1,704	$	12,531
Allowance for credit losses:
Beginning balance at January 1, 2022	$	111	$	61	$	23	$	195
Write-offs	$	(20)	$	(3)	$	(2)	$	(25)
Recoveries	1		0		4		5
Additions/(releases)	(5)		6		(4)		(3)
Other*	2		(5)		(2)		(4)
Ending balance at December 31, 2022	$	88	$	60	$	20	$	168

When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies,” in the company’s 2022 Annual Report.

The company summarizes information about the amortized cost basis for client financing receivables, including amortized cost aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost not accruing.


(Dollars in millions)	Total Amortized Cost		Amortized Cost > 90 Days*		Amortized Cost > 90 Days and Accruing*		Billed Invoices > 90 Days and Accruing		Amortized Cost Not Accruing**
At September 30, 2023:
Americas	$	5,841	$	101	$	33	$	7	$	70
EMEA	2,636		34		4		1		30
Asia Pacific	1,190		17		1		1		15
Total client financing receivables	$	9,668	$	152	$	37	$	9	$	115


(Dollars in millions)	Total Amortized Cost		Amortized Cost > 90 Days*		Amortized Cost > 90 Days and Accruing*		Billed Invoices > 90 Days and Accruing		Amortized Cost Not Accruing**
At December 31, 2022:
Americas	$	7,281	$	272	$	198	$	22	$	74
EMEA	3,546		52		8		1		46
Asia Pacific	1,704		20		3		1		17
Total client financing receivables	$	12,531	$	344	$	208	$	23	$	137

**Of the amortized cost not accruing, there was a related allowance of $112 million and $122 million at September 30, 2023 and December 31, 2022, respectively. Financing income recognized on these receivables was immaterial for the three and nine months ended September 30, 2023, respectively.

The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan.

The following tables present the amortized cost basis for client financing receivables by credit quality indicator at September 30, 2023 and December 31, 2022, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduce the risk to IBM. Gross write-offs by vintage year at September 30, 2023 were not material.


(Dollars in millions)	Americas				EMEA				Asia Pacific
At September 30, 2023:	Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C
Vintage year:
2023	$	1,242	$	718	$	385	$	384	$	281	$	59
2022	1,962		307		737		395		381		45
2021	780		160		290		94		120		43
2020	283		120		120		73		105		26
2019	124		33		66		45		52		10
2018 and prior	58		54		16		32		46		21
Total	$	4,449	$	1,393	$	1,613	$	1,023	$	986	$	204


(Dollars in millions)	Americas				EMEA				Asia Pacific
At December 31, 2022:	Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C
Vintage year:
2022	$	3,316	$	1,097	$	1,447	$	704	$	799	$	96
2021	1,197		323		451		159		203		65
2020	559		217		258		158		210		49
2019	251		91		161		99		127		22
2018	128		26		42		16		84		21
2017 and prior	32		45		14		38		12		17
Total	$	5,482	$	1,800	$	2,373	$	1,173	$	1,434	$	269

The company did not have any significant modifications due to financial difficulty during the nine months ended September 30, 2023. The company did not have any significant troubled debt restructurings during the year ended December 31, 2022.