Basis of Presentation

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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.

In September 2024, the IBM Qualified Personal Pension Plan (Qualified PPP) purchased a nonparticipating single premium group annuity contract from The Prudential Insurance Company of America (the Insurer) and irrevocably transferred to the Insurer approximately $6 billion of the Qualified PPP’s defined benefit pension obligations and related plan assets, thereby reducing the company’s pension obligations and assets by the same amount. The group annuity contract was purchased using assets of the Qualified PPP and no additional funding contribution was required from the company. As a result of this transaction, the company recognized a one-time, non-cash, pre-tax pension settlement charge of $2.7 billion ($2.0 billion net of tax) in the third quarter of 2024, primarily related to the accelerated recognition of accumulated actuarial losses of the Qualified PPP. The $0.7 billion tax benefit associated with the settlement charge is reflected as an adjustment to reconcile net income/(loss) to net cash from operating activities within changes in operating assets and liabilities, net of acquisitions/divestitures in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2024. Refer to note 18, “Retirement-Related Benefits,” for additional information.

For the three and nine months ended September 30, 2024, the company reported a benefit from income taxes of $485 million and $597 million, respectively. The tax benefits for the three and nine months ended September 30, 2024 were driven by the transfer to the Insurer of a portion of the Qualified PPP’s defined benefit pension obligations and related plan assets, as described above. The tax benefit for the nine months ended September 30, 2024, was also driven by the resolution of certain tax audit matters in the first quarter. For the three and nine months ended September 30, 2023, the company reported a provision for income taxes of $159 million and $702 million, respectively.

Noncontrolling interest amounts, included as a reduction within other (income) and expense in the Consolidated Income Statement, were not material to the consolidated results for the periods presented.

The company has supplier finance programs with third-party financial institutions where the company agrees to pay the financial institutions the stated amounts of invoices from participating suppliers on the originally invoiced maturity date, which have an average term of 90 to 120 days, consistent with the company's standard payment terms. The financial institutions offer earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. The company does not provide secured legal assets or other forms of guarantees under the arrangements. The company is not a party to the arrangements between its suppliers and the financial institutions. These obligations are recognized as accounts payable in the Consolidated Balance Sheet. The obligations outstanding under these programs at September 30, 2024 and December 31, 2023 were $99 million and $101 million, respectively.

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 2023 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-period amounts have been reclassified to conform to the change in current-period presentation. This is annotated where applicable.