Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Amounts related to cumulative basis adjustments for fair value hedges

At September 30, 2024 and December 31, 2023, the following amounts were recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:

(Dollars in millions)	September 30, 2024		December 31, 2023
Short-term debt:
Carrying amount of the hedged item	$	—	$	(1)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)	$	—	$	(1)
Long-term debt:
Carrying amount of the hedged item	$	(6,704)	$	(6,629)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities) (1)	$	(19)	$	61

(1)Includes ($166) million and ($200) million of hedging adjustments on discontinued hedging relationships at September 30, 2024 and December 31, 2023, respectively.

Effect of derivative instruments in the Consolidated Income Statement

The total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of fair value hedges, cash flow hedges, net investment hedges and derivatives not designated as hedging instruments are recorded and the total effect of hedge activity on these income and expense line items are as follows:

(Dollars in millions)	Total				Gains/(Losses) of Total Hedge Activity
For the three months ended September 30:	2024		2023		2024		2023
Cost of services	$	5,048	$	5,217	$	5	$	(2)
Cost of sales	$	1,404	$	1,419	$	3	$	(5)
Cost of financing	$	95	$	94	$	(2)	$	(3)
SG&A expense	$	4,911	$	4,458	$	83	$	(58)
Other (income) and expense	$	2,244	$	(215)	$	428	$	(316)
Interest expense	$	429	$	412	$	(11)	$	(15)

	Gain (Loss) Recognized in Consolidated Income Statement
(Dollars in millions)	Consolidated Income Statement Line Item	Recognized on Derivatives				Attributable to Risk Being Hedged (2)
For the three months ended September 30:		2024		2023		2024		2023
Derivative instruments in fair value hedges: (1)
Interest rate contracts	Cost of financing	$	31	$	(33)	$	(37)	$	28
	Interest expense	155		(166)		(185)		139
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts	Other (income) and expense	194		(141)		N/A		N/A
Equity contracts	SG&A expense	83		(54)		N/A		N/A
Total		$	463	$	(394)	$	(222)	$	167

	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
	Recognized in OCI				Consolidated Income Statement Line Item	Reclassified from AOCI				Amounts Excluded from Effectiveness Testing (3)
(Dollars in millions)
For the three months ended September 30:	2024		2023			2024		2023		2024		2023
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—	Cost of financing	$	(1)	$	(1)	$	—	$	—
					Interest expense	(3)		(4)		—		—
Foreign exchange contracts					Cost of services	5		(2)		—		—
Amount included in the assessment of effectiveness	(153)		101		Cost of sales	3		(5)		—		—
Amount excluded from the assessment of effectiveness	(62)		29		Cost of financing	(1)		(2)		—		—
					SG&A expense	0		(4)		—		—
					Other (income) and expense	255		(164)		(20)		(11)
					Interest expense	(5)		(11)		—		—
Instruments in net investment hedges: (4)
Foreign exchange contracts					Cost of financing	—		—		5		5
Amount included in the assessment of effectiveness	(1,086)		652		Interest expense	—		—		26		26
Amount excluded from the assessment of effectiveness	10		—
Total	$	(1,290)	$	782		$	254	$	(192)	$	11	$	21

(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 and amortization of basis adjustments recorded on de-designated hedging relationships during the period.

(3)Amounts excluded from effectiveness testing for both net investment hedges and cash flow hedges of foreign currency debt are amortized to net income on a straight-line basis over the life of the relevant hedging instrument.

(4)Instruments in net investment hedges include derivative and non-derivative instruments with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable

(Dollars in millions)	Total				Gains/(Losses) of Total Hedge Activity
For the nine months ended September 30:	2024		2023		2024		2023
Cost of services	$	15,414	$	15,821	$	19	$	(6)
Cost of sales	$	4,393	$	4,329	$	30	$	12
Cost of financing	$	281	$	297	$	(9)	$	(10)
SG&A expense	$	14,823	$	14,212	$	168	$	44
Other (income) and expense	$	1,694	$	(721)	$	1	$	(315)
Interest expense	$	1,288	$	1,202	$	(45)	$	(46)

	Gain (Loss) Recognized in Consolidated Income Statement
(Dollars in millions)	Consolidated Income Statement Line Item	Recognized on Derivatives				Attributable to Risk Being Hedged (2)
For the nine months ended September 30:		2024		2023		2024		2023
Derivative instruments in fair value hedges: (1)
Interest rate contracts	Cost of financing	$	(5)	$	(55)	$	(13)	$	42
	Interest expense	(24)		(261)		(66)		196
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts	Other (income) and expense	(174)		(321)		N/A		N/A
Equity contracts	SG&A expense	158		37		N/A		N/A
Total		$	(46)	$	(600)	$	(79)	$	238

	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
	Recognized in OCI				Consolidated Income Statement Line Item	Reclassified from AOCI				Amounts Excluded from Effectiveness Testing (3)
(Dollars in millions)
For the nine months ended September 30:	2024		2023			2024		2023		2024		2023
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—	Cost of financing	$	(2)	$	(2)	$	—	$	—
					Interest expense	(10)		(11)		—		—
Foreign exchange contracts					Cost of services	19		(6)		—		—
Amount included in the assessment of effectiveness	147		250		Cost of sales	30		12		—		—
Amount excluded from the assessment of effectiveness	(84)		29		Cost of financing	(3)		(10)		—		—
					SG&A expense	10		7		—		—
					Other (income) and expense	233		16		(57)		(11)
					Interest expense	(15)		(46)		—		—
Instruments in net investment hedges: (4)
Foreign exchange contracts					Cost of financing	—		—		14		16
Amount included in the assessment of effectiveness	(205)		564		Interest expense	—		—		69		75
Amount excluded from the assessment of effectiveness	10		—
Total	$	(131)	$	843		$	263	$	(40)	$	26	$	81

(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 and amortization of basis adjustments recorded on de-designated hedging relationships during the period.

(3)Amounts excluded from effectiveness testing for both net investment hedges and cash flow hedges of foreign currency debt are amortized to net income on a straight line basis over the life of the relevant hedging instrument.

(4)Instruments in net investment hedges include derivative and non-derivative instruments with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable