NOTE L. EQUITY ACTIVITY

The authorized capital stock of IBM consists of 4,687,500,000 shares of common stock with a $.20 per share par value, of which 945,867,403 shares were outstanding at December 31, 2016 and 150,000,000 shares of preferred stock with a $.01 per share par value, none of which were outstanding at December 31, 2016.

Stock Repurchases

The Board of Directors authorizes the company to repurchase IBM common stock. The company repurchased 23,283,400 common shares at a cost of $3,455 million, 30,338,647 common shares at a cost of $4,701 million and 71,504,867 common shares at a cost of $13,395 million in 2016, 2015 and 2014, respectively. These amounts reflect transactions executed through December 31 of each year. Actual cash disbursements for repurchased shares may differ due to varying settlement dates for these transactions. At December 31, 2016, $5,109 million of Board common stock repurchase authorization was available. The company plans to purchase shares on the open market or in private transactions from time to time, depending on market conditions.

Other Stock Transactions

The company issued the following shares of common stock as part of its stock-based compensation plans and employees stock purchase plan: 3,893,366 shares in 2016, 6,013,875 shares in 2015, and 7,687,026 shares in 2014. The company issued 383,077 treasury shares in 2016, 1,155,558 treasury shares in 2015 and 1,264,232 treasury shares in 2014, as a result of restricted stock unit releases and exercises of stock options by employees of certain acquired businesses and by non-U.S. employees. Also, as part of the company’s stock-based compensation plans, 854,365 common shares at a cost of $126 million, 1,625,820 common shares at a cost of $248 million, and 1,313,569 common shares at a cost of $236 million in 2016, 2015 and 2014, respectively, were remitted by employees to the company in order to satisfy minimum statutory tax withholding requirements. These amounts are included in the treasury stock balance in the Consolidated Statement of Financial Position and the Consolidated Statement of Changes in Equity.

Reclassifications and Taxes Related to Items of Other Comprehensive Income

($ in millions)

	Before Tax			Tax (Expense)/			Net of Tax
For the year ended December 31, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss)
Foreign currency translation adjustments	$	(20	)	$	(120	)	$	(140	)
Net changes related to available-for-sale securities
Unrealized gains/(losses) arising during the period	$	(38	)	$	14		$	(23	)
Reclassification of (gains)/losses to other (income) and expense	34			(13		)	21

Total net changes related to available-for-sale securities	$	(3	)	$	1		$	(2	)

Unrealized gains/(losses) on cash flow hedges
Unrealized gains/(losses) arising during the period	$	243		$	(80	)	$	163
Reclassification of (gains)/losses to:
Cost of sales	13			(8		)	6
SG&A expense	(4		)	(2		)	(7		)
Other (income) and expense	68			(26		)	42
Interest expense	24			(9		)	15

Total unrealized gains/(losses) on cash flow hedges	$	345		$	(126	)	$	219

Retirement-related benefit plans (1)
Net (losses)/gains arising during the period	$	(2,490	)	$	924		$	(1,566	)
Curtailments and settlements	(16		)	1			(15		)
Amortization of prior service (credits)/costs	(107		)	34			(74		)
Amortization of net (gains)/losses	2,764			(976		)	1,788

Total retirement-related benefit plans	$	150		$	(19	)	$	132

Other comprehensive income/(loss)	$	472		$	(263	)	$	209

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note S, “Retirement-Related Benefits,” for additional information.)

($ in millions)

	Before Tax			Tax (Expense)/			Net of Tax
For the year ended December 31, 2015:	Amount			Benefit			Amount
Other comprehensive income/(loss)
Foreign currency translation adjustments	$	(1,379	)	$	(342	)	$	(1,721	)
Net changes related to available-for-sale securities
Unrealized gains/(losses) arising during the period	$	(54	)	$	21		$	(33	)
Reclassification of (gains)/losses to other (income) and expense	86			(33		)	53

Total net changes related to available-for-sale securities	$	32		$	(12	)	$	20

Unrealized gains/(losses) on cash flow hedges
Unrealized gains/(losses) arising during the period	$	618		$	(218	)	$	399
Reclassification of (gains)/losses to:
Cost of sales	(192		)	57			(135		)
SG&A expense	(149		)	43			(105		)
Other (income) and expense	(731		)	281			(451		)
Interest expense	0			0			0

Total unrealized gains/(losses) on cash flow hedges	$	(454	)	$	162		$	(292	)

Retirement-related benefit plans (1)
Prior service costs/(credits)	$	6		$	(2	)	$	4
Net (losses)/gains arising during the period	(2,963		)	1,039			(1,925		)
Curtailments and settlements	33			(9		)	24
Amortization of prior service (credits)/costs	(100		)	36			(65		)
Amortization of net (gains)/losses	3,304			(1,080		)	2,223

Total retirement-related benefit plans	$	279		$	(17	)	$	262

Other comprehensive income/(loss)	$	(1,523	)	$	(208	)	$	(1,731	)

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note S, “Retirement-Related Benefits,” for additional information.)

($ in millions)

	Before Tax			Tax (Expense)/			Net of Tax
For the year ended December 31, 2014:	Amount			Benefit			Amount
Other comprehensive income/(loss)
Foreign currency translation adjustments	$	(1,636	)	$	(438	)	$	(2,074	)
Net changes related to available-for-sale securities
Unrealized gains/(losses) arising during the period	$	(29	)	$	11		$	(18	)
Reclassification of (gains)/losses to other (income) and expense	5			(2		)	3

Total net changes related to available-for-sale securities	$	(24	)	$	9		$	(15	)

Unrealized gains/(losses) on cash flow hedges
Unrealized gains/(losses) arising during the period	$	958		$	(341	)	$	618
Reclassification of (gains)/losses to:
Cost of sales	15			(7		)	9
SG&A expense	(15		)	6			(9		)
Other (income) and expense	(98		)	38			(60		)
Interest expense	1			0			0

Total unrealized gains/(losses) on cash flow hedges	$	861		$	(304	)	$	557

Retirement-related benefit plans (1)
Prior service costs/(credits)	$	1		$	0		$	1
Net (losses)/gains arising during the period	(9,799		)	3,433			(6,366		)
Curtailments and settlements	24			(7		)	17
Amortization of prior service (credits)/costs	(114		)	41			(73		)
Amortization of net (gains)/losses	2,531			(852		)	1,678

Total retirement-related benefit plans	$	(7,357	)	$	2,615		$	(4,742	)

Other comprehensive income/(loss)	$	(8,156	)	$	1,883		$	(6,274	)

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note S, “Retirement-Related Benefits,” for additional information.)

Accumulated Other Comprehensive Income/(Loss) (net of tax)

($ in millions)

							Net Change			Net Unrealized
	Net Unrealized			Foreign			Retirement-			Gains/(Losses)			Accumulated
	Gains/(Losses)			Currency			Related			on Available-			Other
	on CashFlow			Translation			Benefit			For-Sale			Comprehensive
	Hedges			Adjustments*			Plans			Securities			Income/(Loss)
December 31, 2013	$	(165	)	$	332		$	(21,767	)	$	(1	)	$	(21,602	)
Other comprehensive income before reclassifications	618			(2,074		)	(6,348		)	(18		)	(7,822		)
Amount reclassified from accumulated other comprehensive income	(60		)	0			1,605			3			1,548

Total change for the period	557			(2,074		)	(4,742		)	(15		)	(6,274		)

December 31, 2014	392			(1,742		)	(26,509		)	(15		)	(27,875		)
Other comprehensive income before reclassifications	399			(1,721		)	(1,897		)	(33		)	(3,252		)
Amount reclassified from accumulated other comprehensive income	(691		)	0			2,158			53			1,520

Total change for the period	(292		)	(1,721		)	262			20			(1,731		)

December 31, 2015	100			(3,463		)	(26,248		)	5			(29,607		)
Other comprehensive income before reclassifications	163			(140		)	(1,581		)	(23		)	(1,581		)
Amount reclassified from accumulated other comprehensive income	56			0			1,714			21			1,791

Total change for the period	219			(140		)	132			(2		)	209

December 31, 2016	$	319		$	(3,603	)	$	(26,116	)	$	2		$	(29,398	)

Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax.