7. Equity Activity:

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the three months ended June 30, 2017:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(38	)	$	278		$	240
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	4		$	(1	)	$	2
Reclassification of (gains)/losses to other (income) and expense	0			0			0

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	$	(96	)	$	24		$	(71	)
Reclassification of (gains)/losses to:
Cost of sales	(10		)	3			(8		)
Cost of services	(18		)	7			(11		)
SG&A expense	(8		)	2			(6		)
Other (income) and expense	(146		)	56			(90		)
Interest expense	7			(3		)	4

Total unrealized gains/(losses) on cash flow hedges	$	(272	)	$	90		$	(183	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	—		$	—		$	—
Net (losses)/gains arising during the period	44			(17		)	27
Curtailments and settlements	3			(1		)	2
Amortization of prior service (credits)/costs	(22		)	8			(14		)
Amortization of net (gains)/losses	713			(268		)	445

Total retirement-related benefit plans	$	738		$	(278	)	$	461

Other comprehensive income/(loss)	$	432		$	88		$	520

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the three months ended June 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(248	)	$	95		$	(154	)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	1		$	0		$	1
Reclassification of (gains)/losses to other (income) and expense	0			0			0

Total net changes related to available-for-sale securities	$	1		$	0		$	1

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	9		$	5		$	13
Reclassification of (gains)/losses to:
Cost of sales*	8			(3		)	5
Cost of services*	5			(2		)	3
SG&A expense	7			(3		)	4
Other (income) and expense	75			(29		)	46
Interest expense	7			(3		)	5

Total unrealized gains/(losses) on cash flow hedges	$	111		$	(34	)	$	76

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	78		$	(27	)	$	51
Curtailments and settlements	10			(4		)	6
Amortization of prior service (credits)/costs	(27		)	10			(17		)
Amortization of net (gains)/losses	693			(263		)	431

Total retirement-related benefit plans	$	754		$	(283	)	$	471

Other comprehensive income/(loss)	$	617		$	(223	)	$	394

* Reclassified to conform to 2017 presentation.

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the six months ended June 30, 2017:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	124		$	386		$	510
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	3		$	(1	)	$	2
Reclassification of (gains)/losses to other (income) and expense	1			0			1

Total net changes related to available-for-sale securities	$	4		$	(1	)	$	2

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(128	)	$	32		$	(96	)
Reclassification of (gains)/losses to:
Cost of sales	(22		)	6			(16		)
Cost of services	(27		)	10			(17		)
SG&A expense	(29		)	7			(22		)
Other (income) and expense	(211		)	81			(130		)
Interest expense	14			(6		)	9

Total unrealized gains/(losses) on cash flow hedges	$	(402	)	$	131		$	(271	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	0		$	0		$	0
Net (losses)/gains arising during the period	105			(37		)	69
Curtailments and settlements	1			(1		)	1
Amortization of prior service (credits)/costs	(44		)	15			(28		)
Amortization of net (gains)/losses	1,423			(497		)	926

Total retirement-related benefit plans	$	1,486		$	(519	)	$	967

Other comprehensive income/(loss)	$	1,211		$	(3	)	$	1,208

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the six months ended June 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(10	)	$	361		$	351
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(35	)	$	14		$	(22	)
Reclassification of (gains)/losses to other (income) and expense	37			(14		)	23

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

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(256	)	$	96		$	(160	)
Reclassification of (gains)/losses to:
Cost of sales*	(1		)	(1		)	(2		)
Cost of services*	11			(5		)	7
SG&A expense	3			(2		)	1
Other (income) and expense	(12		)	5			(7		)
Interest expense	9			(4		)	6

Total unrealized gains/(losses) on cash flow hedges	$	(245	)	$	90		$	(156	)

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	(68	)	$	25		$	(43	)
Curtailments and settlements	14			(5		)	9
Amortization of prior service (credits)/costs	(53		)	19			(33		)
Amortization of net (gains)/losses	1,383			(510		)	873

Total retirement-related benefit plans	$	1,277		$	(471	)	$	806

Other comprehensive income/(loss)	$	1,023		$	(21	)	$	1,002

* Reclassified to conform to 2017 presentation.

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

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

							Net Change			Net Unrealized
	Net Unrealized			Foreign			Retirement-			Gains/(Losses)		Accumulated
	Gains/(Losses)			Currency			Related			on Available-		Other
	on Cash Flow			Translation			Benefit			For-Sale		Comprehensive
(Dollars in millions)	Hedges			Adjustments*			Plans			Securities		Income/(Loss)
January 1, 2017	$	319		$	(3,603	)	$	(26,116	)	$	2	$	(29,398	)
Other comprehensive income before reclassifications	(96		)	510			70			2		486
Amount reclassified from accumulated other comprehensive income	(175		)	0			897			1		723

Total change for the period	(271		)	510			967			2		1,208

June 30, 2017	$	47		$	(3,093	)	$	(25,148	)	$	5	$	(28,189	)

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

							Net Change			Net Unrealized
	Net Unrealized			Foreign			Retirement-			Gains/(Losses)			Accumulated
	Gains/(Losses)			Currency			Related			on Available-			Other
	on Cash Flow			Translation			Benefit			For-Sale			Comprehensive
(Dollars in millions)	Hedges			Adjustments*			Plans			Securities			Income/(Loss)
January 1, 2016	$	100		$	(3,463	)	$	(26,248	)	$	5		$	(29,607	)
Other comprehensive income before reclassifications	(160		)	351			(34		)	(22		)	135
Amount reclassified from accumulated other comprehensive income	4			0			840			23			867

Total change for the period	(156		)	351			806			1			1,002

June 30, 2016	$	(56	)	$	(3,112	)	$	(25,442	)	$	6		$	(28,604	)

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