Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

5. Stock-Based Compensation: Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in millions)	2017			2016			2017			2016
Cost	$	22		$	23		$	68		$	67
Selling, general and administrative	88			105			277			295
Research, development and engineering	13			14			43			41

Pre-tax stock-based compensation cost	123			142			388			403
Income tax benefits	(41		)	(47		)	(128		)	(131		)

Total net stock-based compensation cost	$	82		$	95		$	260		$	272

Pre-tax stock-based compensation cost for the three months ended September 30, 2017 decreased $19 million compared to the corresponding period in the prior year. This was due to decreases related to performance share units ($11 million), the conversion of stock-based awards previously issued by acquired entities ($7 million) and restricted stock units ($2 million).

Pre-tax stock-based compensation cost for the nine months ended September 30, 2017 decreased $15 million compared to the corresponding period in the prior year. This was due to decreases related to the conversion of stock-based awards previously issued by acquired entities ($20 million) and performance share units ($17 million), partially offset by an increase in restricted stock units ($22 million).

The implementation of the new FASB guidance for share-based payment transactions resulted in an immaterial impact to income tax benefits as of the three months and nine months ended September 30, 2017. Refer to note 2, “Accounting Changes,” for additional information.

As of September 30, 2017, the total unrecognized compensation cost of $905 million related to non-vested awards was expected to be recognized over a weighted-average period of approximately 2.6 years.

There was no significant capitalized stock-based compensation cost at September 30, 2017 and 2016.