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 September 30, 2017:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	89		$	195		$	284
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(1	)	$	1		$	0
Reclassification of (gains)/losses to other (income) and expense	0			0			0

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	$	(70	)	$	20		$	(50	)
Reclassification of (gains)/losses to:
Cost of sales	(1		)	1			(1		)
Cost of services	(20		)	8			(12		)
SG&A expense	6			(1		)	4
Other (income) and expense	(64		)	25			(39		)
Interest expense	7			(3		)	4

Total unrealized gains/(losses) on cash flow hedges	$	(143	)	$	49		$	(94	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	0		$	0		$	0
Net (losses)/gains arising during the period	1			0			1
Curtailments and settlements	2			(1		)	1
Amortization of prior service (credits)/costs	(22		)	7			(15		)
Amortization of net (gains)/losses	733			(242		)	491

Total retirement-related benefit plans	$	713		$	(235	)	$	479

Other comprehensive income/(loss)	$	658		$	11		$	669

(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 September 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(99	)	$	50		$	(49	)
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	(1		)	0			(1		)

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	$	35		$	(14	)	$	21
Reclassification of (gains)/losses to:
Cost of sales*	7			(3		)	4
Cost of services*	(3		)	1			(2		)
SG&A expense	(2		)	(1		)	(3		)
Other (income) and expense	6			(2		)	4
Interest expense	7			(3		)	4

Total unrealized gains/(losses) on cash flow hedges	$	50		$	(22	)	$	29

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	11		$	(5	)	$	6
Curtailments and settlements	4			(1		)	3
Amortization of prior service (credits)/costs	(28		)	9			(19		)
Amortization of net (gains)/losses	696			(225		)	471

Total retirement-related benefit plans	$	683		$	(222	)	$	461

Other comprehensive income/(loss)	$	632		$	(192	)	$	440

* 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 nine months ended September 30, 2017:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	213		$	581		$	794
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	2		$	0		$	1
Reclassification of (gains)/losses to other (income) and expense	1			0			0

Total net changes related to available-for-sale securities	$	2		$	0		$	2

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(198	)	$	53		$	(146	)
Reclassification of (gains)/losses to:
Cost of sales	(23		)	6			(17		)
Cost of services	(47		)	18			(29		)
SG&A expense	(23		)	6			(17		)
Other (income) and expense	(275		)	106			(169		)
Interest expense	21			(8		)	13

Total unrealized gains/(losses) on cash flow hedges	$	(545	)	$	180		$	(365	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	0		$	0		$	0
Net (losses)/gains arising during the period	106			(36		)	70
Curtailments and settlements	3			(1		)	2
Amortization of prior service (credits)/costs	(66		)	23			(43		)
Amortization of net (gains)/losses	2,156			(739		)	1,417

Total retirement-related benefit plans	$	2,200		$	(754	)	$	1,446

Other comprehensive income/(loss)	$	1,869		$	7		$	1,877

(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 nine months ended September 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(109	)	$	411		$	303
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(36	)	$	14		$	(22	)
Reclassification of (gains)/losses to other (income) and expense	36			(14		)	22

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

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(221	)	$	82		$	(139	)
Reclassification of (gains)/losses to:
Cost of sales*	5			(4		)	2
Cost of services*	9			(3		)	5
SG&A expense	1			(3		)	(1		)
Other (income) and expense	(6		)	2			(4		)
Interest expense	17			(6		)	10

Total unrealized gains/(losses) on cash flow hedges	$	(195	)	$	68		$	(127	)

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	(57	)	$	20		$	(37	)
Curtailments and settlements	19			(7		)	12
Amortization of prior service (credits)/costs	(81		)	29			(52		)
Amortization of net (gains)/losses	2,079			(735		)	1,344

Total retirement-related benefit plans	$	1,960		$	(693	)	$	1,267

Other comprehensive income/(loss)	$	1,656		$	(213	)	$	1,442

* 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	(146		)	794			72			1		721
Amount reclassified from accumulated other comprehensive income	(219		)	0			1,374			0		1,155

Total change for the period	(365		)	794			1,446			2		1,877

September 30, 2017	$	(46	)	$	(2,809	)	$	(24,670	)	$	4	$	(27,521	)

* 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	(139		)	303			(25		)	(22		)	117
Amount reclassified from accumulated other comprehensive income	12			0			1,292			22			1,326

Total change for the period	(127		)	303			1,267			0			1,442

September 30, 2016	$	(28	)	$	(3,161	)	$	(24,981	)	$	4		$	(28,164	)

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