8. 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, 2018:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(347	)	$	(158	)	$	(505	)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	0		$	0		$	0
Reclassification of (gains)/losses to other (income) and expense	—			—			—


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	$	(149	)	$	38		$	(111	)
Reclassification of (gains)/losses to:
Cost of sales	6			(2		)	5
Cost of services	(9		)	2			(7		)
SG&A expense	3			(1		)	2
Other (income) and expense	397			(100		)	297
Interest expense	38			(9		)	28


Total unrealized gains/(losses) on cash flow hedges	$	285		$	(71	)	$	214


Retirement-related benefit plans(1):
Prior service costs/(credits)	$	0		$	0		$	0
Net (losses)/gains arising during the period	82			(23		)	59
Curtailments and settlements	6			(2		)	4
Amortization of prior service (credits)/costs	(19		)	5			(13		)
Amortization of net (gains)/losses	741			(207		)	534


Total retirement-related benefit plans	$	810		$	(226	)	$	584


Other comprehensive income/(loss)	$	748		$	(455	)	$	294

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 9, “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, 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 9, “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, 2018:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(513	)	$	(106	)	$	(620	)
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	0			0			0

Total net changes related to available-for-sale securities	$	(2	)	$	0		$	(1	)

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(89	)	$	29		$	(60	)
Reclassification of (gains)/losses to:
Cost of sales	23			(6		)	17
Cost of services	(28		)	7			(21		)
SG&A expense	21			(6		)	15
Other (income) and expense	293			(74		)	219
Interest expense	71			(18		)	53

Total unrealized gains/(losses) on cash flow hedges	$	292		$	(68	)	$	224

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	(1	)	$	0		$	(1	)
Net (losses)/gains arising during the period	84			(23		)	61
Curtailments and settlements	6			(2		)	4
Amortization of prior service (credits)/costs	(37		)	10			(27		)
Amortization of net (gains)/losses	1,494			(410		)	1,084

Total retirement-related benefit plans	$	1,545		$	(424	)	$	1,121

Other comprehensive income/(loss)	$	1,322		$	(598	)	$	724

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 9, “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 9, “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, 2018	$	35		$	(2,834	)	$	(23,796	)	$	3		$	(26,592	)
Cumulative effect of a change in accounting principle **	5			46			(2,471		)	(2		)	(2,422		)

Other comprehensive income before reclassifications	(60		)	(620		)	64			(1		)	(681		)
Amount reclassified from accumulated other comprehensive income	284			0			1,057			0			1,405

Total change for the period	$	224		$	(620	)	$	1,121		$	(1	)	$	724

June 30, 2018	$	264		$	(3,408	)	$	(25,146	)	$	0		$	(28,290	)

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

** Reflects the adoption of the FASB guidance on stranded tax effects, hedging and financial instruments. Refer to note 2, “Accounting Changes”.

							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.