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Revenue Recognition (Tables)
 6 Months Ended
Jun. 30, 2018
Revenue Recognition  
Schedule of disaggregation of revenue

 

Revenue by Major Products/Service Offerings

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

 

 

Total

 

(Dollars in millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Other

 

Revenue

 

For the three months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Solutions Software

 

$
3,214

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$
3,214

 

Transaction Processing Software

 
1,366

 

—

 

—

 

—

 

—

 

—

 
1,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

—

 
1,931

 

—

 

—

 

—

 

—

 
1,931

 

Global Process Services

 

—

 
315

 

—

 

—

 

—

 

—

 
315

 

Application Management

 

—

 
1,946

 

—

 

—

 

—

 

—

 
1,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Services

 

—

 

—

 
5,768

 

—

 

—

 

—

 
5,768

 

Technical Support Services

 

—

 

—

 
1,750

 

—

 

—

 

—

 
1,750

 

Integration Software

 

—

 

—

 
1,097

 

—

 

—

 

—

 
1,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems Hardware

 

—

 

—

 

—

 
1,756

 

—

 

—

 
1,756

 

Operating Systems Software

 

—

 

—

 

—

 
421

 

—

 

—

 
421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing*

 

—

 

—

 

—

 

—

 
394

 

—

 
394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

 

—

 

—

 

—

 

—

 

—

 
45

 
45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
4,580

 

$
4,192

 

$
8,615

 

$
2,177

 

$
394

 

$
45

 

$
20,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers.

 

Revenue by Geography

 

 

 

Total

 

(Dollars in millions)

 

Revenue

 

For the three months ended June 30, 2018:

 

 

 

 

 

 

 

Americas

 

$
9,212

 

Europe/Middle East/Africa

 
6,407

 

Asia Pacific

 
4,384

 

 

 

 

 

Total

 

$
20,003

 

 

 

 

 

 

 

Revenue by Major Products/Service Offerings

 

 

 

 

 

 

 

Technology

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

 

Services &

 

 

 

 

 

 

 

 

 

 

 

Cognitive

 

Business

 

Cloud

 

 

 

Global

 

 

 

Total

 

(Dollars in millions)

 

Solutions

 

Services

 

Platforms

 

Systems

 

Financing

 

Other

 

Revenue

 

For the six months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Solutions Software

 

$
6,171

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$
6,171

 

Transaction Processing Software

 
2,708

 

—

 

—

 

—

 

—

 

—

 
2,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

—

 
3,798

 

—

 

—

 

—

 

—

 
3,798

 

Global Process Services

 

—

 
620

 

—

 

—

 

—

 

—

 
620

 

Application Management

 

—

 
3,948

 

—

 

—

 

—

 

—

 
3,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infrastructure Services

 

—

 

—

 
11,593

 

—

 

—

 

—

 
11,593

 

Technical Support Services

 

—

 

—

 
3,531

 

—

 

—

 

—

 
3,531

 

Integration Software

 

—

 

—

 
2,116

 

—

 

—

 

—

 
2,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems Hardware

 

—

 

—

 

—

 
2,848

 

—

 

—

 
2,848

 

Operating Systems Software

 

—

 

—

 

—

 
828

 

—

 

—

 
828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing*

 

—

 

—

 

—

 

—

 
799

 

—

 
799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

 

—

 

—

 

—

 

—

 

—

 
114

 
114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
8,879

 

$
8,365

 

$
17,240

 

$
3,676

 

$
799

 

$
114

 

$
39,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Contains lease and loan/working capital financing arrangements which are not subject to the guidance on revenue from contracts with customers.

 

Revenue by Geography

 

 

 

Total

 

(Dollars in millions)

 

Revenue

 

For the six months ended June 30, 2018:

 

 

 

 

 

 

 

Americas

 

$
17,919

 

Europe/Middle East/Africa

 
12,583

 

Asia Pacific

 
8,573

 

 

 

 

 

Total

 

$
39,075

 

 

 

 

 

 

 

Schedule of reconciliation of contract balances

 

 

 

 

At June 30,

 

At January 1,

 

(Dollars in millions)

 

2018

 

2018 (as adjusted)

 

Notes and accounts receivable-trade (net of allowances of $310 and $297 at June 30, 2018 and January 1, 2018, respectively)

 

$
7,445

 

$
8,295

 

Contract assets (1)

 
515

 
557

 

Deferred income (current)

 
11,752

 
11,493

 

Deferred income (noncurrent)

 
3,718

 
3,758

 

 

 

(1)

Included within prepaid expenses and other current assets in the Consolidated Statement of Financial Position.

 

Schedule of deferred contract costs

 

 

 

At June 30,

 

(Dollars in millions)

 

2018

 

Capitalized costs to obtain a contract

 

$
715

 

Deferred costs to fulfill a contract:

 

 

 

Deferred setup costs

 
2,108

 

Other deferred fulfillment costs

 
2,133

 

 

 

 

 

Total deferred costs (1)

 

$
4,956

 

 

 

 

 

 

 

 

(1)

Of the total, $2,344 million is current and $2,613 million is noncurrent. Prior to January 1, 2018, the current and noncurrent balance of deferred costs were included within prepaid expenses and other current assets and investments and sundry assets, respectively.

 

Accounting Standards Update 2014-09, Revenue from Contracts with Customers  
Revenue Recognition  
Schedule of transition disclosures

 

Consolidated Statement of Earnings Impacts

 

 

As reported under

 

Adjustments to

 

Adjusted

 

(Dollars in millions except per share amounts)

 

new revenue

 

convert to

 

amounts under

 

For the three months ended June 30, 2018:

 

standard

 

prior GAAP

 

prior GAAP

 

Revenue

 

$
20,003

 

$
38

 

$
20,041

 

Cost

 
10,804

 
24

 
10,829

 

Gross profit

 
9,199

 
14

 
9,212

 

Selling, general and administrative expense

 
4,857

 
17

 
4,874

 

Income from continuing operations before income taxes

 
2,776

 
(3

)
2,773

 

Provision for/(benefit from) income taxes

 
373

 
(1

)
372

 

Net income

 

$
2,404

 

$
(2

)

$
2,402

 

Earnings/(loss) per share of common stock:

 

 

 

 

 

 

 

Assuming dilution

 

$
2.61

 

$
0.00

 

$
2.61

 

Basic

 

$
2.63

 

$
0.00

 

$
2.63

 

 

 

 

As reported under

 

Adjustments to

 

Adjusted

 

(Dollars in millions except per share amounts)

 

new revenue

 

convert to

 

amounts under

 

For the six months ended June 30, 2018:

 

standard

 

prior GAAP

 

prior GAAP

 

Revenue

 

$
39,075

 

$
(14

)

$
39,061

 

Cost

 
21,629

 
0

 
21,629

 

Gross profit

 
17,445

 
(14

)
17,432

 

Selling, general and administrative expense

 
10,302

 
(4

)
10,298

 

Income from continuing operations before income taxes

 
3,911

 
(10

)
3,901

 

Provision for/(benefit from) income taxes

 
(166

)
(3

)
(170

)

Net income

 

$
4,083

 

$
(7

)

$
4,076

 

Earnings/(loss) per share of common stock:

 

 

 

 

 

 

 

Assuming dilution

 

$
4.42

 

$
(0.01

)

$
4.41

 

Basic

 

$
4.44

 

$
(0.01

)

$
4.43

 

 

Consolidated Statement of Financial Position Impacts

 

 

 

As reported under

 

Adjustments to

 

Adjusted

 

(Dollars in millions)

 

new revenue

 

convert to

 

amounts under

 

At June 30, 2018:

 

standard

 

prior GAAP

 

prior GAAP

 

Assets:

 

 

 

 

 

 

 

Notes and accounts receivable - trade (net of allowances)

 

$
7,445

 

$
582

 

$
8,027

 

Deferred costs (current)

 
2,344

 
(382

)
1,961

 

Prepaid expenses and other current assets

 
2,443

 
(515

)
1,928

 

Deferred taxes

 
4,689

 
187

 
4,876

 

Deferred costs (noncurrent)

 
2,613

 
(332

)
2,281

 

Investments and sundry assets

 
2,518

 

—

 
2,518

 

Total assets

 

$
121,622

 

$
(461

)

$
121,161

 

Liabilities:

 

 

 

 

 

 

 

Taxes

 

$
2,780

 

$

—

 

$
2,780

 

Deferred income (current)

 
11,752

 
57

 
11,809

 

Deferred income (noncurrent)

 
3,718

 
(7

)
3,712

 

Total liabilities

 

$
102,974

 

$
50

 

$
103,024

 

Equity:

 

 

 

 

 

 

 

Retained earnings

 

$
157,349

 

$
(530

)

$
156,819

 

AOCI

 
(28,290

)
18

 
(28,271

)

Total stockholders’ equity

 
18,648

 
(512

)
18,136

 

Total liabilities and stockholders’ equity

 

$
121,622

 

$
(461

)

$
121,161

 

 

Consolidated Statement of Cash Flows Impacts

 

 

 

As reported under

 

Adjustments to

 

Adjusted

 

(Dollars in millions)

 

new revenue

 

convert to

 

amounts under

 

For the six months ended June 30, 2018:

 

standard

 

prior GAAP

 

prior GAAP

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$
4,083

 

$
(7

)

$
4,076

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions/divestitures

 
336

 
7

 
343

 

Net cash provided by operating activities

 

$
6,896

 

$

—

 

$
6,896