Basis of Presentation	9 Months Ended
Sep. 30, 2019
Accounting Policies
Basis of Presentation	1. Basis of Presentation: The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. In the first quarter of 2019, the company made a number of changes to its organizational structure and management system. These changes impacted the company’s reportable segments, but did not impact the company’s Consolidated Financial Statements. Refer to note 8, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Form 10-Q are reported on a comparable basis. The company provided recast historical segment information reflecting these changes in a Form 8-K dated April 4, 2019. On July 9, 2019, the company completed the acquisition of all the outstanding shares of Red Hat. Refer to note 11, “Acquisitions/Divestitures,” and note 12, “Intangible Assets Including Goodwill,” for additional information on the impacts to the consolidated financial results at and for the three and nine months ended September 30, 2019. Noncontrolling interest amounts of $7.1 million and $6.2 million, net of tax, for the three months ended September 30, 2019 and 2018, respectively, and $19.0 million and $17.9 million, net of tax, for the nine months ended September 30, 2019 and 2018, respectively, are included as a reduction within other (income) and expense in the Consolidated Statement of Earnings. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2018 Annual Report. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, revenues for post-contract support provided for perpetual (one-time charge) software licenses were reclassified from Services Revenue to Sales Revenue and Services Costs to Sales Costs within the Consolidated Statement of Earnings. The revenue amounts reclassified were $0.5 billion, $1.0 billion and $1.6 billion for the three months ended September 30, 2018, nine months ended September 30, 2019 and nine months ended September 30, 2018, respectively. The cost amounts reclassified were $0.1 billion, $0.2 billion and $0.3 billion. This reclassification had no impact on total revenue, total cost, net income, financial position or cash flows for any periods presented. Other immaterial reclassifications have been annotated where applicable.

Basis of Presentation

9 Months Ended

Sep. 30, 2019

1. Basis of Presentation:

The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates.

In the first quarter of 2019, the company made a number of changes to its organizational structure and management system. These changes impacted the company’s reportable segments, but did not impact the company’s Consolidated Financial Statements. Refer to note 8, “Segments,” for additional information on the company’s reportable segments. The periods presented in this Form 10-Q are reported on a comparable basis. The company provided recast historical segment information reflecting these changes in a Form 8-K dated April 4, 2019.

On July 9, 2019, the company completed the acquisition of all the outstanding shares of Red Hat. Refer to note 11, “Acquisitions/Divestitures,” and note 12, “Intangible Assets Including Goodwill,” for additional information on the impacts to the consolidated financial results at and for the three and nine months ended September 30, 2019.

Noncontrolling interest amounts of $7.1 million and $6.2 million, net of tax, for the three months ended September 30, 2019 and 2018, respectively, and $19.0 million and $17.9 million, net of tax, for the nine months ended September 30, 2019 and 2018, respectively, are included as a reduction within other (income) and expense in the Consolidated Statement of Earnings.

Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2018 Annual Report.

Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, revenues for post-contract support provided for perpetual (one-time charge) software licenses were reclassified from Services Revenue to Sales Revenue and Services Costs to Sales Costs within the Consolidated Statement of Earnings. The revenue amounts reclassified were $0.5 billion, $1.0 billion and $1.6 billion for the three months ended September 30, 2018, nine months ended September 30, 2019 and nine months ended September 30, 2018, respectively. The cost amounts reclassified were $0.1 billion, $0.2 billion and $0.3 billion. This reclassification had no impact on total revenue, total cost, net income, financial position or cash flows for any periods presented. Other immaterial reclassifications have been annotated where applicable.