Revenue Recognition

9 Months Ended

Sep. 30, 2021

Revenue Recognition

Revenue Recognition

3. Revenue Recognition:

Disaggregation of Revenue

The following tables provide details of revenue by major products/service offerings and by geography.

Revenue by Major Products/Service Offerings

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020
Cloud & Data Platforms	$	3,046	$	2,775	$	9,032	$	8,108
Cognitive Applications		1,314		1,317		3,938		3,745
Transaction Processing Platforms		1,332		1,461		4,257		4,687
Total Cloud & Cognitive Software	$	5,692	$	5,553	$	17,227	$	16,540
Consulting		2,292		1,966		6,717		5,973
Application Management		1,847		1,758		5,439		5,332
Global Process Services		287		240		846		687
Total Global Business Services	$	4,427	$	3,965	$	13,002	$	11,992
Infrastructure & Cloud Services		4,681		4,933		14,370		14,663
Technology Support Services		1,473		1,528		4,496		4,582
Total Global Technology Services	$	6,154	$	6,462	$	18,866	$	19,245
Systems Hardware		796		919		3,294		3,404
Operating Systems Software		312		338		957		1,074
Total Systems	$	1,107	$	1,257	$	4,251	$	4,477
Global Financing*		220		273		702		837
Other		18		50		45		163
Total revenue	$	17,618	$	17,560	$	54,093	$	53,253

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

Revenue by Geography

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2021		2020		2021		2020
Americas	$	8,217	$	8,139	$	25,216	$	24,755
Europe/Middle East/Africa		5,593		5,564		17,272		16,775
Asia Pacific		3,808		3,857		11,605		11,723
Total	$	17,618	$	17,560	$	54,093	$	53,253

Remaining Performance Obligations

The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed, such as certain as-a-Service, governmental, term software license and services offerings. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

At September 30, 2021, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $108 billion. Approximately 60 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 30 percent in the subsequent three to five years and the balance (mostly Infrastructure & Cloud Services) thereafter.

Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods

For the three and nine months ended September 30, 2021, revenue was reduced by $49 million and $85 million, respectively, for performance obligations satisfied (or partially satisfied) in previous periods mainly due to changes in estimates on contracts with cost-to-cost measures of progress.

Reconciliation of Contract Balances

The following table provides information about notes and accounts receivable – trade, contract assets and deferred income balances:

	At September 30,		At December 31,
(Dollars in millions)	2021		2020
Notes and accounts receivable — trade (net of allowances of $277 in 2021 and $351 in 2020)	$	6,609	$	7,132
Contract assets*		566		497
Deferred income (current)		12,264		12,833
Deferred income (noncurrent)		3,965		4,301

* Included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

The amount of revenue recognized during the three and nine months ended September 30, 2021 that was included within the deferred income balance at June 30, 2021 and December 31, 2020 was $5.1 billion and $9.5 billion, respectively, and was primarily related to services and software.

The following table provides roll forwards of the notes and accounts receivable – trade allowance for expected credit losses for the nine months ended September 30, 2021 and the year ended December 31, 2020:

(Dollars in millions)
January 1, 2021		Additions / (Releases)		Write-offs		Other*		September 30, 2021
$	351	$	(44)	$	(30)	$	0	$	277

January 1, 2020		Additions / (Releases)		Write-offs		Other*		December 31, 2020
$	316	$	76	$	(46)	$	5	$	351

* Primarily represents translation adjustments.

The contract assets allowance for expected credit losses was not material in any of the periods presented.