Basis of Presentation	9 Months Ended
Sep. 30, 2021
Basis of Presentation
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, including the macroeconomic impacts of the COVID-19 pandemic. As a result, actual results may be different from these estimates. On November 3, 2021, the company completed the previously announced separation of its managed infrastructure services unit into a new public company with the distribution of 80.1 percent of the outstanding common stock of Kyndryl Holdings, Inc. (Kyndryl) to IBM stockholders on a pro rata basis. To effect the separation, IBM stockholders received one share of Kyndryl common stock for every five shares of IBM common stock held at the close of business on October 25, 2021, the record date for the distribution. The company retained 19.9 percent of the shares of Kyndryl common stock immediately following the separation with the intent to dispose of such shares within twelve months after the distribution. The company’s financial results for the third quarter and nine months ended September 30, 2021 include Kyndryl. With the completion of the separation, the historical results of Kyndryl will be presented as discontinued operations in the company’s Consolidated Financial Statements beginning in the fourth quarter of 2021. Effective immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes will impact the company’s reportable segments beginning in the fourth quarter of 2021 but will not impact the company’s Consolidated Financial Statements. Since these organizational changes did not occur until the fourth quarter of 2021, the periods presented in this Form 10-Q are reported under the historical segments. See note 4, "Segments" for additional information. The continuing operations provision for income taxes for the third quarter of 2021 was $188 million, compared to $128 million in the third quarter of 2020. The increase primarily relates to higher discrete tax benefits in the prior year. The provision for income taxes for the third quarter of 2021 includes tax charges related to the Kyndryl separation, partially offset by tax benefits associated with third quarter events that resulted in the expected utilization of U.S. foreign tax credits. The continuing operations provision for income taxes for the first nine months of 2021 was $365 million, compared to a benefit from income taxes of $888 million for the first nine months of 2020. The benefit from income taxes for the first nine months of 2020 was primarily related to the tax impacts of an intra-entity sale of certain of the company’s intellectual property. Noncontrolling interest amounts of $8.3 million and $3.4 million, net of tax, for the three months ended September 30, 2021 and 2020, respectively, and $22.4 million and $14.7 million, net of tax, for the nine months ended September 30, 2021 and 2020, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement. 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 2020 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. This is annotated where applicable.

Basis of Presentation

9 Months Ended

Sep. 30, 2021

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, including the macroeconomic impacts of the COVID-19 pandemic. As a result, actual results may be different from these estimates.

On November 3, 2021, the company completed the previously announced separation of its managed infrastructure services unit into a new public company with the distribution of 80.1 percent of the outstanding common stock of Kyndryl Holdings, Inc. (Kyndryl) to IBM stockholders on a pro rata basis. To effect the separation, IBM stockholders received one share of Kyndryl common stock for every five shares of IBM common stock held at the close of business on October 25, 2021, the record date for the distribution. The company retained 19.9 percent of the shares of Kyndryl common stock immediately following the separation with the intent to dispose of such shares within twelve months after the distribution. The company’s financial results for the third quarter and nine months ended September 30, 2021 include Kyndryl. With the completion of the separation, the historical results of Kyndryl will be presented as discontinued operations in the company’s Consolidated Financial Statements beginning in the fourth quarter of 2021.

Effective immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system. These changes will impact the company’s reportable segments beginning in the fourth quarter of 2021 but will not impact the company’s Consolidated Financial Statements. Since these organizational changes did not occur until the fourth quarter of 2021, the periods presented in this Form 10-Q are reported under the historical segments. See note 4, "Segments" for additional information.

The continuing operations provision for income taxes for the third quarter of 2021 was $188 million, compared to $128 million in the third quarter of 2020. The increase primarily relates to higher discrete tax benefits in the prior year. The provision for income taxes for the third quarter of 2021 includes tax charges related to the Kyndryl separation, partially offset by tax benefits associated with third quarter events that resulted in the expected utilization of U.S. foreign tax credits. The continuing operations provision for income taxes for the first nine months of 2021 was $365 million, compared to a benefit from income taxes of $888 million for the first nine months of 2020. The benefit from income taxes for the first nine months of 2020 was primarily related to the tax impacts of an intra-entity sale of certain of the company’s intellectual property.

Noncontrolling interest amounts of $8.3 million and $3.4 million, net of tax, for the three months ended September 30, 2021 and 2020, respectively, and $22.4 million and $14.7 million, net of tax, for the nine months ended September 30, 2021 and 2020, respectively, are included as a reduction within other (income) and expense in the Consolidated Income Statement.

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 2020 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. This is annotated where applicable.