Financing receivables primarily consist of client loan and installment payment receivables (loans) and investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans are provided primarily to clients to finance the purchase of hardware, software and services. Payment terms on these financing arrangements are generally for terms up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Infrastructure products and are for terms ranging generally from two to six years. Commercial financing receivables, which consist of both held-for-investment and held-for-sale receivables, relate primarily to working capital financing for dealers and remarketers of IBM products. Payment terms for working capital financing generally range from 30 to 90 days.

A summary of the components of the company’s financing receivables is presented as follows:


	Client Financing Receivables
	Client Loan and		Investment in
	Installment Payment		Sales-Type and		Commercial Financing Receivables
(Dollars in millions)	Receivables		Direct Financing		Held for		Held for
At December 31, 2021:	(Loans)		Leases		Investment		Sale*		Total
Financing receivables, gross	$	9,303	$	3,336	$	450	$	793	$	13,881
Unearned income		(353)		(223)		—		—		(576)
Unguaranteed residual value		—		335		—		—		335
Amortized cost	$	8,949	$	3,448	$	450	$	793	$	13,640
Allowance for credit losses		(131)		(64)		(6)		—		(201)
Total financing receivables, net	$	8,818	$	3,384	$	444	$	793	$	13,439
Current portion	$	5,371	$	1,406	$	444	$	793	$	8,014
Noncurrent portion	$	3,447	$	1,978	$	—	$	—	$	5,425

* The carrying value of the receivables classified as held for sale approximates fair value.

The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties. These actions may include credit insurance, financial guarantees, nonrecourse borrowings, transfers of receivables recorded as true sales in accordance with accounting guidance or sales of equipment under operating lease. Sale of receivables arrangements are also utilized in the normal course of business as part of the company’s cash and liquidity management.

Financing receivables pledged as collateral for nonrecourse borrowings were $313 million and $408 million at June 30, 2022 and December 31, 2021, respectively. These borrowings are included in note 12, “Borrowings.”

Transfer of Financial Assets

The company enters into agreements with third-party financial institutions to sell certain of its client financing receivables, including both loan and lease receivables, for cash proceeds. Throughout 2021, sales of client financing receivables were utilized as part of the company’s cash and liquidity management as well as for credit mitigation. In the first half of 2022, sales of client financing receivables were largely focused on credit mitigation. In addition, the company has an existing agreement with a third-party investor to sell IBM short-term commercial financing receivables on a revolving basis. The company has expanded this agreement to other countries and geographies since commencement in the U.S. and Canada in 2020.

The following table presents the total amount of client and commercial financing receivables transferred:


(Dollars in millions)
For the six months ended June 30:	2022		2021
Client financing receivables
Lease receivables	$	15	$	732
Loan receivables		2		1,359
Total client financing receivables transferred	$	17	$	2,091
Commercial financing receivables
Receivables transferred during the period	$	3,914	$	2,621
Receivables uncollected at end of period*	$	815	$	821

*	Of the total amount of commercial financing receivables sold and derecognized from the Consolidated Balance Sheet, the amounts presented remained uncollected from business partners as of June 30, 2022 and 2021.

The transfer of these receivables qualified as true sales and therefore reduced financing receivables. The cash proceeds from the sales are included in cash flows from operating activities and the impacts to the Consolidated Income Statement, including fees and net gain or loss associated with the transfers of these receivables for the six months ended June 30, 2022 and 2021 were not material.

Financing Receivables by Portfolio Segment

The following tables present the amortized cost basis for client financing receivables at June 30, 2022 and December 31, 2021, further segmented by three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material.


(Dollars in millions)
At June 30, 2022:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	7,092	$	3,173	$	1,666	$	11,930
Allowance for credit losses:
Beginning balance at January 1, 2022	$	111	$	61	$	23	$	195
Write-offs	$	(16)	$	(1)	$	(2)	$	(18)
Recoveries		1		0		4		5
Additions/(releases)		(2)		(3)		(5)		(10)
Other*		2		(5)		(1)		(5)
Ending balance at June 30, 2022	$	96	$	51	$	19	$	166


(Dollars in millions)
At December 31, 2021:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	6,573	$	3,793	$	2,031	$	12,397
Allowance for credit losses:
Beginning balance at January 1, 2021	$	141	$	77	$	37	$	255
Write-offs	$	(8)	$	(2)	$	(7)	$	(17)
Recoveries		0		0		1		1
Additions/(releases)		(19)		(11)		(7)		(38)
Other*		(3)		(3)		0		(7)
Ending balance at December 31, 2021	$	111	$	61	$	23	$	195

* Primarily represents translation adjustments.

When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies,” in the company’s 2021 Annual Report. Any changes to economic models that occurred after the balance sheet date will be reflected in future periods.

Past Due Financing Receivables

The company summarizes information about the amortized cost basis for client financing receivables, including amortized cost aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost not accruing.


					Amortized		Billed		Amortized
	Total		Amortized		Cost		Invoices		Cost
(Dollars in millions)	Amortized		Cost		> 90 Days and		> 90 Days and		Not
At June 30, 2022:	Cost		> 90 Days*		Accruing*		Accruing		Accruing**
Americas	$	7,092	$	216	$	141	$	11	$	76
EMEA		3,173		85		4		1		83
Asia Pacific		1,666		23		5		2		18
Total client financing receivables	$	11,930	$	324	$	150	$	15	$	177


					Amortized		Billed		Amortized
	Total		Amortized		Cost		Invoices		Cost
(Dollars in millions)	Amortized		Cost		> 90 Days and		> 90 Days and		Not
At December 31, 2021:	Cost		> 90 Days*		Accruing*		Accruing		Accruing**
Americas	$	6,573	$	188	$	100	$	6	$	90
EMEA		3,793		99		7		2		95
Asia Pacific		2,031		25		5		2		20
Total client financing receivables	$	12,397	$	312	$	112	$	10	$	205

*	At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days.

**	Of the amortized cost not accruing, there was a related allowance of $129 million and $153 million at June 30, 2022 and December 31, 2021, respectively. Financing income recognized on these receivables was immaterial for the three and six months ended June 30, 2022, respectively.

Credit Quality Indicators

The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan.

The following tables present the amortized cost basis for client financing receivables by credit quality indicator at June 30, 2022 and December 31, 2021, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduce the risk to IBM.


(Dollars in millions)	Americas				EMEA				Asia Pacific
At June 30, 2022:	Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D
Vintage year:
2022	$	1,987	$	799	$	614	$	431	$	393	$	86
2021		1,750		584		645		349		290		108
2020		761		306		337		221		268		60
2019		382		151		190		166		190		30
2018		186		72		86		51		141		35
2017 and prior		61		52		19		65		44		22
Total	$	5,128	$	1,964	$	1,891	$	1,282	$	1,326	$	340


(Dollars in millions)	Americas				EMEA				Asia Pacific
At December 31, 2021:	Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D		Aaa – Baa3		Ba1 – D
Vintage year:
2021	$	2,556	$	1,147	$	1,181	$	778	$	565	$	226
2020		1,013		392		506		342		381		86
2019		544		236		287		291		297		51
2018		338		117		189		85		211		64
2017		108		50		15		52		74		17
2016 and prior		20		53		21		46		38		20
Total	$	4,579	$	1,994	$	2,198	$	1,595	$	1,567	$	464

Troubled Debt Restructurings

The company did not have any significant troubled debt restructurings during the six months ended June 30, 2022 or for the year ended December 31, 2021.