Revenue Recognition

3 Months Ended

Mar. 31, 2023

Revenue Recognition

Revenue Recognition

3. Revenue Recognition:

Disaggregation of Revenue

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

Revenue by Major Products/Service Offerings

(Dollars in millions)
For the three months ended March 31:	2023		2022
Hybrid Platform & Solutions	$	4,179	$	4,080
Transaction Processing		1,742		1,692
Total Software	$	5,921	$	5,772
Business Transformation		2,283		2,255
Application Operations		1,736		1,619
Technology Consulting		943		955
Total Consulting	$	4,962	$	4,829
Hybrid Infrastructure		1,709		1,700
Infrastructure Support		1,389		1,519
Total Infrastructure	$	3,098	$	3,219
Financing*		196		154
Other		75		224
Total revenue	$	14,252	$	14,197

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

Revenue by Geography

(Dollars in millions)
For the three months ended March 31:	2023		2022
Americas	$	7,078	$	7,056
Europe/Middle East/Africa		4,331		4,231
Asia Pacific		2,843		2,910
Total	$	14,252	$	14,197

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 March 31, 2023, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $58 billion. Approximately 71 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 27 percent in the subsequent three to five years and the balance thereafter.

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

For the three months ended March 31, 2023, revenue was reduced by $47 million 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 March 31,		At December 31,
(Dollars in millions)	2023		2022
Notes and accounts receivable — trade (net of allowances of $250 in 2023 and $233 in 2022)	$	5,757	$	6,541
Contract assets*	$	461	$	464
Deferred income (current)	$	13,220	$	12,032
Deferred income (noncurrent)	$	3,443	$	3,499

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

The amount of revenue recognized during the three months ended March 31, 2023 that was included within the deferred income balance at December 31, 2022 was $3.9 billion 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 three months ended March 31, 2023 and the year ended December 31, 2022.

(Dollars in millions)
January 1, 2023		Additions / (Releases)		Write-offs		Foreign currency and other		March 31, 2023
$	233	$	23	$	(8)	$	1	$	250

January 1, 2022		Additions / (Releases)		Write-offs		Foreign currency and other		December 31, 2022
$	218	$	59	$	(31)	$	(14)	$	233

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