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Financing Receivables | 3 Months Ended
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Mar. 31, 2025
Receivables [Abstract] |
Financing Receivables | Financing Receivables: Financing receivables primarily consist of client loan and installment payment receivables (loans), 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 IBM hardware, software and services. Payment terms on these financing arrangements are for terms generally up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Infrastructure products and are for terms generally up to five years. Commercial financing receivables, which consist of both held-for-investment and held-for-sale receivables, relate primarily to working capital financing for business partners and distributors of IBM products and services. Payment terms for working capital financing generally range from 30 to 60 days. A summary of the components of the company’s financing receivables is presented as follows:
|  | Client Financing Receivables |  |  |  |  |  |
|  | Client Loan and Installment Payment Receivables |  | Investment in Sales-Type and Direct Financing |  |  |  |
|  |  |  | Commercial Financing Receivables |  |
(Dollars in millions) |  |  |  | Held for |  | Held for |  |
At March 31, 2025 |  | (Loans) |  | Leases |  | Investment |  | Sale (1) |  | Total
Financing receivables, gross |  | $ | 6,914 |  |  | $ | 3,225 |  |  | $ | 459 |  |  | $ | 588 |  |  | $ | 11,187 |
Unearned income |  | (540) |  |  | (327) |  |  | — |  |  | — |  |  | (868) |
Unguaranteed residual value |  | — |  |  | 466 |  |  | — |  |  | — |  |  | 466 |
Amortized cost |  | $ | 6,374 |  |  | $ | 3,364 |  |  | $ | 459 |  |  | $ | 588 |  |  | $ | 10,785 |
Allowance for credit losses |  | (88) |  |  | (57) |  |  | (5) |  |  | — |  |  | (149) |
Total financing receivables, net |  | $ | 6,286 |  |  | $ | 3,307 |  |  | $ | 454 |  |  | $ | 588 |  |  | $ | 10,635 |
Current portion |  | $ | 3,302 |  |  | $ | 1,372 |  |  | $ | 454 |  |  | $ | 588 |  |  | $ | 5,715 |
Noncurrent portion |  | $ | 2,985 |  |  | $ | 1,935 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,920 |
|  | Client Financing Receivables |  |  |  |  |  |
|  | Client Loan and Installment Payment Receivables |  | Investment in Sales-Type and Direct Financing |  |  |  |  |  |
|  |  |  | Commercial Financing Receivables |  |
(Dollars in millions) |  |  |  | Held for |  | Held for |  |
At December 31, 2024 |  | (Loans) |  | Leases |  | Investment |  | Sale (1) |  | Total
Financing receivables, gross |  | $ | 7,425 |  |  | $ | 3,406 |  |  | $ | 1,322 |  |  | $ | 900 |  |  | $ | 13,052 |
Unearned income |  | (547) |  |  | (344) |  |  | — |  |  | — |  |  | (891) |
Unguaranteed residual value |  | — |  |  | 479 |  |  | — |  |  | — |  |  | 479 |
Amortized cost |  | $ | 6,878 |  |  | $ | 3,540 |  |  | $ | 1,322 |  |  | $ | 900 |  |  | $ | 12,639 |
Allowance for credit losses |  | (73) |  |  | (50) |  |  | (5) |  |  | — |  |  | (128) |
Total financing receivables, net |  | $ | 6,804 |  |  | $ | 3,491 |  |  | $ | 1,317 |  |  | $ | 900 |  |  | $ | 12,512 |
Current portion |  | $ | 3,535 |  |  | $ | 1,408 |  |  | $ | 1,317 |  |  | $ | 900 |  |  | $ | 7,159 |
Noncurrent portion |  | $ | 3,269 |  |  | $ | 2,083 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,353 |
(1)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 secured borrowings, true sales, 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 secured borrowings were $197 million and $213 million at March 31, 2025 and December 31, 2024, respectively. These borrowings are included in note 12, “Borrowings.” Transfer of Financial Assets Effective January 1, 2025, the company extended its existing agreement for a 26-month term with a third-party investor to sell up to $1.3 billion of IBM short-term commercial financing receivables on a revolving basis. In addition, 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. There were no material client financing receivables transferred for the three months ended March 31, 2025 and 2024. The following table presents the total amount of commercial financing receivables transferred.
(Dollars in millions) |  |
For the three months ended March 31: |  | 2025 |  | 2024
Commercial financing receivables: |  |  |  |
Receivables transferred during the period |  | $ | 1,942 |  |  | $ | 1,802 |
Receivables uncollected at end of period (1) |  | $ | 680 |  |  | $ | 655 |
(1)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 March 31, 2025 and 2024. 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. For the three months ended March 31, 2025 and 2024, the net loss, including fees, associated with the transfer of commercial financing receivables was $12 million and $15 million, respectively, and is included in other (income) and expense in the Consolidated Income Statement. For the company’s policy on determining treatment for transfer of financial assets, refer to note A, “Significant Accounting Policies,” in the company’s 2024 Annual Report. Financing Receivables by Portfolio Segment The following tables present the amortized cost basis for client financing receivables at March 31, 2025 and December 31, 2024, 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 March 31, 2025: |  | Americas |  | EMEA |  | Asia Pacific |  | Total
Amortized cost |  | $ | 5,376 |  |  | $ | 2,975 |  |  | $ | 1,387 |  |  | $ | 9,738 |
Allowance for credit losses: |  |  |  |  |  |  |  |
Beginning balance at January 1, 2025 |  | $ | 69 |  |  | $ | 45 |  |  | $ | 9 |  |  | $ | 123 |
Write-offs |  | $ | 0 |  |  | $ | 0 |  |  | $ | — |  |  | $ | 0 |
Recoveries |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Additions/(releases) |  | 7 |  |  | 10 |  |  | 2 |  |  | 19 |
Other (1) |  | 2 |  |  | 1 |  |  | 0 |  |  | 3 |
Ending balance at March 31, 2025 |  | $ | 78 |  |  | $ | 56 |  |  | $ | 11 |  |  | $ | 144 |
(1)Primarily represents translation adjustments.
(Dollars in millions) |  |  |  |  |  |  |  |
At December 31, 2024: |  | Americas |  | EMEA |  | Asia Pacific |  | Total
Amortized cost |  | $ | 5,861 |  |  | $ | 3,128 |  |  | $ | 1,429 |  |  | $ | 10,418 |
Allowance for credit losses: |  |  |  |  |  |  |  |
Beginning balance at January 1, 2024 |  | $ | 92 |  |  | $ | 48 |  |  | $ | 11 |  |  | $ | 150 |
Write-offs |  | $ | (2) |  |  | $ | (1) |  |  | $ | 0 |  |  | $ | (3) |
Recoveries |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Additions/(releases) |  | (10) |  |  | 0 |  |  | (2) |  |  | (12) |
Other (1) |  | (11) |  |  | (2) |  |  | 0 |  |  | (14) |
Ending balance at December 31, 2024 |  | $ | 69 |  |  | $ | 45 |  |  | $ | 9 |  |  | $ | 123 |
(1)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 2024 Annual Report. 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.
(Dollars in millions) |  | Total Amortized Cost |  | Amortized Cost > 90 Days (1) |  | Amortized Cost > 90 Days and Accruing (1) |  | Billed Invoices > 90 Days and Accruing |  | Amortized Cost Not Accruing (2)
At March 31, 2025: |  |  |  |  |
Americas |  | $ | 5,376 |  |  | $ | 70 |  |  | $ | 10 |  |  | $ | 1 |  |  | $ | 63 |
EMEA |  | 2,975 |  |  | 29 |  |  | 1 |  |  | 0 |  |  | 30 |
Asia Pacific |  | 1,387 |  |  | 7 |  |  | 0 |  |  | 0 |  |  | 7 |
Total client financing receivables |  | $ | 9,738 |  |  | $ | 107 |  |  | $ | 11 |  |  | $ | 1 |  |  | $ | 100 |
(Dollars in millions) |  | Total Amortized Cost |  | Amortized Cost > 90 Days (1) |  | Amortized Cost > 90 Days and Accruing (1) |  | Billed Invoices > 90 Days and Accruing |  | Amortized Cost Not Accruing (2)
At December 31, 2024: |  |  |  |  |
Americas |  | $ | 5,861 |  |  | $ | 66 |  |  | $ | 7 |  |  | $ | 1 |  |  | $ | 62 |
EMEA |  | 3,128 |  |  | 29 |  |  | 1 |  |  | 0 |  |  | 28 |
Asia Pacific |  | 1,429 |  |  | 8 |  |  | 0 |  |  | 0 |  |  | 7 |
Total client financing receivables |  | $ | 10,418 |  |  | $ | 103 |  |  | $ | 8 |  |  | $ | 1 |  |  | $ | 97 |
(1)At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days. (2)Of the amortized cost not accruing, there was a related allowance of $96 million and $94 million at March 31, 2025 and December 31, 2024, respectively. Financing income recognized on these receivables was immaterial for the three months ended March 31, 2025 and 2024, 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 March 31, 2025 and December 31, 2024, 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. Gross write-offs by vintage year at March 31, 2025 and December 31, 2024 were not material.
(Dollars in millions) |  | Americas |  | EMEA |  | Asia Pacific
At March 31, 2025: |  | Aaa – Baa3 |  | Ba1 – C |  | Aaa – Baa3 |  | Ba1 – C |  | Aaa – Baa3 |  | Ba1 – C
Vintage year: |  |  |  |  |  |  |  |  |  |  |  |
2025 |  | $ | 504 |  |  | $ | 99 |  |  | $ | 183 |  |  | $ | 67 |  |  | $ | 135 |  |  | $ | 36 |
2024 |  | 1,700 |  |  | 431 |  |  | 961 |  |  | 541 |  |  | 499 |  |  | 70 |
2023 |  | 1,111 |  |  | 332 |  |  | 300 |  |  | 225 |  |  | 257 |  |  | 15 |
2022 |  | 815 |  |  | 94 |  |  | 319 |  |  | 164 |  |  | 233 |  |  | 23 |
2021 |  | 165 |  |  | 16 |  |  | 100 |  |  | 19 |  |  | 56 |  |  | 4 |
2020 and prior |  | 50 |  |  | 60 |  |  | 48 |  |  | 48 |  |  | 44 |  |  | 15 |
Total |  | $ | 4,344 |  |  | $ | 1,032 |  |  | $ | 1,912 |  |  | $ | 1,063 |  |  | $ | 1,225 |  |  | $ | 162 |
(Dollars in millions) |  | Americas |  | EMEA |  | Asia Pacific
At December 31, 2024: |  | Aaa – Baa3 |  | Ba1 – C |  | Aaa – Baa3 |  | Ba1 – C |  | Aaa – Baa3 |  | Ba1 – C
Vintage year: |  |  |  |  |  |  |  |  |  |  |  |
2024 |  | $ | 2,080 |  |  | $ | 621 |  |  | $ | 1,145 |  |  | $ | 514 |  |  | $ | 616 |  |  | $ | 77 |
2023 |  | 1,372 |  |  | 310 |  |  | 341 |  |  | 258 |  |  | 285 |  |  | 19 |
2022 |  | 950 |  |  | 113 |  |  | 408 |  |  | 194 |  |  | 254 |  |  | 26 |
2021 |  | 233 |  |  | 24 |  |  | 125 |  |  | 27 |  |  | 69 |  |  | 5 |
2020 |  | 43 |  |  | 17 |  |  | 29 |  |  | 15 |  |  | 36 |  |  | 8 |
2019 and prior |  | 53 |  |  | 44 |  |  | 37 |  |  | 35 |  |  | 26 |  |  | 7 |
Total |  | $ | 4,732 |  |  | $ | 1,129 |  |  | $ | 2,085 |  |  | $ | 1,043 |  |  | $ | 1,287 |  |  | $ | 142 |
Modifications The company did not have any significant modifications due to clients experiencing financial difficulty during the three months ended March 31, 2025 or for the year ended December 31, 2024.

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