7. Equity Activity:

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the three months ended June 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(248	)	$	95		$	(154	)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	1		$	0		$	1
Reclassification of (gains)/losses to other (income) and expense	0			0			0

Total net changes related to available-for-sale securities	$	1		$	0		$	1

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	9		$	5		$	13
Reclassification of (gains)/losses to:
Cost of sales	13			(5		)	8
SG&A expense	7			(3		)	4
Other (income) and expense	75			(29		)	46
Interest expense	7			(3		)	5

Total unrealized gains/(losses) on cash flow hedges	$	111		$	(34	)	$	76

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	78		$	(27	)	$	51
Curtailments and settlements	10			(4		)	6
Amortization of prior service (credits)/costs	(27		)	10			(17		)
Amortization of net (gains)/losses	693			(263		)	431

Total retirement-related benefit plans	$	754		$	(283	)	$	471

Other comprehensive income/(loss)	$	617		$	(223	)	$	394

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the three months ended June 30, 2015:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	102		$	67		$	169
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(15	)	$	6		$	(10	)
Reclassification of (gains)/losses to other (income) and expense	0			0			0

Total net changes related to available-for-sale securities	$	(15	)	$	6		$	(10	)

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(187	)	$	60		$	(127	)
Reclassification of (gains)/losses to:
Cost of sales	(58		)	17			(41		)
SG&A expense	(42		)	12			(30		)
Other (income) and expense	(221		)	85			(136		)
Interest expense	0			0			0

Total unrealized gains/(losses) on cash flow hedges	$	(508	)	$	175		$	(333	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	1		$	0		$	1
Net (losses)/gains arising during the period	93			(31		)	62
Curtailments and settlements	3			(1		)	2
Amortization of prior service (credits)/costs	(25		)	9			(16		)
Amortization of net (gains)/losses	821			(285		)	536

Total retirement-related benefit plans	$	894		$	(310	)	$	585

Other comprehensive income/(loss)	$	472		$	(62	)	$	411

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the six months ended June 30, 2016:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(10	)	$	361		$	351
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(35	)	$	14		$	(22	)
Reclassification of (gains)/losses to other (income) and expense	37			(14		)	23

Total net changes related to available-for-sale securities	$	2		$	(1	)	$	1

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(256	)	$	96		$	(160	)
Reclassification of (gains)/losses to:
Cost of sales	10			(5		)	5
SG&A expense	3			(2		)	1
Other (income) and expense	(12		)	5			(7		)
Interest expense	9			(4		)	6

Total unrealized gains/(losses) on cash flow hedges	$	(245	)	$	90		$	(156	)

Retirement-related benefit plans(1):
Net (losses)/gains arising during the period	$	(68	)	$	25		$	(43	)
Curtailments and settlements	14			(5		)	9
Amortization of prior service (credits)/costs	(53		)	19			(33		)
Amortization of net (gains)/losses	1,383			(510		)	873

Total retirement-related benefit plans	$	1,277		$	(471	)	$	806

Other comprehensive income/(loss)	$	1,023		$	(21	)	$	1,002

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Reclassifications and Taxes Related to Items of Other Comprehensive Income

(Dollars in millions)	Before Tax			Tax (Expense)/			Net of Tax
For the six months ended June 30, 2015:	Amount			Benefit			Amount
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(350	)	$	(199	)	$	(549	)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	17		$	(6	)	$	10
Reclassification of (gains)/losses to other (income) and expense	0			0			0

Total net changes related to available-for-sale securities	$	16		$	(6	)	$	10

Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	432		$	(158	)	$	274
Reclassification of (gains)/losses to:
Cost of sales	(108		)	32			(76		)
SG&A expense	(82		)	24			(58		)
Other (income) and expense	(380		)	146			(234		)
Interest expense	0			0			0

Total unrealized gains/(losses) on cash flow hedges	$	(138	)	$	44		$	(94	)

Retirement-related benefit plans(1):
Prior service costs/(credits)	$	6		$	(2	)	$	4
Net (losses)/gains arising during the period	16			(5		)	10
Curtailments and settlements	7			(2		)	5
Amortization of prior service (credits)/costs	(51		)	17			(33		)
Amortization of net (gains)/losses	1,656			(565		)	1,091

Total retirement-related benefit plans	$	1,635		$	(558	)	$	1,077

Other comprehensive income/(loss)	$	1,163		$	(719	)	$	444

(1)

These AOCI components are included in the computation of net periodic pension cost. (See note 8, “Retirement-Related Benefits,” for additional information.)

Accumulated Other Comprehensive Income/(Loss) (net of tax)

							Net Change			Net Unrealized
	Net Unrealized			Foreign			Retirement-			Gains/(Losses)			Accumulated
	Gains/(Losses)			Currency			Related			on Available-			Other
	on Cash Flow			Translation			Benefit			For-Sale			Comprehensive
(Dollars in Millions)	Hedges			Adjustments*			Plans			Securities			Income/(Loss)
January 1, 2016	$	100		$	(3,463	)	$	(26,248	)	$	5		$	(29,607	)
Other comprehensive income before reclassifications	(160		)	351			(34		)	(22		)	135
Amount reclassified from accumulated other comprehensive income	4			0			840			23			867

Total change for the period	(156		)	351			806			1			1,002

June 30, 2016	$	(56	)	$	(3,112	)	$	(25,442	)	$	6		$	(28,604	)

* Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax.

							Net Change			Net Unrealized
	Net Unrealized			Foreign			Retirement-			Gains/(Losses)			Accumulated
	Gains/(Losses)			Currency			Related			on Available-			Other
	on Cash Flow			Translation			Benefit			For-Sale			Comprehensive
(Dollars in Millions)	Hedges			Adjustments*			Plans			Securities			Income/(Loss)
January 1, 2015	$	392		$	(1,742	)	$	(26,509	)	$	(15	)	$	(27,875	)
Other comprehensive income before reclassifications	274			(549		)	19			10			(246		)
Amount reclassified from accumulated other comprehensive income	(368		)	0			1,058			0			690

Total change for the period	(94		)	(549		)	1,077			10			444

June 30, 2015	$	298		$	(2,292	)	$	(25,433	)	$	(5	)	$	(27,432	)

* Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax.