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Revenue Recognition
9 Months Ended
Sep. 30, 2021
Revenue Recognition  
Revenue Recognition

3. Revenue Recognition:

Disaggregation of Revenue

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

Revenue by Major Products/Service Offerings

    

    

 

Three Months Ended September 30, 

Nine Months Ended September 30, 

 

(Dollars in millions)

2021

2020

2021

2020

 

Cloud & Data Platforms

$

3,046

$

2,775

$

9,032

$

8,108

Cognitive Applications

1,314

1,317

3,938

3,745

Transaction Processing Platforms

 

1,332

 

1,461

 

4,257

 

4,687

Total Cloud & Cognitive Software

$

5,692

$

5,553

$

17,227

$

16,540

Consulting

 

2,292

 

1,966

 

6,717

 

5,973

Application Management

 

1,847

 

1,758

 

5,439

 

5,332

Global Process Services

 

287

 

240

 

846

 

687

Total Global Business Services

$

4,427

$

3,965

$

13,002

$

11,992

Infrastructure & Cloud Services

 

4,681

 

4,933

 

14,370

 

14,663

Technology Support Services

 

1,473

 

1,528

 

4,496

 

4,582

Total Global Technology Services

$

6,154

$

6,462

$

18,866

$

19,245

Systems Hardware

 

796

 

919

 

3,294

 

3,404

Operating Systems Software

 

312

 

338

 

957

 

1,074

Total Systems

$

1,107

$

1,257

$

4,251

$

4,477

Global Financing*

 

220

 

273

 

702

 

837

Other

 

18

 

50

 

45

 

163

Total revenue

$

17,618

$

17,560

$

54,093

$

53,253

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

Revenue by Geography

    

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(Dollars in millions)

2021

2020

 

2021

2020

Americas

$

8,217

$

8,139

$

25,216

$

24,755

Europe/Middle East/Africa

 

5,593

 

5,564

 

17,272

 

16,775

Asia Pacific

 

3,808

 

3,857

 

11,605

 

11,723

Total

$

17,618

$

17,560

$

54,093

$

53,253

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 September 30, 2021, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $108 billion. Approximately 60 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 30 percent in the subsequent three to five years and the balance (mostly Infrastructure & Cloud Services) thereafter.

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

For the three and nine months ended September 30, 2021, revenue was reduced by $49 million and $85 million, respectively, 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 September 30, 

    

At December 31, 

(Dollars in millions)

2021

2020

Notes and accounts receivable trade (net of allowances of $277 in 2021 and $351 in 2020)

$

6,609

$

7,132

Contract assets*

 

566

 

497

Deferred income (current)

 

12,264

 

12,833

Deferred income (noncurrent)

 

3,965

 

4,301

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

The amount of revenue recognized during the three and nine months ended September 30, 2021 that was included within the deferred income balance at June 30, 2021 and December 31, 2020 was $5.1 billion and $9.5 billion, respectively, 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 nine months ended September 30, 2021 and the year ended December 31, 2020:

(Dollars in millions)

    

    

    

    

    

    

    

    

January 1, 2021

Additions / (Releases)

Write-offs 

Other*

September 30, 2021

$

351

$

(44)

$

(30)

$

0

$

277

January 1, 2020

Additions / (Releases)

Write-offs 

Other*

December 31, 2020

$

316

$

76

$

(46)

$

5

$

351

* Primarily represents translation adjustments.

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