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Stock-Based Compensation
9 Months Ended
Sep. 30, 2021
Stock-Based Compensation  
Stock-Based Compensation

16. Stock-Based Compensation:

Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations.

Three Months Ended September 30, 

Nine Months Ended September 30, 

(Dollars in millions)

2021

2020

2021

2020

Cost

$

45

$

42

$

127

$

109

Selling, general and administrative

 

156

 

129

 

431

 

401

Research, development and engineering

 

61

 

50

 

160

 

147

Pre-tax stock-based compensation cost

$

262

$

222

$

719

$

658

Income tax benefits

 

(58)

 

(50)

 

(179)

 

(146)

Total net stock-based compensation cost

$

204

$

172

$

540

$

512

Pre-tax stock-based compensation cost for the three months ended September 30, 2021 increased $40 million compared to the corresponding period in the prior year. This was due to increases from performance share units ($21 million), conversion of stock options previously issued by acquired entities ($15 million) and restricted stock units ($4 million).

Pre-tax stock-based compensation cost for the nine months ended September 30, 2021 increased $61 million compared to the corresponding period in the prior year. This was due to increases related to performance share units ($29 million), restricted stock units ($19 million) and conversion of stock options previously issued by acquired entities ($13 million).

Total unrecognized compensation cost related to non-vested awards at September 30, 2021 was $1.6 billion and is expected to be recognized over a weighted-average period of approximately 2.5 years.

Capitalized stock-based compensation cost was not material at September 30, 2021 and 2020.

In connection with the separation of Kyndryl, as required by the company’s stock-based incentive award plans, the number of shares underlying remaining unvested stock awards will be adjusted. The company will also adjust the exercise price and number of shares underlying outstanding stock options. All adjustments are made with the intent to preserve the intrinsic value of each award immediately before and after the separation.