International Business Machines Corp. (IBM)

IBM recognizes revenue when it is realized or realizable and earned. IBM considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the client, risk of loss has transferred to the client, and either client acceptance has been obtained, client acceptance provisions have lapsed, or IBM has objective evidence that the criteria specified in the client acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.

IBM recognizes revenue on sales to solution providers, resellers and distributors (herein referred to as "resellers") when the reseller has: economic substance apart from IBM, credit risk, risk of loss to the inventory; and, the fee to IBM is not contingent upon resale or payment by the end user, IBM has no further obligations related to bringing about resale or delivery and all other revenue recognition criteria have been met.

IBM reduces revenue for estimated client returns, price protection, rebates and other similar allowances. Revenue is recognized only if these estimates can be reasonably and reliably determined. IBM bases its estimates on historical results taking into consideration the type of client, the type of transaction and the specifics of each arrangement. Payments made under cooperative marketing programs are recognized as an expense only if IBM receives from the client an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably and reliably estimated. If IBM does not receive an identifiable benefit sufficiently separable from the product sale whose fair value can be reasonably estimated, such payments are recorded as a reduction of revenue.

Revenue from sales of third-party vendor products or services is recorded net of costs when IBM is acting as an agent between the client and the vendor, and gross when IBM is the principal for the transaction. Several factors are considered to determine whether IBM is an agent or principal, most notably whether IBM is the primary obligor to the client, or has inventory risk. Consideration is also given to whether IBM adds meaningful value to the vendor's product or service, was involved in the selection of the vendor's product or service, has latitude in establishing the sales price or has credit risk.

IBM reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions. In addition to the aforementioned general policies, the following are the specific revenue recognition policies for multiple-deliverable arrangements and for each major category of revenue.

Source: 10-K (filing date: 2018-02-27).

International Business Machines Corp., Income Statement, Revenues

USD $ in millions

Based on: 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).

Item	Description	The company
IBM consolidated revenue	Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).	International Business Machines Corp.'s iBM consolidated revenue declined from 2015 to 2016 and from 2016 to 2017.