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Consolidated financial statements (audited)
International Business Machines Corporation and Subsidiary Companies

Consolidated statement of stockholders' equity (audited)

($ in millions)
Common Stock and Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Gains and (Losses) Not Affecting Retained Earnings Total

* Foreign currency translation adjustments are presented gross with associated hedges shown net of tax.

The accompanying notes are an integral part of the financial statements.
2005
Stockholders’ equity, January 1, 2005 $ 26,673 $ 38,148 $ (31,072) $ (2,061) $ 31,688
Net income plus gains and (losses) not affecting retained earnings:
Net income 7,934 $ 7,934
Gains and (losses) not affecting retained earnings (net of tax):
Net unrealized gains on cash flow hedge derivatives (net of tax expense of $502) 891 891
Foreign currency translation adjustments (net of tax expense of $345*) (1,153) (1,153)
Minimum pension liability adjustment (net of tax expense of $320) 290 290
Net unrealized gains on marketable securities (net of tax expense of $8) 17 17
Total gains and (losses) not affecting retained earnings 45
Subtotal: Net income plus gains and (losses) not affecting retained earnings $ 7,979
Cash dividends declared—common stock (1,250) (1,250)
Common stock issued under employee plans (18,572,017 shares) 2,257 2,257
Purchases (606,697 shares) and sales (2,594,786 shares) of treasury stock under employee plans—net (98) 197 99
Other treasury shares purchased, not retired (90,237,800 shares) (7,671) (7,671)
Decrease in shares remaining to be issued in acquisition (24) (24)
Income tax benefits—stock transactions 20 20
Stockholders’ equity, December 31, 2005 $ 28,926 $ 44,734 $ (38,546) $ (2,016) $ 33,098
($ in millions)
Common Stock and Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Gains and (Losses) Not Affecting Retained Earnings Total

* Foreign currency translation adjustments are presented gross with associated hedges shown net of tax.

The accompanying notes are an integral part of the financial statements.
2006
Stockholders’ equity, January 1, 2006 $ 28,926 $ 44,734 $ (38,546) $ (2,016) $ 33,098
Net income plus gains and (losses) not affecting retained earnings:
Net income 9,492 $ 9,492
Gains and (losses) not affecting retained earnings (net of tax):
Net unrealized losses on cash flow hedge derivatives (net of tax benefit of $178) (342) (342)
Foreign currency translation adjustments (net of tax benefit of $225*) 1,020 1,020
Minimum pension liability adjustment (net of tax expense of $900) 1,881 1,881
Net unrealized gains on marketable securities (net of tax expense of $34) 53 53
Total gains and (losses) not affecting retained earnings 2,613
Adjustments to initially adopt SFAS No. 158
Prior service credits/(costs) (net of tax expense of $494) 871 871
Net gains/(losses) (net of tax benefit of $6,028) (10,371) (10,371)
Transition assets/(obligations) (net of tax expense of $1) 2 2
Subtotal: Net income plus gains and (losses) not affecting retained earnings and adjustments to adopt SFAS No. 158 $ 2,607
Cash dividends declared—common stock (1,683) (1,683)
Common stock issued under employee plans (27,211,279 shares) 2,322 2,322
Purchases (633,769 shares) and sales (3,489,803 shares) of treasury stock under employee plans—net (111) 272 161
Other treasury shares purchased, not retired (97,564,462 shares) (8,022) (8,022)
Decrease in shares remaining to be issued in acquisition (3) (3)
Income tax benefits—stock transactions 26 26
Stockholders’ equity, December 31, 2006 $ 31,271 $ 52,432 $ (46,296) $ (8,901) $ 28,506
($ in millions)
Common Stock and Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Gains and (Losses) Not Affecting Retained Earnings Total

* Foreign currency translation adjustments are presented gross with associated hedges shown net of tax.

The accompanying notes are an integral part of the financial statements.
2007
Stockholders’ equity, January 1, 2007 $ 31,271 $ 52,432 $ (46,296) $ (8,901) $ 28,506
Adjustment to initially adopt FIN 48 117 117
Net income plus gains and (losses) not affecting retained earnings:
Net income 10,418 $ 10,418
Gains and (losses) not affecting retained earnings (net of tax):
Net unrealized losses on cash flow hedge derivatives (net of tax benefit of $32) (123) (123)
Foreign currency translation adjustments (net of tax benefit of $553*) 726 726
Retirement-related benefit plans:
Prior service credits (net of tax expense of $31) 44 44
Net gains/(losses) (net of tax expense of $1,913) 3,611 3,611
Amortization of prior service costs/(credits) (net of tax benefit of $50) (85) (85)
Amortization of net gains/(losses) (net of tax expense of $654) 1,110 1,110
Amortization of transition assets (net of tax benefit of $1) (2) (2)
Net unrealized gains on marketable securities (net of tax expense of $132) 206 206
Total gains and (losses) not affecting retained earnings 5,487
Subtotal: Net income plus gains and (losses) not affecting retained earnings $ 15,905
Cash dividends declared—common stock (2,147) (2,147)
Common stock issued under employee plans (49,137,038 shares) 4,332 4,332
Purchases (1,282,131 shares) and sales (9,282,055 shares) of treasury stock under employee plans—net (179) 729 550
Other treasury shares purchased, not retired (178,385,436 shares) (405) (18,378) (18,783)
Decrease in shares remaining to be issued in acquisition (6) (6)
Income tax expense—stock transactions (4) (4)
Stockholders’ equity, December 31, 2007 $ 35,188 $ 60,640 $ (63,945) $ (3,414) $ 28,470
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