Notes to consolidated financial statements (audited)
International Business Machines Corporation and Subsidiary Companies

Rental expense from continuing operations, including amounts charged to inventories and fixed assets, and excluding amounts previously reserved, was $1,681 million in 2008, $1,559 million in 2007 and $1,446 million in 2006. Rental expense in agreements with rent holidays and scheduled rent increases is recorded on a straight-line basis over the lease term. Contingent rentals are included in the determination of rental expense as accruable. Rental expense in prior periods is presented to conform with 2008 presentation, inclusive of rental expenses associated with automobile leases within certain countries. The table below depicts gross minimum rental commitments from continuing operations under noncancelable leases, amounts related to vacant space associated with infrastructure reductions and restructuring actions taken prior to 1994, and in 1999, 2002 and 2005 (previously reserved), sublease income commitments and capital lease commitments. These amounts reflect activities primarily related to office space, as well as manufacturing facilities.