IBM 1998 Annual Report Download - page 89

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS International Business Machines Corporation and Subsidiary Companies
87
Segment Assets and Other Items
The assets of the hardware segments primarily include inven-
tory and plant, property and equipment. The software segment
assets mainly include inventory, plant, property and equipment,
and investment in deferred software development. The Global
Services segment assets primarily include maintenance inven-
tory and plant, property and equipment associated with its
strategic outsourcing business. Details regarding the Global
Financing segment assets can be found on page 89.
To accomplish the efficient use of space and equipment, it
becomes necessary, in most instances, for several segments
to share plant, property and equipment assets. Where assets
are shared, landlord ownership of the assets is assigned to
one segment and not allocated to each user segment. This is
consistent with the company’s management system and is
reflected as such in the schedule on page 88. In such cases,
there will not be a precise compatibility between segment
pre-tax income and segment assets.
Similarly, the depreciation amounts reported by segment are
deployed on a landlord ownership basis and may not be con-
sistent with the actual amounts included in the segments’ pre-
tax income. Such amounts included in pre-tax income reflect
occupancy charges from the landlord segment and are not
specifically identified by the management reporting system.
Capital expenditures reported by segment are also in line with
the landlord ownership basis of asset assignment.
The Global Financing segment amounts on page 88 for inter-
est income and interest expense reflect the interest income
and expense associated with the financing business as well as
the investment in cash and marketable securities. The remain-
ing amounts of interest income and interest expense are not
allocated discretely to the other segments, but are included as
part of an indirect expense allocation.
Reconciliations to IBM as Reported
(Dollars in millions) 1998 1997 1996
REVENUE:
Total reportable segments $«90,912 $«89,173 $«86,602
Other revenues 151 99 343
Elimination of internal
revenue (9,396) (10,764) (10,998)
Total IBM Consolidated $«81,667 $«78,508 $«75,947
PRE-TAX INCOME:
Total reportable segments $«««9,699 $«««9,686 $«10,269
Elimination of internal
transactions (162) (377) (251)
Unallocated corporate
expenses (497) (282) (996)
Purchased research and
development —— (435)
Total IBM Consolidated $«««9,040 $«««9,027 $«««8,587
Major Customers
No single customer represents 10% or more of the company’s
total revenue.
Immaterial Items
INVESTMENT IN EQUITY ALLIANCES AND
EQUITY ALLIANCES GAINS/LOSSES
The investments in equity alliances and the resulting gains and
losses from these investments attributable to the segments
are minimal and do not have a material impact on the financial
results of the segments.