IBM 2010 Annual Report Download - page 128

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies126
Other Plan Information
The following table presents information for defined benefit pension plans with accumulated benefit obligations (ABO) in excess of plan
assets. For a more detailed presentation of the funded status of the company’s defined benefit pension plans, see the table on page 116.
($ in millions)
2010 2009
Benefit Benefit
At December 31: Obligation Plan Assets Obligation Plan Assets
Plans with PBO in excess of plan assets $21,589 $10,627 $28,720 $17,633
Plans with ABO in excess of plan assets 21,166 10,576 27,996 17,561
Plans with assets in excess of PBO 72,288 75,355 60,942 63,942
Note V.
Segment Information
The company creates business value for clients and solves business
problems through integrated solutions that leverage information
technology and deep knowledge of business processes. IBM
solutions typically create value by reducing a client’s operational
costs or by enabling new capabilities that generate revenue. These
solutions draw from an industry-leading portfolio of consulting,
delivery and implementation services, enterprise software, systems
and financing.
The company’s major operations consist of five business seg-
ments: Global Tech nol ogy Services, Global Business Services,
Software, Systems and Technology and Global Financing. The seg-
ments repre sent components of the company for which separate
financial information is available that is utilized on a regular basis by
the chief executive officer in determining how to allocate the com-
pany’s resources and evaluate performance. The segments are
determined based on several factors, including client base, homo-
geneity of products, technology, delivery channels and similar
economic characteristics.
Information about each segment’s business and the products
and services that generate each segment’s revenue is located
in the “Description of Business” section of the Management
Dis cus sion on pages 22 and 23, and “Segment Details,” on pages
25 through 30.
Segment revenue and pre-tax income include transactions
between the segments that are intended to reflect an arm’s-length
transfer price. Systems and software that is used by Global
Technology Services in outsourcing engagements is primarily
sourced internally from Systems and Technology and Software.
For providing IT services that are used internally, Global Technology
Services and Global Business Services recover cost, as well as a
reasonable fee, that is intended to reflect the arm’s-length value
of providing the services. The Global Services segments enter into
arm’s-length leases and loans at prices equivalent to market rates
with Global Financing to facilitate the acquisition of equipment
used in services engagements. All internal transaction prices are
reviewed annually, and reset if appropriate.
The company utilizes globally integrated support organizations
to realize economies of scale and efficient use of resources. As a
result, a considerable amount of expense is shared by all of the
segments. This shared expense includes sales coverage, certain
marketing functions and support functions such as Accounting,
Treasury, Procurement, Legal, Human Re sources and Billing and
Collections. Where practical, shared expenses are allocated based
on measurable drivers of expense, e.g., headcount. When a clear
and measurable driver cannot be identified, shared expenses are
allocated on a financial basis that is consistent with the company’s
management system; e.g., advertising expense is allocated based
on the gross profits of the segments. The unallocated corporate
amounts arising from certain divestitures, indirect infrastructure
reductions, miscellaneous tax items and the unallocated corporate
expense pool are recorded in net income but are not allocated to
the segments.