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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
105
($ in millions)
At December 31, 2014:
Adjusted
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Debt securities—noncurrent
(1) $ 7 $3 $ — $ 9
Available-for-sale equity investments
(1) $272 $2 $31 $243
(1) Included within investments and sundry assets in the Consolidated Statement of Financial Position.
($ in millions)
At December 31, 2013:
Adjusted
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Debt securities—noncurrent
(1) $ 7 $1 $— $ 9
Available-for-sale equity investments
(1) $20 $2 $ 4 $18
(1) Included within investments and sundry assets in the Consolidated Statement of Financial Position.
During the fourth quarter of 2014, the company acquired equity
securities in conjunction with the sale of the industry standard
server business which are classified as available-for-sale securi-
ties. Gross unrealized losses related to available-for-sale securities
of $31 million were recorded in the Consolidated Statement of
Financial Position.
Based on an evaluation of available evidence as of Decem-
ber31, 2014, the company believes that unrealized losses on debt
and available-for-sale equity securities are temporary and do not
represent an other-than-temporary impairment.
Sales of debt and available-for-sale equity investments during
the period were as follows:
($ in millions)
For the year ended December 31: 2014 2013 2012
Proceeds $21 $41 $112
Gross realized gains (before taxes) 013 45
Gross realized losses (before taxes) 55 1
The after-tax net unrealized gains/(losses) on available-for-sale
debt and equity securities that have been included in other com-
prehensive income/(loss) and the after-tax net (gains)/losses
reclassified from accumulated other comprehensive income/(loss)
to net income were as follows:
($ in millions)
For the year ended December 31: 2014 2013
Net unrealized gains/(losses)
arising during the period $(18) $ 0
Net unrealized (gains)/losses
reclassified to net income 3(5)
The contractual maturities of substantially all available-for-sale
debt securities are less than one year at December31, 2014.
Derivative Financial Instruments
The company operates in multiple functional currencies and is
a significant lender and borrower in the global markets. In the
normal course of business, the company is exposed to the impact
of interest rate changes and foreign currency fluctuations, and to
a lesser extent equity and commodity price changes and client
credit risk. The company limits these risks by following estab-
lished risk management policies and procedures, including the
use of derivatives, and, where cost effective, financing with debt
in the currencies in which assets are denominated. For interest
rate exposures, derivatives are used to better align rate move-
ments between the interest rates associated with the company’s
lease and other financial assets and the interest rates associated
with its financing debt. Derivatives are also used to manage the
and $32,856 million and the estimated fair value is $37,524 million
and $34,555 million at December31, 2014 and 2013, respectively.
If measured at fair value in the financial statements, long-term debt
(including the current portion) would be classified as Level2 in the
fair value hierarchy.
Debt and Marketable Equity Securities
The company’s cash equivalents and current debt securities are
considered available-for-sale and recorded at fair value, which is
not materially different from carrying value, in the Consolidated
Statement of Financial Position.
During the first quarter of 2014, the company acquired equity
securities in conjunction with the sale of the customer care busi-
ness which are classified as trading securities. At December31,
2014, unrealized gains related to trading securities of $21 million
were recorded in other (income) and expense in the Consolidated
Statement of Earnings.
The following tables summarize the company’s noncurrent
debt and marketable equity securities which are also considered
available-for-sale and recorded at fair value in the Consolidated
Statement of Financial Position.