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36 Management Discussion
International Business Machines Corporation and Subsidiary Companies
Selling, General and Administrative
($ inmillions)
For the year ended December 31: 2015 2014
Yr.-to-Yr.
Percent
Change
Selling, general and
administrative expense
Selling, general and
administrative—other $16,643 $18,532 (10.2)%
Advertising and promotional
expense 1,290 1,307 (1.3)
Workforce rebalancing charges 587 1,472 (60.1)
Retirement-related costs 1,052 811 29.7
Amortization of acquired
intangible assets 304 374 (18.8)
Stock-based compensation 322 350 (8.0)
Bad debt expense 231 334 (30.8)
Total consolidated selling,
general and administrative
expense $20,430 $23,180 (11.9)%
Non-operating adjustments
Amortization of acquired
intangible assets (304) (374) (18.8)
Acquisition-related charges (21) (11) 81.1
Non-operating retirement-related
(costs)/income (533) (257) 107.3
Operating (non-GAAP)
selling, general and
administrative expense $19,573 $22,537 (13.2)%
Total selling, general and administrative (SG&A) expense d e-
creased 11.9percent in 2015 versus 2014, driven primarily by the
following factors:
• The effects of currency (7points); and
• Lower workforce rebalancing charges (3points); and
• The impact of the divested Systemx business (1point).
Operating (non-GAAP) expense decreased 13.2percent year to
year driven primarily by the same factors.
Bad debt expense decreased $103 million in 2015 compared
to 2014. The receivables provision coverage was 2.6percent at
December 31, 2015, an increase of 40basis points from Decem-
ber31, 2014.
Research, Development and Engineering
($ inmillions)
For the year ended December 31: 2015 2014
Yr.-to-Yr.
Percent
Change
Total consolidated research,
development and engineering $5,247 $5,437 (3.5)%
Non-operating adjustment
Non-operating retirement-related
(costs)/income (48) 77 NM
Operating (non-GAAP) research,
development and engineering $5,200 $5,514 (5.7)%
NM—Not meaningful
Research, development and engineering (RD&E) expense was
6.4percent of revenue in 2015 and 5.9percent of revenue in 2014.
RD&E expense decreased 3.5percent in 2015 versus 2014
primarily driven by:
• The effects of currency (5points); and
• The impact of the divested Systemx business (4points);
partially offset by
• Increased base spending (4points); and
• Higher expense due to acquisitions (1point).
Operating (non-GAAP) RD&E expense decreased 5.7percent
in 2015 compared to the prior year, driven primarily by the same
factors.
Intellectual Property and Custom Development Income
($ inmillions)
For the year ended December 31: 2015 2014
Yr.-to-Yr.
Percent
Change
Sales and other transfers
of intellectual property $303 $283 7.1%
Licensing/royalty-based fees 117 129 (9.8)
Custom development income 262 330 (20.5)
Total $682 $742 (8.1)%
The timing and amount of Sales and other transfers of IP may vary
significantly from period to period depending upon the timing of
divestitures, economic conditions, industry consolidation and the
timing of new patents and know-how development. There were no
material individual IP transactions in 2015 or 2014.