0001558370-22-008760 | 10-QT | XBRL Viewer

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FINANCIAL ASSETS AND LIABILITIES - Fair Value Measurements (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Financial assets and financial liabilities:
Derivative assets impacted by netting arrangements	$ 0	$ 0
Long-term debt	3,000	3,000
Long-term debt, fair value	2,700
Time deposits
Financial assets and financial liabilities:
Impairments of non-financial assets	0	0
Level 2
Financial assets and financial liabilities:
Derivative liabilities	2	1
Prepaid expenses and other current assets \| Level 2
Financial assets and financial liabilities:
Derivative assets	9	9
Cash and cash equivalents \| Time deposits
Financial assets and financial liabilities:
Available-for-sale debt securities	$ 972	$ 609

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

3 Months Ended

Mar. 31, 2022

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

NOTE 14. REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS

During the quarter ended March 31, 2022, the Company identified and corrected an $87 million over-accrual in its accrued contract costs balance that related to a majority-owned, consolidated joint venture in our Principal Markets segment. This over-accrual was principally built up over the pre-Separation periods of January 1, 2012, to November 3, 2021, resulting in overstatements of cost of services and accrued contract costs. The Company concluded that such impacts were not material to any prior annual or interim period. We further determined that the correction of the over-accrual within the transition period would be significant to the three-month results, and as a result it will be corrected as an immaterial revision to our 2021 Annual Report in a separate Form 8-K filing subsequent to the release of this Transition Report and will be reflected as a revision to prior interim periods in our subsequent Quarterly Reports on Form 10-Q. Because the majority of the over-accrual originated prior to 2019, we decreased the opening balance of accrued contract costs as of January 1, 2019, by $57 million and increased the opening balance of equity by $43 million, net of the tax effect of $14 million.

A summary of the impact of the revision to the accompanying prior-period consolidated balance sheet and consolidated statement of equity is presented in the tables below. The impacts to the consolidated statements of operations, comprehensive income (loss) and cash flow for the period ended March 31, 2021, are considered immaterial.


	At December 31, 2021
Consolidated Balance Sheet ($ in millions)	As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	585	$	(87)	$	498
Total current liabilities		4,544		(87)		4,457
Other liabilities		501		22		522
Total liabilities		10,511		(65)		10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)		4,218		66		4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before non-controlling interests		2,700		65		2,765
Total equity		2,702		65		2,767


	At March 31, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,976	$	51	$	6,027
Accumulated other comprehensive income (loss)		(1,186)		4		(1,182)
Total equity		4,848		54		4,902


	At January 1, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,972	$	51	$	6,023
Accumulated other comprehensive income (loss)		(1,100)		4		(1,096)
Total equity		4,931		54		4,985

REVENUE RECOGNITION - Deferred Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Deferred Contract Costs
Deferred costs	$ 2,387		$ 2,185
Deferred costs, current	1,143		920
Deferred costs, noncurrent	1,244		1,265
Total deferred costs amortized	455
Amortization of deferred costs	136	$ 160
Deferred transition costs
Deferred Contract Costs
Deferred costs	961		1,012
Total deferred costs amortized	112
Prepaid software costs
Deferred Contract Costs
Deferred costs	806		658
Total deferred costs amortized	207
Capitalized costs to fulfill contracts
Deferred Contract Costs
Deferred costs	302		235
Capitalized costs to obtain contracts
Deferred Contract Costs
Deferred costs	$ 318		$ 282
Minimum
Deferred Contract Costs
Term of contract with customer	3 years
Maximum
Deferred Contract Costs
Term of contract with customer	6 years

BORROWINGS - Revolving Credit Agreement (Details) $ in Millions	Oct. 31, 2021 USD ($)
Revolving Credit Facility
Line of Credit Facility [Line Items]
Aggregate amount	$ 3,150

REVENUE RECOGNITION - Remaining Performance Obligations, Expected Timing of Satisfaction (Details)	Mar. 31, 2022
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Remaining Performance Obligations
Percentage of remaining performance obligation expected to be recognized	55.00%
Duration of expected recognition period for remaining performance obligation	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Remaining Performance Obligations
Percentage of remaining performance obligation expected to be recognized	36.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01 \| Minimum
Remaining Performance Obligations
Duration of expected recognition period for remaining performance obligation	3 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01 \| Maximum
Remaining Performance Obligations
Duration of expected recognition period for remaining performance obligation	5 years

TAXES (Details) - USD ($) $ in Millions	3 Months Ended
TAXES (Details) - USD ($) $ in Millions	Mar. 31, 2022	Mar. 31, 2021
TAXES
Effective tax rate (as a percent)	(21.00%)	(22.60%)
Provision for income taxes	$ 40	$ 91
Additions to valuation allowances	$ 60

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

FINANCIAL ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2022

FINANCIAL ASSETS AND LIABILITIES

FINANCIAL ASSETS AND LIABILITIES

NOTE 7. FINANCIAL ASSETS AND LIABILITIES

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following fair value hierarchy:

●

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date.

●

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

●

Level 3 – Unobservable inputs for the asset or liability.

The level of an asset or liability within the fair value hierarchy is determined based on the lowest level of any input that is significant to the fair value measurement.

In determining the fair value of certain financial instruments, the Company considers certain market valuation adjustments to the “base valuations” using the methodologies described below for several parameters that market participants would consider in determining fair value:

●

Counterparty credit risk adjustments are applied to certain financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument.

●

Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing certain liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s credit risk as observed in the credit default swap market.

Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, land, goodwill and intangible assets are recorded at fair value or at cost, as appropriate, in the period they are initially recognized, and such fair value may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired. The impairment models used for non-financial assets depend on the type of asset. The fair value measurements, in such instances, would be classified in Level 3 of the fair value hierarchy.

We perform a qualitative assessment of assets on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value is less than carrying value. There were no impairments of non-financial assets recognized for the three months ended March 31, 2022 and 2021, respectively.

Financial Assets and Liabilities Measured at Fair Value

The gross balances of derivative assets contained within prepaid expenses and other current assets in the Consolidated Balance Sheet was $9 million at both March 31, 2022, and December 31, 2021. The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at March 31, 2022, and December 31, 2021, were $2 million and $1 million, respectively. The fair value of derivatives is the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates and is categorized as Level 2 in the fair value hierarchy.

The Company may enter into master netting agreements with certain counterparties that allow for netting of exposures in the event of default or breach. However, in the Consolidated Balance Sheet, the Company does not offset derivative assets against liabilities with counterparties in master netting arrangements by counterparty, and there was no derivative instruments activity impacted by master netting agreements at March 31, 2022, and December 31, 2021.

Financial Assets and Liabilities Not Measured at Fair Value

Accounts receivable are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. If measured at fair value in the consolidated financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt, which would be classified as Level 2.

The Company also has time deposits that have maturities of 90 days or less, and their carrying values approximate fair value. They are measured for impairment on a recurring basis by comparing their fair value with their amortized cost basis. There were no impairments of financial assets recognized for any of the periods presented. The balance of these time deposits with maturities of 90 days or less contained within cash and cash equivalents in the Consolidated Balance Sheet at March 31, 2022, and December 31, 2021, was $972 million and $609 million, respectively. If measured at fair value in the consolidated financial statements, time deposits with maturities of 90 days or less would be categorized as Level 2 in the fair value hierarchy.

The fair value of our outstanding debt (excluding finance lease obligations) is based on various methodologies, including quoted prices in active markets for identical debt instruments, which is a Level 1 measurement, and calculated fair value using an expected present value technique that uses rates currently available to the Company for debt in active markets with similar terms and remaining maturities, which is a Level 2 measurement. As of March 31, 2022, our outstanding debt (excluding finance lease obligations) had a carrying value of $3.0 billion and an estimated fair value of

$2.7 billon, consisting of quoted prices for identical debt instruments (Level 1) and expected present value calculated off observable inputs (Level 2). As of December 31, 2021, our outstanding debt (excluding finance lease obligations) had a carrying value of $3.0 billion, which approximated fair value.

Derivative Financial Instruments

Foreign Exchange Risk

Anticipated Cost Transactions

The Company has foreign exchange derivative financial instruments designated as cash flow hedges to manage foreign currency risk that was deemed to be associated with the Company’s operations and has been allocated to the Company’s Consolidated Income Statement through the pre-Separation periods, based on its pro rata share of the underlying items hedged, where applicable, with the remainder allocated on a pro rata basis of revenue. Changes in fair value of derivatives designated as a cash flow hedge are recorded, net of applicable taxes, in other comprehensive income and subsequently reclassified into the same income statement line item as the hedged exposure when the underlying hedged item is recognized in earnings. The cash flows associated with derivatives designated as cash flow hedges are reported in cash flows from operating activities in the Consolidated Statement of Cash Flows.

At March 31, 2022, and December 31, 2021, the total notional amount of forward contracts designated as cash flow hedges of forecasted foreign currency cost transactions was $216 million and $213 million, respectively. The notional amounts of derivative instruments do not necessarily represent the amounts exchanged by the Company with third parties and are not necessarily a direct measure of the financial exposure. The maximum remaining length of time over which the Company hedged its exposure is approximately one year. At March 31, 2022, and December 31, 2021, the weighted-average remaining maturity of these instruments was approximately 0.5 years.

At March 31, 2022, in connection with cash flow hedges of foreign currency cost transactions, the Company recorded net deferred gains of $3 million (before taxes) in AOCI. At December 31, 2021, in connection with cash flow hedges of foreign currency cost transactions, the Company recorded net deferred gains of $4 million (before taxes) in AOCI. The Company estimates that $3 million (before taxes) of deferred net gains on derivatives in AOCI at March 31, 2022, will be reclassified to net income within the next twelve months, providing an offsetting economic impact against the underlying anticipated transactions.

Subsidiary Cash and Foreign Currency Asset / Liability Management

The Company uses global treasury centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. Changes in fair value of derivatives not designated as hedges are reported in earnings in other (income) and expense. Cash flows from derivatives not designated as hedges are reported in cash flows from investing activities in the Consolidated Statement of Cash Flows. The terms of these swap contracts are generally less than one year. The changes in the fair values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Income Statement. At March 31, 2022, and December 31, 2021, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $945 million and $581 million, respectively.

The Effect of Derivative Instruments in the Consolidated Income Statement

The total amounts of income and expense line items presented in the Consolidated Income Statement in which the effects of cash flow hedges and derivatives not designated as hedging instruments are recorded, and the total effect of hedge activity on these income and expense line items are as follows:


					Gains (Losses) from
(Dollars in millions)	Total				Hedge Activity
For the three months ended March 31:	2022		2021		2022		2021
Cost of services	$	3,824	$	4,318	$	1	$	—
Selling, general and administrative expenses		690		714		—		—
Other expenses		27		22		(1)		—

Gain (Loss) Recognized in Consolidated Income Statement

(Dollars in millions)

Consolidated

Recognized on

Attributable to Risk

For the three months

Income Statement

Derivatives

Being Hedged

ended March 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expenses

(1)

—

Total

(1)

—


	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)	Recognized				Consolidated	Reclassified
For the three months	in OCI				Income Statement	from AOCI
ended March 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	1	$	—	Cost of services	$	1	$	—
					Selling, general and administrative expenses		—		—
					Other expenses		—		—
Total	$	1	$	—		$	1	$	—

NA - not applicable

For the three months ended March 31, 2022 and 2021, there were no gains or losses excluded from the assessment of hedge effectiveness for cash flow hedges, or associated with an underlying exposure that did not or was not expected to occur, nor are there any anticipated in the normal course of business.

Prior to the third quarter of 2021, Kyndryl did not independently execute derivative financial instruments to manage its foreign currency risk and instead participated in a centralized foreign currency hedging program administered by IBM. The hedging activity allocated to Kyndryl was for the former Parent’s forecasted currency exposures. In the third quarter of 2021, we began to execute trades to hedge the Company’s foreign exchange exposures, and this activity is recorded in the Company’s consolidated financial statements.

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2022

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees and the fair value of these guarantees recognized in the Consolidated Balance Sheet at March 31, 2022, and December 31, 2021, were not material. Additionally, the Company has contractual commitments that are noncancellable with certain software and cloud partners to provide services to its customers. During the three months ended March 31, 2022, there were no significant changes to such contractual commitments as presented in our 2021 Annual Report.

As a company with approximately 90,000 employees and with clients around the world, Kyndryl is subject to, or could become subject to, either as plaintiff or defendant, a variety of contingencies, including claims, demands and suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. Given the rapidly evolving external landscape of cybersecurity, privacy and data protection laws, regulations and threat actors, the Company or its clients could become subject to actions or proceedings in various jurisdictions. Also, as is typical for companies of Kyndryl’s scope and scale, the Company is subject to, or could become subject to, actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the Company’s benefit plans), as well as actions with respect to contracts, securities, foreign operations, competition law and environmental matters. These actions may be commenced by a number of different parties, including competitors, clients, employees, government and regulatory agencies, stockholders and representatives of the locations in which the Company does business. Some of the actions to which the Company is, or may become, party may involve particularly complex technical issues, and some actions may raise novel questions under the laws of the various jurisdictions in which these matters arise. Additionally, the Company is, or may be, a party to agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters.

The Company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In accordance with the relevant accounting guidance, the Company provides disclosures of matters for which the likelihood of material loss is at least reasonably possible. In addition, the Company may also disclose matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer and employee relations considerations.

The Company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses (individually or in the aggregate) to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter.

Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. While the Company will continue to defend itself vigorously, it is possible that the Company’s business, financial condition, results of operations or cash flows could be affected in any particular period by the resolution of one or more of these matters.

In July 2017, BMC Software, Inc. (“BMC”) filed suit against IBM in the U.S. Court for the Southern District of Texas in a dispute involving IBM’s managed infrastructure services business. BMC alleges IBM’s removal of BMC software from one of its client’s sites at the client’s request constituted breach of contract and trade secret misappropriation. IBM defeated BMC’s motion for injunctive relief, completed the client’s transformation project and counterclaimed for breach of contract. In September 2021, the trial court overruled in part and granted in part the magistrate judge’s recommendations on summary judgment, dismissing IBM’s counterclaims and permitting some of BMC’s claims for damages to proceed. The case went to trial in March 2022, and the outcome remains pending.

BORROWINGS

3 Months Ended

Mar. 31, 2022

BORROWINGS

BORROWINGS

NOTE 9. BORROWINGS

Debt

The following table presents the components of our debt:


			March 31,		December 31,
(Dollars in millions)	Interest Rate	Maturity	2022		2021
Unsecured floating-rate term loan	1.37%*	November, 2024	$	500	$	500
Commercial loan agreement	3.00%	July, 2026		123		129
Unsecured senior notes due 2026	2.05%	October, 2026		700		700
Unsecured senior notes due 2028	2.70%	October, 2028		500		500
Unsecured senior notes due 2031	3.15%	October, 2031		650		650
Unsecured senior notes due 2041	4.10%	October, 2041		550		550
Finance lease obligations **	1.79%	2022-2027		219		222
			$	3,242	$	3,251
Less: Unamortized discount				5		5
Less: Unamortized debt issuance costs				15		15
Less: Current maturities of long-term debt				96		103
Total long-term debt			$	3,127	$	3,128

* Floating rate calculated as of March 31, 2022, using a rate equal to one-month U.S. dollar LIBOR plus 1.125%.

** Finance lease obligations presented using the weighted-average interest rate and calendar-year maturity dates.

Contractual obligations of long-term debt outstanding at March 31, 2022, exclusive of finance lease obligations, are as follows:


(Dollars in millions)*	Principal
Year ending March 31:
2023	$	27
2024		28
2025		529
2026		29
2027		710
Thereafter		1,700
Total	$	3,023

* Contractual obligations approximate scheduled repayments.

Revolving Credit Agreement

In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving Credit Agreement”) for our future liquidity needs.

The Revolving Credit Agreement expires, unless extended, in October 2026. Interest rates on borrowings under the Revolving Credit Agreements are based on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement. The total expense recorded by the Company for the Revolving Credit Agreement was not material in any of the periods presented.

We may voluntarily prepay borrowings under the Revolving Credit Agreement without premium or penalty, subject to customary “breakage” costs. The Revolving Credit Agreement includes certain customary mandatory prepayment provisions.

Interest on Debt

Interest expense for the three months ended March 31, 2022 and 2021, was $21 million and $14 million, respectively. Most of the interest for the pre-Separation period presented in the historical Consolidated Income Statement reflects the allocation of interest expense associated with debt issued by IBM for which a portion of the proceeds benefited Kyndryl.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

REVENUE RECOGNITION - Remaining Performance Obligations (Details) $ in Billions	3 Months Ended
	Mar. 31, 2022 USD ($)
REVENUE RECOGNITION
Practical expedient, remaining performance obligations	true
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied	$ 47.8

NET LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2022

NET LOSS PER SHARE

Schedule of computation of basic and diluted earnings per share of common stock


	Three Months Ended March 31,
(In millions, except per share amounts)	2022		2021
Net income (loss) on which basic and diluted earnings per share is calculated	$	(229)	$	(494)

Number of shares on which basic and diluted earnings per share is calculated		224.4		224.1

Basic earnings (loss) per share	$	(1.02)	$	(2.20)
Diluted earnings (loss) per share		(1.02)		(2.20)

Schedule of anti dilutive securities excluded in computation of diluted earnings per share



(In millions)
Nonvested restricted stock units issued and outstanding		9.8
Market-conditioned performance awards		1.8
Stock options issued and outstanding		3.8
Total		15.5

BORROWINGS - Interest on Debt (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Interest on Debt
Interest expense	$ 21	$ 14

RELATED PARTY TRANSACTIONS - Assignment of Receivables and Term Deposit Account (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
IBM
Related Party Transaction [Line Items]
Receivables	$ 0	$ 695

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS (Tables)

3 Months Ended

Mar. 31, 2022

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

Schedule of revision to financial statements


	At December 31, 2021
Consolidated Balance Sheet ($ in millions)	As Previously Reported		Adjustments		As Revised
Accrued contract costs	$	585	$	(87)	$	498
Total current liabilities		4,544		(87)		4,457
Other liabilities		501		22		522
Total liabilities		10,511		(65)		10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)		4,218		66		4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before non-controlling interests		2,700		65		2,765
Total equity		2,702		65		2,767


	At March 31, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,976	$	51	$	6,027
Accumulated other comprehensive income (loss)		(1,186)		4		(1,182)
Total equity		4,848		54		4,902


	At January 1, 2021
Consolidated Statement of Equity ($ in millions)	As Previously Reported		Adjustments		As Revised
Net parent investment	$	5,972	$	51	$	6,023
Accumulated other comprehensive income (loss)		(1,100)		4		(1,096)
Total equity		4,931		54		4,985

CONSOLIDATED INCOME STATEMENT (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONSOLIDATED INCOME STATEMENT
related-party revenue	$ 236	$ 154
related-party cost of services	$ 924	$ 1,006

- Definition

Direct costs arising from transactions with related parties who are not affiliates or joint Ventures. These costs are categorized as cost of goods sold.

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- Definition

Amount of revenue, fees and commissions earned from transactions between (a) a parent company and its subsidiaries; (b) subsidiaries of a common parent; (c) an entity and trusts for the benefit of employees, for example, but not limited to, pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management; (d) an entity and its principal, owners, management, or members of their immediate families; and (e) affiliates.

+ References

+ Details

RELATED PARTY TRANSACTIONS - Allocation of Corporate Expenses (Details) - IBM - Management Costs And Corporate Support Services - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Related Party Transaction [Line Items]
Allocation of corporate expenses	$ 0	$ 337
Other (income) and expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses		7
Interest expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses		14
Selling, general and administrative expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses		$ 317

FINANCIAL ASSETS AND LIABILITIES - Effect of Hedge Activity on Income and Expense (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Derivative Instruments, Gain (Loss) [Line Items]
Cost of services	$ 3,824	$ 4,318
Selling, general and administrative expenses	690	714
Other expenses	27	$ 22
Cost of services.
Derivative Instruments, Gain (Loss) [Line Items]
Gains (Losses) from Hedge Activity	1
Other expenses
Derivative Instruments, Gain (Loss) [Line Items]
Gains (Losses) from Hedge Activity	$ (1)

- Definition

The aggregate cost of goods produced and sold and services rendered during the reporting period.

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CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Millions, $ in Millions	Mar. 31, 2022	Dec. 31, 2021
CONSOLIDATED BALANCE SHEET
Notes and accounts receivable - trade, allowances	$ 44	$ 44
Common Stock, Par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares authorized (in shares)	1,000.0	1,000.0
Common Stock, Shares issued (in shares)	224.5	224.2
Treasury Stock (in shares)	0.2	0.0
Accounts Receivable, related party	$ 343	$ 373
Accounts payable, related party	$ 806	$ 733

SEGMENTS (Tables)

3 Months Ended

Mar. 31, 2022

SEGMENTS

Summary of results of segments


	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Revenue
United States	$	1,169	$	1,228
Japan		706		763
Principal Markets		1,579		1,825
Strategic Markets		978		955
Total revenue	$	4,431	$	4,771
Segment adjusted EBITDA
United States	$	248	$	180
Japan		154		123
Principal Markets		98		52
Strategic Markets		92		96
Total segment adjusted EBITDA	$	592	$	450

Summary of reconciliation of consolidated totals to segment information


	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Pretax income (loss)	$	(189)	$	(403)
Workforce rebalancing charges		—		52
Transaction-related costs		58		55
Stock-based compensation expense		31		16
Interest expense		21		14
Depreciation expense		246		339
Amortization expense		326		330
Corporate expense not allocated to the segments		56		40
Other adjustments *		43		7
Segment adjusted EBITDA	$	592	$	450

* Other adjustments represents significant litigation costs and pension costs other than pension servicing costs and multi-employer plan costs.

FINANCIAL ASSETS AND LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2022

FINANCIAL ASSETS AND LIABILITIES

Effect of Derivative Instruments in the Combined Income Statement


					Gains (Losses) from
(Dollars in millions)	Total				Hedge Activity
For the three months ended March 31:	2022		2021		2022		2021
Cost of services	$	3,824	$	4,318	$	1	$	—
Selling, general and administrative expenses		690		714		—		—
Other expenses		27		22		(1)		—

Gain (Loss) Recognized in Consolidated Income Statement

(Dollars in millions)

Consolidated

Recognized on

Attributable to Risk

For the three months

Income Statement

Derivatives

Being Hedged

ended March 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expenses

(1)

—

Total

(1)

—


	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)	Recognized				Consolidated	Reclassified
For the three months	in OCI				Income Statement	from AOCI
ended March 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	1	$	—	Cost of services	$	1	$	—
					Selling, general and administrative expenses		—		—
					Other expenses		—		—
Total	$	1	$	—		$	1	$	—

NA - not applicable

TAXES

3 Months Ended

Mar. 31, 2022

TAXES

TAXES

NOTE 5. TAXES

Due to the change in fiscal year-end discussed in Note 1 – Significant Accounting Policies, income taxes for the three months ended March 31, 2022, are computed using the actual tax rate for the period. For the period prior to the Separation, income taxes have been calculated as if Kyndryl had filed income tax returns on a standalone basis, as our operations were historically included in certain tax returns filed by IBM.

For the three months ended March 31, 2022, the Company’s effective tax rate was (21.0%), compared to (22.6%) for the three months ended March 31, 2021. The Company’s negative effective tax rates in 2022 and 2021 reflect a tax expense on a pretax book loss in both periods. The Company’s effective tax rate for the three months ended March 31, 2022, was lower than the Company’s statutory tax rate primarily due to undistributed foreign earnings, taxes on foreign operations and the establishment of valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized. For the period ended March 31, 2022, the additions to valuation allowance of $60 million relate to a full valuation allowance established against the net deferred tax assets in certain jurisdictions and a partial valuation allowance established against certain deferred tax assets in the United States.

The Company’s effective tax rate for the three months ended March 31, 2021, was lower than the Company’s statutory tax rate primarily due to the geographic mix of pretax income and changes in valuation allowances.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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NET LOSS PER SHARE - Computation of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
NET LOSS PER SHARE
Stock dividends declared	$ 0	$ 0
Net income (loss)	$ (229)	$ (494)
Weighted-average shares outstanding during period
Number of shares on which basic earnings per share is calculated	224.4	224.1
Number of shares on which diluted earnings per share is calculated	224.4	224.1
Basic earnings (loss) per share (in dollars per share)	$ (1.02)	$ (2.20)
Diluted earnings (loss) per share (in dollars per share)	$ (1.02)	$ (2.20)
Shares distributed on separation date	224.1

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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+ Details

CONSOLIDATED INCOME STATEMENT - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONSOLIDATED INCOME STATEMENT
Revenues	$ 4,431	$ 4,771
Cost of services	3,824	4,318
Selling, general and administrative expenses	690	714
Workforce rebalancing charges		52
Transaction-related costs	58	55
Interest expense	21	14
Other expenses	27	22
Total costs and expenses	4,620	5,175
Income (loss) before income taxes	(189)	(403)
Provision for income taxes	40	91
Net income (loss)	$ (229)	$ (494)
NET LOSS PER SHARE
Basic earnings (loss) per share (in dollars per share)	$ (1.02)	$ (2.20)
Diluted earnings (loss) per share (in dollars per share)	$ (1.02)	$ (2.20)
Weighted-average basic shares outstanding (in shares)	224.4	224.1
Weighted-average diluted shares outstanding (in shares)	224.4	224.1

RELATED PARTY TRANSACTIONS - Related Party Revenue and Purchases (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Related Party Transaction [Line Items]
Revenues	$ 236	$ 154
related-party cost of services	924	1,006
Cost of services	3,824	4,318
Depreciation	246	339
Payment for purchase of hardware from IBM	180	180
IBM
Related Party Transaction [Line Items]
Revenues	236	154
Due from related party		6,000	$ 0
IBM \| Outsourcing
Related Party Transaction [Line Items]
Cost of services	924	1,000
IBM \| Networking and IT services
Related Party Transaction [Line Items]
Cost of services		121
IBM \| Hardware, software and services
Related Party Transaction [Line Items]
Cost of services		762
Depreciation		115
Payment for purchase of hardware from IBM	25	87
Due from related party	$ 265
Upgraded hardware period	2 years
Estimated useful lives (in years)	5 years
IBM \| Cost of service
Related Party Transaction [Line Items]
related-party cost of services	$ 924	$ 1,000

RETIREMENT-RELATED BENEFITS (Tables)

3 Months Ended

Mar. 31, 2022

RETIREMENT-RELATED BENEFITS

Components of net periodic cost of the retirement-related benefit plans


(Dollars in millions)	Defined Benefit Pension Plans				Nonpension Postretirement Benefit Plans
For the three months ended March 31:	2022		2021		2022		2021
Service cost	$	14	$	23	$	—	$	—
Interest cost⁽¹⁾		6		1		—		1
Expected return on plan assets⁽¹⁾		(10)		(5)		—		—
Amortization of prior service costs (credits)⁽¹⁾		—		—		—		—
Recognized actuarial losses (gains)⁽¹⁾		16		11		—		—
Curtailments and settlements⁽¹⁾		4		—		—		—
Multi-employer plans and other costs⁽²⁾		(1)		3		—		—
Net periodic benefit cost	$	28	$	32	$	—	$	1

(1)	These components of net periodic benefit cost are included in other (income) and expense in the Consolidated Income Statement.

(2)	Multi-employer plan costs represent required contributions for the period to multi-employer plans, which are plans sponsored by third parties. The Company recognizes expense in connection with multi-employer plans as operating costs as contributions are funded.

INTANGIBLE ASSETS INCLUDING GOODWILL - Future Amortization Expense (Details) $ in Millions	Mar. 31, 2022 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract]
2023	$ 45
2024	31
2025	26
2026	23
2027	19
Thereafter	2
Capitalized software
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract]
2023	1
Customer relationships
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract]
2023	40
2024	28
2025	23
2026	19
2027	16
Thereafter	2
Patents/trademarks
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract]
2023	4
2024	3
2025	3
2026	3
2027	$ 3

RETIREMENT-RELATED BENEFITS

3 Months Ended

Mar. 31, 2022

RETIREMENT-RELATED BENEFITS

RETIREMENT-RELATED BENEFITS

NOTE 12. RETIREMENT-RELATED BENEFITS

The following table presents the components of net periodic benefit cost for the retirement-related benefit plans recognized in the Consolidated Income Statement, excluding defined contribution plans, for the three months ended March 31, 2022 and 2021.


(Dollars in millions)	Defined Benefit Pension Plans				Nonpension Postretirement Benefit Plans
For the three months ended March 31:	2022		2021		2022		2021
Service cost	$	14	$	23	$	—	$	—
Interest cost⁽¹⁾		6		1		—		1
Expected return on plan assets⁽¹⁾		(10)		(5)		—		—
Amortization of prior service costs (credits)⁽¹⁾		—		—		—		—
Recognized actuarial losses (gains)⁽¹⁾		16		11		—		—
Curtailments and settlements⁽¹⁾		4		—		—		—
Multi-employer plans and other costs⁽²⁾		(1)		3		—		—
Net periodic benefit cost	$	28	$	32	$	—	$	1

(1)	These components of net periodic benefit cost are included in other (income) and expense in the Consolidated Income Statement.

(2)	Multi-employer plan costs represent required contributions for the period to multi-employer plans, which are plans sponsored by third parties. The Company recognizes expense in connection with multi-employer plans as operating costs as contributions are funded.

During the three months ended March 31, 2022, Company contributions paid to the defined benefit pension plans, multi-employer plans and nonpension postretirement benefit plans were not significantly different from amounts previously disclosed in our 2021 Annual Report.

The Company estimates contributions to its defined benefit pension plans, multi-employer plans and nonpension postretirement benefit plans for fiscal year 2023 to be approximately $27 million. These amounts generally represents legally mandated minimum contributions.

In connection with the change to the fiscal year-end to March 31 from December 31, the Company performed an interim remeasurement of our retirement-related benefit plans at March 31, 2022, which resulted in a change in the discount rate from 1.19% at December 31, 2021, to 1.88% at March 31, 2022. Retirement and nonpension postretirement benefit obligations on the Consolidated Balance Sheet decreased by $140 million primarily due to this remeasurement.

- Definition

The entire disclosure for retirement benefits.

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-URI http://asc.fasb.org/extlink&oid=123447040&loc=d3e1928-114920

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-Name Accounting Standards Codification
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+ Details

ACCOUNTING CHANGES

3 Months Ended

Mar. 31, 2022

ACCOUNTING CHANGES

ACCOUNTING CHANGES

NOTE 2. ACCOUNTING CHANGES

Standards Implemented

In October 2021, the Financial Accounting Standards Board (“FASB”) issued guidance (“Revenue Contracts with Customers Acquired in a Business Combination”) which requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination as if the acquirer had originated the contracts, in accordance with ASC 606, Revenue from Contracts with Customers. Deferred revenue acquired in a business combination is no longer required to be measured at its fair value, which had historically resulted in a deferred revenue impairment at the date of acquisition. The guidance is effective January 1, 2023, and early adoption is permitted. The Company has early adopted the guidance as of January 1, 2022. Our adoption did not materially affect our consolidated financial statements.

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

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+ Details

SEGMENTS (Details)	3 Months Ended
SEGMENTS (Details)	Mar. 31, 2022 segment
SEGMENTS
Number of reportable segments	4

SEGMENTS

3 Months Ended

Mar. 31, 2022

SEGMENTS

SEGMENTS

NOTE 4. SEGMENTS

Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews performance and allocates resources. Our four reportable segments consist of the following:

United States: This reportable segment is comprised of Kyndryl’s operations in the United States.

Japan: This reportable segment is comprised of Kyndryl’s operations in Japan.

Principal Markets: This reportable segment represents the aggregation of our operations in Australia / New Zealand, Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland.

Strategic Markets: This reportable segment is comprised of our operations in all other countries in which we operate.

The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) excluding net interest expense, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), transaction-related costs, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges, impairment expense, significant litigation costs, and foreign currency impacts of highly inflationary countries. The use of revenue and adjusted EBITDA aligns with how the CODM assesses performance and allocates resources for the Company’s segments. The Company has recast the prior-period results to reflect the change in segment structure that became effective in the fourth quarter of 2021. In addition, during the three months ended March 31, 2022, the Company updated certain allocation methodologies related to its measure of segment adjusted EBITDA and has accordingly recast the prior-period information to reflect these updates, which did not change the aggregate amount of segment adjusted EBITDA.

Our geographic markets frequently work together to sell and implement certain contracts. The economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses.

The following table reflects the results of the Company’s segments:


	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Revenue
United States	$	1,169	$	1,228
Japan		706		763
Principal Markets		1,579		1,825
Strategic Markets		978		955
Total revenue	$	4,431	$	4,771
Segment adjusted EBITDA
United States	$	248	$	180
Japan		154		123
Principal Markets		98		52
Strategic Markets		92		96
Total segment adjusted EBITDA	$	592	$	450

The following table reconciles consolidated pretax income to segment adjusted EBITDA:


	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Pretax income (loss)	$	(189)	$	(403)
Workforce rebalancing charges		—		52
Transaction-related costs		58		55
Stock-based compensation expense		31		16
Interest expense		21		14
Depreciation expense		246		339
Amortization expense		326		330
Corporate expense not allocated to the segments		56		40
Other adjustments *		43		7
Segment adjusted EBITDA	$	592	$	450

* Other adjustments represents significant litigation costs and pension costs other than pension servicing costs and multi-employer plan costs.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

EQUITY - AOCI Rollforward (Details) - USD ($) $ in Millions	3 Months Ended
EQUITY - AOCI Rollforward (Details) - USD ($) $ in Millions	Mar. 31, 2022	Mar. 31, 2021
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	$ 2,767	$ 4,985
Net transfers from Parent		498
Other comprehensive income (loss), net of tax	54	(86)
Balance at the end of the period	2,711	4,902
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(1,143)	(1,096)
Other comprehensive income (loss), net of tax	54	(86)
Balance at the end of the period	(1,089)	(1,182)
Unrealized Gains (Losses) on Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	3
Balance at the end of the period	3
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(684)	(878)
Other comprehensive income (loss), net of tax	(51)	(96)
Balance at the end of the period	(735)	(974)
Net Change Retirement-Related Benefit Plans
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(462)	(218)
Other comprehensive income (loss), net of tax	105	10
Balance at the end of the period	$ (357)	$ (208)

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

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- Definition

Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.

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+ Details

FINANCIAL ASSETS AND LIABILITIES - Foreign Exchange Risk (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Not designated as hedging instruments - economic hedges \| Currency swaps
Derivatives, Fair Value [Line Items]
Notional amount	$ 945	$ 581
Not designated as hedging instruments - economic hedges \| Currency swaps \| Maximum
Derivatives, Fair Value [Line Items]
Term of contract	1 year
Derivative instruments in cash flow hedges \| Foreign exchange contracts
Derivatives, Fair Value [Line Items]
Net gains from derivatives		4
Derivative instruments in cash flow hedges \| Designated as hedging instruments \| Foreign exchange contracts
Derivatives, Fair Value [Line Items]
Notional amount		$ 213
Net gains from derivatives	$ 3
Deferred net loss/ profit on derivatives reclassified to net income	3
Derivative instruments in cash flow hedges \| Designated as hedging instruments \| Foreign exchange forward contracts
Derivatives, Fair Value [Line Items]
Notional amount	$ 216
Maximum length of time hedged	1 year
Weighted average remaining maturity	6 months	6 months

SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
SIGNIFICANT ACCOUNTING POLICIES (Policies)	Mar. 31, 2022
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	Basis of Presentation Prior to the Separation on November 3, 2021 (the “pre-Separation periods”), our historical financial statements were prepared on a combined basis and were derived from the consolidated financial statements of IBM. For the period subsequent to November 3, 2021, the financial statements are presented on a consolidated basis as the Company became a standalone public company. Management believes the accompanying financial statements include all adjustments necessary to present fairly the Company’s financial position as of March 31, 2022, and December 31, 2021, and its results of operations for the three months ended March 31, 2022 and 2021. The financial statements for historical periods were derived from the Company’s audited annual consolidated financial statements but do not contain all of the footnote disclosures from the annual financial statements. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2022 (our “2021 Annual Report”). Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain items have been recast to conform to current-period presentation.
Principles of Consolidation	Principles of Consolidation For the pre-Separation periods, the accompanying financial statements were derived from the consolidated financial statements and accounting records of the Parent as if the Company operated on a standalone basis during the periods presented and were prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. All significant intercompany transactions during the pre-Separation periods between Kyndryl and IBM have been included in the consolidated financial statements. Intercompany transactions between Kyndryl and IBM were considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected as Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows and in the Consolidated Balance Sheet within Net Parent investment. After the Separation on November 3, 2021, the Company’s consolidated financial statements are based on our reported results as a standalone company. All significant transactions and accounts within Kyndryl were eliminated.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts that are reported in the consolidated financial statements and accompanying disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses, deferred transition costs and other matters. Estimates were also used in determining the allocation of costs and expenses from IBM for the pre-Separation periods. These estimates are based on management’s knowledge of current events, historical experience and actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may be different from these estimates.
Transition Period	Transition Period On January 27, 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company from December 31 to March 31. This is our transition report for the period from January 1, 2022, to March 31, 2022. The Company’s 2023 fiscal year began on April 1, 2022, and will end on March 31, 2023.
Standards Implemented	Standards Implemented In October 2021, the Financial Accounting Standards Board (“FASB”) issued guidance (“Revenue Contracts with Customers Acquired in a Business Combination”) which requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination as if the acquirer had originated the contracts, in accordance with ASC 606, Revenue from Contracts with Customers. Deferred revenue acquired in a business combination is no longer required to be measured at its fair value, which had historically resulted in a deferred revenue impairment at the date of acquisition. The guidance is effective January 1, 2023, and early adoption is permitted. The Company has early adopted the guidance as of January 1, 2022. Our adoption did not materially affect our consolidated financial statements.
Segments	Our reportable segments correspond to how the chief operating decision maker (“CODM”) reviews performance and allocates resources. Our four reportable segments consist of the following: United States: This reportable segment is comprised of Kyndryl’s operations in the United States. Japan: This reportable segment is comprised of Kyndryl’s operations in Japan. Principal Markets: This reportable segment represents the aggregation of our operations in Australia / New Zealand, Canada, France, Germany, India, Italy, Spain / Portugal, and the United Kingdom / Ireland. Strategic Markets: This reportable segment is comprised of our operations in all other countries in which we operate. The measure of segment operating performance used by Kyndryl’s CODM is adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) excluding net interest expense, depreciation and amortization (excluding depreciation of right-of-use assets and amortization of capitalized contract costs), transaction-related costs, pension costs other than pension servicing costs and multi-employer plan costs, stock-based compensation expense, workforce rebalancing charges, impairment expense, significant litigation costs, and foreign currency impacts of highly inflationary countries. The use of revenue and adjusted EBITDA aligns with how the CODM assesses performance and allocates resources for the Company’s segments. The Company has recast the prior-period results to reflect the change in segment structure that became effective in the fourth quarter of 2021. In addition, during the three months ended March 31, 2022, the Company updated certain allocation methodologies related to its measure of segment adjusted EBITDA and has accordingly recast the prior-period information to reflect these updates, which did not change the aggregate amount of segment adjusted EBITDA. Our geographic markets frequently work together to sell and implement certain contracts. The economic environment and its effects on the industries served by our geographic markets affect revenues and operating expenses within our geographic markets to differing degrees. Currency fluctuations also tend to affect our geographic markets differently, depending on the geographic concentrations and locations of their businesses.

CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities:
Net income (loss)	$ (229)	$ (494)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation of property and equipment	246	339
Depreciation of right-of-use assets	103	99
Amortization of transition costs and prepaid software	319	323
Amortization of capitalized contract costs	136	160
Amortization of intangible assets	7	7
Stock-based compensation	31	16
Deferred taxes	(10)	17
Net (gain) loss on asset sales and other	12	(1)
Change in operating assets and liabilities:
Deferred costs (excluding amortization)	(672)	(548)
Right-of-use assets and liabilities (excluding depreciation)	(117)	(118)
Workforce rebalancing liabilities	(73)	(138)
Receivables	(31)	(138)
Accounts payable	384	(99)
Taxes (including items settled with former Parent in prior-year period)	(66)	74
Other assets and other liabilities	151	172
Net cash provided by (used in) operating activities	189	(328)
Cash flows from investing activities:
Payments for property and equipment	(180)	(180)
Proceeds from disposition of property and equipment	9	93
Other investing activities, net	(53)	(13)
Net cash used in investing activities	(225)	(100)
Cash flows from financing activities:
Debt repayments	(28)	(17)
Net transfers from Parent		460
Short-term borrowings (repayments), net	(2)
Common stock repurchases for tax withholdings	(3)
Other financing activities, net	(10)
Net cash provided by (used in) financing activities	(43)	443
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(7)	(3)
Net change in cash, cash equivalents and restricted cash	(86)	13
Cash, cash equivalents and restricted cash at January 1	2,240	38
Cash, cash equivalents and restricted cash at March 31	2,154	$ 50
Supplemental data
Income taxes paid, net of refunds received	47
Interest paid on debt	$ 3

NET LOSS PER SHARE

3 Months Ended

Mar. 31, 2022

NET LOSS PER SHARE

NET LOSS PER SHARE

NOTE 6. NET LOSS PER SHARE

We did not declare any stock dividends in the periods presented. The following tables provide the computation of basic and diluted earnings per share of common stock for the three months ended March 31, 2022 and 2021.


	Three Months Ended March 31,
(In millions, except per share amounts)	2022		2021
Net income (loss) on which basic and diluted earnings per share is calculated	$	(229)	$	(494)

Number of shares on which basic and diluted earnings per share is calculated		224.4		224.1

Basic earnings (loss) per share	$	(1.02)	$	(2.20)
Diluted earnings (loss) per share		(1.02)		(2.20)

Prior to the Separation, the Company did not have any publicly-traded issued and outstanding common stock or equivalents. Accordingly, the net loss per share for the three months ended March 31, 2021, is calculated based on the 224.1 million shares distributed on the Separation Date.

For the three months ended March 31, 2022, basic and weighted-average shares outstanding were the same because the effect of the below securities would have been anti-dilutive.



(In millions)
Nonvested restricted stock units issued and outstanding		9.8
Market-conditioned performance awards		1.8
Stock options issued and outstanding		3.8
Total		15.5

INTANGIBLE ASSETS INCLUDING GOODWILL - Business Combinations (Details) - Exa Transaction $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($) item
Intangible asset balances by major asset class
Number of business combinations \| item	2
Majority interest	51.00%
Consideration, net of cash acquired	$ 48
Cash acquired	$ 59
Equity interest (as a percentage)	49.00%

INTANGIBLE ASSETS INCLUDING GOODWILL - Goodwill by Segment (Details) - USD ($) $ in Millions	3 Months Ended		5 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022
Changes in Goodwill Balances
Beginning Balance	$ 732
Goodwill, Additions	91
Goodwill impairment losses	0	$ 0	$ 469
Ending Balance	823		823
EMEA
Changes in Goodwill Balances
Goodwill impairment losses			293
Japan
Changes in Goodwill Balances
Beginning Balance	415
Goodwill, Additions	91
Ending Balance	506		506
United States
Changes in Goodwill Balances
Goodwill impairment losses			176
Principal Markets
Changes in Goodwill Balances
Beginning Balance	142
Ending Balance	142		142
Strategic Markets
Changes in Goodwill Balances
Beginning Balance	176
Ending Balance	$ 176		$ 176

INTANGIBLE ASSETS INCLUDING GOODWILL

3 Months Ended

Mar. 31, 2022

INTANGIBLE ASSETS INCLUDING GOODWILL

INTANGIBLE ASSETS INCLUDING GOODWILL

NOTE 8. INTANGIBLE ASSETS INCLUDING GOODWILL

Business Combinations

In the three months ended March 31, 2022, the Company completed two business combinations, both of which closed on February 1, 2022. Our financial statements for the first three months ended 2022 reflect the assets, liabilities, operating results and cash flows of both business combinations, commencing from the acquisition date. These transactions consisted of an immaterial acquisition in our Strategic Markets segment and a transfer of a majority interest (51%) of a managed infrastructure services joint venture in Japan (the “Exa transaction”) from our former Parent that could not be completed prior to the Separation due to local regulatory approvals. The non-controlling interest acquired in the Exa transaction represents the fair value of the joint venture prorated by the non-controlling shareholder’s percentage of ownership (49%). The Company closed the Exa transaction for consideration of $48 million, net of cash acquired of $59 million. Acquisition costs associated with these two acquisitions were immaterial and expensed as incurred.

The Exa transaction enabled us to seamlessly continue our relationships with certain key customers in Japan. The purchase price allocation for the business combinations is preliminary, and there may be changes in the allocation of consideration to assets acquired and liabilities assumed, including intangible assets and goodwill, for up to twelve months from the acquisition closing dates.

The following table summarizes total consideration transferred, fair value of net assets acquired, net liabilities assumed and goodwill for the Exa transaction:


(Dollars in millions)
Cash consideration	$	107
Non-controlling interest		102
Total enterprise value	$	209

Cash acquired	$	59
Net liabilities assumed, excluding cash		(16)
Deferred tax liabilities arising from acquired intangibles		(32)
Intangible assets *		107
Goodwill		91
Total purchase price allocation	$	209

* Intangible assets acquired consists of $16 million of patents and trademarks and $91 million of customer relationships.

Intangible Assets

The following tables present the Company’s intangible asset balances by major asset class.


	At March 31, 2022						At December 31, 2021
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
(Dollars in millions)	Amount		Amortization		Amount		Amount		Amortization		Amount
Capitalized software	$	16	$	(16)	$	1	$	16	$	(13)	$	3
Customer relationships		229		(100)		129		130		(97)		33
Completed technology		20		(20)		—		20		(20)		—
Patents and trademarks		18		(2)		16		2		(2)		—
Total	$	283	$	(138)	$	145	$	169	$	(132)	$	36

The net carrying amount of intangible assets increased by $108 million during the three months ended March 31, 2022, compared to the prior quarter, primarily due to increases in customer relationships and trademarks with useful lives of five to seven years, arising from the business combinations in the quarter, partially offset by intangible asset

amortization. The aggregate intangible asset amortization expense was $7 million for the three months ended March 31, 2022, and 2021.

The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at March 31, 2022:


	Capitalized		Customer		Patents and
(Dollars in millions)	Software		Relationships		Trademarks		Total
Year ending March 31:
2023	$	1	$	40	$	4	$	45
2024		—		28		3		31
2025		—		23		3		26
2026		—		19		3		23
2027		—		16		3		19
Thereafter		—		2		—		2

Goodwill

The changes in the goodwill balances by segment for the three months ended March 31, 2022, and for the year ended December 31, 2021, were as follows:


			Additions and
(Dollars in millions)	Balance at		Other		Balance at
Segment	December 31, 2021		Adjustments		March 31, 2022
United States	$	—	$	—	$	—
Japan		415		91		506
Principal Markets		142		—		142
Strategic Markets		176		—		176
Total	$	732	$	91	$	823

The increase in goodwill in our Japan segment primarily reflects the Exa transaction. Goodwill is calculated as the excess of the fair value of the consideration transferred over the fair value of the net assets recognized and represents the future economic benefits arising from other net assets acquired that could not be individually identified and separately recognized. We believe that the primary items that generated goodwill enable us to serve certain customers in Japan. The Exa transaction did not result in any tax-deductible goodwill.

There were no goodwill impairment losses recorded for the three months ended March 31, 2022 and 2021. We review goodwill for impairment annually during the fourth quarter of the fiscal year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable by first assessing qualitative factors to determine if it is more likely than not that fair value is less than carrying value. Cumulatively, the Company has recorded $469 million in goodwill impairment charges within its former EMEA ($293 million) and current United States ($176 million) reporting units.

RELATED PARTY TRANSACTIONS - Leases and Lease Guarantees (Details) - IBM $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($)
Related Party Transaction [Line Items]
Number of leases agreements with third parties	66
Lease liability guaranteed by IBM	$ 160

REVENUE RECOGNITION

3 Months Ended

Mar. 31, 2022

REVENUE RECOGNITION

REVENUE RECOGNITION

NOTE 3. REVENUE RECOGNITION

Disaggregation of Revenue

The Company views its segment results to be the best view of disaggregated revenue. Refer to Note 4 – Segments.

Remaining Performance Obligations

The remaining performance obligation (“RPO”) represents the aggregate amount of contractual deliverables yet to be recognized as revenue at the end of the reporting period. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed. The customer is not considered committed when it is able to terminate for convenience without payment of a substantive penalty. The RPO also includes estimates of variable consideration. Additionally, as a practical expedient, the Company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.

At March 31, 2022, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $47.8 billion. Approximately 55 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 36 percent in the subsequent three through five years, and the balance thereafter.

Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods

During the three months ended March 31, 2022, revenue was reduced by $15 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates on contracts with cost-to-cost measures of progress.

Contract Balances

The following table provides information about accounts receivable, contract assets and deferred income balances:


	March 31,		December 31,
(Dollars in millions)	2022		2021
Accounts receivable (net of allowances of $44 in 2022 and $44 in 2021)	$	2,271	$	2,279
Contract assets *		41		62
Deferred income (current)		882		872
Deferred income (noncurrent)		452		475

*	Included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

The amount of revenue recognized during the three months ended March 31, 2022, that was included within the deferred income balance at December 31, 2021, was $225 million.

The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the three months ended March 31, 2022, and the year ended December 31, 2021:


	Three Months Ended		Year Ended
(Dollars in millions)	March 31, 2022		December 31, 2021
Beginning balance	$	44	$	91
Additions (releases)		6		(23)
Write-offs		(4)		(5)
Other *		(2)		(19)
Ending balance	$	44	$	44

*	Primarily represents translation adjustments and reclassifications.

The contract assets allowance for expected credit losses was not material in any of the periods presented.

Major Clients

No single client represented more than 10 percent of the Company’s total revenue during the three months ended March 31, 2022 and 2021. Other than the former Parent (see Note 13 – Related-Party Transactions), no single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2022, and December 31, 2021.

Deferred Costs

Costs to acquire and fulfill customer contracts are deferred and amortized over the contract period or expected customer relationship life. The expected customer relationship period is determined based on the average customer relationship period, including expected renewals, for each offering type and ranges from three to six years. For contracts with an estimated amortization period of less than one year, we elected the practical expedient to expense incremental costs immediately.

The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31, 2022, and December 31, 2021:


	March 31,		December 31,
(Dollars in millions)	2022		2021
Deferred transition costs	$	961	$	1,012
Prepaid software costs		806		658
Capitalized costs to fulfill contracts		302		235
Capitalized costs to obtain contracts		318		282
Total deferred costs *	$	2,387	$	2,185

*	Of the total deferred costs, $1,143 million was current and $1,244 million was noncurrent at March 31, 2022, and $920 million was current and $1,265 million was noncurrent at December 31, 2021.

The amount of total deferred costs amortized for the three months ended March 31, 2022, was $455 million, composed of $112 million of amortization of deferred transition costs, $207 million of amortization of prepaid software and $136 million of amortization of capitalized contract costs.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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-Subparagraph (b)(2)
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045

+ Details

FINANCIAL ASSETS AND LIABILITIES - Gains and Losses (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Derivative instruments in cash flow hedges
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI	$ 1
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI	1
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing	0	$ 0
Not designated as hedging instruments - economic hedges
Derivative Instruments, Gain (Loss) [Line Items]
Net gains (loss) from derivatives	(1)
Cost of services. \| Derivative instruments in cash flow hedges
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Recognized in OCI	1
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI	1
Other expenses \| Foreign exchange contracts \| Not designated as hedging instruments - economic hedges
Derivative Instruments, Gain (Loss) [Line Items]
Net gains (loss) from derivatives	$ (1)

NET LOSS PER SHARE - Anti dilutive securities (Details) shares in Millions	3 Months Ended
	Mar. 31, 2022 shares
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	15.5
RSUs
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	9.8
Performance awards
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	1.8
Stock options
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	3.8

REVENUE RECOGNITION (Tables)

3 Months Ended

Mar. 31, 2022

REVENUE RECOGNITION

Schedule of reconciliation of contract balances


	March 31,		December 31,
(Dollars in millions)	2022		2021
Accounts receivable (net of allowances of $44 in 2022 and $44 in 2021)	$	2,271	$	2,279
Contract assets *		41		62
Deferred income (current)		882		872
Deferred income (noncurrent)		452		475

*	Included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

Schedule of notes and accounts receivable - trade allowance for credit losses


	Three Months Ended		Year Ended
(Dollars in millions)	March 31, 2022		December 31, 2021
Beginning balance	$	44	$	91
Additions (releases)		6		(23)
Write-offs		(4)		(5)
Other *		(2)		(19)
Ending balance	$	44	$	44

*	Primarily represents translation adjustments and reclassifications.

Schedule of capitalized costs to acquire and fulfill customer contracts


	March 31,		December 31,
(Dollars in millions)	2022		2021
Deferred transition costs	$	961	$	1,012
Prepaid software costs		806		658
Capitalized costs to fulfill contracts		302		235
Capitalized costs to obtain contracts		318		282
Total deferred costs *	$	2,387	$	2,185

*	Of the total deferred costs, $1,143 million was current and $1,244 million was noncurrent at March 31, 2022, and $920 million was current and $1,265 million was noncurrent at December 31, 2021.

BORROWINGS - Contractual obligations of long-term debt outstanding (Details) $ in Millions	Mar. 31, 2022 USD ($)
Pre-swap annual contractual obligations of long-term debt outstanding
2023	$ 27
2024	28
2025	529
2026	29
2027	710
Thereafter	1,700
Total	$ 3,023

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS - Revision to financial statements (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended
	Jan. 01, 2019	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Jan. 01, 2021	Dec. 31, 2020
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued contract costs		$ 676		$ 498
Total current liabilities		5,058		4,457
Other noncurrent liabilities		449		522
Total liabilities		10,730		10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)		4,315		4,284
Accumulated other comprehensive income (loss)		(1,089)		(1,143)
Total stockholders' equity before non-controlling interests		2,618		2,765
Total equity		$ 2,711	$ 4,902	$ 2,767		$ 4,985
Common Stock, Par value (in dollars per share)		$ 0.01		$ 0.01
Common Stock, Shares authorized (in shares)		1,000.0		1,000.0
Common Stock, Shares issued (in shares)		224.5		224.2
Provision for income taxes		$ 40	91
Over-accrual of Accrued contract costs
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued contract costs				$ 498
Total current liabilities				4,457
Other noncurrent liabilities				522
Total liabilities				10,446
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)				4,284
Accumulated other comprehensive income (loss)			(1,182)	(1,143)	$ (1,096)
Total stockholders' equity before non-controlling interests				2,765
Total equity			4,902	$ 2,767	4,985
Common Stock, Par value (in dollars per share)				$ 0.01
Common Stock, Shares authorized (in shares)				1,000.0
Common Stock, Shares issued (in shares)				224.2
Net parent investment			6,027		6,023
Over-accrual of Accrued contract costs \| As Previously Reported
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued contract costs				$ 585
Total current liabilities				4,544
Other noncurrent liabilities				501
Total liabilities				10,511
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)				4,218
Accumulated other comprehensive income (loss)			(1,186)	(1,143)	(1,100)
Total stockholders' equity before non-controlling interests				2,700
Total equity			4,848	2,702	4,931
Net parent investment			5,976		5,972
Over-accrual of Accrued contract costs \| Adjustments
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued contract costs	$ (57)	$ (87)		(87)
Total current liabilities				(87)
Other noncurrent liabilities				22
Total liabilities				(65)
Common stock, par value $0.01 per share, and additional paid-in capital (1,000.0 shares authorized, 224.2 shares issued)				66
Accumulated other comprehensive income (loss)			4	(1)	4
Total stockholders' equity before non-controlling interests				65
Total equity	43		54	$ 65	54
Net parent investment			$ 51		$ 51
Provision for income taxes	$ (14)

EQUITY

3 Months Ended

Mar. 31, 2022

EQUITY

EQUITY

NOTE 11. EQUITY

The following table presents reclassifications and taxes related to items of other comprehensive income (loss) for the three months ended March 31, 2022 and 2021:


	Pretax		Tax (Expense)		Net of Tax
(Dollars in millions)	Amount		Benefit		Amount
For the three months ended March 31, 2022:
Foreign currency translation adjustments	$	(51)	$	—	$	(51)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period		1		—		1
Reclassification of (gains) losses to net income		(1)		—		(1)
Total unrealized gains (losses) on cash flow hedges	$	—	$	—	$	—
Retirement-related benefit plans*:
Net (losses) gains arising during the period	$	136	$	(45)	$	91
Curtailments and settlements		4		(1)		3
Amortization of net (gains) losses		16		(4)		12
Total retirement-related benefit plans	$	156	$	(50)	$	105
Other comprehensive income (loss)	$	105	$	(50)	$	54

For the three months ended March 31, 2021:
Foreign currency translation adjustments	$	(96)	$	—	$	(96)
Retirement-related benefit plans*:
Net (losses) gains arising during the period	$	5	$	(2)	$	3
Amortization of net (gains) losses		11		(4)		7
Total retirement-related benefit plans	$	16	$	(5)	$	10
Other comprehensive income (loss)	$	(81)	$	(5)	$	(86)

*	These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information.

The following table presents the components of accumulated other comprehensive income (loss), net of taxes:


	Net Unrealized		Foreign		Net Change		Accumulated
	Gain (Losses)		Currency		Retirement-		Other
	on Cash		Translation		Related		Comprehensive
(Dollars in millions)	Flow Hedges		Adjustments*		Benefit Plans		Income (Loss)
January 1, 2022	$	3	$	(684)	$	(462)	$	(1,143)
Other comprehensive income (loss)**		—		(51)		105		54
March 31, 2022	$	3	$	(735)	$	(357)	$	(1,089)

January 1, 2021	$	—	$	(878)	$	(218)	$	(1,096)
Other comprehensive income (loss)**		—		(96)		10		(86)
March 31, 2021	$	—	$	(974)	$	(208)	$	(1,182)

*	Foreign currency translation adjustments are presented gross.

**	No amounts were reclassified from accumulated other comprehensive income.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
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-Subparagraph (b)
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+ Details

EQUITY (Tables)

3 Months Ended

Mar. 31, 2022

EQUITY

Reclassifications and taxes related to items of other comprehensive income (loss)


	Pretax		Tax (Expense)		Net of Tax
(Dollars in millions)	Amount		Benefit		Amount
For the three months ended March 31, 2022:
Foreign currency translation adjustments	$	(51)	$	—	$	(51)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period		1		—		1
Reclassification of (gains) losses to net income		(1)		—		(1)
Total unrealized gains (losses) on cash flow hedges	$	—	$	—	$	—
Retirement-related benefit plans*:
Net (losses) gains arising during the period	$	136	$	(45)	$	91
Curtailments and settlements		4		(1)		3
Amortization of net (gains) losses		16		(4)		12
Total retirement-related benefit plans	$	156	$	(50)	$	105
Other comprehensive income (loss)	$	105	$	(50)	$	54

For the three months ended March 31, 2021:
Foreign currency translation adjustments	$	(96)	$	—	$	(96)
Retirement-related benefit plans*:
Net (losses) gains arising during the period	$	5	$	(2)	$	3
Amortization of net (gains) losses		11		(4)		7
Total retirement-related benefit plans	$	16	$	(5)	$	10
Other comprehensive income (loss)	$	(81)	$	(5)	$	(86)

*	These AOCI components are included in the computation of net periodic benefit cost. Refer to Note 12 – Retirement-Related Benefits for additional information.

Accumulated other comprehensive income (loss) (net of tax)


	Net Unrealized		Foreign		Net Change		Accumulated
	Gain (Losses)		Currency		Retirement-		Other
	on Cash		Translation		Related		Comprehensive
(Dollars in millions)	Flow Hedges		Adjustments*		Benefit Plans		Income (Loss)
January 1, 2022	$	3	$	(684)	$	(462)	$	(1,143)
Other comprehensive income (loss)**		—		(51)		105		54
March 31, 2022	$	3	$	(735)	$	(357)	$	(1,089)

January 1, 2021	$	—	$	(878)	$	(218)	$	(1,096)
Other comprehensive income (loss)**		—		(96)		10		(86)
March 31, 2021	$	—	$	(974)	$	(208)	$	(1,182)

*	Foreign currency translation adjustments are presented gross.

**	No amounts were reclassified from accumulated other comprehensive income.

SEGMENTS - Results of segments (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Segment Information
Revenues	$ 4,431	$ 4,771
Segment adjusted EBITDA	592	450
United States
Segment Information
Revenues	1,169	1,228
Segment adjusted EBITDA	248	180
Japan
Segment Information
Revenues	706	763
Segment adjusted EBITDA	154	123
Principal Markets
Segment Information
Revenues	1,579	1,825
Segment adjusted EBITDA	98	52
Strategic Markets
Segment Information
Revenues	978	955
Segment adjusted EBITDA	$ 92	$ 96

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

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+ Details

INTANGIBLE ASSETS INCLUDING GOODWILL - Business Combinations - Summary of Total Consideration (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Intangible asset balances by major asset class
Goodwill	$ 823	$ 732
Exa Transaction
Intangible asset balances by major asset class
Cash consideration	107
Non-controlling interest	102
Total enterprise value	209
Cash acquired	59
Net liabilities assumed, excluding cash	(16)
Deferred tax liabilities arising from acquired intangibles	(32)
Intangible assets	107
Goodwill	91
Total purchase price allocation	$ 209

RETIREMENT-RELATED BENEFITS - Contributions (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Retirement-Related Benefits
Discount rate	1.88%	1.19%
Retirement and nonpension postretirement benefit obligations net decrease	$ (140.0)
Nonpension Postretirement Plans
Retirement-Related Benefits
Expected benefit payments, 2023	$ 27.0

BORROWINGS - Debt (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Borrowings
Financing lease obligations	$ 219	$ 222
Total	3,242	3,251
Less: Unamortized discount	5	5
Less: Unamortized debt issuance costs	15	15
Less: current maturities of long-term debt	96	103
Total	$ 3,127	3,128
Finance lease obligations, interest rate (as a percent)	1.79%
Unsecured floating-rate term loan
Borrowings
Long-term debt	$ 500	500
Debt instrument, weighted-average interest rate (as a percent)	1.37%
Unsecured floating-rate term loan \| LIBOR
Borrowings
Debt instrument, weighted-average interest rate (as a percent)	1.125%
Commercial loan agreement
Borrowings
Long-term debt	$ 123	129
Debt instrument, weighted-average interest rate (as a percent)	3.00%
Unsecured senior notes due 2026
Borrowings
Long-term debt	$ 700	700
Debt instrument, weighted-average interest rate (as a percent)	2.05%
Unsecured senior notes due 2028
Borrowings
Long-term debt	$ 500	500
Debt instrument, weighted-average interest rate (as a percent)	2.70%
Unsecured senior notes due 2031
Borrowings
Long-term debt	$ 650	650
Debt instrument, weighted-average interest rate (as a percent)	3.15%
Unsecured senior notes due 2041
Borrowings
Long-term debt	$ 550	$ 550
Debt instrument, weighted-average interest rate (as a percent)	4.10%

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2022

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Kyndryl Holdings, Inc. (“we”, “the Company” or “Kyndryl”) is a leading technology services company and the largest infrastructure services provider in the world, serving as a partner to more than 4,000 customers whose operations span over 100 countries. Prior to November 3, 2021, the Company was wholly owned by International Business Machines Corporation (“IBM”, “Parent” or “former Parent”).

In October 2021, the Board of Directors of IBM approved the spin-off (the “Separation” or the “Spin-off”) of the infrastructure services unit (the “Kyndryl Businesses”) of its Global Technology Services (“GTS”) segment through the distribution of shares of Kyndryl’s common stock to IBM stockholders. In conjunction with the Distribution, Kyndryl underwent an internal reorganization following which it became the holder, directly or through its subsidiaries, of the Kyndryl Businesses. On November 3, 2021, the Separation was achieved through the Parent’s pro rata distribution of 80.1% of the shares of common stock of Kyndryl to holders of the Parent’s common stock as of the close of business on the record date of October 25, 2021. The Parent retained 19.9% of the shares of the Company’s common stock. The Parent’s stockholders of record received one share of the Company’s common stock for every five shares of the Parent’s common stock.

Basis of Presentation

Prior to the Separation on November 3, 2021 (the “pre-Separation periods”), our historical financial statements were prepared on a combined basis and were derived from the consolidated financial statements of IBM. For the period subsequent to November 3, 2021, the financial statements are presented on a consolidated basis as the Company became a standalone public company. Management believes the accompanying financial statements include all adjustments necessary to present fairly the Company’s financial position as of March 31, 2022, and December 31, 2021, and its results of operations for the three months ended March 31, 2022 and 2021. The financial statements for historical periods were derived from the Company’s audited annual consolidated financial statements but do not contain all of the footnote disclosures from the annual financial statements. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2022 (our “2021 Annual Report”).

Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain items have been recast to conform to current-period presentation.

Principles of Consolidation

For the pre-Separation periods, the accompanying financial statements were derived from the consolidated financial statements and accounting records of the Parent as if the Company operated on a standalone basis during the periods presented and were prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.

All significant intercompany transactions during the pre-Separation periods between Kyndryl and IBM have been included in the consolidated financial statements. Intercompany transactions between Kyndryl and IBM were considered to be effectively settled in the consolidated financial statements at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected as Net transfers from Parent in the financing activities section in the Consolidated Statement of Cash Flows and in the Consolidated Balance Sheet within Net Parent investment.

After the Separation on November 3, 2021, the Company’s consolidated financial statements are based on our reported results as a standalone company. All significant transactions and accounts within Kyndryl were eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts that are reported in the consolidated financial statements and accompanying disclosures. Estimates are used in determining the following, among others: revenue, costs to complete service contracts, income taxes, pension assumptions, valuation of assets including goodwill and intangible assets, the depreciable and amortizable lives of long-lived assets, loss contingencies, allowance for credit losses, deferred transition costs and other matters. Estimates were also used in determining the allocation of costs and expenses from IBM for the pre-Separation periods. These estimates are based on management’s knowledge of current events, historical experience and actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may be different from these estimates.

Transition Period

On January 27, 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company from December 31 to March 31. This is our transition report for the period from January 1, 2022, to March 31, 2022. The Company’s 2023 fiscal year began on April 1, 2022, and will end on March 31, 2023.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ (229)	$ (494)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(51)	(96)
Unrealized gains (losses) arising during the period	1
Reclassification of (gains) losses to net income	(1)
Retirement-related benefit plans:
Net gains (losses) arising during the period	136	5
Amortization of prior service (credits) costs	4
Amortization of net (gains) losses	16	10
Total retirement-related benefit plans	156	16
Other comprehensive income (loss), before tax	105	(81)
Income tax (expense) benefit related to items of other comprehensive income (loss)	(50)	(5)
Other comprehensive income (loss), net of tax	54	(86)
Total comprehensive income (loss)	$ (175)	$ (580)

RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2022

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 13. RELATED-PARTY TRANSACTIONS

Related-Party Revenue and Purchases

Kyndryl provides various services to IBM, including those related to hosting data centers and servicing IBM’s information technology infrastructure, which are reported as revenue in the Company’s Consolidated Income Statement. Revenue generated from these services was $236 million and $154 million for the three months ended March 31, 2022 and 2021, respectively.

Kyndryl utilizes various IBM products and services, recognized as costs of services, in the fulfillment of services contracts. Total cost of services recognized from these related-party transactions in the Company’s Consolidated Income Statement was $924 million and $1.0 billion for the three months ended March 31, 2022 and 2021, respectively. Related-party cost of $924 million for the current quarter includes outsourcing goods and services provided by the former Parent to Kyndryl’s customers post-Separation. Related-party cost of $1.0 billion for the quarter ended March 31, 2021, were related to pre-Separation services, including costs incurred by Kyndryl to provide services to the former Parent for networking and IT services of $121 million; costs for the usage of IBM-branded software allocated to Kyndryl by the former Parent of $762 million; and depreciation charges related to IBM hardware allocated to Kyndryl of $115 million.

Capital expenditures for purchases of IBM hardware were reflected as payments for property and equipment within the investing section of the Company’s Consolidated Statement of Cash Flows in the amounts of $25 million and $87 million for the three months ended March 31, 2022 and 2021, respectively. Additionally, as part of the Separation, IBM has committed to provide Kyndryl, at no cost, approximately $265 million of upgraded hardware over a two-year period. The amounts committed by IBM are reflected within other assets (noncurrent) within the Consolidated Balance Sheet at March 31, 2022. The expected average useful life of the upgraded hardware is approximately five years, and the Company intends to recognize total depreciation approximating $265 million over the useful life, consistent with our depreciation policy.

Related Party Agreements

On November 2, 2021, in connection with the Separation, the Company entered into several agreements with IBM that govern the relationship of the parties following the Separation. Such agreements were described in our 2021 Annual Report.

Allocation of Corporate Expenses

Post-Separation, general corporate expenses from IBM were no longer allocated to Kyndryl; therefore, no related amounts were reflected on the Company’s financial statements for the three months ended March 31, 2022.

Prior to the Separation, IBM allocated certain general corporate expenses that would have been incurred by Kyndryl had it been a separate, standalone company. These allocated general corporate expenses from IBM were recorded in the historical Consolidated Income Statement, Consolidated Statement of Comprehensive Income (Loss) and Consolidated Statement of Cash Flows. Allocations for management costs and corporate support services provided to Kyndryl for the three months ended March 31, 2021, totaled $337 million, consisting of $7 million of allocated other (income) and expense, $14 million of allocated interest expense and $317 million of allocated selling, general and administrative expense, which primarily represents expenses for corporate functions including, but not limited to, senior management, legal, human resources, finance and accounting, treasury, information technology and other shared services. All such amounts have been deemed to have been incurred and settled by Kyndryl through Net Parent investment in the period in which the costs were recorded. These costs were allocated based on direct usage as applicable, with the remainder allocated on a pro-rata basis of gross profit, headcount, assets or other measures.

Net Parent Investment

As a result of the Separation, Net Parent investment in the Consolidated Balance Sheet and Consolidated Statement of Equity was fully settled on November 3, 2021. As such, there was no balance in Net Parent investment at December 31, 2021, and there was no activity within the account during the three months ended March 31, 2022.

Prior to the Separation, Net Parent investment in the historical Balance Sheet and Statement of Equity represented IBM’s historical investment in Kyndryl, the net effect of transactions with and allocations from IBM, and Kyndryl’s accumulated earnings. The Net Parent investment balance at March 31, 2021, was $6 billion. The amount of transfers from Parent recorded within Net Parent investment during the three months ended March 31, 2021, was $498 million, which included cash pooling and general financing activities, allocation of IBM’s corporate expenses, related party sales and purchases, related party intangible asset fees and income taxes. During the three months ended March 31, 2021, there were $38 million of non-cash transfers from Parent, including income taxes, allocation of Parent’s stock-based compensation, depreciation and other non-cash items. This resulted in a net transfer from Parent of $460 million on the historical Statement of Cash Flows.

Assignment of Receivables

Historically, a portion of Kyndryl’s receivables with extended payment terms have been assigned to IBM’s Global Financing business. In October 2021, in preparation for the Separation, the Company entered into a Receivables Purchase Agreement with an unaffiliated bank. There were no amounts assigned to IBM Global Financing during the three months ended March 31, 2022. During the three months ended March 31, 2021, the gross amounts of Kyndryl receivables assigned to IBM Global Financing was $695 million. The fees and the net gains and losses associated with the assignment of receivables to IBM Global Finance were not material for any of the periods presented. Receivables assigned to IBM Global Finance were not recognized on the Company’s Combined Balance Sheet.

Lease Guarantees

Kyndryl has identified 66 lease agreements with third parties with an estimated aggregate lease liability guaranteed by IBM of $160 million as of March 31, 2022.

SIGNIFICANT ACCOUNTING POLICIES - Kyndryl's Spin-off (Details)		3 Months Ended
	Nov. 03, 2021 shares	Mar. 31, 2022 customer country
Percentage of common stock transferred on spin off	80.10%
Number of shares issued per share on spin off \| shares	0.2
IBM
Ownership percentage retained	19.90%
Minimum
Number of customers \| customer		4,000
Number of countries \| country		100

REVENUE RECOGNITION - Reconciliation of Contract Balances (Details) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Reconciliation of Contract Balances

Accounts receivable (net of allowances of $44 in 2022 and $44 in 2021)

$ 2,271

$ 2,279

Contract assets

^[1]

Deferred income (current)

882

872

Deferred income (noncurrent)

452

$ 475

Revenue recognized that was included in deferred income at the beginning of the period

$ 225

[1]	Included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

SEGMENTS - Reconciliation of consolidated totals to segment information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
SEGMENTS
Income (loss) before income taxes	$ (189)	$ (403)
Workforce rebalancing charges		52
Transaction-related costs	58	55
Stock-based compensation	31	16
Interest expense	21	14
Depreciation expense	246	339
Amortization expense	326	330
Corporate expense not allocated to the segments	56	40
Other adjustments	43	7
Segment adjusted EBITDA	$ 592	$ 450

INTANGIBLE ASSETS INCLUDING GOODWILL - Intangible Assets by Class (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Intangible asset balances by major asset class
Gross Carrying Amount	$ 283	$ 169
Accumulated Amortization	(138)	(132)
Net Carrying Amount	145	36	$ 36
Net carrying amount of intangible assets increased	108
Amortization of Intangible Assets	7	7
Intangible asset amortization expense	7	$ 7
Capitalized software
Intangible asset balances by major asset class
Gross Carrying Amount	16		16
Accumulated Amortization	(16)		(13)
Net Carrying Amount	1		3
Customer relationships
Intangible asset balances by major asset class
Gross Carrying Amount	229		130
Accumulated Amortization	(100)		(97)
Net Carrying Amount	129		33
Completed technology
Intangible asset balances by major asset class
Gross Carrying Amount	20		20
Accumulated Amortization	(20)		(20)
Patents/trademarks
Intangible asset balances by major asset class
Gross Carrying Amount	18		2
Accumulated Amortization	(2)		$ (2)
Net Carrying Amount	$ 16
Minimum \| Customer relationships and trademarks
Intangible asset balances by major asset class
Useful life	5 years
Maximum \| Customer relationships and trademarks
Intangible asset balances by major asset class
Useful life	7 years

RELATED PARTY TRANSACTIONS - Net Parent Investment (Details) - IBM - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2021
Related Party Transaction [Line Items]
Due from related party	$ 6,000	$ 0
Amount of transfers from Parent	498
Non-cash transfers from parent	38
Net transfers from parent in statement of cash flows	$ 460

- Definition

Receivables to be collected from (obligations owed to) related parties, net as of the balance sheet date where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth.

+ References

+ Details

REVENUE RECOGNITION - Trade Allowance for Credit Losses (Details) - USD ($)
$ in Millions

3 Months Ended

12 Months Ended

Mar. 31, 2022

Dec. 31, 2021

Roll forward of notes and accounts receivable - trade allowance for credit losses

Allowance for Credit Loss, Beginning Balance

$ 44

$ 91

Additions (releases)

(23)

Write-offs

(4)

(5)

Other

^[1]

(2)

(19)

Allowance for Credit Loss, Ending Balance

$ 44

[1]	Primarily represents translation adjustments and reclassifications.

CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Millions	Common Stock and Additional Paid-In Capital	Net Parent Investment	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Accumulated Deficit	Non-Controlling Interests	Total
Balance at the beginning of the period at Dec. 31, 2020		$ 6,023	$ (1,096)			$ 58	$ 4,985
Equity
Net income (loss)		(494)					(494)
Other comprehensive income (loss), net of tax			(86)				(86)
Net transfers from Parent		498					498
Changes in non-controlling interests						(1)	(1)
Balance at the end of the period at Mar. 31, 2021		$ 6,027	(1,182)			57	4,902
Balance at the beginning of the period at Dec. 31, 2021	$ 4,284		(1,143)	$ (1)	$ (375)	3	2,767
Balance at the beginning of the period (in shares) at Dec. 31, 2021	224.2
Equity
Net income (loss)					(229)		(229)
Other comprehensive income (loss), net of tax			54				54
Common stock issued under employee plans	$ 31						31
Common stock issued under employee plans ( in shares)	0.5
Purchases of treasury stock				(3)			(3)
Purchases of treasury stock ( in shares)	(0.2)
Changes in non-controlling interests						91	91
Balance at the end of the period at Mar. 31, 2022	$ 4,315		$ (1,089)	$ (4)	$ (605)	$ 94	$ 2,711
Balance at the end of the period (in shares) at Mar. 31, 2022	224.5

EQUITY - Reclassifications and Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss)	$ 54	$ (86)
Accumulated Other Comprehensive Income (Loss)
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	105	(81)
Other comprehensive income (loss), tax (expense) benefit	(50)	(5)
Other comprehensive income (loss)	54	(86)
Foreign Currency Translation Adjustments
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	(51)	(96)
Other comprehensive income (loss)	(51)	(96)
Unrealized Gains (Losses) on Cash Flow Hedges
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Unrealized gains (losses) arising during the period, before tax amount	1
Unrealized gains (losses) arising during the period, net of tax amount	1
Reclassification/amortization, before tax amount	(1)
Reclassification/amortization, net of tax amount	(1)
Net Change Retirement-Related Benefit Plans
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	156	16
Other comprehensive income (loss), tax (expense) benefit	(50)	(5)
Other comprehensive income (loss)	105	10
Retirement-Related Benefit Plans, Net Gains (Losses)
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Unrealized gains (losses) arising during the period, before tax amount	136	5
Unrealized gains (losses) arising during the period, tax (expense) benefit	(45)	(2)
Unrealized gains (losses) arising during the period, net of tax amount	91	3
Reclassification/amortization, before tax amount	16	11
Reclassification/amortization, tax (expense) benefit	(4)	(4)
Reclassification/amortization, net of tax amount	12	$ 7
Retirement-Related Benefit Plans, Curtailments and Settlements
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Unrealized gains (losses) arising during the period, before tax amount	4
Unrealized gains (losses) arising during the period, tax (expense) benefit	(1)
Unrealized gains (losses) arising during the period, net of tax amount	$ 3

CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 2,134	$ 2,223
Restricted cash	20	17
Accounts receivable (net of allowances of $44 in 2022 and $44 in 2021)*	2,271	2,279
Deferred costs (current portion)	1,143	920
Prepaid expenses and other current assets	525	337
Total current assets	6,092	5,777
Property and equipment, net	2,834	2,923
Operating right-of-use assets, net	1,312	1,361
Deferred costs (noncurrent portion)	1,244	1,265
Deferred taxes	555	675
Goodwill	823	732
Intangible assets, net	145	36
Pension assets	61	58
Other noncurrent assets	375	385
Total assets	13,442	13,213
Current liabilities:
Accounts payable	1,555	1,140
Value-added tax and income tax liabilities	284	357
Short-term debt	96	105
Accrued compensation and benefits	509	381
Deferred income (current portion)	882	872
Operating lease liabilities (current portion)	374	360
Accrued contract costs	676	498
Other accrued expenses and liabilities	682	744
Total current liabilities	5,058	4,457
Long-term debt	3,127	3,128
Retirement and nonpension postretirement benefit obligations	716	856
Deferred income (noncurrent portion)	452	475
Operating lease liabilities (noncurrent portion)	928	1,007
Other noncurrent liabilities	449	522
Total liabilities	10,730	10,446
Commitments and contingencies
Equity:
Common stock, par value $0.01 per share, and additional paid-in capital (shares authorized: 1,000.0; shares issued: 2022 - 224.5, 2021 - 224.2)	4,315	4,284
Accumulated deficit	(605)	(375)
Treasury stock, at cost (shares: 2022 - 0.2, 2021 - 0.0)	(4)	(1)
Accumulated other comprehensive income (loss)	(1,089)	(1,143)
Total stockholders' equity before non-controlling interests	2,618	2,765
Non-controlling interests	94	3
Total equity	2,711	2,767
Total liabilities and equity	$ 13,442	$ 13,213

REVENUE RECOGNITION - Performance Obligations Satisfied or Partially Satisfied in Prior Periods (Details) $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($)
REVENUE RECOGNITION
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods	$ (15)

RETIREMENT-RELATED BENEFITS - Net Periodic Benefit Cost of Retirement-Related Benefit Plans (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Defined Benefit Pension Plans
Cost/(Income) of Pension Plans
Service cost	$ 14.0	$ 23.0
Interest cost	$ 6.0	$ 1.0
Interest cost - income statement location	Other expenses	Other expenses
Expected return on plan assets	$ (10.0)	$ (5.0)
Expected return on plan assets - income statement location	Other expenses	Other expenses
Amortization of prior service costs/(credits) - income statement location	Other expenses	Other expenses
Recognized actuarial losses (gains)	$ 16.0	$ 11.0
Recognized actuarial losses - income statement location	Other expenses	Other expenses
Curtailments and settlements	$ 4.0
Curtailments and settlements - income statement location	Other expenses	Other expenses
Multi-employer plans/other costs	$ (1.0)	$ 3.0
Net periodic benefit cost	$ 28.0	32.0
Non Pension Postretirement Benefit Plans
Cost/(Income) of Pension Plans
Interest cost		$ 1.0
Interest cost - income statement location	Other expenses	Other expenses
Amortization of prior service costs/(credits) - income statement location	Other expenses	Other expenses
Recognized actuarial losses - income statement location	Other expenses	Other expenses
Curtailments and settlements - income statement location	Other expenses	Other expenses
Net periodic benefit cost		$ 1.0

BORROWINGS (Tables)

3 Months Ended

Mar. 31, 2022

BORROWINGS

Summary of components of debt


			March 31,		December 31,
(Dollars in millions)	Interest Rate	Maturity	2022		2021
Unsecured floating-rate term loan	1.37%*	November, 2024	$	500	$	500
Commercial loan agreement	3.00%	July, 2026		123		129
Unsecured senior notes due 2026	2.05%	October, 2026		700		700
Unsecured senior notes due 2028	2.70%	October, 2028		500		500
Unsecured senior notes due 2031	3.15%	October, 2031		650		650
Unsecured senior notes due 2041	4.10%	October, 2041		550		550
Finance lease obligations **	1.79%	2022-2027		219		222
			$	3,242	$	3,251
Less: Unamortized discount				5		5
Less: Unamortized debt issuance costs				15		15
Less: Current maturities of long-term debt				96		103
Total long-term debt			$	3,127	$	3,128

* Floating rate calculated as of March 31, 2022, using a rate equal to one-month U.S. dollar LIBOR plus 1.125%.

** Finance lease obligations presented using the weighted-average interest rate and calendar-year maturity dates.

Schedule of contractual obligations of long-term debt outstanding

Contractual obligations of long-term debt outstanding at March 31, 2022, exclusive of finance lease obligations, are as follows:


(Dollars in millions)*	Principal
Year ending March 31:
2023	$	27
2024		28
2025		529
2026		29
2027		710
Thereafter		1,700
Total	$	3,023

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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+ Details

INTANGIBLE ASSETS INCLUDING GOODWILL (Tables)

3 Months Ended

Mar. 31, 2022

INTANGIBLE ASSETS INCLUDING GOODWILL

Schedule total considerations transferred


(Dollars in millions)
Cash consideration	$	107
Non-controlling interest		102
Total enterprise value	$	209

Cash acquired	$	59
Net liabilities assumed, excluding cash		(16)
Deferred tax liabilities arising from acquired intangibles		(32)
Intangible assets *		107
Goodwill		91
Total purchase price allocation	$	209

Intangible asset balances by major asset class


	At March 31, 2022						At December 31, 2021
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
(Dollars in millions)	Amount		Amortization		Amount		Amount		Amortization		Amount
Capitalized software	$	16	$	(16)	$	1	$	16	$	(13)	$	3
Customer relationships		229		(100)		129		130		(97)		33
Completed technology		20		(20)		—		20		(20)		—
Patents and trademarks		18		(2)		16		2		(2)		—
Total	$	283	$	(138)	$	145	$	169	$	(132)	$	36

Intangible assets, future amortization expense


	Capitalized		Customer		Patents and
(Dollars in millions)	Software		Relationships		Trademarks		Total
Year ending March 31:
2023	$	1	$	40	$	4	$	45
2024		—		28		3		31
2025		—		23		3		26
2026		—		19		3		23
2027		—		16		3		19
Thereafter		—		2		—		2

Changes in goodwill balances by reportable segment


			Additions and
(Dollars in millions)	Balance at		Other		Balance at
Segment	December 31, 2021		Adjustments		March 31, 2022
United States	$	—	$	—	$	—
Japan		415		91		506
Principal Markets		142		—		142
Strategic Markets		176		—		176
Total	$	732	$	91	$	823