0001558370-23-001077 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Dec. 31, 2022	Feb. 02, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2022
Entity File Number	001-40853
Entity Registrant Name	Kyndryl Holdings, Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	86-1185492
Entity Address, Address Line One	One Vanderbilt Avenue, 15th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10017
City Area Code	212
Local Phone Number	896-2098
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	KD
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		227,505,040
Entity Central Index Key	0001867072
Current Fiscal Year End Date	--03-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

CONSOLIDATED INCOME STATEMENT - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED INCOME STATEMENT
Revenues	$ 4,303	$ 4,556	$ 12,771	$ 13,886
Cost of services	3,596	3,999	10,886	12,233
Selling, general and administrative expenses	731	643	2,131	2,062
Workforce rebalancing charges (benefits)	10	(1)	16	(13)
Transaction-related costs	48	129	218	572
Impairment expense		469	0	469
Interest expense	27	18	65	50
Other expense (income)	30	19	16	13
Total costs and expenses	4,441	5,276	13,333	15,385
Income (loss) before income taxes	(138)	(720)	(563)	(1,499)
Provision for (benefit from) income taxes	(32)	11	74	311
Net income (loss)	$ (106)	$ (731)	$ (637)	$ (1,810)
NET LOSS PER SHARE
Basic earnings (loss) per share (in dollars per share)	$ (0.47)	$ (3.26)	$ (2.81)	$ (8.07)
Diluted earnings (loss) per share (in dollars per share)	$ (0.47)	$ (3.26)	$ (2.81)	$ (8.07)
Weighted-average basic shares outstanding (in shares)	227.0	224.2	226.4	224.1
Weighted-average diluted shares outstanding (in shares)	227.0	224.2	226.4	224.1

CONSOLIDATED INCOME STATEMENT (Parenthetical) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED INCOME STATEMENT
Related-party revenue	$ 260	$ 287	$ 550
Related-party cost of services	$ 1,100	$ 1,382	$ 2,973

- 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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ (106)	$ (731)	$ (637)	$ (1,810)
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	260	400	(229)	290
Unrealized gains (losses) arising during the period	(4)	1	(9)	4
Reclassification of (gains) losses to net income	2	(1)	1	(1)
Total unrealized gains (losses) on cash flow hedges	(2)	1	(8)	3
Retirement-related benefit plans:
Prior service costs (credits)		1		1
Net gains (losses) arising during the period		72		67
Curtailments and settlements		3		3
Amortization of net (gains) losses	10	19	30	41
Total retirement-related benefit plans	10	94	30	112
Other comprehensive income (loss), before tax	267	495	(207)	405
Income tax (expense) benefit related to items of other comprehensive income (loss)	(3)	(24)	(7)	(29)
Other comprehensive income (loss), net of tax	265	470	(214)	375
Total comprehensive income (loss)	$ 159	$ (262)	$ (850)	$ (1,435)

CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Dec. 31, 2022	Mar. 31, 2022
Current assets:
Cash and cash equivalents	$ 2,002	$ 2,134
Restricted cash	14	20
Accounts receivable (net of allowances of $34 at December 31, 2022 and $44 at March 31, 2022)	1,539	2,271
Deferred costs (current portion)	927	1,143
Prepaid expenses and other current assets	486	525
Total current assets	4,967	6,092
Property and equipment, net	2,762	2,834
Operating right-of-use assets, net	1,115	1,312
Deferred costs (noncurrent portion)	1,186	1,244
Deferred taxes	478	555
Goodwill	812	823
Intangible assets, net	158	145
Pension assets	58	61
Other noncurrent assets	315	375
Total assets	11,851	13,442
Current liabilities:
Accounts payable	1,719	1,555
Value-added tax and income tax liabilities	245	284
Short-term debt	103	96
Accrued compensation and benefits	388	509
Deferred income (current portion)	817	882
Operating lease liabilities (current portion)	329	374
Accrued contract costs	402	676
Other accrued expenses and liabilities	604	682
Total current liabilities	4,607	5,058
Long-term debt	3,097	3,127
Retirement and nonpension postretirement benefit obligations	660	716
Deferred income (noncurrent portion)	377	452
Operating lease liabilities (noncurrent portion)	790	928
Other noncurrent liabilities	389	449
Total liabilities	9,920	10,730
Commitments and contingencies
Equity:
Common stock, par value $0.01 per share, and additional paid-in capital (shares authorized: 1,000.0; shares issued: December 31, 2022 - 229.3, March 31, 2022 - 229.3)	4,397	4,315
Accumulated deficit	(1,241)	(605)
Treasury stock, at cost (shares: December 31, 2022 - 1.8, March 31, 2022 - 0.2)	(21)	(4)
Accumulated other comprehensive income (loss)	(1,303)	(1,089)
Total stockholders' equity before non-controlling interests	1,832	2,618
Non-controlling interests	99	94
Total equity	1,930	2,711
Total liabilities and equity	$ 11,851	$ 13,442

CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) shares in Millions, $ in Millions	Dec. 31, 2022	Mar. 31, 2022
CONSOLIDATED BALANCE SHEET
Notes and accounts receivable - trade, allowances	$ 34	$ 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)	229.3	224.5
Treasury Stock (in shares)	1.8	0.2
Accounts Receivable, related party		$ 343
Accounts payable, related party		$ 806

CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended		9 Months Ended		14 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022
Cash flows from operating activities:
Net income (loss)	$ (106)	$ (731)	$ (637)	$ (1,810)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation of property and equipment	232	294	681	960
Depreciation of right-of-use assets			285	229
Amortization of transition costs and prepaid software			909	955
Amortization of capitalized contract costs	114		337	403
Amortization of intangible assets			36	30
Goodwill impairment		469	0	469	$ 469
Stock-based compensation	29	18	81	56
Deferred taxes			5	(418)
Net (gain) loss on asset sales and other			(17)	12
Change in operating assets and liabilities:
Deferred costs (excluding amortization)			(1,063)	(1,071)
Right-of-use assets and liabilities (excluding depreciation)			(275)	(256)
Workforce rebalancing liabilities			(1)	(204)
Receivables			647	(938)
Accounts payable			235	224
Taxes (including items settled with former Parent in prior-year period)			(36)	920
Other assets and other liabilities			(418)	650
Net cash provided by operating activities			769	209
Cash flows from investing activities:
Capital expenditures			(711)	(572)
Proceeds from disposition of property and equipment			20	100
Other investing activities, net			(8)	(1)
Net cash used in investing activities			(699)	(472)
Cash flows from financing activities:
Debt repayments			(83)	(71)
Proceeds from issuance of debt, net of debt issuance costs				3,035
Net transfers to Parent				(490)
Common stock repurchases for tax withholdings			(17)	(1)
Net cash provided by (used in) financing activities			(100)	2,472
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(109)	(19)
Net change in cash, cash equivalents and restricted cash			(138)	2,190
Cash, cash equivalents and restricted cash at April 1			2,154	50
Cash, cash equivalents and restricted cash at December 31	$ 2,016	$ 2,240	2,016	2,240	$ 2,016
Supplemental data
Income taxes paid, net of refunds received			109	12
Interest paid on debt			$ 89	$ 2

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	Common Stock	Non-Controlling Interests	Total
Balance at the beginning of the period at Mar. 31, 2021		$ 6,027	$ (1,182)				$ 57	$ 4,902
Equity
Net income (loss)		(1,434)			$ (375)			(1,810)
Other comprehensive income (loss), net of tax			375					375
Common stock issued under employee plans	$ 13							13
Common stock issued under employee plans (in shares)						100,000
Purchases of treasury stock				$ (1)				(1)
Purchases of treasury stock (in shares)						0.0
Changes in non-controlling interests							(55)	(55)
Issuance of common stock and reclassification of net transfers from Parent	4,271	(4,593)	(338)					(660)
Issuance of common stock and reclassification of net transfers from parent (in shares)						224,100,000
Balance at the end of the period at Dec. 31, 2021	$ 4,284		(1,143)	(1)	(375)		3	2,767
Balance at the end of the period (in shares) at Dec. 31, 2021	224,200,000					224.2
Balance at the beginning of the period at Sep. 30, 2021		7,102	(1,614)				51	5,539
Equity
Net income (loss)		(355)			(375)			(731)
Other comprehensive income (loss), net of tax			470					470
Common stock issued under employee plans	$ 13							13
Common stock issued under employee plans (in shares)	100,000
Purchases of treasury stock				(1)				(1)
Purchases of treasury stock (in shares)	0.0
Changes in non-controlling interests							(49)	(49)
Issuance of common stock and reclassification of net transfers from Parent	$ 4,271	$ (6,747)						(2,476)
Issuance of common stock and reclassification of net transfers from parent (in shares)	224,100,000
Balance at the end of the period at Dec. 31, 2021	$ 4,284		(1,143)	(1)	(375)		3	2,767
Balance at the end of the period (in shares) at Dec. 31, 2021	224,200,000					224.2
Balance at the beginning of the period at Mar. 31, 2022	$ 4,315		(1,089)	(4)	(605)		94	2,711
Balance at the beginning of the period (in shares) at Mar. 31, 2022	224,500,000
Equity
Net income (loss)					(637)			(637)
Other comprehensive income (loss), net of tax			(214)					(214)
Common stock issued under employee plans	$ 81							81
Common stock issued under employee plans (in shares)	4,500,000
Purchases of treasury stock				(17)				(17)
Purchases of treasury stock (in shares)	(1,500,000)
Changes in non-controlling interests							5	5
Balance at the end of the period at Dec. 31, 2022	$ 4,397		(1,303)	(21)	(1,241)		99	1,930
Balance at the end of the period (in shares) at Dec. 31, 2022	227,500,000
Balance at the beginning of the period at Sep. 30, 2022	$ 4,370		(1,567)	(17)	(1,136)		96	1,746
Balance at the beginning of the period (in shares) at Sep. 30, 2022	226,800,000
Equity
Net income (loss)					(106)			(106)
Other comprehensive income (loss), net of tax			265					265
Common stock issued under employee plans	$ 27							27
Common stock issued under employee plans (in shares)	1,100,000
Purchases of treasury stock				(4)				(4)
Purchases of treasury stock (in shares)	(400,000)
Changes in non-controlling interests							2	2
Balance at the end of the period at Dec. 31, 2022	$ 4,397		$ (1,303)	$ (21)	$ (1,241)		$ 99	$ 1,930
Balance at the end of the period (in shares) at Dec. 31, 2022	227,500,000

SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Dec. 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 thousands of enterprise 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 Separation, 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 upon the Spin-off. 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. As of September 30, 2022, IBM had transferred all of its 19.9% retained interest in Kyndryl common stock pursuant to exchange agreements with a third-party financial institution.

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 and its results of operations for all the periods presented. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the report on Form 8-K/A we filed with the U.S. Securities and Exchange Commission (“SEC”) on May 27, 2022 (the “8-K/A”) and our transition report for the three months ended March 31, 2022 filed on Form 10-QT.

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 intercompany accounts between Kyndryl entities 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

In January 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company from December 31 to March 31. The Company’s 2023 fiscal year began on April 1, 2022 and will end on March 31, 2023. The Company filed a Transition Report on Form 10-QT for the period of January 1 to March 31, 2022 with the SEC on May 13, 2022.

ACCOUNTING CHANGES

9 Months Ended

Dec. 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.

New Standards to be Implemented

In September 2022, the FASB amended its guidance related to supplier finance programs. The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The roll-forward information is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact that this amended guidance will have on the Company’s financial statements.

In December 2022, the FASB issued guidance deferring the sunset date of ASC 848, Reference Rate Reform to December 31, 2024. The FASB previously issued temporary, optional expedients related to the accounting for contract modifications and hedging transactions as a result of markets transitioning from the use of LIBOR and other interbank offered rates to alternative reference rates. The Company has evaluated the impact of the amended guidance and concluded that the guidance will not have a material impact on the Company’s 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

REVENUE RECOGNITION

9 Months Ended

Dec. 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 December 31, 2022, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $39.6 billion. Approximately 59 percent of the amount is expected to be recognized as revenue in the next two years, approximately 34 percent in the subsequent three years, and the balance thereafter.

During the three and nine months ended December 31, 2022, revenue decreased by $3 million and increased by $4 million, respectively, 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:


	December 31,		March 31,
(Dollars in millions)	2022		2022
Accounts receivable (net of allowances of $34 at December 31, 2022 and $44 at March 31, 2022) *	$	1,539	$	2,271
Contract assets **		30		41
Deferred income (current)		817		882
Deferred income (noncurrent)		377		452

*	Including unbilled receivable balances of $382 million at December 31, 2022 and $473 million at March 31, 2022.

Contract assets represent services performed by the Company prior to billing the client, which give the Company the right to consideration that is typically subject to milestone completion or client acceptance. They are included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

The amount of revenue recognized during the three and nine months ended December 31, 2022 that was included within the deferred income balance at the beginning of the period was $249 million and $496 million, respectively.

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


	Nine Months Ended		Nine Months Ended
(Dollars in millions)	December 31, 2022		December 31, 2021
Beginning balance	$	44	$	90
Additions (releases)		5		(21)
Write-offs		(8)		(4)
Other *		(6)		(21)
Ending balance	$	34	$	44

*	Primarily represents currency translation adjustments.

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 and nine months ended December 31, 2022 and 2021. No single client represented more than 10 percent of the Company’s total accounts receivable balance as of December 31, 2022 and March 31, 2022.

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 December 31, 2022 and March 31, 2022:


	December 31,		March 31,
(Dollars in millions)	2022		2022
Deferred transition costs	$	863	$	961
Prepaid software costs		661		806
Capitalized costs to fulfill contracts		279		302
Capitalized costs to obtain contracts		310		318
Total deferred costs *	$	2,112	$	2,387

*	Of the total deferred costs, $927 million was current and $1,186 million was noncurrent at December 31, 2022, and $1,143 million was current and $1,244 million was noncurrent at March 31, 2022.

The amount of total deferred costs amortized for the three months ended December 31, 2022 was $440 million, composed of $87 million of amortization of deferred transition costs, $239 million of amortization of prepaid software and $114 million of amortization of capitalized contract costs. The amount of total deferred costs amortized for the nine months ended December 31, 2022 was $1,246 million, composed of $259 million of amortization of deferred transition costs, $650 million of amortization of prepaid software and $337 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.

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+ Details

SEGMENTS

9 Months Ended

Dec. 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), charges related to ceasing to use leased assets, charges related to lease termination, 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 December 31,				Nine Months Ended December 31,
(Dollars in millions)	2022		2021		2022		2021
Revenue
United States	$	1,265	$	1,193	$	3,581	$	3,577
Japan		606		683		1,855		2,160
Principal Markets		1,472		1,670		4,460		5,260
Strategic Markets		961		1,010		2,874		2,889
Total revenue	$	4,303	$	4,556	$	12,771	$	13,886
Segment adjusted EBITDA
United States	$	271	$	202	$	639	$	662
Japan		90		124		318		378
Principal Markets		91		155		248		289
Strategic Markets		145		134		352		444
Total segment adjusted EBITDA	$	597	$	615	$	1,556	$	1,773

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


	Three Months Ended December 31,				Nine Months Ended December 31,
(Dollars in millions)	2022		2021		2022		2021
Pretax income (loss)	$	(138)	$	(720)	$	(563)	$	(1,499)
Workforce rebalancing charges (benefits)		10		(1)		16		(13)
Transaction-related costs		48		129		218		572
Stock-based compensation expense		29		18		81		56
Impairment expense		—		469		—		469
Interest expense		27		18		65		50
Depreciation expense		232		294		681		960
Amortization expense		336		312		945		984
Corporate expense not allocated to the segments		16		28		57		113
Other adjustments *		37		67		55		81
Segment adjusted EBITDA	$	597	$	615	$	1,556	$	1,773

*	Other adjustments represent pension expense other than pension servicing costs and multi-employer plan costs, significant litigation costs and charges related to ceasing to use leased assets.

- 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

TAXES

9 Months Ended

Dec. 31, 2022

TAXES

TAXES

NOTE 5. TAXES

For the three months ended December 31, 2022, the Company’s effective tax rate was 23.2%, compared to (1.5%) for the three months ended December 31, 2021. For the nine months ended December 31, 2022, the Company’s effective tax rate was (13.1%), compared to (20.7%) for the nine months ended December 31, 2021. The Company’s positive effective tax rate for the three months ended December 31, 2022 reflects a tax benefit on a pretax loss resulting from return-to-provision adjustments recorded in that period. The Company’s negative effective tax rates for the nine months ended December 31, 2022 and in 2021 reflect a tax expense on a pretax book loss in those periods. For the three and nine months ended December 31, 2022, income taxes are computed using the estimated annual effective tax rate applicable to the fiscal year ending March 31, 2023.

The Company’s effective tax rate for the three months ended December 31, 2022 was higher than the Company’s statutory tax rate primarily due to a benefit recorded during the period resulting from return-to-provision adjustments related to the filing of certain 2021 income tax returns. The Company’s effective tax rate for the nine months ended December 31, 2022 was lower than the Company’s statutory tax rate primarily due to taxes on foreign operations and an increase in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized, partially offset by the benefit resulting from return-to-provision adjustments. For the three and nine months ended December 31, 2022, the additions to valuation allowance primarily relate to a valuation allowance established against certain deferred tax assets in the United States.

The Company’s effective tax rate for the three months ended December 31, 2021 was lower than the Company’s statutory tax rate primarily due to the geographic mix of pretax income and nondeductible goodwill impairment. The Company’s effective tax rate for the nine months ended December 31, 2021 was lower than the Company’s statutory tax rate primarily due to the geographic mix of pretax income, changes in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized, and tax charges related to the transfer of Kyndryl’s operations from IBM in contemplation of the Company’s Separation.

- 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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+ Details

NET LOSS PER SHARE

9 Months Ended

Dec. 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 and nine months ended December 31, 2022 and 2021.


	Three Months Ended December 31,				Nine Months Ended December 31,
(In millions, except per share amounts)	2022		2021		2022		2021
Net income (loss) on which basic and diluted earnings per share is calculated	$	(106)	$	(731)	$	(637)	$	(1,810)
Number of shares on which basic and diluted earnings per share is calculated		227.0		224.2		226.4		224.1

Basic earnings (loss) per share	$	(0.47)	$	(3.26)	$	(2.81)	$	(8.07)
Diluted earnings (loss) per share		(0.47)		(3.26)		(2.81)		(8.07)

Prior to the Separation, the Company did not have any publicly-traded common stock or equivalents issued and outstanding. Accordingly, for periods prior to the Separation, the number of shares used in the calculation of basic and diluted earnings per share were based on the 224.1 million shares distributed on the Separation Date.

For the three and nine months ended December 31, 2022, the Company’s basic and diluted weighted-average shares outstanding were the same. The following securities were not included in the computation of diluted net loss per share because they would have been anti-dilutive:



(In millions)
Nonvested restricted stock units issued and outstanding		9.9
Nonvested performance-based stock units		2.5
Nonvested market-conditioned performance awards		2.4
Stock options issued and outstanding		3.7
Total		18.6

FINANCIAL ASSETS AND LIABILITIES

9 Months Ended

Dec. 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 asset impairments on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value is less than carrying value.

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 were $32 million at December 31, 2022 and $9 million at March 31, 2022. The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other noncurrent liabilities in the Consolidated Balance Sheet were $9 million at December 31, 2022 and $2 million at March 31, 2022. 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 December 31, 2022 and March 31, 2022.

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 has time deposits that have maturities of 90 days or less, and their carrying values approximate fair value. 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 December 31, 2022 and March 31, 2022 was $775 million and $972 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. Our outstanding debt (excluding finance lease obligations) had a carrying value of $3.0 billion as of each of December 31, 2022 and March 31, 2022, and an estimated fair value of $2.3 billion and $2.7 billion as of December 31, 2022 and March 31, 2022, respectively.

Financial assets 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.

Transfers of Financial Assets

The Company has entered into agreements with third-party financial institutions to sell certain financial assets (primarily trade receivables) without recourse. The Company determined these are true sales. The carrying value of the financial asset sold is derecognized, and a net gain or loss on the sale is recognized at the time of the transfer. An agreement with third-party financial institutions executed in November 2021 enabled us to sell, at any one time, on a revolving basis, up to $1.1 billion of our trade receivables with payment terms from three to nine months and was subsequently amended to decrease such amount to $1.0 billion. This agreement was further amended during the quarter ended December 31, 2022 to provide that we may sell an additional amount of trade receivables with payment terms of less than three months, contingent on the approval of the counterparty to purchase such receivables, with no defined limit on such sales. In the quarter ended June 30, 2022, the Company entered into a separate agreement, in which the sale of receivables is contingent on the approval of the counterparty with no defined facility limit.

The net proceeds from these arrangements are reflected as cash provided by operating activities in the Consolidated Statement of Cash Flows. Gross proceeds from receivables sold to third parties under this program were $930 million and $2.3 billion for the three and nine months ended December 31, 2022, respectively. Gross proceeds from receivables sold to third parties and the financing division of our former Parent were $472 million and $1.7 billion for the three and nine months ended December 31, 2021, respectively. The fees associated with the transfers of receivables were $14 million and $34 million for the three and nine months ended December 31, 2022, respectively, and immaterial for the three and nine months ended December 31, 2021, respectively.

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. Changes in fair value of derivatives designated as cash flow hedges 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. Through the pre-Separation periods, derivatives designated as cash flow hedges were deemed to be associated with the Company’s operations and were allocated to the Company’s Consolidated Income Statement based on its pro rata share of the underlying items hedged, where applicable, with the remainder allocated on a pro rata basis of revenue.

At December 31, 2022 and March 31, 2022, the total notional amount of forward contracts designated as cash flow hedges of forecasted foreign currency cost transactions was $285 million and $216 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 December 31, 2022 and March 31, 2022, the weighted-average remaining maturity of these instruments was approximately 0.5 years.

At December 31, 2022, in connection with cash flow hedges of foreign currency cost transactions, the Company had net deferred losses of $5 million (before taxes) in accumulated other comprehensive income (“AOCI”). At March 31, 2022, in connection with cash flow hedges of foreign currency cost transactions, the Company had net deferred gains of $3 million (before taxes) in AOCI. The Company estimates that $5 million (before taxes) of deferred net losses on derivatives in AOCI at December 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 December 31, 2022 and March 31, 2022, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $1.7 billion and $945 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 December 31:	2022		2021		2022		2021
Cost of services	$	3,596	$	3,999	$	(2)	$	1
Other expense (income)		30		19		43		4

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 December 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expense (income)

Total

—


	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 December 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	(4)	$	4	Cost of services	$	(2)	$	1
Total	$	(4)	$	4		$	(2)	$	1

NA - not applicable


					Gains (Losses) from
(Dollars in millions)	Total				Hedge Activity
For the nine months ended December 31:	2022		2021		2022		2021
Cost of services	$	10,886	$	12,233	$	(1)	$	1
Other expense (income)		16		13		27		4

Gain (Loss) Recognized in Consolidated Income Statement

(Dollars in millions)

Consolidated

Recognized on

Attributable to Risk

For the nine months

Income Statement

Derivatives

Being Hedged

ended December 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expense (income)

Total

—


	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)	Recognized				Consolidated	Reclassified
For the nine months	in OCI				Income Statement	from AOCI
ended December 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	(9)	$	4	Cost of services	$	(1)	$	1
Total	$	(9)	$	4		$	(1)	$	1

NA - not applicable

For the three and nine months ended December 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. For the three and nine months ended December 31, 2022 and 2021, amounts recognized in OCI and reclassified from AOCI were immaterial, as the gains and losses from maturing and revalued cash flow hedges on various currencies offset each other.

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 certain of the Company’s foreign exchange exposures.

INTANGIBLE ASSETS INCLUDING GOODWILL

9 Months Ended

Dec. 31, 2022

INTANGIBLE ASSETS INCLUDING GOODWILL

INTANGIBLE ASSETS INCLUDING GOODWILL

NOTE 8. INTANGIBLE ASSETS INCLUDING GOODWILL

Business Combinations

On February 1, 2022, the Company completed two business combinations, consisting 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:


	March 31,
(Dollars in millions)	2022
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 consist 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 December 31, 2022						At March 31, 2022
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
(Dollars in millions)	Amount		Amortization		Amount		Amount		Amortization		Amount
Capitalized software	$	61	$	(16)	$	45	$	16	$	(16)	$	1
Customer relationships*		232		(132)		100		229		(100)		129
Completed technology		20		(20)		—		20		(20)		—
Patents and trademarks*		18		(5)		13		18		(2)		16
Total	$	331	$	(173)	$	158	$	283	$	(138)	$	145

* Amounts at December 31, 2022 include effects from foreign currency translation.

The net carrying amount of intangible assets increased by $13 million during the nine months ended December 31, 2022, primarily due to additions to capitalized software and foreign currency translation. The aggregate intangible asset amortization expense was $11 million and $36 million for the three and nine months ended December 31, 2022, compared to $11 million and $30 million for the three and nine months ended December 31, 2021. The amortization expense for these periods primarily relate to assets acquired via business combinations.

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


	Capitalized		Customer		Patents and
(Dollars in millions)	Software		Relationships		Trademarks		Total
Year ending March 31:
2023 (remaining three months)	$	1	$	9	$	1	$	10
2024		12		27		3		43
2025		12		24		3		39
2026		10		20		3		34
2027		9		17		3		29
Thereafter		—		2		—		2

Goodwill

The changes in the goodwill balances by segment for the nine months ended December 31, 2022 were as follows:


			Additions and
(Dollars in millions)	Balance at		Other		Balance at
Segment	March 31, 2022		Adjustments*		December 31, 2022
United States	$	—	$	—	$	—
Japan		506		(10)		495
Principal Markets		142		—		142
Strategic Markets		176		—		176
Total	$	823	$	(10)	$	812

* Primarily related to foreign currency translation.

Management reviews goodwill for impairment annually during the fourth quarter of the calendar 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.

We use an income-based approach where fair value is determined using a discounted cash flow model that requires significant judgment with respect to revenue and growth rates, based upon annual budgets and long-term strategic plans. Fair value estimates employed in our annual impairment review of goodwill involve using various assumptions. Assumptions critical to our fair value estimates were discount rates, expected revenue growth and projected EBITDA margins used in determining the fair value of the reporting units. These and other assumptions are impacted by economic conditions and expectations of management and may change based on different facts and circumstances. We believe the assumptions used to estimate future cash flows are reasonable, but there can be no assurance that the expected cash flows will be realized. The use of different assumptions would increase or decrease discounted cash flows or earnings projections and therefore could change impairment determinations.

We prepared our impairment test as of October 1, 2022 and determined that the fair values of each of our reporting units exceeded net book value by more than 50%. Among our reporting units, the narrowest difference between the calculated fair value and net book value was in our Principal Markets segment’s Canada reporting unit, whose calculated fair value exceeded its net book value by 53%. Future developments related to macroeconomic factors, including increases to the discount rate used, or changes to other inputs and assumptions, including revenue growth, could reduce the fair value of this and/or other reporting units and lead to impairment. There were no goodwill impairment losses recorded for the nine months ended December 31, 2022. 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.

BORROWINGS

9 Months Ended

Dec. 31, 2022

BORROWINGS

BORROWINGS

NOTE 9. BORROWINGS

Debt

The following table presents the components of our debt:


			December 31,		March 31,
(Dollars in millions)	Interest Rate	Maturity	2022		2022
Unsecured floating-rate term loan	5.42%*	November 2024	$	500	$	500
Commercial loan agreement	3.00%	July 2026		102		123
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 **	2.29%	2023-2027		216		219
			$	3,218	$	3,242
Less: Unamortized discount				5		5
Less: Unamortized debt issuance costs				13		15
Less: Current maturities of long-term debt				103		96
Total long-term debt			$	3,097	$	3,127

* Floating rate calculated as of December 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 December 31, 2022, exclusive of finance lease obligations, are as follows:


(Dollars in millions)*	Principal
Year ending March 31:
2023 (remaining three months)	$	7
2024		28
2025		529
2026		29
2027		710
Thereafter		1,700
Total	$	3,002

* 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 Agreement 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 and nine months ended December 31, 2022 was $27 million and $65 million, compared to $18 million and $50 million for the three and nine months ended December 31, 2021. 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 from 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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-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Dec. 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 December 31, 2022 and March 31, 2022 were not material. Additionally, the Company has contractual commitments that are noncancellable with certain software, hardware and cloud partners used in the delivery of services to customers. Certain of these commitments were allocated to the Company as part of the Separation from its former Parent. The Company has determined that these commitments may exceed the Company’s needs over the next four to six years. If the Company is unable to satisfy, reduce or amend its contractual commitments, it would record the future charges for any payments related to excess commitments as cost of services. The Company’s overall contractual commitments have decreased compared to information reported in the Company’s last annual filings due to contract renegotiation and attainments outpacing new additions.

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.

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 various aspects of IBM’s business, including its managed infrastructure business. BMC alleged IBM’s removal of BMC software from one of its client’s sites at the client’s request constituted breach of contract, fraudulent inducement and trade secret misappropriation. In May 2022, the trial court entered a judgment against IBM and awarded BMC $717 million in direct damages and $717 million in punitive damages, plus interest. IBM has appealed the judgment and has stated publicly that it intends to seek a complete reversal on appeal. IBM may seek an indemnity from the Company in connection with this matter. Until there is a final and conclusive judgment in the case after all appeals and proceedings are concluded, until the amount of any applicable insurance is determined, and until a definitive assessment of Kyndryl’s indemnity obligations (if any) occurs, which in the aggregate will likely take several years, the amount of indemnity obligation (if any) that the Company may owe to IBM is indeterminate.

Separately, certain contractual disputes have arisen between Kyndryl and IBM. IBM and Kyndryl have commenced arbitration proceedings related to certain of these matters. Kyndryl intends to vigorously pursue its interests and defenses in these matters, including asserting its own claims in arbitration if necessary.

EQUITY

9 Months Ended

Dec. 31, 2022

EQUITY

EQUITY

NOTE 11. EQUITY

The following tables present reclassifications and taxes related to items of other comprehensive income (loss) for the three and nine months ended December 31, 2022 and 2021:


	Pretax		Tax (Expense)		Net of Tax
(Dollars in millions)	Amount		Benefit		Amount
For the three months ended December 31, 2022:
Foreign currency translation adjustments	$	260	$	—	$	260
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	(4)	$	—	$	(4)
Reclassification of (gains) losses to net income		2		—		2
Total unrealized gains (losses) on cash flow hedges	$	(2)	$	—	$	(2)
Retirement-related benefit plans*:
Amortization of net (gains) losses	$	10	$	(3)	$	7
Total retirement-related benefit plans	$	10	$	(3)	$	7
Other comprehensive income (loss)	$	267	$	(3)	$	265

For the three months ended December 31, 2021:
Foreign currency translation adjustments	$	400	$	—	$	400
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	$	1	$	—	$	1
Retirement-related benefit plans*:
Prior service costs (credits)	$	1	$	(2)	$	(1)
Net gains (losses) arising during the period		72		(18)		54
Curtailments and settlements		3		(1)		2
Amortization of net (gains) losses		19		(3)		16
Total retirement-related benefit plans	$	94	$	(24)	$	70
Other comprehensive income (loss)	$	495	$	(24)	$	470

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


	Pretax		Tax (Expense)		Net of Tax
(Dollars in millions)	Amount		Benefit		Amount
For the nine months ended December 31, 2022:
Foreign currency translation adjustments	$	(229)	$	—	$	(229)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	(9)	$	2	$	(7)
Reclassification of (gains) losses to net income		1		—		1
Total unrealized gains (losses) on cash flow hedges	$	(8)	$	2	$	(6)
Retirement-related benefit plans*:
Amortization of net (gains) losses	$	30	$	(9)	$	21
Total retirement-related benefit plans	$	30	$	(9)	$	21
Other comprehensive income (loss)	$	(207)	$	(7)	$	(214)

For the nine months ended December 31, 2021:
Foreign currency translation adjustments	$	290	$	—	$	290
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	4	$	—	$	4
Reclassification of (gains) losses to net income		(1)		—		(1)
Total unrealized gains (losses) on cash flow hedges	$	3	$	—	$	3
Retirement-related benefit plans*:
Prior service costs (credits)	$	1	$	(2)	$	(1)
Net gains (losses) arising during the period		67		(16)		51
Curtailments and settlements		3		(1)		2
Amortization of net (gains) losses		41		(9)		32
Total retirement-related benefit plans	$	112	$	(29)	$	84
Other comprehensive income (loss)	$	405	$	(29)	$	375

*	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 tables present 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)
October 1, 2022	$	(1)	$	(1,223)	$	(343)	$	(1,567)
Other comprehensive income (loss)		(2)		260		7		265
December 31, 2022	$	(3)	$	(963)	$	(336)	$	(1,303)

October 1, 2021	$	3	$	(1,084)	$	(534)	$	(1,614)
Other comprehensive income (loss)		1		400		70		470
December 31, 2021	$	3	$	(684)	$	(463)	$	(1,143)


	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)
April 1, 2022	$	3	$	(735)	$	(357)	$	(1,089)
Other comprehensive income (loss)		(6)		(229)		21		(214)
December 31, 2022	$	(3)	$	(963)	$	(336)	$	(1,303)

April 1, 2021	$	—	$	(974)	$	(208)	$	(1,182)
Net transfers from Parent		—		—		(338)		(338)
Other comprehensive income (loss)		3		290		84		375
December 31, 2021	$	3	$	(684)	$	(463)	$	(1,143)

*	Foreign currency translation adjustments are presented gross.

- 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.

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+ Details

RETIREMENT-RELATED BENEFITS

9 Months Ended

Dec. 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 and nine months ended December 31, 2022 and 2021.


(Dollars in millions)	Defined Benefit Pension Plans				Nonpension Postretirement Benefit Plans
For the three months ended December 31:	2022		2021		2022		2021
Service cost	$	12	$	16	$	—	$	—
Interest cost⁽¹⁾		9		6		—		1
Expected return on plan assets⁽¹⁾		(10)		(12)		—		—
Recognized actuarial losses (gains)⁽¹⁾		10		19		—		—
Curtailments and settlements⁽¹⁾		—		2		—		—
Multi-employer plans and other costs⁽²⁾		—		1		—		—
Net periodic benefit cost	$	20	$	33	$	—	$	1


(Dollars in millions)	Defined Benefit Pension Plans				Nonpension Postretirement Benefit Plans
For the nine months ended December 31:	2022		2021		2022		2021
Service cost	$	36	$	58	$	1	$	2
Interest cost⁽¹⁾		27		10		—		1
Expected return on plan assets⁽¹⁾		(32)		(25)		—		(1)
Recognized actuarial losses (gains)⁽¹⁾		30		41		—		—
Curtailments and settlements⁽¹⁾		—		2		—		—
Multi-employer plans and other costs⁽²⁾		4		4		—		—
Net periodic benefit cost	$	64	$	90	$	1	$	2

(1)	These components of net periodic benefit cost are included in other expense (income) 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.

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 $37 million. These amounts generally represent legally mandated minimum contributions. During the three and nine months ended December 31, 2022, Company contributions paid to the defined benefit pension plans, multi-employer plans and nonpension postretirement benefit plans were $15 million and $27 million, respectively.

- Definition

The entire disclosure for retirement benefits.

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+ Details

TRANSACTIONS WITH FORMER PARENT

9 Months Ended

Dec. 31, 2022

TRANSACTIONS WITH FORMER PARENT

TRANSACTIONS WITH FORMER PARENT

NOTE 13. TRANSACTIONS WITH FORMER PARENT

Change in Beneficial Ownership

IBM transferred all of its 19.9% retained interest in Kyndryl common stock to a third-party financial institution through exchange agreements in May and August 2022. IBM ceased to be a related party of Kyndryl in August 2022. Transactions related to former Parent after August 11, 2022 are no longer reported as related-party activities. As a result, there was no related party revenue or cost of services recognized for the three months ended December 31, 2022.

Revenue and Purchases related to Former Parent

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 $260 million for the three months ended December 31, 2021. Revenue generated from these services was $287 million and $550 million for the nine months ended December 31, 2022 and 2021, respectively. No related party revenue was recognized after August 2022.

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 $1.1 billion for the three months ended December 31, 2021. Related-party costs of $1.1 billion for the quarter ended December 31, 2021 included $386 million pre-Separation costs and $714 million post-Separation costs. Total cost of services was $1.4 billion and $3.0 billion for the nine months ended December 31, 2022 and 2021, respectively. No related party cost of services was recognized after August 2022.

Capital Expenditures with Former Parent

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 $89 million and $212 million for the nine months ended December 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. For the three and nine months ended December 31, 2022, $21 million and $41 million, respectively, of the upgraded hardware committed by IBM was delivered to Kyndryl. Accordingly, such balance was transferred from other assets (noncurrent) to property and equipment on the Balance Sheet and recognized as non-cash investing activity. The Company intends to recognize depreciation expense related to such equipment over its useful life of five years, consistent with its 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 and nine months ended December 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 nine months ended December 31, 2021 totaled $652 million, which consisted of $3 million of allocated other (income) and expense, $32 million of allocated interest expense and $615 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 March 31, 2022, and there was no activity within the account during the three and nine months ended December 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. In conjunction with the Separation, the Company issued common stock and reclassified net Parent investment to common stock and additional paid-in capital to close out the net Parent investment balance. As a result, there was no balance in net Parent investment at December 31, 2021.

Lease Guarantees

Kyndryl has lease agreements with third parties with an estimated aggregate lease liability of $111 million that are guaranteed by IBM as of December 31, 2022.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

9 Months Ended

Dec. 31, 2022

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

NOTE 14. REVISION OF PRIOR-PERIOD FINANCIAL STATEMENTS

During the three months 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 predominantly 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, and corresponding understatements of pretax and net income. The Company concluded that such impacts were not material to any prior annual or interim period. The Company further determined that the correction of the over-accrual within the transition period ended March 31, 2022 would be significant to the three-month results. As a result, we recorded an immaterial revision to portions of our 2021 Annual Report and immaterial revisions to prior interim periods in our Quarterly Reports on Form 10-Q.

A summary of the impact of the revision to the accompanying prior-period consolidated financial statements is presented in the tables below.


(Dollars in millions)	Three Months Ended December 31, 2021
Consolidated Income Statement	As Previously Reported		Adjustments		As Revised
Cost of services	$	4,011	$	(12)	$	3,999
Total costs and expenses		5,287		(12)		5,276
Income (loss) before income taxes		(732)		12		(720)
Provision for income taxes		8		3		11
Net income (loss)		(740)		9		(731)


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Income Statement	As Previously Reported		Adjustments		As Revised
Cost of services	$	12,252	$	(20)	$	12,233
Total costs and expenses		15,405		(20)		15,385
Income (loss) before income taxes		(1,519)		20		(1,499)
Provision for income taxes		305		5		311
Net income (loss)		(1,825)		15		(1,810)


(Dollars in millions)	Three Months Ended December 31, 2021
Consolidated Statement of Comprehensive Income (Loss)	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(740)	$	9	$	(731)
Foreign currency translation adjustments		401		(1)		400
Other comprehensive income (loss), before tax		496		(1)		495
Other comprehensive income (loss), net of tax		470		(1)		470
Total comprehensive income (loss)		(270)		8		(262)


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Statement of Comprehensive Income (Loss)	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(1,825)	$	15	$	(1,810)
Foreign currency translation adjustments		295		(4)		290
Other comprehensive income (loss), before tax		409		(4)		405
Other comprehensive income (loss), net of tax		379		(4)		375
Total comprehensive income (loss)		(1,446)		11		(1,435)


(Dollars in millions)	At December 31, 2021
Consolidated Balance Sheet	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		4,218		66		4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before noncontrolling interests		2,700		65		2,765
Total equity		2,702		65		2,767


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Statement of Cash Flows	As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(1,825)	$	15	$	(1,810)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with former Parent)		915		5		920
Other assets and other liabilities		670		(20)		650


(Dollars in millions)	At March 31, 2021
Consolidated Statement of Equity	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


(Dollars in millions)	At September 30, 2021
Consolidated Statement of Equity	As Previously Reported		Adjustments		As Revised
Net Parent investment	$	7,045	$	57	$	7,102
Accumulated other comprehensive income/(loss)		(1,615)		1		(1,614)
Total equity		5,481		57		5,539


(Dollars in millions)	At December 31, 2021
Consolidated Statement of Equity	As Previously Reported		Adjustments		As Revised
Common Stock	$	4,218	$	66	$	4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total equity		2,702		65		2,767

SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
SIGNIFICANT ACCOUNTING POLICIES (Policies)	Dec. 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 and its results of operations for all the periods presented. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the report on Form 8-K/A we filed with the U.S. Securities and Exchange Commission (“SEC”) on May 27, 2022 (the “8-K/A”) and our transition report for the three months ended March 31, 2022 filed on Form 10-QT. 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 intercompany accounts between Kyndryl entities 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 In January 2022, the Board of Directors of Kyndryl approved a change to the fiscal year-end of the Company from December 31 to March 31. The Company’s 2023 fiscal year began on April 1, 2022 and will end on March 31, 2023. The Company filed a Transition Report on Form 10-QT for the period of January 1 to March 31, 2022 with the SEC on May 13, 2022.
Standards Implemented and New Standards to be 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. New Standards to be Implemented In September 2022, the FASB amended its guidance related to supplier finance programs. The amended guidance requires additional disclosures surrounding the use of supplier finance programs to purchase goods or services, including disclosing the key terms of the programs, the amount of obligations outstanding at the end of the reporting period, and a roll-forward of those obligations. The new guidance, except the roll-forward information, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The roll-forward information is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact that this amended guidance will have on the Company’s financial statements. In December 2022, the FASB issued guidance deferring the sunset date of ASC 848, Reference Rate Reform to December 31, 2024. The FASB previously issued temporary, optional expedients related to the accounting for contract modifications and hedging transactions as a result of markets transitioning from the use of LIBOR and other interbank offered rates to alternative reference rates. The Company has evaluated the impact of the amended guidance and concluded that the guidance will not have a material impact on the Company’s 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), charges related to ceasing to use leased assets, charges related to lease termination, 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.

REVENUE RECOGNITION (Tables)

9 Months Ended

Dec. 31, 2022

REVENUE RECOGNITION

Schedule of reconciliation of contract balances


	December 31,		March 31,
(Dollars in millions)	2022		2022
Accounts receivable (net of allowances of $34 at December 31, 2022 and $44 at March 31, 2022) *	$	1,539	$	2,271
Contract assets **		30		41
Deferred income (current)		817		882
Deferred income (noncurrent)		377		452

*	Including unbilled receivable balances of $382 million at December 31, 2022 and $473 million at March 31, 2022.

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


	Nine Months Ended		Nine Months Ended
(Dollars in millions)	December 31, 2022		December 31, 2021
Beginning balance	$	44	$	90
Additions (releases)		5		(21)
Write-offs		(8)		(4)
Other *		(6)		(21)
Ending balance	$	34	$	44

*	Primarily represents currency translation adjustments.

Schedule of capitalized costs to acquire and fulfill customer contracts


	December 31,		March 31,
(Dollars in millions)	2022		2022
Deferred transition costs	$	863	$	961
Prepaid software costs		661		806
Capitalized costs to fulfill contracts		279		302
Capitalized costs to obtain contracts		310		318
Total deferred costs *	$	2,112	$	2,387

*	Of the total deferred costs, $927 million was current and $1,186 million was noncurrent at December 31, 2022, and $1,143 million was current and $1,244 million was noncurrent at March 31, 2022.

SEGMENTS (Tables)

9 Months Ended

Dec. 31, 2022

SEGMENTS

Summary of results of segments


	Three Months Ended December 31,				Nine Months Ended December 31,
(Dollars in millions)	2022		2021		2022		2021
Revenue
United States	$	1,265	$	1,193	$	3,581	$	3,577
Japan		606		683		1,855		2,160
Principal Markets		1,472		1,670		4,460		5,260
Strategic Markets		961		1,010		2,874		2,889
Total revenue	$	4,303	$	4,556	$	12,771	$	13,886
Segment adjusted EBITDA
United States	$	271	$	202	$	639	$	662
Japan		90		124		318		378
Principal Markets		91		155		248		289
Strategic Markets		145		134		352		444
Total segment adjusted EBITDA	$	597	$	615	$	1,556	$	1,773

Summary of reconciliation of consolidated totals to segment information

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


	Three Months Ended December 31,				Nine Months Ended December 31,
(Dollars in millions)	2022		2021		2022		2021
Pretax income (loss)	$	(138)	$	(720)	$	(563)	$	(1,499)
Workforce rebalancing charges (benefits)		10		(1)		16		(13)
Transaction-related costs		48		129		218		572
Stock-based compensation expense		29		18		81		56
Impairment expense		—		469		—		469
Interest expense		27		18		65		50
Depreciation expense		232		294		681		960
Amortization expense		336		312		945		984
Corporate expense not allocated to the segments		16		28		57		113
Other adjustments *		37		67		55		81
Segment adjusted EBITDA	$	597	$	615	$	1,556	$	1,773

*	Other adjustments represent pension expense other than pension servicing costs and multi-employer plan costs, significant litigation costs and charges related to ceasing to use leased assets.

NET LOSS PER SHARE (Tables)

9 Months Ended

Dec. 31, 2022

NET LOSS PER SHARE

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


	Three Months Ended December 31,				Nine Months Ended December 31,
(In millions, except per share amounts)	2022		2021		2022		2021
Net income (loss) on which basic and diluted earnings per share is calculated	$	(106)	$	(731)	$	(637)	$	(1,810)
Number of shares on which basic and diluted earnings per share is calculated		227.0		224.2		226.4		224.1

Basic earnings (loss) per share	$	(0.47)	$	(3.26)	$	(2.81)	$	(8.07)
Diluted earnings (loss) per share		(0.47)		(3.26)		(2.81)		(8.07)

Schedule of anti dilutive securities were not included in the computation of diluted earnings (loss) per share



(In millions)
Nonvested restricted stock units issued and outstanding		9.9
Nonvested performance-based stock units		2.5
Nonvested market-conditioned performance awards		2.4
Stock options issued and outstanding		3.7
Total		18.6

FINANCIAL ASSETS AND LIABILITIES (Tables)

9 Months Ended

Dec. 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 December 31:	2022		2021		2022		2021
Cost of services	$	3,596	$	3,999	$	(2)	$	1
Other expense (income)		30		19		43		4

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 December 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expense (income)

Total

—


	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 December 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	(4)	$	4	Cost of services	$	(2)	$	1
Total	$	(4)	$	4		$	(2)	$	1

NA - not applicable


					Gains (Losses) from
(Dollars in millions)	Total				Hedge Activity
For the nine months ended December 31:	2022		2021		2022		2021
Cost of services	$	10,886	$	12,233	$	(1)	$	1
Other expense (income)		16		13		27		4

Gain (Loss) Recognized in Consolidated Income Statement

(Dollars in millions)

Consolidated

Recognized on

Attributable to Risk

For the nine months

Income Statement

Derivatives

Being Hedged

ended December 31:

Line Item

2022

2021

2022

2021

Derivative instruments not designated as hedging instruments:

Foreign exchange contracts

Other expense (income)

Total

—


	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)	Recognized				Consolidated	Reclassified
For the nine months	in OCI				Income Statement	from AOCI
ended December 31:	2022		2021		Line Item	2022		2021
Derivative instruments in cash flow hedges:
Foreign exchange contracts	$	(9)	$	4	Cost of services	$	(1)	$	1
Total	$	(9)	$	4		$	(1)	$	1

NA - not applicable

INTANGIBLE ASSETS INCLUDING GOODWILL (Tables)

9 Months Ended

Dec. 31, 2022

INTANGIBLE ASSETS INCLUDING GOODWILL

Schedule total considerations transferred


	March 31,
(Dollars in millions)	2022
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 consist of $16 million of patents and trademarks and $91 million of customer relationships.

Intangible asset balances by major asset class


	At December 31, 2022						At March 31, 2022
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
(Dollars in millions)	Amount		Amortization		Amount		Amount		Amortization		Amount
Capitalized software	$	61	$	(16)	$	45	$	16	$	(16)	$	1
Customer relationships*		232		(132)		100		229		(100)		129
Completed technology		20		(20)		—		20		(20)		—
Patents and trademarks*		18		(5)		13		18		(2)		16
Total	$	331	$	(173)	$	158	$	283	$	(138)	$	145

* Amounts at December 31, 2022 include effects from foreign currency translation.

Intangible assets, future amortization expense


	Capitalized		Customer		Patents and
(Dollars in millions)	Software		Relationships		Trademarks		Total
Year ending March 31:
2023 (remaining three months)	$	1	$	9	$	1	$	10
2024		12		27		3		43
2025		12		24		3		39
2026		10		20		3		34
2027		9		17		3		29
Thereafter		—		2		—		2

Changes in goodwill balances by reportable segment


			Additions and
(Dollars in millions)	Balance at		Other		Balance at
Segment	March 31, 2022		Adjustments*		December 31, 2022
United States	$	—	$	—	$	—
Japan		506		(10)		495
Principal Markets		142		—		142
Strategic Markets		176		—		176
Total	$	823	$	(10)	$	812

* Primarily related to foreign currency translation.

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

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+ Details

BORROWINGS (Tables)

9 Months Ended

Dec. 31, 2022

BORROWINGS

Summary of components of debt


			December 31,		March 31,
(Dollars in millions)	Interest Rate	Maturity	2022		2022
Unsecured floating-rate term loan	5.42%*	November 2024	$	500	$	500
Commercial loan agreement	3.00%	July 2026		102		123
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 **	2.29%	2023-2027		216		219
			$	3,218	$	3,242
Less: Unamortized discount				5		5
Less: Unamortized debt issuance costs				13		15
Less: Current maturities of long-term debt				103		96
Total long-term debt			$	3,097	$	3,127

* Floating rate calculated as of December 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


(Dollars in millions)*	Principal
Year ending March 31:
2023 (remaining three months)	$	7
2024		28
2025		529
2026		29
2027		710
Thereafter		1,700
Total	$	3,002

* Contractual obligations approximate scheduled repayments.

- 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.

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+ Details

EQUITY (Tables)

9 Months Ended

Dec. 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 December 31, 2022:
Foreign currency translation adjustments	$	260	$	—	$	260
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	(4)	$	—	$	(4)
Reclassification of (gains) losses to net income		2		—		2
Total unrealized gains (losses) on cash flow hedges	$	(2)	$	—	$	(2)
Retirement-related benefit plans*:
Amortization of net (gains) losses	$	10	$	(3)	$	7
Total retirement-related benefit plans	$	10	$	(3)	$	7
Other comprehensive income (loss)	$	267	$	(3)	$	265

For the three months ended December 31, 2021:
Foreign currency translation adjustments	$	400	$	—	$	400
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	$	1	$	—	$	1
Retirement-related benefit plans*:
Prior service costs (credits)	$	1	$	(2)	$	(1)
Net gains (losses) arising during the period		72		(18)		54
Curtailments and settlements		3		(1)		2
Amortization of net (gains) losses		19		(3)		16
Total retirement-related benefit plans	$	94	$	(24)	$	70
Other comprehensive income (loss)	$	495	$	(24)	$	470

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


	Pretax		Tax (Expense)		Net of Tax
(Dollars in millions)	Amount		Benefit		Amount
For the nine months ended December 31, 2022:
Foreign currency translation adjustments	$	(229)	$	—	$	(229)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	(9)	$	2	$	(7)
Reclassification of (gains) losses to net income		1		—		1
Total unrealized gains (losses) on cash flow hedges	$	(8)	$	2	$	(6)
Retirement-related benefit plans*:
Amortization of net (gains) losses	$	30	$	(9)	$	21
Total retirement-related benefit plans	$	30	$	(9)	$	21
Other comprehensive income (loss)	$	(207)	$	(7)	$	(214)

For the nine months ended December 31, 2021:
Foreign currency translation adjustments	$	290	$	—	$	290
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period	$	4	$	—	$	4
Reclassification of (gains) losses to net income		(1)		—		(1)
Total unrealized gains (losses) on cash flow hedges	$	3	$	—	$	3
Retirement-related benefit plans*:
Prior service costs (credits)	$	1	$	(2)	$	(1)
Net gains (losses) arising during the period		67		(16)		51
Curtailments and settlements		3		(1)		2
Amortization of net (gains) losses		41		(9)		32
Total retirement-related benefit plans	$	112	$	(29)	$	84
Other comprehensive income (loss)	$	405	$	(29)	$	375

*	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)
October 1, 2022	$	(1)	$	(1,223)	$	(343)	$	(1,567)
Other comprehensive income (loss)		(2)		260		7		265
December 31, 2022	$	(3)	$	(963)	$	(336)	$	(1,303)

October 1, 2021	$	3	$	(1,084)	$	(534)	$	(1,614)
Other comprehensive income (loss)		1		400		70		470
December 31, 2021	$	3	$	(684)	$	(463)	$	(1,143)


	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)
April 1, 2022	$	3	$	(735)	$	(357)	$	(1,089)
Other comprehensive income (loss)		(6)		(229)		21		(214)
December 31, 2022	$	(3)	$	(963)	$	(336)	$	(1,303)

April 1, 2021	$	—	$	(974)	$	(208)	$	(1,182)
Net transfers from Parent		—		—		(338)		(338)
Other comprehensive income (loss)		3		290		84		375
December 31, 2021	$	3	$	(684)	$	(463)	$	(1,143)

*	Foreign currency translation adjustments are presented gross.

RETIREMENT-RELATED BENEFITS (Tables)

9 Months Ended

Dec. 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 December 31:	2022		2021		2022		2021
Service cost	$	12	$	16	$	—	$	—
Interest cost⁽¹⁾		9		6		—		1
Expected return on plan assets⁽¹⁾		(10)		(12)		—		—
Recognized actuarial losses (gains)⁽¹⁾		10		19		—		—
Curtailments and settlements⁽¹⁾		—		2		—		—
Multi-employer plans and other costs⁽²⁾		—		1		—		—
Net periodic benefit cost	$	20	$	33	$	—	$	1


(Dollars in millions)	Defined Benefit Pension Plans				Nonpension Postretirement Benefit Plans
For the nine months ended December 31:	2022		2021		2022		2021
Service cost	$	36	$	58	$	1	$	2
Interest cost⁽¹⁾		27		10		—		1
Expected return on plan assets⁽¹⁾		(32)		(25)		—		(1)
Recognized actuarial losses (gains)⁽¹⁾		30		41		—		—
Curtailments and settlements⁽¹⁾		—		2		—		—
Multi-employer plans and other costs⁽²⁾		4		4		—		—
Net periodic benefit cost	$	64	$	90	$	1	$	2

(1)	These components of net periodic benefit cost are included in other expense (income) 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.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS (Tables)

9 Months Ended

Dec. 31, 2022

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

Schedule of revision to financial statements


(Dollars in millions)	Three Months Ended December 31, 2021
Consolidated Income Statement	As Previously Reported		Adjustments		As Revised
Cost of services	$	4,011	$	(12)	$	3,999
Total costs and expenses		5,287		(12)		5,276
Income (loss) before income taxes		(732)		12		(720)
Provision for income taxes		8		3		11
Net income (loss)		(740)		9		(731)


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Income Statement	As Previously Reported		Adjustments		As Revised
Cost of services	$	12,252	$	(20)	$	12,233
Total costs and expenses		15,405		(20)		15,385
Income (loss) before income taxes		(1,519)		20		(1,499)
Provision for income taxes		305		5		311
Net income (loss)		(1,825)		15		(1,810)


(Dollars in millions)	Three Months Ended December 31, 2021
Consolidated Statement of Comprehensive Income (Loss)	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(740)	$	9	$	(731)
Foreign currency translation adjustments		401		(1)		400
Other comprehensive income (loss), before tax		496		(1)		495
Other comprehensive income (loss), net of tax		470		(1)		470
Total comprehensive income (loss)		(270)		8		(262)


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Statement of Comprehensive Income (Loss)	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(1,825)	$	15	$	(1,810)
Foreign currency translation adjustments		295		(4)		290
Other comprehensive income (loss), before tax		409		(4)		405
Other comprehensive income (loss), net of tax		379		(4)		375
Total comprehensive income (loss)		(1,446)		11		(1,435)


(Dollars in millions)	At December 31, 2021
Consolidated Balance Sheet	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		4,218		66		4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total stockholders’ equity before noncontrolling interests		2,700		65		2,765
Total equity		2,702		65		2,767


(Dollars in millions)	Nine Months Ended December 31, 2021
Consolidated Statement of Cash Flows	As Previously Reported		Adjustments		As Revised
Cash flows from operating activities:
Net income (loss)	$	(1,825)	$	15	$	(1,810)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with former Parent)		915		5		920
Other assets and other liabilities		670		(20)		650


(Dollars in millions)	At March 31, 2021
Consolidated Statement of Equity	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


(Dollars in millions)	At September 30, 2021
Consolidated Statement of Equity	As Previously Reported		Adjustments		As Revised
Net Parent investment	$	7,045	$	57	$	7,102
Accumulated other comprehensive income/(loss)		(1,615)		1		(1,614)
Total equity		5,481		57		5,539


(Dollars in millions)	At December 31, 2021
Consolidated Statement of Equity	As Previously Reported		Adjustments		As Revised
Common Stock	$	4,218	$	66	$	4,284
Accumulated other comprehensive income/(loss)		(1,143)		(1)		(1,143)
Total equity		2,702		65		2,767

SIGNIFICANT ACCOUNTING POLICIES - Kyndryl's Spin-off (Details)	Nov. 03, 2021 shares	Dec. 31, 2022 country	Sep. 30, 2022
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%
Ownership interest transferred			19.90%
Minimum
Number of countries \| country		100

REVENUE RECOGNITION - Remaining Performance Obligations (Details) $ in Billions	9 Months Ended
	Dec. 31, 2022 USD ($)
REVENUE RECOGNITION
Practical expedient, remaining performance obligations	true
Remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied	$ 39.6

REVENUE RECOGNITION - Remaining Performance Obligations, Expected Timing of Satisfaction (Details)	Dec. 31, 2022
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Remaining Performance Obligations
Percentage of remaining performance obligation expected to be recognized	59.00%
Duration of expected recognition period for remaining performance obligation	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Remaining Performance Obligations
Percentage of remaining performance obligation expected to be recognized	34.00%
Duration of expected recognition period for remaining performance obligation	3 years

REVENUE RECOGNITION - Performance Obligations Satisfied or Partially Satisfied in Prior Periods (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2022
REVENUE RECOGNITION
Impact to revenue from performance obligations satisfied (or partially satisfied) in previous periods	$ (3)	$ 4

REVENUE RECOGNITION - Reconciliation of Contract Balances (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2022	Mar. 31, 2022
Reconciliation of Contract Balances
Accounts receivable (net of allowances of $34 at December 31, 2022 and $44 at March 31, 2022)	$ 1,539	$ 1,539	$ 2,271
Contract assets	30	30	41
Deferred income (current)	817	817	882
Deferred income (noncurrent)	377	377	452
Unbilled receivable	382	382	$ 473
Revenue recognized that was included in deferred income at the beginning of the period	$ 249	$ 496

REVENUE RECOGNITION - Trade Allowance for Credit Losses (Details) - USD ($) $ in Millions	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Roll forward of notes and accounts receivable - trade allowance for credit losses
Allowance for Credit Loss, Beginning Balance	$ 44	$ 90
Additions (releases)	5	(21)
Write-offs	(8)	(4)
Other	(6)	(21)
Allowance for Credit Loss, Ending Balance	$ 34	$ 44

REVENUE RECOGNITION - Deferred Costs (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Deferred Contract Costs
Deferred costs	$ 2,112	$ 2,112		$ 2,387
Deferred costs, current	927	927		1,143
Deferred costs, noncurrent	1,186	1,186		1,244
Total deferred costs amortized	440	1,246
Amortization of deferred costs	114	337	$ 403
Deferred transition costs
Deferred Contract Costs
Deferred costs	863	863		961
Total deferred costs amortized	87	259
Prepaid software costs
Deferred Contract Costs
Deferred costs	661	661		806
Total deferred costs amortized	239	650
Capitalized costs to fulfill contracts
Deferred Contract Costs
Deferred costs	279	279		302
Capitalized costs to obtain contracts
Deferred Contract Costs
Deferred costs	$ 310	$ 310		$ 318
Minimum
Deferred Contract Costs
Term of contract with customer		3 years
Maximum
Deferred Contract Costs
Term of contract with customer		6 years

SEGMENTS (Details)	9 Months Ended
SEGMENTS (Details)	Dec. 31, 2022 segment
SEGMENTS
Number of reportable segments	4

SEGMENTS - Results of segments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Segment Information
Revenues	$ 4,303	$ 4,556	$ 12,771	$ 13,886
Segment adjusted EBITDA	597	615	1,556	1,773
United States
Segment Information
Revenues	1,265	1,193	3,581	3,577
Segment adjusted EBITDA	271	202	639	662
Japan
Segment Information
Revenues	606	683	1,855	2,160
Segment adjusted EBITDA	90	124	318	378
Principal Markets
Segment Information
Revenues	1,472	1,670	4,460	5,260
Segment adjusted EBITDA	91	155	248	289
Strategic Markets
Segment Information
Revenues	961	1,010	2,874	2,889
Segment adjusted EBITDA	$ 145	$ 134	$ 352	$ 444

- 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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SEGMENTS - Reconciliation of consolidated totals to segment information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		14 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022
SEGMENTS
Income (loss) before income taxes	$ (138)	$ (720)	$ (563)	$ (1,499)
Workforce rebalancing charges (benefits)	10	(1)	16	(13)
Transaction-related costs	48	129	218	572
Stock-based compensation expense	29	18	81	56
Impairment expense		469	0	469	$ 469
Interest expense	27	18	65	50
Depreciation expense	232	294	681	960
Amortization expense	336	312	945	984
Corporate expense not allocated to the segments	16	28	57	113
Other adjustments	37	67	55	81
Segment adjusted EBITDA	$ 597	$ 615	$ 1,556	$ 1,773

TAXES (Details)	3 Months Ended		9 Months Ended
TAXES (Details)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
TAXES
Effective tax rate (as a percent)	23.20%	(1.50%)	(13.10%)	(20.70%)

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		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
NET LOSS PER SHARE
Stock dividends declared	$ 0	$ 0	$ 0	$ 0
Net income (loss) on which basic and diluted earnings per share is calculated	$ (106)	$ (731)	$ (637)	$ (1,810)
Weighted-average shares outstanding during period
Number of shares on which basic earnings per share is calculated	227.0	224.2	226.4	224.1
Number of shares on which diluted earnings per share is calculated	227.0	224.2	226.4	224.1
Basic earnings (loss) per share (in dollars per share)	$ (0.47)	$ (3.26)	$ (2.81)	$ (8.07)
Diluted earnings (loss) per share (in dollars per share)	$ (0.47)	$ (3.26)	$ (2.81)	$ (8.07)
Shares distributed on separation date		224.1		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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-URI https://asc.fasb.org/extlink&oid=120409616&loc=SL4591552-111686

Reference 33: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 8
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22658-107794

+ Details

NET LOSS PER SHARE - Anti dilutive securities (Details) shares in Millions	3 Months Ended
	Dec. 31, 2022 shares
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	18.6
RSUs
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	9.9
Performance-based stock units
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	2.5
Market-conditioned performance awards
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	2.4
Stock options
Securities not included in the computation of diluted earnings (loss) per share
Anti dilutive securities	3.7

FINANCIAL ASSETS AND LIABILITIES - Fair Value Measurements (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Financial assets and financial liabilities:
Derivative assets impacted by netting arrangements	$ 0		$ 0		$ 0
Long-term debt	3,000		3,000		3,000
Long-term debt, fair value	2,300		2,300		2,700
Trade receivables sold	1,000		1,000
Gross proceeds from third parties	930		2,300
Financing receivables sold		$ 472		$ 1,700
Fees and net gains and losses	14		34
Level 2
Financial assets and financial liabilities:
Derivative assets	$ 32		$ 32		$ 9
Derivative Asset, Statement of Financial Position [Extensible Enumeration]	Prepaid Expense and Other Assets, Current		Prepaid Expense and Other Assets, Current		Prepaid Expense and Other Assets, Current
Derivative liabilities	$ 9		$ 9		$ 2
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities, Noncurrent, Accrued Liabilities and Other Liabilities, Current		Other Liabilities, Noncurrent, Accrued Liabilities and Other Liabilities, Current		Other Liabilities, Noncurrent, Accrued Liabilities and Other Liabilities, Current
Cash and cash equivalents \| Time deposits
Financial assets and financial liabilities:
Available-for-sale debt securities	$ 775		$ 775		$ 972
Minimum
Financial assets and financial liabilities:
Trade receivable term			3 months
Maximum
Financial assets and financial liabilities:
Trade receivables sold	$ 1,100		$ 1,100
Trade receivable term			9 months

FINANCIAL ASSETS AND LIABILITIES - Foreign Exchange Risk (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Dec. 31, 2022	Mar. 31, 2022
Not designated as hedging instruments - economic hedges \| Currency swaps
Derivatives, Fair Value [Line Items]
Notional amount	$ 1,700	$ 945
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 \| Designated as hedging instruments \| Foreign exchange contracts
Derivatives, Fair Value [Line Items]
Net gains from derivatives		3
Net loss from derivatives	$ 5
Deferred net loss/ profit on derivatives reclassified to net income	(5)
Derivative instruments in cash flow hedges \| Designated as hedging instruments \| Foreign exchange forward contracts
Derivatives, Fair Value [Line Items]
Notional amount	$ 285	$ 216
Maximum length of time hedged	1 year
Weighted average remaining maturity	6 months	6 months

FINANCIAL ASSETS AND LIABILITIES - Effect of Hedge Activity on Income and Expense (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Derivative Instruments, Gain (Loss) [Line Items]
Cost of services	$ 3,596	$ 3,999	$ 10,886	$ 12,233
Other expense (income)	30	19	16	13
Cost of services.
Derivative Instruments, Gain (Loss) [Line Items]
Gains (Losses) from Hedge Activity	(2)	1	(1)	1
Other expenses
Derivative Instruments, Gain (Loss) [Line Items]
Gains (Losses) from Hedge Activity	$ 43	$ 4	$ 27	$ 4

- Definition

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

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=123596393&loc=d3e14064-108612

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03.2)
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-SubTopic 10
-Section 50
-Paragraph 3
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=114001798&loc=d3e33918-111571

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(i))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iii)(B))
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(i))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iii)(A))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 13: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(ii))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-Subparagraph (SX 210.13-02(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

+ Details

FINANCIAL ASSETS AND LIABILITIES - Gains and Losses (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 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	$ (4)	$ 4	$ (9)	$ 4
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI	(2)	1	(1)	1
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Amounts Excluded from Effectiveness Testing	0	0	0	0
Not designated as hedging instruments - economic hedges
Derivative Instruments, Gain (Loss) [Line Items]
Net gains (loss) from derivatives	43	4	27	4
Foreign exchange contracts \| Not designated as hedging instruments - economic hedges
Derivative Instruments, Gain (Loss) [Line Items]
Net gains (loss) from derivatives	$ 43	$ 4	$ 27	$ 4
Derivative, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Income and Expense	Other Income and Expense	Other Income and Expense	Other Income and Expense
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	$ (4)	$ 4	$ (9)	$ 4
Gain (Loss) Recognized in Earnings and Other Comprehensive Income - Reclassified from AOCI	$ (2)	$ 1	$ (1)	$ 1

INTANGIBLE ASSETS INCLUDING GOODWILL - Business Combinations (Details) $ in Millions		9 Months Ended
	Feb. 01, 2022 USD ($) item	Dec. 31, 2022 USD ($) item	Mar. 31, 2022 USD ($)
Intangible asset balances by major asset class
Goodwill		$ 812	$ 823
Exa Transaction
Intangible asset balances by major asset class
Number of business combinations \| item	2	2
Majority interest	51.00%
Consideration, net of cash acquired	$ 48
Equity interest (as a percentage)		49.00%
Cash consideration	107
Non-controlling interest	102
Total purchase price allocation	209
Cash acquired	59
Net liabilities assumed, excluding cash	(16)
Deferred tax liabilities arising from acquired intangibles	(32)
Intangible assets	107
Goodwill	91
Exa Transaction \| Patents and trademarks
Intangible asset balances by major asset class
Intangible assets	16
Exa Transaction \| Customer relationships
Intangible asset balances by major asset class
Intangible assets	$ 91

INTANGIBLE ASSETS INCLUDING GOODWILL - Intangible Assets by Class (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2022
Intangible asset balances by major asset class
Gross Carrying Amount	$ 331		$ 331		$ 283
Accumulated Amortization	(173)		(173)		(138)
Net Carrying Amount	158		158		145
Net carrying amount of intangible assets increased			13
Intangible asset amortization expense	11	$ 11	36	$ 30
Capitalized software
Intangible asset balances by major asset class
Gross Carrying Amount	61		61		16
Accumulated Amortization	(16)		(16)		(16)
Net Carrying Amount	45		45		1
Customer relationships
Intangible asset balances by major asset class
Gross Carrying Amount	232		232		229
Accumulated Amortization	(132)		(132)		(100)
Net Carrying Amount	100		100		129
Completed technology
Intangible asset balances by major asset class
Gross Carrying Amount	20		20		20
Accumulated Amortization	(20)		(20)		(20)
Patents and trademarks
Intangible asset balances by major asset class
Gross Carrying Amount	18		18		18
Accumulated Amortization	(5)		(5)		(2)
Net Carrying Amount	$ 13		$ 13		$ 16

INTANGIBLE ASSETS INCLUDING GOODWILL - Future Amortization Expense (Details) $ in Millions	Dec. 31, 2022 USD ($)
Future amortization expense, by year
2023 (remaining three months)	$ 10
2024	43
2025	39
2026	34
2027	29
Thereafter	2
Capitalized software
Future amortization expense, by year
2023 (remaining three months)	1
2024	12
2025	12
2026	10
2027	9
Customer relationships
Future amortization expense, by year
2023 (remaining three months)	9
2024	27
2025	24
2026	20
2027	17
Thereafter	2
Patents and trademarks
Future amortization expense, by year
2023 (remaining three months)	1
2024	3
2025	3
2026	3
2027	$ 3

INTANGIBLE ASSETS INCLUDING GOODWILL - Goodwill by Segment (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended		14 Months Ended
	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Oct. 01, 2022
Changes in Goodwill Balances
Beginning Balance		$ 823
Goodwill, Other Adjustments		(10)
Goodwill impairment	$ 469	0	$ 469	$ 469
Ending Balance		812		812
Minimum
Changes in Goodwill Balances
Percentage of net book value exceeded					50.00%
EMEA
Changes in Goodwill Balances
Goodwill impairment				293
Japan
Changes in Goodwill Balances
Beginning Balance		506
Goodwill, Other Adjustments		(10)
Ending Balance		495		495
United States
Changes in Goodwill Balances
Goodwill impairment				176
Principal Markets
Changes in Goodwill Balances
Beginning Balance		142
Ending Balance		142		142
Principal Markets \| Canada and Australia/New Zealand Reporting Units
Changes in Goodwill Balances
Percentage of net book value exceeded					53.00%
Strategic Markets
Changes in Goodwill Balances
Beginning Balance		176
Ending Balance		$ 176		$ 176

BORROWINGS - Debt (Details) - USD ($) $ in Millions	Dec. 31, 2022	Mar. 31, 2022
Borrowings
Financing lease obligations	$ 216	$ 219
Total	3,218	3,242
Less: Unamortized discount	5	5
Less: Unamortized debt issuance costs	13	15
Less: Current maturities of long-term debt	103	96
Total	$ 3,097	3,127
Finance lease obligations, interest rate (as a percent)	2.29%
Unsecured floating-rate term loan
Borrowings
Long-term debt	$ 500	500
Debt instrument, weighted-average interest rate (as a percent)	5.42%
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	$ 102	123
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%

BORROWINGS - Contractual obligations of long-term debt outstanding (Details) $ in Millions	Dec. 31, 2022 USD ($)
Pre-swap annual contractual obligations of long-term debt outstanding
2023 (remaining three months)	$ 7
2024	28
2025	529
2026	29
2027	710
Thereafter	1,700
Total	$ 3,002

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

BORROWINGS - Interest on Debt (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Interest on Debt
Interest expense	$ 27	$ 18	$ 65	$ 50

COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	1 Months Ended	9 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	May 31, 2022 USD ($)	Dec. 31, 2022 employee
Loss Contingencies
Number of employees \| employee		90,000
Minimum
Loss Contingencies
Duration of contractual commitments		4 years
Maximum
Loss Contingencies
Duration of contractual commitments		6 years
BMC v. IBM \| IBM
Loss Contingencies
Direct damages sought, value	$ 717
Punitive damages sought, value	$ 717

EQUITY - Reclassifications and Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss)	$ 265	$ 470	$ (214)	$ 375
Accumulated Other Comprehensive Income (Loss)
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	267	495	(207)	405
Other comprehensive income (loss), tax (expense) benefit	(3)	(24)	(7)	(29)
Other comprehensive income (loss)	265	470	(214)	375
Foreign Currency Translation Adjustments
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	260	400	(229)	290
Other comprehensive income (loss)	260	400	(229)	290
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	(4)	1	(9)	4
Unrealized gains (losses) arising during the period, tax (expense) benefit			2
Unrealized gains (losses) arising during the period, net of tax amount	(4)	1	(7)	4
Reclassification/amortization, before tax amount	2	(1)	1	(1)
Reclassification/amortization, net of tax amount	2	(1)	1	(1)
Other comprehensive income (loss), before tax amount	(2)	1	(8)	3
Other comprehensive income (loss), tax (expense) benefit			2
Other comprehensive income (loss)	(2)	1	(6)	3
Net Change Retirement-Related Benefit Plans
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Other comprehensive income (loss), before tax amount	10	94	30	112
Other comprehensive income (loss), tax (expense) benefit	(3)	(24)	(9)	(29)
Other comprehensive income (loss)	7	70	21	84
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		72		67
Unrealized gains (losses) arising during the period, tax (expense) benefit		(18)		(16)
Unrealized gains (losses) arising during the period, net of tax amount		54		51
Reclassification/amortization, before tax amount	10	19	30	41
Reclassification/amortization, tax (expense) benefit	(3)	(3)	(9)	(9)
Reclassification/amortization, net of tax amount	$ 7	16	$ 21	32
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		3		3
Unrealized gains (losses) arising during the period, tax (expense) benefit		(1)		(1)
Unrealized gains (losses) arising during the period, net of tax amount		2		2
Retirement-Related Benefit Plans, Prior Service Costs (Credits)
Reclassifications and Taxes Related to Items of Other Comprehensive Income (Loss)
Unrealized gains (losses) arising during the period, before tax amount		1		1
Unrealized gains (losses) arising during the period, tax (expense) benefit		(2)		(2)
Unrealized gains (losses) arising during the period, net of tax amount		$ (1)		$ (1)

EQUITY - AOCI Rollforward (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
EQUITY - AOCI Rollforward (Details) - USD ($) $ in Millions	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	$ 1,746	$ 5,539	$ 2,711	$ 4,902
Other comprehensive income (loss), net of tax	265	470	(214)	375
Balance at the end of the period	1,930	2,767	1,930	2,767
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(1,567)	(1,614)	(1,089)	(1,182)
Net transfers from Parent				(338)
Other comprehensive income (loss), net of tax	265	470	(214)	375
Balance at the end of the period	(1,303)	(1,143)	(1,303)	(1,143)
Unrealized Gains (Losses) on Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(1)	3	3
Other comprehensive income (loss), net of tax	(2)	1	(6)	3
Balance at the end of the period	(3)	3	(3)	3
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(1,223)	(1,084)	(735)	(974)
Other comprehensive income (loss), net of tax	260	400	(229)	290
Balance at the end of the period	(963)	(684)	(963)	(684)
Net Change Retirement-Related Benefit Plans
Accumulated Other Comprehensive Income (Loss) (net of tax)
Balance at the beginning of the period	(343)	(534)	(357)	(208)
Net transfers from Parent				(338)
Other comprehensive income (loss), net of tax	7	70	21	84
Balance at the end of the period	$ (336)	$ (463)	$ (336)	$ (463)

- Definition

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

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126968391&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 50
-Paragraph 4
-URI https://asc.fasb.org/extlink&oid=124431353&loc=SL124442407-227067

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI https://asc.fasb.org/extlink&oid=126973232&loc=d3e21463-112644

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 45
-Paragraph 17
-URI https://asc.fasb.org/extlink&oid=118261656&loc=d3e32136-110900

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(21))
-URI https://asc.fasb.org/extlink&oid=126953954&loc=SL114868664-224227

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
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-SubTopic 10
-Section 55
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

- 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.

+ References

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+ Details

RETIREMENT-RELATED BENEFITS - Net Periodic Benefit Cost of Retirement-Related Benefit Plans (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021
Defined Benefit Pension Plans
Cost/(Income) of Pension Plans
Service cost	$ 12.0	$ 16.0	$ 36.0	$ 58.0
Interest cost	$ 9.0	$ 6.0	$ 27.0	$ 10.0
Interest cost - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Expected return on plan assets	$ (10.0)	$ (12.0)	$ (32.0)	$ (25.0)
Expected return on plan assets - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Recognized actuarial losses (gains)	$ 10.0	$ 19.0	$ 30.0	$ 41.0
Recognized actuarial losses - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Curtailments and settlements		$ 2.0		$ 2.0
Curtailments and settlements - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Multi-employer plans/other costs		$ 1.0	$ 4.0	$ 4.0
Net periodic benefit cost	$ 20.0	33.0	64.0	90.0
Non Pension Postretirement Benefit Plans
Cost/(Income) of Pension Plans
Service cost			$ 1.0	2.0
Interest cost		$ 1.0		$ 1.0
Interest cost - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Expected return on plan assets				$ (1.0)
Expected return on plan assets - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Recognized actuarial losses - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Curtailments and settlements - income statement location	Other expense (income)	Other expense (income)	Other expense (income)	Other expense (income)
Net periodic benefit cost		$ 1.0	$ 1.0	$ 2.0

RETIREMENT-RELATED BENEFITS - Contributions (Details) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Retirement-Related Benefits
Employer contributions	$ 15	$ 27
Nonpension Postretirement Plans
Retirement-Related Benefits
Expected benefit payments, 2023	$ 37	$ 37

- Definition

Amount of contribution received by defined benefit plan from employer which increases plan assets.

+ References + Details

TRANSACTIONS WITH FORMER PARENT - Related Party Revenue and Purchases (Details) - USD ($) $ in Millions	3 Months Ended		4 Months Ended	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2022	Dec. 31, 2021	Aug. 11, 2022	May 19, 2022
Related Party Transaction [Line Items]
Revenues		$ 260		$ 287	$ 550
Related-party cost of services		1,100		1,382	2,973
Payment for purchase of hardware from IBM				711	572
IBM
Related Party Transaction [Line Items]
Ownership interest transferred						19.90%	19.90%
Revenues	$ 0	260	$ 0	287	550
Related-party cost of services	0
IBM \| Hardware, software and services
Related Party Transaction [Line Items]
Payment for purchase of hardware from IBM				89	212
Due from related party	265		265	$ 265
Upgraded hardware period				2 years
Purchases from related party	$ 21			$ 41
Estimated useful lives (in years)	5 years
IBM \| Cost of service
Related Party Transaction [Line Items]
Related-party cost of services		1,100	$ 0	$ 1,400	$ 3,000
IBM \| Cost of service \| Pre-Separation Costs
Related Party Transaction [Line Items]
Related-party cost of services		386
IBM \| Cost of service \| Post-Separation Costs
Related Party Transaction [Line Items]
Related-party cost of services		$ 714

TRANSACTIONS WITH FORMER PARENT - Allocation of Corporate Expenses (Details) - IBM - Management Costs And Corporate Support Services - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Related Party Transaction [Line Items]
Allocation of corporate expenses	$ 0	$ 0	$ 652
Other (income) and expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses			3
Interest expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses			32
Selling, general and administrative expense.
Related Party Transaction [Line Items]
Allocation of corporate expenses			$ 615

TRANSACTIONS WITH FORMER PARENT - Net Parent Investment (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Mar. 31, 2021
Related Party Transaction [Line Items]
Net Parent investment			$ 7,102	$ 6,027
IBM
Related Party Transaction [Line Items]
Net Parent investment	$ 0	$ 0

TRANSACTIONS WITH FORMER PARENT - Lease Guarantees (Details) $ in Millions	Dec. 31, 2022 USD ($)
IBM
Related Party Transaction [Line Items]
Lease liability guaranteed by IBM	$ 111

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS - Revision to financial statements (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Mar. 31, 2021
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Cost of services	$ 3,596	$ 3,999	$ 10,886	$ 12,233
Total costs and expenses	4,441	5,276	13,333	15,385
Income (loss) before income taxes	(138)	(720)	(563)	(1,499)
Provision for (benefit from) income taxes	(32)	11	74	311
Net income (loss)	(106)	(731)	(637)	(1,810)
Foreign currency translation adjustments	260	400	(229)	290
Other comprehensive income (loss), before tax	267	495	(207)	405
Other comprehensive income (loss), net of tax	265	470	(214)	375
Total comprehensive income (loss)	159	(262)	(850)	(1,435)
Accrued contract costs	402	498	402	498		$ 676
Total current liabilities	4,607	4,457	4,607	4,457		5,058
Other liabilities	389	522	389	522		449
Total liabilities	9,920	10,446	9,920	10,446		10,730
Net Parent investment							$ 7,102	$ 6,027
Common stock	4,397	4,284	4,397	4,284		4,315
Accumulated other comprehensive income (loss)	(1,303)	(1,143)	(1,303)	(1,143)		(1,089)	(1,614)	(1,182)
Total stockholders' equity before non-controlling interests	1,832	2,765	1,832	2,765		2,618
Total equity	1,930	2,767	1,930	2,767	$ 1,746	2,711	5,539	4,902
Cash flows from operating activities:
Net income (loss)	$ (106)	(731)	(637)	(1,810)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with former Parent in prior-year period)			(36)	920
Other assets and other liabilities			$ (418)	650
As Previously Reported
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Cost of services		4,011		12,252
Total costs and expenses		5,287		15,405
Income (loss) before income taxes		(732)		(1,519)
Provision for (benefit from) income taxes		8		305
Net income (loss)		(740)		(1,825)
Foreign currency translation adjustments		401		295
Other comprehensive income (loss), before tax		496		409
Other comprehensive income (loss), net of tax		470		379
Total comprehensive income (loss)		(270)		(1,446)
Accrued contract costs		585		585
Total current liabilities		4,544		4,544
Other liabilities		501		501
Total liabilities		10,511		10,511
Net Parent investment							7,045	5,976
Common stock		4,218		4,218
Accumulated other comprehensive income (loss)		(1,143)		(1,143)			(1,615)	(1,186)
Total stockholders' equity before non-controlling interests		2,700		2,700
Total equity		2,702		2,702			5,481	4,848
Cash flows from operating activities:
Net income (loss)		(740)		(1,825)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with former Parent in prior-year period)				915
Other assets and other liabilities				670
Adjustments
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Cost of services		(12)		(20)
Total costs and expenses		(12)		(20)
Income (loss) before income taxes		12		20
Provision for (benefit from) income taxes		3		5
Net income (loss)		9		15
Foreign currency translation adjustments		(1)		(4)
Other comprehensive income (loss), before tax		(1)		(4)
Other comprehensive income (loss), net of tax		(1)		(4)
Total comprehensive income (loss)		8		11
Accrued contract costs		(87)		(87)
Total current liabilities		(87)		(87)
Other liabilities		22		22
Total liabilities		(65)		(65)
Net Parent investment							57	51
Common stock		66		66
Accumulated other comprehensive income (loss)		(1)		(1)			1	4
Total stockholders' equity before non-controlling interests		65		65
Total equity		65		65			$ 57	$ 54
Cash flows from operating activities:
Net income (loss)		$ 9		15
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Taxes (including items settled with former Parent in prior-year period)				5
Other assets and other liabilities				$ (20)
Over-accrual of Accrued contract costs \| Adjustments
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Accrued contract costs						$ 87