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. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.

At March 31, 2026, the aggregate amount of RPO related to customer contracts that are unsatisfied or partially unsatisfied was $32.8 billion. Approximately 59 percent of the amount is expected to be recognized as revenue in the next two years, approximately 37 percent in the subsequent three years, and the balance thereafter.

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

For the year ended March 31, 2026, revenue increased by $40 million for performance obligations satisfied (or partially satisfied) in previous periods, mainly due to changes in estimates.

Contract Balances

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

​

​

The change in deferred income is primarily driven by the timing difference of invoice billing and revenue recognition. The amount of revenue recognized during the year ended March 31, 2026 that was included within the deferred income balance at March 31, 2025 was $714 million.

The following table provides roll-forwards of the accounts receivable allowance for expected credit losses for the years ended March 31, 2026, 2025 and 2024:

​

* Primarily represents translation adjustments.

The allowance for expected credit losses of long-term accounts receivable, sales-type leases receivable, and contract assets 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 years ended March 31, 2026, 2025 and 2024. No single client represented more than 10 percent of the Company’s total accounts receivable balance as of March 31, 2026 and 2025.

Deferred Costs

The following table provides amounts of capitalized costs to acquire and fulfill customer contracts at March 31, 2026 and 2025:

​

* Prepaid software costs include deferred costs for committed multi-year, on-premises software purchase contracts.

† Of the total deferred costs, $1,166 million was current and $1,880 million was noncurrent at March 31, 2026, and $1,009 million was current and $1,040 million was noncurrent at March 31, 2025.

​

The amount of total deferred costs amortized during the year ended March 31, 2026 was $1.7 billion, composed of $238 million of amortization of deferred transition costs, $1,001 million of amortization of prepaid software costs and $458 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2025 was $1.7 billion, composed of $291 million of amortization of deferred transition costs, $986 million of amortization of prepaid software costs and $420 million of amortization of capitalized contract costs. The amount of total deferred costs amortized during the year ended March 31, 2024 was $1.8 billion, composed of $335 million of amortization of deferred transition costs, $921 million of amortization of prepaid software costs and $531 million of amortization of capitalized contract costs. There were no material impairment losses incurred in any period. Refer to Note 1 – Significant Accounting Policies for additional information on deferred costs to fulfill a contract and capitalized costs of obtaining a contract.