# Non-U.S. Operations

**(Dollars in millions)**

| 1985 | 1984 | 1983 |
| --- | --- | --- |
| **At end of year:** |
| Net assets employed |
| Current assets | $ 12,395 | $ 8,583 | $ 8,115 |
| Current liabilities | 6,629 | 4,636 | 4,585 |
| Working capital | 5,766 | 3,947 | 3,530 |
| Plant, rental machines and other property, net | 6,451 | 4,902 | 5,622 |
| Investments and other assets | 2,569 | 1,690 | 1,062 |
| **Total** | 14,786 | 10,539 | 10,214 |
| Long-term debt | 645 | 222 | 466 |
| Other liabilities | 1,448 | 1,125 | 1,249 |
| Deferred income taxes | 805 | 346 | 27 |
| **Net assets employed** | $ 11,888 | $ 8,846 | $ 8,472 |
| Number of employees | 163,294 | 156,042 | 159,944 |
| **For the year:** |
| Gross income from sales, services and rentals | $ 21,545 | $ 18,566 | $ 17,053 |
| Earnings before income taxes | $ 5,546 | $ 4,640 | $ 3,841 |
| Provision for income taxes | 2,468 | 2,053 | 1,677 |
| Net earnings | $ 3,078 | $ 2,587 | $ 2,164 |
| Investment in plant, rental machines and other property | $ 2,333 | $ 1,807 | $ 1,987 |

Non-U.S. subsidiaries which operate in a local currency environment account for approximately 85% of the company's non-U.S. gross income. The remaining 15% of the company's non-U.S. gross income is from subsidiaries and branches which operate in U.S. dollars or whose economic environment is highly inflationary.

For the years 1985, 1984 and 1983, non-U.S. financial results have been impacted by the strength of the U.S. dollar relative to the currencies of many countries. As the dollar strengthens, net assets and net earnings recorded in local currencies translate into fewer U.S. dollars than they would have at the previous year's rates. The dollar, which had continued to strengthen during 1983 and 1984, began to weaken in 1985. However, for the full year 1985, IBM's gross income and net earnings were still adversely affected by currency rates. The translation adjustments, resulting from the translation of net assets, amounted to $1,466 million at December 31, 1985, $2,948 million at December 31, 1984, and $2,070 million at December 31, 1983. The reduction of the translation adjustments since the end of 1984 is a reflection of the weakening of the dollar during 1985. The graphs on page 32 illustrate the movement, in relation to the dollar, of the six major currencies in which IBM conducts most of its non-U.S. business.

Undistributed earnings of non-U.S. subsidiaries included in consolidated retained earnings amounted to $11,147 million at December 31, 1985, $9,837 million at December 31, 1984 and $8,510 million at December 31, 1983. These earnings, which reflect full provision for non-U.S. income taxes, are indefinitely reinvested in non-U.S. operations. Accordingly, no provision has been made for taxes that might be payable upon remittance of such earnings.