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Item 8. Financial Statements and Supplementary Data

2023-05-19 compared with 2022-05-26 · 563 added, 836 removed, 1255 unchanged (53% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2023, March 31, 2022 and March 31, 2021

Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended March 31, 202 2 , March 31, 202 1 and March 31, 20 20

Consolidated Statements of Comprehensive (Loss) Income for the Fiscal Years Ended March 31, 2023, March 31, 2022 and March 31, 2021

Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2023, March 31, 2022 and March 31, 2021

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Note 1–Summary of Significant Accounting Policies

Note 2–Acquisitions

Note 2–Divestitures

Note 4–Assets Held For Sale

Note 3 –Earnings (Loss) Per Share

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Note 1 0 –Goodwill

Note 13–Income Taxes

Note 1 1 –Debt

Note 1 2 –Revenue

Note 1 3 –Restructuring Costs

Note 1 4 –Pension and Other Benefit Plans

Note 1 5 –Income Taxes

Note 1 6 –Stockholders' Equity

1 unchanged sentence

Note 1 8 –Cash Flows

Note 19–Other Expense (Income)

Note 19–Other Expense (Income), Net

Note 2 0 –Segment and Geographic Information

Note 21–Revenue

Note 22–Restructuring Costs

Note 2 1 –Commitments and Contingencies

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of DXC Technology Company and subsidiaries (the "Company") as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changes in equity, for each of the three years in the period ended March 31, 2022, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of DXC Technology Company and subsidiaries (the "Company") as of March 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, cash flows, and changes in equity, for each of the three years in the period ended March 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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• We analyzed the population of material revenue arrangements that were new or modified during the year and performed the following procedures on the arrangements that were determined to be complex:

– Obtained and read the customer contract and evaluated management’s identification of performance obligations and embedded lease components, if applicable.

– Obtained and read the customer contract and evaluated management’s identification of performance obligations and embedded lease components.

– If applicable, evaluated management’s conclusions regarding lease classification.

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Intangible assets, net of accumulated amortization of $ 5,670 and $ 5,124

Operating right-of-use assets, net 1,133 1,366

Operating lease assets, net 909 1,133

Goodwill 539 617

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Accrued payroll and related costs 569 570

Current operating lease liabilities 388 418

Operating lease liabilities 317 388

Accrued expenses and other current liabilities 1,836 2,882

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Non-current deferred revenue 788 862

Non-current income tax liabilities and deferred income taxes 587 994

Non-current operating lease liabilities 648 815

Non-current pension obligations 463 590

Non-current income tax liabilities and deferred tax liabilities 994 854

Other long-term liabilities 449 546

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Depreciation and amortization 1,519 1,717 1,970

Goodwill impairment losses — — 6,794

Restructuring costs 216 318 551

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Gain on disposition of businesses ( 190 ) ( 371 ) ( 2,004 )

Gain on arbitration award — — ( 632 )

Other (income) expense, net ( 1,081 ) 102 ( 720 )

Other expense (income), net 1,084 ( 1,081 ) 102

Total costs and expenses 15,315 15,124 17,075

Income (loss) before income taxes 1,141 654 ( 5,228 )

Income tax expense 405 800 130

Net income (loss) 736 ( 146 ) ( 5,358 )

(Loss) income before income taxes ( 885 ) 1,141 654

Income tax (benefit) expense ( 319 ) 405 800

Net (loss) income ( 566 ) 736 ( 146 )

net income attributable to non-controlling interest, net of tax 2 18 3

Net income (loss) attributable to DXC common stockholders $ 718 $ ( 149 ) $ ( 5,369 )

Income (loss) per common share:

Net (loss) income attributable to DXC common stockholders $ ( 568 ) $ 718 $ ( 149 )

(Loss) income per common share:

Basic $ ( 2.48 ) $ 2.87 $ ( 0.59 )

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DXC TECHNOLOGY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

Net income (loss) $ 736 $ ( 146 ) $ ( 5,358 )

Other comprehensive income (loss), net of taxes:

Net (loss) income $ ( 566 ) $ 736 $ ( 146 )

Other comprehensive (loss) income, net of taxes:

Foreign currency translation adjustments, net of tax (1)

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Pension and other post-retirement benefit plans, net of tax ( 38 ) 3 ( 6 )

Other comprehensive income (loss), net of taxes ( 72 ) 304 ( 348 )

Comprehensive income (loss) 664 158 ( 5,706 )

comprehensive income attributable to non-controlling interest 29 6 22

Comprehensive income (loss) attributable to DXC common stockholders $ 635 $ 152 $ ( 5,728 )

Other comprehensive (loss) income, net of taxes ( 391 ) ( 72 ) 304

Comprehensive (loss) income ( 957 ) 664 158

comprehensive (loss) income attributable to non-controlling interest — 29 6

Comprehensive (loss) income attributable to DXC common stockholders $ ( 957 ) $ 635 $ 152

(1) Tax expense (benefit) related to foreign currency translation adjustments was $ 2 , $ 5 , and $( 27 ) for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, respectively.

(2) Tax expense (benefit) related to cash flow hedge adjustments was $ 2 , $ 6 , and $( 5 ) for the fiscal years ended March 31, 2022, March 31, 2021, and March 31, 2020, respectively.

(2) Tax (benefit) expense related to cash flow hedge adjustments was $( 6 ), $ 2 , and $ 6 for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, respectively.

(3) Tax benefit related to available-for-sale securities was $ 0 , $ 0 , and $ 1 for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, respectively.

(4) Tax expense related to prior service costs was $ 2 , $ 2 , and $ 0 for the fiscal years ended March 31, 2022, March 31, 2021, and March 31, 2020, respectively.

(4) Tax (benefit) expense related to prior service costs was $( 1 ), $ 2 , and $ 2 for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, respectively.

(5) Tax benefit related to amortization of prior service costs was $ 15 , $ 2 , and $ 4 for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021, respectively.

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Cash flows from operating activities:

Net income (loss) $ 736 $ ( 146 ) $ ( 5,358 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net (loss) income $ ( 566 ) $ 736 $ ( 146 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 1,551 1,742 1,988

Goodwill impairment losses — — 6,794

Operating right-of-use expense 404 484 616

Pension & other post-employment benefits, actuarial & settlement (gains) losses ( 684 ) 519 ( 244 )

Pension & other post-employment benefits, actuarial & settlement losses (gains) 1,431 ( 684 ) 519

Share-based compensation 108 101 56

Deferred taxes ( 609 ) 255 ( 403 )

(Gain) loss on dispositions ( 421 ) ( 1,983 ) 1

Gain on dispositions ( 260 ) ( 421 ) ( 1,983 )

Provision for losses on accounts receivable ( 1 ) 5 53

Unrealized foreign currency exchange (gains) losses ( 12 ) ( 36 ) 24

Unrealized foreign currency exchange losses (gains) 8 ( 12 ) ( 36 )

Impairment losses and contract write-offs 47 51 275

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Software purchased and developed ( 188 ) ( 295 ) ( 254 )

Proceeds (payments) for acquisitions, net of cash acquired — 184 ( 1,997 )

Proceeds for acquisitions, net of cash acquired — — 184

Business dispositions ( 147 ) 533 4,947

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Proceeds from sale of assets 171 100 164

Short-term investing — — ( 75 )

Proceeds from short-term investing — 24 —

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Taxes paid related to net share settlements of share-based compensation awards ( 17 ) ( 18 ) ( 7 )

Repurchase of common stock and advance payment for accelerated share repurchase ( 628 ) — ( 736 )

Repurchase of common stock ( 669 ) ( 628 ) —

Dividend payments — — ( 53 )

1 unchanged sentence

Other financing activities, net ( 6 ) ( 79 ) ( 21 )

Net cash (used in) provided by financing activities ( 1,818 ) ( 5,476 ) 657

Net cash used in financing activities ( 1,507 ) ( 1,818 ) ( 5,476 )

Effect of exchange rate changes on cash and cash equivalents ( 97 ) 29 39

Net (decrease) increase in cash and cash equivalents including cash classified within current assets held for sale ( 348 ) ( 648 ) 780

Net decrease in cash and cash equivalents including cash classified within current assets held for sale ( 824 ) ( 348 ) ( 648 )

Cash classified within current assets held for sale 10 52 ( 63 )

Net (decrease) increase in cash and cash equivalents ( 296 ) ( 711 ) 780

Net decrease in cash and cash equivalents ( 814 ) ( 296 ) ( 711 )

Cash and cash equivalents at beginning of year 2,672 2,968 3,679

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Paid-in Capital

Retained Earnings (Accumulated Deficit) Accumulated

Accumulated Deficit Accumulated

Comprehensive

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Balance at March 31, 2020 255,674 $ 3 $ 10,714 $ ( 5,177 ) $ ( 603 ) $ ( 152 ) $ 4,785 $ 344 $ 5,129

Cumulative effect of adopting ASU 2016-13 ( 4 ) ( 4 ) ( 4 )

Net loss ` ( 149 ) ( 149 ) 3 ( 146 )

Other comprehensive loss ( 359 ) ( 359 ) 11 ( 348 )

Other comprehensive income 301 301 3 304

Share-based compensation expense 46 46 46

Acquisition of treasury stock ( 6 ) ( 6 ) ( 6 )

Share repurchase program ( 15,934 ) ( 669 ) ( 67 ) ( 736 ) ( 736 )

Stock option exercises and other common stock transactions 1,379 1 1 1

Dividends declared ($ 0.84 per share)

( 219 ) ( 219 ) ( 219 )

Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 15 ) ( 16 )

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Balance at March 31, 2021 257,053 $ 3 $ 10,761 $ ( 5,331 ) $ ( 302 ) $ ( 158 ) $ 4,973 $ 335 $ 5,308

Cumulative effect of adopting ASU 2016-13 ( 4 ) ( 4 ) ( 4 )

Net loss ( 149 ) ( 149 ) 3 ( 146 )

Other comprehensive income 301 301 3 304

Net income 718 718 18 736

Other comprehensive loss ( 83 ) ( 83 ) 11 ( 72 )

Share-based compensation expense 80 80 80

Acquisition of treasury stock ( 15 ) ( 15 ) ( 15 )

Share repurchase program ( 18,819 ) ( 796 ) 162 ( 634 ) ( 634 )

Stock option exercises and other common stock transactions 2,274 12 12 12

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Balance at March 31, 2022 240,508 $ 3 $ 10,057 $ ( 4,450 ) $ ( 385 ) $ ( 173 ) $ 5,052 $ 323 $ 5,375

Net income 718 718 18 736

Other comprehensive income ( 83 ) — ( 83 ) 11 ( 72 )

Net loss ( 568 ) ( 568 ) 2 ( 566 )

Other comprehensive loss ( 389 ) ( 389 ) ( 2 ) ( 391 )

Share-based compensation expense 98 98 98

1 unchanged sentence

Share repurchase program (2)

( 24,437 ) ( 1 ) ( 1,036 ) 354 ( 683 ) ( 683 )

Stock option exercises and other common stock transactions 1,987 1 1 1

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(1) 3,333,592 treasury shares as of March 31, 2023

(2) On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (the "IRA") into law.

The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022.

We reflect the excise tax within equity as part of the repurchase of the common stock.

The accompanying notes are an integral part of these consolidated financial statements.

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Note 1 - Summary of Significant Accounting Policies

DXC Technology Company ("DXC" or the "Company") helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds.

With decades of driving innovation, the world’s largest companies trust DXC to deploy its Enterprise Technology Stack to deliver new levels of performance, competitiveness and customer experience.

During the third quarter of fiscal 2022, a subsidiary of DXC entered into a purchase agreement to sell (the "FDB Sale") its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for € 300 million (approximately $ 335 million as of March 31, 2022), subject to certain adjustments.

The closing of the transaction is subject to certain conditions, including receipt of certain regulatory consents.

At March 31, 2022, FDB held approximately $ 572 million in cash which primarily related to customer deposit liabilities.

On April 1, 2021, DXC completed the sale of its healthcare provider software business ("HPS" or the "HPS Business") to Dedalus Holding S.p.A.

The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HPS Business for € 468 million (approximately $ 551 million), subject to certain adjustments.

See Note 3 - "Divestitures" for further information.

On October 1, 2020, DXC completed the sale of its U.S.

State and Local Health and Human Services business ("HHS" or the "HHS Business") to Veritas Capital Fund Management, L.L.C.

("Veritas Capital") to form Gainwell Technologies.

The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business together with future services to be provided by the Company for a total enterprise value of $ 5.0 billion, subject to net working capital adjustments and assumed liabilities.

See Note 3 - "Divestitures" for further information.

Luxoft Acquisition

On June 14, 2019, DXC completed its acquisition of Luxoft Holding, Inc.

("Luxoft"), a global digital strategy and software engineering firm (the "Luxoft Acquisition").

The acquisition builds on DXC’s unique value proposition as an end-to-end, mainstream IT and digital services market leader and strengthens the Company’s ability to design and deploy transformative digital solutions for customers at scale.

See Note 2 - "Acquisitions" for further information.

DXC Technology Company ("DXC," the "Company," "we," "us," or "our") is a global IT services market leader.

We provide mission-critical IT services that transform global businesses.

We deliver excellence for our customers and colleagues around the world.

Our more than 130,000 people in approximately 70 countries are entrusted by our customers, approximately half of today’s Fortune 500 companies.

We operate through two segments:

Global Business Services ("GBS") and Global Infrastructure Services ("GIS"), to provide solutions across our six differentiated offerings that modernize operations and drive innovation across our customers' entire IT estate.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the Consolidated Financial Statements as the “financial statements,” (ii) the Consolidated Statements of Operations as the “statements of operations,” (iii) the Consolidated Statement of Comprehensive Income (Loss) as the "statements of comprehensive income," (iv) the Consolidated Balance Sheets as the “balance sheets,” and (v) the Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references throughout to numbered “Notes” refer to the numbered Notes in these Notes to Consolidated Financial Statements.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In order to make this report easier to read, DXC refers throughout to (i) the Consolidated Financial Statements as the “financial statements,” (ii) the Consolidated Statements of Operations as the “statements of operations,” (iii) the Consolidated Statement of Comprehensive (Loss) Income as the "statements of comprehensive income," (iv) the Consolidated Balance Sheets as the “balance sheets,” and (v) the Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Consolidated Financial Statements (“Notes”) in this Annual Report on Form 10-K.

The accompanying financial statements have been prepared in accordance with the rules and regulations of the U.S.

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Non-controlling interests are presented as a separate component within equity in the balance sheets.

Net earnings attributable to the non-controlling interests are presented separately in the statements of operations, and comprehensive income attributable to non-controlling interests are presented separately in the statements of comprehensive income.

Net earnings attributable to the non-controlling interests are presented separately in the statements of operations, and comprehensive (loss) income attributable to non-controlling interests are presented separately in the statements of comprehensive (loss) income.

All intercompany transactions and balances have been eliminated.

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Use of Estimates

The preparation of the financial statements, in accordance with GAAP, requires the Company's management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of the financial statements, in accordance with GAAP, requires the Company's management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities.

The Company bases its estimates on assumptions regarding historical experience, currently available information, and anticipated developments that it believes are reasonable and appropriate.

However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates.

The severity, magnitude and duration, as well as the economic consequences of the ongoing COVID-19 crisis, are uncertain, rapidly changing and difficult to predict.

Therefore, accounting estimates and assumptions may change over time in response to the COVID-19 crisis and may change materially in future periods.

Estimates are used for, but not limited to, contracts accounted for using the percentage-of-completion method, cash flows used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans.

In the opinion of the Company's management, the accompanying financial statements contain all adjustments necessary, including those of a normal recurring nature, to fairly present the financial statements.

Effective April 1, 2019, the Company adopted ASU 2016-02, "Leases (ASC 842)" using the modified retrospective method.

Refer to Note 7 - "Leases" for required disclosures.

The Company determines if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether DXC obtains substantially all economic benefits from and has the ability to direct the use of the asset.

Operating leases are included in operating right-of-use ("ROU") assets, net, current operating lease liabilities and non-current operating lease liabilities in DXC's balance sheets.

Leased assets classified as operating leases are included in operating right-of-use ("ROU") assets, net, with the associated liabilities included in current operating lease liabilities and non-current operating lease liabilities in DXC's balance sheets.

Finance leases are included in property and equipment, net, short-term debt and current maturities of long-term debt and long-term debt, net of current maturities in DXC's balance sheets.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating ROU assets and operating lease liabilities are recognized at commencement based on the present value of lease payments over the lease term.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leased assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Lease liabilities are recognized at commencement based on the present value of fixed or in-substance fixed lease payments over the lease term.

Leased assets are recognized at commencement based upon the leased liability plus any lease payments made at or before lease commencement and excluding any lease incentives.

As most of the Company's leases do not provide an implicit rate, DXC uses its incremental borrowing rate based on the information available at commencement to determine the present value of lease payments.

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The rate is dependent on several factors, including the lease term, currency of the lease payments and the Company's credit ratings.

Operating ROU assets also include any lease payments made and exclude lease incentives.

The Company's lease terms may include options to extend or terminate the lease.

Operating ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised.

Leased assets and lease liabilities include these options when it is reasonably certain that they will be exercised.

Lease arrangements generally do not contain any residual value guarantees or material restrictive covenants.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Variable lease expense is related to the Company's leased real estate for offices and primarily includes operational costs.

DXC subleases certain leased office space to third parties when it determines there is excess leased capacity.

Sublease income was not material for all periods presented.

Operating lease expense, which includes interest, is recognized on a straight-line basis over the lease term with variable payments, primarily related to the operational costs for the Company's leased real estate for offices, which are recognized as incurred.

Assets obtained under finance leases are recorded as fixed assets and depreciated over the shorter of the depreciable life of the asset or the lease term.

The Company combines lease and non-lease components under its lease agreements.

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When other parties are involved in providing goods or services as part of our customer arrangements, DXC recognizes revenue on a gross basis as a principal when it controls goods or services before they are transferred to the customer.

In addition, the Company reports revenue net of any revenue-based taxes assessed by a governmental authority that are imposed on and concurrent with specific revenue-producing transactions, such as sales taxes and value-added taxes.

DXC's contracts often include upfront fees billed for activities to familiarize DXC with the customers' operations, take control over their administration and operation, and adapt them to DXC's solutions.

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Software transactions that include multiple performance obligations are described below.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For contracts with multiple performance obligations, DXC allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract.

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These judgments involve consideration of historical and expected experience with the customer and other similar customers, and the facts and circumstances specific to the arrangement.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contracts with our customers may be modified over the course of the contract term and we may change the scope, price or both of the existing contracts.

Contract modifications are reviewed to determine whether they should be accounted for as part of the original contract, the termination of an existing contract and the creation of a new contract, or as a separate contract.

Contract modifications are a separate contract when the modification provides additional goods and services that are distinct and the transaction price is at the standalone selling price.

If the contract modification is part of the existing contract, a cumulative adjustment to revenue is recorded.

If the contract modification represents the termination of the existing contract and the creation of a new contract, the modified transaction price is allocated to the prospective performance obligations and any embedded lease components.

If a contract modification modifies an embedded lease component and the modification is not accounted for as a separate contract, the classification of the lease is reassessed.

The Company generally provides its services under time and materials contracts, unit-price contracts, fixed-price contracts, and software contracts for which revenue is recognized in the following manner:

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Under the percentage-of-completion cost-to-cost method, revenue is recognized based on the proportion of total cost incurred to estimated total costs at completion.

A performance obligation's estimate at completion includes all direct costs such as materials, labor, subcontractor costs, overhead, and a ratable portion of general and administrative costs.

A performance obligation's estimate at completion includes all direct costs such as materials and labor.

If output or input measures are not available or cannot be reasonably estimated, revenue is deferred until progress can be measured and costs are not deferred unless they meet the criteria for capitalization.

Under the percentage-of-completion cost-to-cost method, progress towards completion is measured based on either achievement of specified contract milestones, costs incurred as a proportion of estimated total costs, or other measures of progress when appropriate.

Under the percentage-of-completion cost-to-cost method, progress towards completion is measured based on costs incurred as a proportion of estimated total costs.

Profit in a given period is reported at the estimated profit margin to be achieved on the overall contract.

If estimated total costs at completion exceed estimated revenue for a contract under the percentage-of-completion cost-to-cost method, the loss is recognized in the quarter it first becomes probable and reasonably estimable.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Software contracts.

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Revenue for post-contract customer support and other software services is recognized over time as those services are provided .

Modifications.

Co ntracts with our customers may be modified over the course of the contract term and may change the scope, price or both of the existing contract.

Contract modifications are a separate contract when the modification provides additional goods and services that are distinct and the transaction price is at the standalone selling price.

If the contract modification is part of the existing contract, a cumulative adjustment to revenue is recorded.

If a contract modification modifies an embedded lease component and the modification is not accounted for as a separate contract, the classification of the lease is reassessed.

Practical Expedients and Exemptions

Practical Expedients

DXC does not adjust the promised amount of consideration for the effects of a significant financing component when the period between when DXC transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

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The Company determined the period of benefit considering the length of its customer contracts, its technology, and other factors.

The period of benefit approximates the average stated contract terms, excluding expected future renewals because sales commissions are paid upon contract renewal in a manner commensurate with the initial commissions.

Some commission payments are not capitalized because they are expensed during the fiscal year as the related revenue is recognized.

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The Company recognizes these transition and transformation contract costs as other assets, which are amortized over the respective contract life.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension and Other Benefit Plans

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The fair value of assets is determined based on the prevailing market prices or estimated fair value of investments when quoted prices are not available.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Software Development Costs

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For awards settled in ca sh, the Company recognizes compensation expense based on the fair value at each reporting date net of estimated forfeitures.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company uses a Monte Carlo simulation model to compute the estimated fair value of PSUs with a market condition.

3 unchanged sentences

The dividend yield assumption is based on the respective fiscal year dividend payouts.

Expected volatility is based on a historical approach, therefore the expected volatility assumption is based on the performance period of the award.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations

Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period.

The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date.

The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed in the acquired entity is recorded as goodwill.

If the Company obtains new information about facts and circumstances that existed as of the acquisition date during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company's statements of operations.

For contingent consideration recorded as a liability, the Company initially measures the amount at fair value as of the acquisition date and adjusts the liability, if needed, to fair value each reporting period.

Changes in the fair value of contingent consideration, other than measurement period adjustments, are recognized as income or expense.

Acquisition-related expenses and post-acquisition integration costs are recognized separately from the business combination and are expensed as incurred.

Expected volatility is based on a historical approach and the Company considers the performance period of the award.

Goodwill Impairment Analysis

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This qualitative assessment considers all relevant factors specific to the reporting units, including macroeconomic conditions, industry and market considerations, overall financial performance, and relevant entity-specific events.

If the Company determines that it is not more likely that the carrying amount for a reporting unit is less than its fair value, then subsequent quantitative goodwill impairment testing is not required.

If the Company determines that it is not more likely than not that the carrying amount for a reporting unit is less than its fair value, then subsequent quantitative goodwill impairment testing is not required.

If the Company determines that it is more likely than not that the carrying amount for a reporting unit is greater than its fair value, then it proceeds with a subsequent quantitative goodwill impairment test.

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However, if a reporting unit’s fair value is less than its carrying value, then an impairment charge is recorded in the amount of the excess .

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

When the Company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using both the income approach and the market approach.

The income approach uses a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to present value using a discount rate.

When the Company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using a combination of an income approach and a market approach.

The income approach utilizes a discounted cash flow analysis in which the estimated future cash flows and terminal values for each reporting unit are discounted to present value using a discount rate.

Cash flow projections are based on management's estimates of economic and market conditions, which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements.

The discount rate is based on the specific risk characteristics of each reporting unit, the weighted-average cost of capital and its underlying forecasts.

The discount rate is based on the weighted-average cost of capital and may be adjusted for the relevant risks associated with business-specific characteristics and any uncertainty related to a reporting unit’s ability to execute on the projected future cash flows.

The market approach estimates fair value by applying performance-metric multiples to the reporting unit's prior and expected operating performance.

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The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit.

The weighting ascribed to the market approach fair value assigned to each reporting unit is influenced by two primary factors:

(1) the number of comparable publicly traded companies used in the market approach, and (2) the similarity of the operating and investment characteristics of the reporting units to the comparable publicly traded companies used in the market approach.

If DXC performs a quantitative goodwill impairment test for all of its reporting units in conjunction with its annual goodwill testing, it also compares the sum of all of its reporting units’ fair values to the Company's market capitalization (per-share stock price multiplied by the number of shares outstanding) and calculates an implied control premium representing the excess of the sum of the reporting units’ fair values over the market capitalization.

DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

When the Company performs a quantitative goodwill impairment test for its reporting units, it also compares the sum of the reporting units’ fair values to the Company's market capitalization (per-share stock price multiplied by the number of shares outstanding) and calculates an implied control premium representing the excess of the sum of the reporting units’ fair values over the market capitalization.

The Company evaluates the reasonableness of the control premium by comparing it to control premiums derived from recent comparable business combinations.

If the implied control premium is not supported by market data, the Company reconciles its fair value estimates of the reporting units to a market capitalization supported by relevant market data.

As a result, when DXC’s stock price and thus market capitalization is low relative to the sum of the estimated fair value of its reporting units, this reconciliation can result in reductions to the estimated fair values for the reporting units.

If the implied control premium is not supported by market data, the Company adjusts its fair value estimates of the reporting units to a market capitalization supported by relevant market data.

The Company applies fair value accounting for its financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

The objective of a fair value measurement is to estimate the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

Such transactions to sell an asset or transfer a liability are assumed to occur in the principal market for that asset or liability, or in the absence of the principal market, the most advantageous market.

Assets and liabilities subject to fair value measurement disclosures are required to be classified according to a three-level fair value hierarchy with respect to the inputs used to determine fair value.

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The Company records receivables at their face amounts less an allowance for doubtful accounts.

Receivables consist of amounts billed and currently due from customers, amounts earned but unbilled (including contracts measured under the percentage-of-completion cost-to-cost method of accounting), amounts retained by the customer until the completion of a specified contract, negotiation of contract modification and claims.

Unbilled recoverable amounts under contracts in progress generally become billable upon the passage of time, the achievement of project milestones, or upon acceptance by the customer.

Allowances for uncollectible billed trade receivables are estimated based on a combination of write-off history, aging analysis, any known collectability issues, and certain forward-looking information.

Allowances for uncollectible trade receivables are estimated based on a combination of write-off history, aging analysis, any known collectability issues, and certain forward-looking information.

DXC uses receivables securitization facilities or receivables sales facilities in the normal course of business as part of managing its cash flows.

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Generally, the fair value of the sold receivables approximates the book value due to the short-term nature and, as a result, no gain or loss on sale of receivables is recorded.

Under the receivables securitization facility, the deferred purchase price (the "DPP") receivable is recorded at fair value, which is determined by calculating the expected amount of cash to be received based on unobservable inputs consisting of the face amount of the receivables adjusted for anticipated credit losses.

The Company reflects cash flows related to its beneficial interests in securitization transactions, which is the DPP recorded in connection with the Company's Receivables Securitization Facility within investing activities in its statements of cash flows.

Property and Equipment

Property and equipment, which includes assets under capital leases, are stated at cost less accumulated depreciation.

Property and equipment, which include assets under capital leases, are stated at cost less accumulated depreciation.

Depreciation is computed predominantly on a straight-line basis over the estimated useful lives of the assets or the remaining lease term.

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Leasehold improvements Shorter of lease term or useful life up to 20 years

In accordance with its policy, the Company reviews the estimated useful lives of its property and equipment on an ongoing basis.

As a result, effective fiscal year 2020, the Company changed its estimate of the useful lives of its computers and related equipment from an average of four to five years to an average of four to seven years , which better reflects the estimated periods during which these assets will remain in service.

This change resulted in a $ 225 million decrease to depreciation expense for the fiscal year ended March 31, 2020.

Intangible Assets

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Acquired contract related intangibles Contract life and first contract renewal, where applicable

Software is amortized using predominately the straight-line method.

Software is amortized using predominately the straight-line method (see Software Development Costs above).

Acquired contract related and customer related intangible assets are amortized in proportion to the estimated undiscounted cash flows projected over the estimated life of the asset or on a straight-line basis if such cash flows cannot be reliably estimated.

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Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less costs to sell.

Assets/Liabilities Held for Sale

The Company classifies assets as held for sale in the period when the following conditions are met:

(i) management, having the authority to approve the action, commits to a plan to sell the asset (disposal group);

(ii) the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal group);

(iii) an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated;

(iv) the sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or

circumstances beyond our control extend the period of time required to sell the asset (disposal group) beyond one year;

(v) the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A long-lived asset (disposal group) that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset (disposal group) until the date of sale.

The fair value of a long-lived asset (disposal group) less any costs to sell is assessed each reporting period that it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset (disposal group), as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

The Company uses the liability method in accounting for income taxes.

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In determining whether a valuation allowance is warranted, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent results of financial operations.

The Company recognizes uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination.

The Company recognizes the tax benefit of uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination.

Uncertain tax positions are measured based on the probabilities that the uncertain tax position will be realized upon final settlement.

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dollars using fiscal year-end exchange rates, income and expense accounts are translated at the average rates in effect during the fiscal year and equity accounts are translated at historical rates.

The resulting translation adjustment is reported in the statements of comprehensive income and recorded as part of accumulated other comprehensive income.

The resulting translation adjustment is reported in the statements of comprehensive income and recorded as part of accumulated other comprehensive (loss) income.

Derivative Instruments

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The Company's derivative instruments designated for hedge accounting include interest rate swaps and foreign currency forward and option contracts.

Changes in the fair value measurements of these derivative instruments are reflected as adjustments to other comprehensive income and subsequently reclassified into earnings in the period during which the hedged transactions occurred.

Changes in the fair value measurements of these derivative instruments are reflected as adjustments to other comprehensive (loss) income and subsequently reclassified into earnings in the period during which the hedged transactions occurred.

Any ineffectiveness or excluded portion of a designated hedge is recognized in earnings.

The Company also has entered into certain net investment hedges.

Changes in the fair value of net investment hedges are recorded in the currency translation adjustment section of other comprehensive income and subsequently reclassified into earnings in the period the hedged item affects earnings.

Changes in the fair value of net investment hedges are recorded in the currency translation adjustment section of other comprehensive (loss) income and subsequently reclassified into earnings in the period the hedged item affects earnings.

The Company excludes forward points from the effectiveness assessment of its net investment hedges.

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All cash flows associated with the Company's derivative instruments are classified as operating activities in the statements of cash flows.

Recently Adopted Accounting Pronouncements

During fiscal 2022, DXC adopted the following Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board:

Date Issued and ASU Date Adopted and Method Description Impact

December 2019

ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” April 1, 2021

Multiple Methods This update is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The transition method (retrospective, modified retrospective, or prospective basis) related to the amendments depends on the applicable guidance, and all amendments for which there is no transition guidance specified are applied on a prospective basis.

The Company determined that this standard had no material impact to its condensed consolidated financial statements following adoption.

ASU 2021-05, “Leases (Topic 842):

Lessors–Certain Leases with Variable Lease Payments”

Second quarter of fiscal 2022

Prospective The amendments in this update modify lease classification requirements for lessors, providing that lease contracts with variable lease payments that do not depend on a reference index or a rate should be classified as operating leases if they would have been classified as a sales-type or direct financing lease and resulted in the recognition of a selling loss at lease commencement.

Upon adoption, on a prospective basis, customer leases with variable payments that would have resulted in an upfront loss when meeting sales type lease classification are classified as operating leases upon commencement or modification.

Associated revenues, cost of services, or depreciation are subsequently recognized over their related lease terms or useful life.

Before adopting this standard, leases with similar variable payments were classified as sales-type leases.

These similar leases resulted in the recognition of upfront losses upon commencement or modification prior to the adoption, even when the overall economics of the lease arrangements were expected to be profitable.

New Accounting Pronouncements

Recently issued ASUs effective after March 31, 2023 are not expected to have a material effect on DXC's consolidated financial statements.

Note 2 - Acquisitions

Fiscal 2021 Acquisitions

AXA Bank Germany Acquisition

On January 1, 2021, DXC completed its acquisition of AXA Bank Germany ("AXA Bank"), a German retail bank, from AXA Group for the total consideration of $ 101 million.

In connection with its acquisition of AXA Bank, DXC received cash of $ 294 million which includes customer deposit liabilities totaling $ 197 million.

DXC recorded goodwill associated with the acquisition of AXA Bank totaling $ 2 million.

The AXA bank has been consolidated within FDB and will be part of the FDB sale previously disclosed.

Fiscal 2020 Acquisitions

Luxoft Acquisition

On June 14, 2019, DXC completed the acquisition of Luxoft, a digital service provider whose offerings encompass strategic consulting, custom software development services, and digital solution engineering for total consideration of $ 2.0 billion.

The acquisition combined Luxoft’s digital engineering capabilities with DXC’s expertise in IT modernization and integration.

The purchase agreement was entered into by DXC and Luxoft on January 6, 2019 and the transaction was closed on June 14, 2019.

The transaction between DXC and Luxoft is an acquisition, with DXC as the acquirer and Luxoft as the acquiree, based on the fact that DXC acquired 100 % of the equity interests and voting rights in Luxoft, and that DXC is the entity that transferred the cash consideration.

The Company's allocation of the purchase price to the assets acquired and liabilities assumed as of the Luxoft acquisition date is as follows:

(in millions) Fair Value

Cash and cash equivalents $ 113

Accounts receivable 233

Other current assets 15

Total current assets 361

Property and equipment 31

Intangible assets 577

Other assets 99

Total assets acquired 1,068

Accounts payable, accrued payroll, accrued expenses, and other current liabilities ( 121 )

Deferred revenue ( 8 )

Long-term deferred tax liabilities and income tax payable ( 106 )

Other liabilities ( 72 )

Total liabilities assumed ( 307 )

Net identifiable assets acquired 761

Goodwill 1,262

Total consideration transferred $ 2,023

Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date.

The goodwill recognized with the acquisition was attributable to the synergies expected to be achieved by combining the businesses of DXC and Luxoft, expected future contracts and the acquired workforce.

The cost-saving opportunities are expected to include improved operating efficiencies and asset optimization.

The total goodwill arising from the acquisition was allocated to GBS and is not deductible for tax purposes.

The Company valued current assets and liabilities using existing carrying values as an estimate of the approximate fair value of those items at the acquisition date except for certain contract receivables for which the Company determined fair value based on a cost plus margin approach.

The Company valued acquired property and equipment using predominately the direct capitalization method of the income approach and in certain specific cases, the Company determined that the net book value represents the fair value.

The Company valued customer relationships using the multi-period excess earnings method under the income approach and valued trade names and developed technology using a relief from royalty method under the income approach.

The Company determined that the net book value of the purchased software represents the fair value.

Below are the estimated useful lives of the acquired intangibles:

Estimated Useful Lives (Years)

Customer related intangibles 10

Trade names 20

Developed technology 3

Third-party purchased software 3

The Company valued deferred tax liabilities based on statutory tax rates in the jurisdictions of the legal entities where the acquired non-current assets and liabilities are taxed.

Results of Operations

The Company's statement of operations includes the following revenues and net income attributable to Luxoft since the acquisition date:

(in millions) Twelve Months Ended March 31, 2020 (1)

Revenues $ 695

Net income (loss) $ ( 25 )

(1) Results for the fiscal year ended March 31, 2020 reflect operations subsequent to the acquisition date of June 14, 2019, not the full twelve months of fiscal 2020.

Note 2 - Divestitures

Fiscal 2023 Divestitures

On April 1, 2021, DXC completed the sale of its HPS Business to Dedalus for € 468 million (approximately $ 551 million), which includes € 10 million (approximately $ 12 million) related to future services to be provided by the Company.

The sale proceeds were used to repay the remainder of two series of 4.45 % senior notes due fiscal 2023 for $ 154 million and $ 165 million.

The HPS Sale resulted in a pre-tax gain on sale of $ 331 million, net of closing costs.

The following is a summary of the assets and liabilities distributed as part of the HPS Sale on April 1, 2021:

(in millions) As of April 1, 2021

On January 3, 2023, DXC completed the sale of its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for € 308 million (approximately $ 329 million), resulting in a pre-tax gain of approximately $ 215 million.

Included in the FDB sale was AXA Bank Germany, a German retail bank, that DXC acquired for total consideration of $ 101 million on January 1, 2021.

The following is a summary of the assets and liabilities distributed as part of the FDB Sale on January 3, 2023:

(in millions) As of January 3, 2023

Cash and cash equivalents $ 509

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Intangible assets, net 45

Operating right-of-use assets, net 3

Deferred income taxes, net 74

Property and equipment, net 1

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Accounts payable $ 5

Accrued payroll and related costs 7

Current operating lease liabilities 1

Accrued expenses and other current liabilities 529

Deferred revenue and advance contract payments 45

Income taxes payable 1

Total current liabilities 535

Non-current deferred revenue 10

Long-term operating lease liabilities 2

Non-current income tax liabilities and deferred tax liabilities 6

Other long-term liabilities 4

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Total liabilities $ 545

During fiscal 2023, the Company sold insignificant businesses that resulted in a net loss of $ 25 million.

Included in this amount was the Company's primary Russian entity that the Company sold in the second quarter of fiscal 2023, in response to the ongoing sanctions against certain industry sectors and parties in Russia due to Russia's invasion of Ukraine.

As of March 31, 2023, the Company had entered into definitive agreements to sell insignificant businesses and assets, which are classified as held for sale.

Fiscal 2022 Divestitures

During fiscal 2022, DXC completed the sale of its healthcare provider software business (“HPS” or the “HPS Business”) to Dedalus Holding S.p.A.

(“Dedalus”) for € 468 million (approximately $ 551 million), resulting in a pre-tax gain on sale of $ 331 million, net of closing costs.

During fiscal 2022, the Company sold some insignificant businesses that resulted in a gain of $ 53 million.

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Fiscal 2021 Divestitures

On October 1, 2020, DXC completed the sale of its HHS Business to Veritas Capital.

The sale was accomplished by the cash purchase of all equity interests and assets attributable to the HHS Business for a total enterprise value of $ 5.0 billion (including $ 85 million related to future services to be provided by the Company).

As part of the sale of the HHS business, $ 272 million of repurchased receivables, previously sold under the Milano Receivables Facility ("Milano Facility") (see Note 6 - "Receivables" to the financial statements), $ 12 million of prepaid maintenance, and $ 48 million of software licenses were transferred to the HHS Business.

DXC made payment for these assets during the third quarter of fiscal 2021.

The repurchase of receivables and payment on prepaid maintenance are reported as operating cash outflows, and the payment for software license is considered an investing cash outflow.

The HHS Sale resulted in a pre-tax gain on sale of $ 2,014 million, net of closing costs.

The sale price is subject to adjustment based on changes in actual closing net working capital.

Final potential working capital adjustments are pending.

Approximately $ 3.5 billion of the sale proceeds were used to prepay debt.

DXC's post-divestiture relationship with the HHS Business is governed by the Purchase Agreement, which provides for the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and the HHS Business attributable to periods prior to, at and after the divestment.

In addition, DXC and the HHS Business have service and commercial contracts that generally extend through fiscal 2023.

The divestment of the HHS Business, reported as part of the GBS segment, did not meet the requirements for presentation as discontinued operations as it did not represent a strategic shift that would have a major effect on DXC's operations and financial results and was included in income from continuing operations prior to its divestment.

The following is a summary of the assets and liabilities distributed as part of the HHS Sale on October 1, 2020:

(in millions) As of October 1, 2020

Cash and cash equivalents $ 8

Accounts receivable, net 295

Prepaid expenses 39

Other current assets 2

Total current assets 344

Intangible assets, net 1,308

Operating right-of-use assets, net 74

Goodwill 1,354

Property and equipment, net 46

Other assets 54

Total non-current assets 2,836

Total assets $ 3,180

Accounts payable $ 79

Accrued payroll and related costs 13

Current operating lease liabilities 27

Accrued expenses and other current liabilities 36

Deferred revenue and advance contract payments 20

Total current liabilities 175

Non-current deferred revenue 32

Long-term operating lease liabilities 48

Other long term liabilities 2

Total long-term liabilities 82

Total liabilities $ 257

During fiscal 2021, DXC completed the sale of its U.S.

State and Local Health and Human Services business ("HHS" or the "HHS Business") to Veritas Capital Fund Management, L.L.C.

("Veritas Capital"), for approximately $ 5.0 billion, resulting in a pre-tax gain on sale of $ 2,014 million.

Approximately $ 3.5 billion of the sale proceeds was used to prepay debt.

During fiscal 2021, the Company sold some insignificant businesses that resulted in a loss of $ 10 million.

Note 4 - Assets Held for Sale

As of March 31, 2022, the Company had entered into definitive agreements to sell insignificant businesses, which are classified as held for sale.

As of March 31, 2021, the disposition of the HPS Business met the requirements for presentation as assets held for sale under GAAP.

In addition, as of March 31, 2021, the Company had entered into definitive agreements to sell insignificant businesses, which were also classified as held for sale.

Assets held for sale are reported at carrying value, which is less than fair value.

Assets held for sale and related liabilities as of March 31, 2021 were as follows:

(in millions) HPS Business Other Total

Cash and cash equivalents $ 28 $ 35 $ 63

Accounts receivable, net 64 17 81

Prepaid expenses 6 5 11

Other current assets — 5 5

Total current assets held for sale 98 62 160

Intangible assets, net 101 16 117

Operating right-of-use assets, net 5 18 23

Goodwill 80 9 89

Deferred income taxes, net 43 — 43

Property and equipment, net 4 52 56

Other assets 16 9 25

Total non-current assets held for sale 249 104 353

Total assets held for sale $ 347 $ 166 $ 513

Accounts payable $ 4 $ 8 $ 12

Accrued payroll and related costs 7 2 9

Current operating lease liabilities 2 17 19

Accrued expenses and other current liabilities 13 13 26

Deferred revenue and advance contract payments 46 6 52

Total current liabilities related to assets held for sale 72 46 118

Non-current deferred revenue 10 — 10

Long-term operating lease liabilities 3 1 4

Income tax liabilities and deferred tax liabilities 1 — 1

Other long term liabilities 3 2 5

Total long-term liabilities related to assets held for sale 17 3 20

Total liabilities related to assets held for sale $ 89 $ 49 $ 138

Note 3 - Earnings (Loss) Per Share

Basic EPS are computed using the weighted average number of common shares outstanding during the period.

Basic EPS are computed using the weighted average number of shares of common stock outstanding during the period.

Diluted EPS reflect the incremental shares issuable upon the assumed exercise of stock options and equity awards.

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March 31, 2023 March 31, 2022 March 31, 2021

Net income (loss) attributable to DXC common shareholders:

Net (loss) income attributable to DXC common shareholders:

$ ( 568 ) $ 718 $ ( 149 )

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Weighted average common shares outstanding for diluted EPS 228.99 255.21 254.14

Earnings per Share:

Earnings (loss) per share:

Basic $ ( 2.48 ) $ 2.87 $ ( 0.59 )

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Fiscal Years Ended

March 31, 2022 March 31, 2021 (1)

March 31, 2023 (1)

March 31, 2022 March 31, 2021 (1)

Stock Options 523,969 510,933 1,596,985

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The Company calculates expected credit losses for trade accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions.

The following table presents the activity in allowances against trade accounts receivables:

The following table presents the change in balance for the allowance for doubtful accounts:

As of and for Fiscal Years Ended

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Beginning balance $ 55 $ 91

Impact of adoption of the Credit Loss Standard — 4

Provisions for losses on accounts receivable ( 1 ) 5

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The Receivables Facility has a facility limit of $ 400 million as of March 31, 2023.

The Receivables Facility was amended on July 29, 2022, extending the termination date to July 28, 2023.

Under the Receivables Facility, certain of the Company subsidiaries (the "Sellers") sell accounts receivable to DXC Receivables LLC ("Receivables SPV"), a wholly owned bankruptcy-remote entity, in a true sale.

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As of March 31, 2023, the total availability under the Receivables Facility was $ 400 million and the amount sold to the Purchasers was $ 400 million, which was derecognized from the Company's balance sheet.

The Receivables Facility is scheduled to terminate on July 29, 2022, but provides for one or more optional one-year extensions, if agreed to by the Purchasers.

The Company uses the proceeds from Receivables SPV's sale of receivables under the Receivables Facility for general corporate purposes.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

The fair value of the sold receivables approximated their book value due to their short-term nature, resulting in no gain or loss recorded on the sale of receivables.

While the Company guarantees certain non-financial performance obligations of the Sellers, the Purchasers bear customer credit risk associated with the receivables sold under the Receivables Facility and have recourse in the event of credit-related customer non-payment solely to the assets of the Receivables SPV.

Milano Receivables Facility

On October 1, 2020, and in connection with the consummation of the sale of the HHS Business, and at the direction of the purchaser of the HHS Business, the Milano Facility was terminated.

On October 1, 2020, in connection with the sale of the HHS Business, the Milano Facility was terminated.

For more information, refer to Note 2 - "Divestitures."

German Receivables Facility

On October 1, 2019, the Company executed an accounts receivable securitization facility (the “DE Receivables Facility”) with certain unaffiliated financial institutions (the “DE Purchasers”) for the sale of commercial accounts receivable in Germany.

On June 30, 2021, the Company terminated the agreement governing the DE Receivables Facility.

In connection with the termination of the DE Receivables Facility, the Company repaid all outstanding obligations and fees thereunder.

Under the DE Receivables Facility, certain of the Company’s subsidiaries organized in Germany (the “DE Sellers”) sold accounts receivable to DXC ARFacility Designated Activity Company (“DE Receivables SPV”), a trust-owned bankruptcy-remote entity, in a true sale.

DE Receivables SPV subsequently sold certain of the receivables in their entirety to the DE Purchasers pursuant to a receivables purchase agreement.

Sales of receivables by DE Receivables SPV occurred continuously and were settled monthly.

During the first quarter of fiscal 2021, DE Receivables SPV amended the DE Receivables Facility (the "Amendment").

Under the terms of the DE Receivables Facility, there was no longer any deferred purchase price (“DPP”) for receivables as the entire purchase price is paid in cash when the receivables are sold to the DE Purchasers.

Prior to the Amendment, DPPs were realized by DE Receivables SPV upon the ultimate collection of the underlying receivables sold to the DE Purchasers.

Cash receipts on the DPPs were classified as cash flows from investing activities.

The DPP balance was $ 102 million before the Amendment was executed.

Upon execution of the Amendment, the DE Purchasers extinguished the DPP balance and returned title to the applicable underlying receivables to DE Receivables SPV.

The DPP extinguishment was classified as a non-cash investing activity.

On June 30, 2021, the Company terminated its accounts receivable securitization facility with certain unaffiliated financial institutions for the sale of commercial accounts receivable in Germany (the "DE Receivables Facility").

Under the DE Receivables Facility, the deferred purchase price ("DPP") was classified as cash flows from investing activities.

See Note 18 – “Cash Flows” for additional information.

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$ 227 $ 279 $ 530

(1) There were $ 1,085 million, $ 763 million, and $ 216 million in modifications and terminations in fiscal 2022, 2021, and 2020, respectively, and net of $ 87 million change in lease classification from operating to finance lease in fiscal 2020.

(1) There were $ 1,142 million, $ 1,085 million, and $ 763 million in modifications and terminations in fiscal 2023, 2022, and 2021, respectively.

See Note 18 – "Cash Flows” for further information on non-cash activities affecting cash flows.

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(1) Cost basis approximated fair value due to the short period of time to maturity.

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 53 million and $ 57 million, and losses of $ 4 million and $ 2 million, as of March 31, 2022 and March 31, 2021, respectively, included in other (income) expense, net in the Company’s statements of operations.

During the third quarter of fiscal 2021, previously held investments were sold and the proceeds were used to purchase new investments.The gain of $ 17 million from the sale was included in other (income) expense, net.

(2) Other securities include available-for-sale equity security investments with Level 2 inputs that have a cost basis of $ 52 million and $ 53 million as of March 31, 2023 and March 31, 2022, respectively.

For the periods presented, gains and losses are insignificant and are included in other expense (income), net in the Company’s statements of operations.

The fair value of money market funds, money market deposit accounts, U.S.

Treasury bills with less than three months maturity and time deposits, included in cash and cash equivalents, are based on quoted market prices.

The fair value of other debt securities, included in other long-term assets, is based on actual market prices.

The fair value of other equity securities, included in other long-term assets, is based on actual market prices.

The fair value of contingent consideration, included in other liabilities, is based on contractually defined targets of financial performance in connection with earn outs and other considerations.

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If measured at fair value, these financial instruments would be classified as Level 2 or Level 3 within the fair value hierarchy.

The Company estimates the fair value of its long-term debt primarily by using quoted prices obtained from third-party providers such as Bloomberg and by using an expected present value technique based on observable market inputs for instruments with similar terms currently available to the Company.

The estimated fair value of the Company's long-term debt excluding finance lease liabilities was $ 3.7 billion and $ 4.7 billion as of March 31, 2022 and March 31, 2021, respectively as compared with the carrying value of $ 4.0 billion and $ 4.4 billion as of March 31, 2022 and March 31, 2021, respectively.

If measured at fair value, long-term debt excluding finance lease liabilities would be classified as Level 1 or Level 2 within the fair value hierarchy.

Note 11 - “Debt” includes information about the estimated fair value of the Company's long-term debt.

Non-financial assets such as goodwill, tangible assets, intangible assets, and other contract related long-lived assets are recorded at fair value in the period they are initially recognized;

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The fair value measurements in such instances would be classified as Level 3 within the fair value hierarchy.

Other than the goodwill impairment losses discussed in Note 12 - "Goodwill," there were no significant impairments recorded during the fiscal periods covered by this report.

There were no significant impairments recorded during the fiscal periods covered by this report.

Note 7 - Derivative Instruments

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The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee, Euro and British Pound-denominated intercompany obligations and forecasted transactions.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of March 31, 2022 and March 31, 2021 was $ 727 million and $ 546 million, respectively.

As of March 31, 2022, the related forecasted transactions extend through March 2024.

For the fiscal years ended March 31, 2022 and March 31, 2021, the Company performed an assessment at the inception of the cash flow hedge transactions and determined all critical terms of the hedging instruments and hedged items matched.

The notional amounts of foreign currency forward contracts designated as cash flow hedges as of March 31, 2023 and March 31, 2022 were $ 842 million and $ 727 million, respectively.

As of March 31, 2023, the related forecasted transactions extend through June 2025.

For the fiscal years ended March 31, 2023 and March 31, 2022, the Company performed an assessment at the inception of the cash flow hedge transactions and determined that all critical terms of the hedging instruments and hedged items matched.

The Company performs an assessment of critical terms on an on-going basis throughout the hedging period.

During the fiscal years ended March 31, 2023 and March 31, 2022, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur.

As of March 31, 2022, $ 14 million of the existing amount of gain related to the cash flow hedge reported in accumulated other comprehensive income is expected to be reclassified into earnings within the next 12 months.

Amounts recognized in other comprehensive income (loss) and income (loss) before income taxes

The pre-tax gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $ 23 million and $ 19 million during the fiscal year ended March 31, 2022 and March 31, 2021, respectively.

The pre-tax gain (loss) on derivatives designated for hedge accounting recognized in income (loss) before income taxes was $ 6 million and $( 5 ) million during the fiscal year ended March 31, 2022 and March 31, 2021, respectively.

As of March 31, 2023, $ 6 million of the existing amount of loss related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

Amounts recognized in other comprehensive (loss) income and (loss) income before income taxes

The pre-tax (loss) gain on derivatives designated for hedge accounting recognized in other comprehensive (loss) income was $( 11 ) million and $ 23 million during the fiscal year ended March 31, 2023 and March 31, 2022, respectively.

The pre-tax gain on derivatives designated for hedge accounting recognized in (loss) income before income taxes was $ 11 million and $ 6 million during the fiscal year ended March 31, 2023 and March 31, 2022, respectively.

Derivatives Not Designated For Hedge Accounting

4 unchanged sentences

The notional amount of the foreign currency forward contracts outstanding as of March 31, 2023 and March 31, 2022 was $ 2.5 billion and $ 2.1 billion, respectively.

The following table presents the pretax amounts impacting income related to designated and non-designated foreign currency forward contracts:

The following table presents the pre-tax amounts impacting income related to foreign currency forward contracts designated and non-designated for hedge accounting:

Fiscal Years Ended

5 unchanged sentences

The following tables present the fair values of derivative instruments included in the balance sheets:

Derivative Assets

(in millions) Balance Sheet Line Item March 31, 2023 March 31, 2022

1 unchanged sentence

Foreign currency forward contracts Other current assets $ 6 $ 18

Accrued expenses and other current liabilities $ 13 $ —

Derivatives not designated for hedge accounting:

Foreign currency forward contracts Other current assets $ 15 $ 9

Derivative Liabilities

(in millions) Balance Sheet Line Item March 31, 2022 March 31, 2021

Derivatives designated for hedge accounting:

Foreign currency forward contracts Accrued expenses and other current liabilities $ — $ 5

Derivatives not designated for hedge accounting:

Foreign currency forward contracts Accrued expenses and other current liabilities $ 15 $ 3

The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs.

Accrued expenses and other current liabilities $ 16 $ 15

Other Risks for Derivative Instruments

2 unchanged sentences

To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties.

With respect to its foreign currency derivatives, as of March 31, 2022, there were twelve counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 16 million.

With respect to its foreign currency derivatives, as of March 31, 2023, there were five counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is $ 3 million.

The Company also enters into enforceable master netting arrangements with some of its counterparties.

10 unchanged sentences

Gains or losses on individual net investments in non-U.S.

operations are reclassified to earnings from accumulated other comprehensive income (loss) when such net investments are sold or substantially liquidated.

operations are reclassified to earnings from accumulated other comprehensive (loss) income when such net investments are sold or substantially liquidated.

As of March 31, 2023, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

subsidiaries.

For the fiscal year ended March 31, 2022, the pre-tax impact of gain on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was $ 17 million.

For the fiscal year ended March 31, 2023, the pre-tax impact of gain on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive loss was $ 6 million.

As of March 31, 2022, DXC had $ 0.3 billion of foreign currency-denominated debt designated as hedges of net investments in non-U.S.

13 unchanged sentences

Intangible assets consisted of the following:

As of March 31, 2022

(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value

Software $ 4,063 $ 3,039 $ 1,024

Customer related intangible assets 4,148 1,995 2,153

Other intangible assets 291 90 201

Total intangible assets $ 8,502 $ 5,124 $ 3,378

As of March 31, 2021

(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value

As of March 31, 2023 As of March 31, 2022

(in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

Software $ 4,009 $ 3,290 $ 719 $ 4,063 $ 3,039 $ 1,024

12 unchanged sentences

Thereafter 183

Total $ 2,569

Note 10 - Goodwill

3 unchanged sentences

Divestitures ( 60 ) — ( 60 )

Assets held for sale ( 6 ) — ( 6 )

Foreign currency translation ( 18 ) — ( 18 )

5 unchanged sentences

Balance as of March 31, 2021, net $ 641 $ — $ 641

Acquisition related adjustments 15 — 15

Divestitures ( 2 ) — ( 2 )

5 unchanged sentences

Balance as of March 31, 2022, net $ 617 $ — $ 617

The fiscal 2021 additions to goodwill were related to acquisitions described in Note 2 - "Acquisitions" and assets held for sale are described in Note 4 - "Assets Held for Sale." The foreign currency translation amount reflects the impact of currency movements on non-U.S.

Divestitures are described in Note 2 - "Divestitures." The foreign currency translation amount reflects the impact of currency movements on non-U.S.

dollar-denominated goodwill balances.

Goodwill Impairment Analyses

The Company’s annual goodwill impairment analysis, which was performed qualitatively as of July 1, 2021, did not result in an impairment charge.

At the end of the fiscal 2022, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment.

The Company determined that there have been no such indicators, and, therefore, it was unnecessary to perform an interim goodwill impairment test as of March 31, 2022.

The Company’s annual goodwill impairment analysis, which was performed qualitatively as of July 1, 2020, did not result in an impairment charge.

At the end of the fiscal 2021, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment.

The Company determined that there have been no such indicators, and, therefore, it was unnecessary to perform an interim goodwill impairment test as of March 31, 2021.

The Company performed its annual goodwill impairment assessment as of July 1, 2019.

Subsequent to the measurement date, the Company experienced a decline in its stock price and market capitalization that represented an indicator of impairment as the observed declines were substantial and sustained.

As a result, the Company performed quantitative goodwill impairment tests during the second and fourth quarters of fiscal 2020.

Both quantitative goodwill impairment tests were performed for all of DXC's reporting units, consistent with its policy described in Note 1 - "Summary of Significant Accounting Policies.” As part of the reconciliation to the Company’s market capitalization, the Company concluded on both instances that the carrying values of its reporting units exceeded their estimated fair values and recognized total non-cash impairment charges of $ 6,794 million, consisting of $ 3,789 million and $ 3,005 million in its GBS and GIS segments, respectively.

The goodwill impairment charges do not have an impact on the calculation of the Company's financial covenants under the Company's debt arrangements.

Note 13 - Income Taxes

The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the United States, are as follows:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021 March 31, 2020

Domestic entities $ ( 566 ) $ 975 $ ( 2,928 )

Entities outside the United States 1,707 ( 321 ) ( 2,300 )

Total $ 1,141 $ 654 $ ( 5,228 )

The income tax expense (benefit) on income (loss) from continuing operations is comprised of:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021 March 31, 2020

Federal $ ( 118 ) $ 730 $ 3

State ( 17 ) 257 16

Foreign 285 216 167

150 1,203 186

Federal 9 ( 221 ) ( 125 )

State ( 9 ) ( 51 ) 17

Foreign 255 ( 131 ) 52

255 ( 403 ) ( 56 )

Total income tax expense $ 405 $ 800 $ 130

The current federal (benefit) and tax expense for fiscal years 2022, 2021, and 2020 includes a $( 7 ) million, $( 4 ) million and $( 31 ) million transition tax benefit, respectively.

The current expense (benefit) for fiscal years 2022, 2021 and 2020, includes interest and penalties of $( 3 ) million, $ 2 million and $ 2 million, respectively, for uncertain tax positions.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE.

HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded a $ 27 million tax indemnification receivable related to uncertain tax positions, $ 72 million of tax indemnification receivable related to other tax payables and $ 129 million of tax indemnification payable related to other tax receivables.

In connection with the spin-off of the Company's former U.S.

public sector business (the "USPS Separation"), the Company entered into a tax matters agreement with Perspecta Inc.

(including its successors and permitted assigns, "Perspecta").

The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods.

Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE.

The Company remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company has recorded a tax indemnification receivable from Perspecta of $ 72 million related to other tax payables and a tax indemnification payable to Perspecta of $ 15 million related to income tax and other tax receivables.

In connection with the sale of HPS business, the Company entered into a tax matters agreement with Dedalus.

Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of HPS business.

The major elements contributing to the difference between the U.S.

federal statutory tax rate and the effective tax rate ("ETR") for continuing operations is below.

Fiscal Years Ended

March 31, 2022 March 31, 2021 March 31, 2020

Statutory rate 21.0 % 21.0 % ( 21.0 ) %

State income tax, net of federal tax ( 6.9 ) 10.8 ( 1.4 )

Foreign tax rate differential 151.1 ( 198.4 ) ( 11.9 )

Goodwill impairment — — 28.3

Change in valuation allowances ( 140.9 ) 239.3 12.1

Income Tax and Foreign Tax Credits ( 15.2 ) ( 48.7 ) ( 2.6 )

Arbitration Award — — ( 3.6 )

Change in uncertain tax positions 6.8 17.2 1.1

Withholding Taxes 6.2 10.3 0.9

Tax on Foreign Income 2.5 17.6 0.4

Excess tax benefits or expense for stock compensation 0.1 2.2 0.1

Capitalized transaction costs 0.2 0.5 0.1

Base Erosion and Transition Taxes 6.6 ( 0.7 ) ( 0.7 )

Impact of Business Divestitures 3.0 52.6 —

Granite Trust Capital Loss — ( 5.7 ) —

Other items, net 1.0 4.3 0.7

Effective tax rate 35.5 % 122.3 % 2.5 %

In fiscal 2022, the ETR was primarily impacted by:

• Income Tax and Foreign Tax Credits, which decreased income tax expense and decreased the ETR by $ 174 million and 15.2 %, respectively.

• Changes in Luxembourg losses that increased the ETR by $ 1,609 million and 141.0 %, respectively, with an offsetting decrease in the ETR due to a decrease in the valuation allowance of the same amount.

• Adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $ 78 million and 6.8 %, respectively.

In fiscal 2021, the ETR was primarily impacted by:

• Impact of the HHS and other business divestitures, which increased tax expense and increased the ETR $ 344 million and 52.6 %, respectively.

The HHS tax gain increased tax expense and the ETR as the tax basis of assets sold, primarily goodwill, was lower than the book basis.

• Continued losses in countries where we are recording a valuation allowance on certain deferred tax assets, primarily in Belgium, Denmark, Italy, France, Luxembourg, and U.S., and an impairment of the full German deferred tax asset, which increased income tax expense and increased the ETR by $ 1,565 million and 239.3 %, respectively.

• An increase in Income Tax and Foreign Tax Credits, which decreased income tax expense and decreased the ETR by $ 319 million and 48.7 %, respectively.

• Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by $ 1,226 million and 187.5 %, respectively, with an offsetting increase in the ETR due to an increase in the valuation allowance of the same amount.

• The Company recognized adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $ 112 million and 17.2 %, respectively.

In fiscal 2020, the ETR was primarily impacted by:

• Non-deductible goodwill impairment charge, which increased tax expense and increased the ETR by $ 1,482 million and 28.3 %, respectively.

• Non-taxable gain on the arbitration award, which decreased income tax expense and decreased the ETR by $ 186 million and 3.6 %, respectively.

• A change in the net valuation allowance on certain deferred tax assets, primarily in Australia, Brazil, China, Luxembourg, and Singapore, which increased income tax expense and increased the ETR by $ 631 million and 12.1 %, respectively.

• An increase in Income Tax and Foreign Tax Credits, primarily relating to research and development credits recognized for prior years, which decreased income tax expense and decreased the ETR by $ 135 million and 2.6 %, respectively.

• Local losses on investments in Luxembourg that increased the foreign rate differential and decreased the ETR by $ 637 million and 12.2 %, respectively, with an offsetting increase in the ETR due to an increase in the valuation allowance of the same amount.

The deferred tax assets (liabilities) were as follows:

(in millions) March 31, 2022 March 31, 2021

Deferred tax assets

Investment basis differences $ — $ 32

Tax loss/credit carryforwards 2,360 4,039

Accrued interest 15 20

Operating lease liabilities

Contract accounting

Other assets 338 351

Total deferred tax assets 3,089 4,893

Valuation allowance ( 2,133 ) ( 3,860 )

Net deferred tax assets 956 1,033

Deferred tax liabilities

Depreciation and amortization ( 430 ) ( 513 )

Operating right-of-use asset ( 227 ) ( 339 )

Investment basis differences ( 8 ) —

Employee benefits ( 426 ) ( 6 )

Other liabilities

( 220 ) ( 246 )

Total deferred tax liabilities ( 1,311 ) ( 1,104 )

Total net deferred tax assets (liabilities) $ ( 355 ) $ ( 71 )

Income tax related assets are included in the accompanying balance sheets as follows:

(in millions) March 31, 2022 March 31, 2021

Income tax receivables and prepaid taxes $ 78 $ 67

Income taxes receivable and prepaid taxes $ 130 $ 136

Deferred tax assets 221 289

Total $ 429 $ 492

Income tax related liabilities are included in the accompanying balance sheet as follows:

(in millions) March 31, 2022 March 31, 2021

Liability for uncertain tax positions $ ( 34 ) $ ( 30 )

Income taxes payable ( 163 ) ( 368 )

$ ( 197 ) $ ( 398 )

Deferred taxes ( 576 ) ( 360 )

Income taxes payable ( 39 ) ( 130 )

Liability for uncertain tax positions ( 379 ) ( 364 )

$ ( 994 ) $ ( 854 )

Total $ ( 1,191 ) $ ( 1,252 )

Significant management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets.

As of each reporting date, management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net deferred tax assets.

Objective verifiable evidence, which is historical in nature, carries more weight than subjective evidence, which is forward looking in nature.

A valuation allowance has been recorded against deferred tax assets of approximately $ 2,133 million as of March 31, 2022 due to uncertainties related to the ability to utilize these assets.

In assessing whether its deferred tax assets are realizable, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowance accordingly.

The Company considers all available positive and negative evidence including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent financial operations.

In the current reporting period, the Company recorded adjustments to Luxembourg losses and corresponding adjustments to the valuation allowance.

The net decrease in the valuation allowance of $ 1,729 million in fiscal 2022 is primarily due to changes in the Luxembourg losses of $ 1,609 million, other increases in the valuation allowance of $ 1 million and a currency translation adjustment of $ 121 million.

The following table provides information on the Company's various tax carryforwards:

As of March 31, 2022 As of March 31, 2021

(in millions) Total

With No Expiration

With Expiration

Expiration Dates Through

Total With No Expiration With Expiration Expiration Dates Through

Net operating loss carryforwards

$ 88 $ 88 $ — N/A $ 132 $ 128 $ 4 2033

$ 589 $ 243 $ 346 2042 $ 369 $ 6 $ 363 2041

$ 9,368 $ 5,635 $ 3,733 2039 $ 16,700 $ 6,191 $ 10,509 2041

Tax credit carryforwards

$ 5 $ — $ 5 2042 $ 5 $ — $ 5 2040

$ 5 $ 2 $ 3 2037 $ — $ — $ — N/A

$ — $ — $ — N/A $ — $ — $ — N/A

Capital loss carryforwards

Federal $ 42 $ — $ 42 2026 $ — $ — $ — N/A

State $ — $ — $ — N/A $ — $ — $ — N/A

Foreign $ 199 $ 199 $ — N/A $ 45 $ 45 $ — N/A

The Company also has federal and state 163(j) interest deduction carryforward attributes of approximately $ 239 million and $ 667 million, respectively, that have no expiration.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S.

tax upon repatriation.

Such earnings and all current foreign earnings are not indefinitely reinvested.

The following earnings are considered indefinitely reinvested:

approximately $ 495 million that could be subject to U.S.

federal tax when repatriated to the U.S.

under section 1.245A-5(b) of the final Treasury regulations;

and our accumulated earnings in India as of March 31, 2021.

A portion of these indefinitely reinvested earnings may be subject to foreign and U.S.

state tax consequences when remitted.

The Company will continue to evaluate its position in the future based on its future strategy and cash needs.

The Company accounts for income tax uncertainties in accordance with ASC 740 Income Taxes, which prescribes a recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information.

A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.

Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

ASC 740 also provides guidance on the accounting for and disclosure of liabilities for uncertain tax positions, interest and penalties.

In accordance with ASC 740, the Company’s liability for uncertain tax positions was as follows:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021

Tax $ 422 $ 354

Interest 76 46

Penalties 20 22

Offset to receivable ( 104 ) ( 18 )

Net of tax attributes ( 1 ) ( 10 )

Total $ 413 $ 394

The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021 March 31, 2020

Balance at beginning of fiscal year $ 354 $ 253 $ 165

Gross increases related to prior year tax positions 61 60 74

Gross decreases related to prior year tax positions ( 16 ) ( 30 ) ( 9 )

Gross increases related to current year tax positions 93 102 15

Settlements and statute of limitation expirations ( 33 ) ( 36 ) ( 7 )

Acquisitions and Dispositions ( 36 ) 6 18

Foreign exchange and others ( 1 ) ( 1 ) ( 3 )

Balance at end of fiscal year $ 422 $ 354 $ 253

The Company’s liability for uncertain tax positions at March 31, 2022, March 31, 2021 and March 31, 2020, includes $ 393 million, $ 316 million and $ 210 million, respectively, related to amounts that, if recognized, would affect the effective tax rate (excluding related interest and penalties).

The increase relating to the tax positions primarily relate to the Company's increase in foreign tax credits.

The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax expense.

During the year ended March 31, 2022, the Company had net decrease in interest expense of $ 1 million ($ 1 million net of tax) and net decrease in accrued expense for penalties of $ 2 million, and as of March 31, 2022 recognized a liability for interest of $ 76 million ($ 60 million net of tax) and penalties of $ 20 million.

During the year ended March 31, 2021, the Company had a net increase in interest of $ 1 million ($( 1 ) million net of tax) and a net increase in accrued expense for penalties of $ 1 million and as of March 31, 2021, recognized a liability for interest of $ 46 million ($ 39 million net of tax) and penalties of $ 22 million.

During the year ended March 31, 2020, the Company had a net increase in interest expense of $ 5 million ($ 3 million net of tax) and a net decrease in accrued expense for penalties of $ 3 million and, as of March 31, 2020, recognized a liability for interest of $ 45 million ($ 40 million net of tax) and penalties of $ 21 million.

The Company is currently under examination in several tax jurisdictions.

A summary of the tax years that remain subject to examination in certain of the Company’s major tax jurisdictions are:

Jurisdiction:

Tax Years that Remain Subject to Examination

(Fiscal Year Ending):

United States – Federal 2009 and forward

United States – Various States 2009 and forward

Australia 2012 and forward

Canada 2006 and forward

France 2016 and forward

Germany 2010 and forward

India 2001 and forward

2018 and forward

Tax Examinations

The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal 2008 through the tax year ended October 31, 2018.

With respect to CSC’s fiscal 2008 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals.

The IRS examined several issues for these tax years that resulted in various audit adjustments.

The Company and the IRS Office of Appeals have an agreement in principle as to various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years.

As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the IRS Office of Appeals or the U.S.

Tax Court, these matters are not fully reserved and would result in a federal and state tax expense of approximately $ 458 million (including estimated interest and penalties) for the unreserved portion of these items and related cash cost if we do not prevail.

We have received notices of deficiency with respect to fiscal 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S.

We do not expect the U.S.

Tax Court matters to be resolved in the next 12 months.

The Company has agreed to extend the statute of limitations for fiscal years 2008 through 2010 to April 30, 2022, for fiscal years 2014 through fiscal 2017 to February 28, 2023, and for the tax years ended October 31, 2017 and October 31, 2018 to September 30, 2023.

The statute of limitations on assessments for fiscal years 2011 through 2013 has expired, with the exception of a $6 million refund claim for 2012 for which the statute remains open.

However, as previously noted, fiscal years 2011 and 2013 are in the U.S.

Tax Court and consequently these years will remain open until the U.S.

Tax Court proceedings have concluded.

The Company expects to reach resolution with regard to disagreed items for fiscal years 2009 through 2013 no earlier than fiscal 2025, and to reach resolution for fiscal years 2014 through 2017, within 12 months.

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions.

Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future.

The Company believes the outcomes that are reasonably possible within the next 12 months to result in a reduction in its liability for uncertain tax positions, excluding interest, penalties, and tax carryforwards, would be approximately $ 44 million.

The Company’s annual goodwill impairment analyses, which were performed qualitatively in the second quarter of fiscal years 2023, 2022, and 2021, did not result in an impairment charge.

At the end of each fiscal year, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment.

The Company determined that there have been no such indicators, and, therefore, it was unnecessary to perform an interim goodwill impairment test as of the end of each respective fiscal year.

Note 11 - Debt

13 unchanged sentences

Short-term debt and current maturities of long-term debt

$ 900 $ 1,167

Long-term debt, net of current maturities

3 unchanged sentences

1.80 % 2027 696 694

€ 750 Senior notes

0.45 % 2028 828 —

€ 750 million Senior notes

0.45 % 2028 810 828

€ 600 Senior notes

0.95 % 2032 661 —

EUR term loan

2023 - 2024 — 469

$ 650 million Senior notes

2 unchanged sentences

0.95 % 2032 646 661

$ 500 million Senior notes

4.25 % 2025 — 504

$ 500 million Senior notes

4.13 % 2026 — 496

£ 250 million Senior notes

2.75 % 2025 — 343

$ 500 million Senior notes

4.75 % 2028 — 506

$ 234 million Senior notes

7.45 % 2030 — 268

Finance lease liabilities

10 unchanged sentences

$ 3,900 $ 4,065

(1) The carrying amounts of the senior term loans and notes as of March 31, 2022 and March 31, 2021, include the remaining principal outstanding of $ 3,575 million and $ 3,631 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $( 28 ) million and $ 34 million, respectively.

(1) The carrying amounts of the senior notes as of March 31, 2023 and March 31, 2022, include the remaining principal outstanding of $ 3,523 million and $ 3,575 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $ 22 million and $ 28 million, respectively.

(2) At DXC's option, DXC can borrow up to a maximum of € 1 billion or its equivalent in €, £, and $.

Senior Notes and Term Loans

During the first quarter of fiscal 2022, the Company used the proceeds from the sale of its HPS business to complete the redemption of the remaining $ 319 million of the two series of 4.45 % senior notes due fiscal 2023.

The Company also repurchased $ 33 million of its 4.125 % senior notes due fiscal 2026 using the proceeds from the divestitures of other insignificant businesses and existing cash on hand and the remainder of these notes were subsequently redeemed in full.

Euro Senior Notes Issuance

During the second quarter of fiscal 2022, the Company issued (i) € 750 million aggregate principal amount of its 0.450 % senior notes due fiscal 2028 and (ii) € 600 million aggregate principal amount of its 0.950 % senior notes due fiscal 2032 (collectively, the “Euro Notes”).

The proceeds from the Euro Notes were applied principally to the repayment in full of the € 400 million aggregate principal amount of outstanding borrowings under its Euro-denominated term loan facility, the repayment of its U.S.

dollar-denominated 4.25 % senior notes due fiscal 2025 and the repayment of its Sterling-denominated 2.75 % senior notes due fiscal 2025.

Dollar Senior Notes Issuance

During the second quarter of fiscal 2022, the Company issued (i) $ 700 million aggregate principal amount of its 1.80 % senior notes due fiscal 2027, and (ii) $ 650 million aggregate principal amount of its 2.375 % senior notes due fiscal 2029 (collectively, the “USD Notes”).

The proceeds from the USD Notes were used for the repayment of its remaining 4.125 % senior notes due fiscal 2026, its 4.750 % senior notes due fiscal 2028 and its 7.45 % senior notes due fiscal 2030.

The interest on the Company’s $ 700 million senior notes due fiscal 2027 and $ 650 million senior notes due fiscal 2029 are payable semi-annually in arrears, while the interest on the € 650 million senior notes due fiscal 2026, € 750 million senior notes due fiscal 2028 and € 600 million senior notes due fiscal 2032 are payable annually in arrears.

Generally, the Company’s notes are redeemable at the Company’s discretion at the then-applicable redemption premium plus accrued and unpaid interest.

During the second quarter of fiscal 2023, the Company entered into a $ 500 million term loan credit agreement (as amended, the “USD Term Loan”) with certain unaffiliated financial institutions that matures on September 1, 2024, unless the Company exercises its option to extend for one year until September 1, 2025.

The USD Term Loan is required to be drawn down by September 1, 2023.

The Company did not draw on the USD Term Loan as of March 31, 2023.

Fair Value of Debt

The estimated fair value of the Company's long-term debt excluding finance lease liabilities was $ 3.3 billion and $ 3.7 billion as of March 31, 2023 and March 31, 2022, respectively, as compared with the carrying value of $ 3.8 billion and $ 4.0 billion as of March 31, 2023 and March 31, 2022, respectively.

If measured at fair value, long-term debt excluding finance lease liabilities would be classified as Level 1 or Level 2 within the fair value hierarchy.

Future Maturities of Long-term Debt

3 unchanged sentences

Total $ 3,789

Note 12 - Revenue

Revenue Recognition

The following table presents DXC's revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:

Twelve Months Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

United States $ 4,320 $ 4,775 $ 5,983

United Kingdom 1,883 2,295 2,413

Other Europe 4,429 5,117 5,129

Australia 1,449 1,549 1,529

Other International 2,349 2,529 2,675

Total Revenues $ 14,430 $ 16,265 $ 17,729

The revenue by geography pertains to both of the Company’s reportable segments.

Refer to Note 20 - "Segment and Geographic Information" for the Company’s segment disclosures.

Remaining Performance Obligations

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period.

Remaining performance obligation 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.

As of March 31, 2023, approximately $ 19.7 billion of revenue is expected to be recognized from remaining performance obligations.

The Company expects to recognize revenue on approximately 39 % of these remaining performance obligations in fiscal 2024, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company's trade receivables and contract assets and contract liabilities:

(in millions) Balance Sheet Line Item March 31, 2023 March 31, 2022

Trade receivables, net Receivables and contract assets, net of allowance for doubtful accounts $ 2,269 $ 2,694

Contract assets Receivables and contract assets, net of allowance for doubtful accounts $ 366 $ 371

Contract liabilities Deferred revenue and advance contract payments and Non-current deferred revenue $ 1,842 $ 1,915

Change in contract liabilities were as follows:

(in millions) Twelve Months Ended March 31, 2023 Twelve Months Ended March 31, 2022

Balance, beginning of period $ 1,915 $ 1,701

Deferred revenue 2,351 3,099

Recognition of deferred revenue ( 2,303 ) ( 2,770 )

Currency translation adjustment ( 70 ) ( 43 )

Other ( 51 ) ( 72 )

Balance, end of period $ 1,842 $ 1,915

The following tables provides information about the Company’s capitalized costs to obtain and fulfill a contract:

(in millions) March 31, 2023 March 31, 2022

Capitalized sales commission costs (1)

Transition and transformation contract costs, net (2)

Amortization expense of capitalized sales commission and transition and transformation contract costs were as follows:

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

Capitalized sales commission costs amortization (1)

$ 76 $ 85 $ 70

Transition and transformation contract cost amortization (2)

$ 204 $ 227 $ 264

(1) Capitalized sales commission costs are included within other assets in the accompanying balance sheets and amortization expense related to the capitalized sales commission assets are included in selling, general, and administrative expenses in the accompanying statements of operations.

(2) Transition and transformation contract costs, net reflect the Company’s setup costs incurred upon initiation of an outsourcing contract and are included within other assets in the accompanying balance sheets and amortization expense are included within depreciation and amortization in the accompanying statements of operations.

Note 13 - Restructuring Costs

The Company recorded restructuring costs, net of reversals, of $ 216 million, $ 318 million and $ 551 million for fiscal 2023, 2022 and 2021, respectively.

The costs recorded during fiscal 2023 were largely the result of implementing the Fiscal 2023 Plan as described below.

The composition of restructuring liabilities by financial statement line items is as follows:

(in millions) March 31, 2023 March 31, 2022

Accrued expenses and other current liabilities $ 105 $ 113

Other long-term liabilities 22 39

Total $ 127 $ 152

Summary of Restructuring Plans

Fiscal 2023 Plan

During fiscal 2023, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2023 Plan”).

Also included in restructuring costs for the fiscal year ended March 31, 2023 is $ 22 million related to amortization of right-of-use assets and interest expense for leased facilities that we have vacated but that are being actively marketed for sublease, or we are in negotiations with the landlord to potentially terminate or modify those leases.

Restructuring activities, summarized by plan year, were as follows:

Restructuring Liability as of

March 31, 2022 Costs Expensed,

Net of Reversals Costs Not Affecting

Restructuring Liability (1)

Cash Paid Other (2)

Restructuring Liability as of

March 31, 2023

Fiscal 2023 Plan

Workforce Reductions $ — $ 154 $ — $ ( 76 ) $ 1 $ 79

Facilities Costs — 35 ( 24 ) ( 10 ) — 1

— $ 189 ( 24 ) ( 86 ) 1 80

Fiscal 2022 Plan

Workforce Reductions $ 84 $ ( 3 ) $ — $ ( 59 ) $ ( 4 ) $ 18

Facilities Costs 1 32 ( 7 ) ( 26 ) — —

85 29 ( 7 ) ( 85 ) ( 4 ) 18

Other Prior Year and Acquired Plans

Workforce Reductions $ 64 $ ( 1 ) $ — $ ( 34 ) $ ( 2 ) $ 27

Facilities Costs 3 ( 1 ) — ( 1 ) 1 2

67 ( 2 ) — ( 35 ) ( 1 ) 29

Total $ 152 $ 216 $ ( 31 ) $ ( 206 ) $ ( 4 ) $ 127

(1) Pension benefit augmentations recorded as pension liabilities, asset impairments and restructuring costs associated with right-of-use assets.

(2) Foreign currency translation adjustments.

Note 14 - Pension and Other Benefit Plans

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A significant number of employees outside the United States are covered by government sponsored programs at no direct cost to the Company other than related payroll taxes.

The Company accrued $ 4 million, $ 13 million and $ 10 million, for fiscal 2022, 2021 and 2020, respectively, as additional contractual termination benefits for certain employees are part of the Company's restructuring plans.

During fiscal 2023, pension trustees and the Company took actions to reduce the volatility of a defined benefit pension plan in the U.K., including entering into pension risk transfer transactions involving the purchase of annuity contracts for portions of its outstanding defined benefit pension obligations using assets from the pension trust.

In connection with this transaction, the pension trustees transferred $ 1.0 billion of gross defined benefit pension obligations and related plan assets to an insurance company for approximately 5,000 U.K.

plan participants.

In addition, the Company recognized a noncash pension settlement charge of $ 361 million, which includes the accelerated recognition of prior service credit that was included in accumulated other comprehensive income.

This transaction is irrevocable, and as a result of the transaction, the pension trustees and the Company were relieved of all responsibility for the related pension obligations and the insurance company is now required to pay and administer the retirement benefits.

The Company accrued $ 0 million , $ 4 million and $ 13 million, for fiscal 2023, 2022 and 2021, respectively, as additional contractual termination benefits for certain employees as part of the Company's restructuring plans.

These amounts are reflected in the projected benefit obligation and in the net periodic pension cost.

The change in projected benefit obligation for fiscal year 2022 is primarily related to actuarial gains and foreign currency exchange rate changes.

Actuarial gains were primarily due to an increase in discount rates across most plans, with partially offsetting impact of actuarial losses from an increase in inflation rates in Europe and in the United Kingdom and higher than expected benefit indexation in the United Kingdom.

The change in projected benefit obligation for fiscal year 2023 is primarily related to actuarial gains, the pension risk transfer transaction discussed above, and foreign currency exchange rate changes.

Actuarial gains were primarily due to an increase in discount rates across most plans and lower inflation rate assumptions primarily in the United Kingdom, with partially offsetting impact of actuarial losses primarily from higher than expected benefit indexation in the United Kingdom.

Projected Benefit Obligations

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March 31, 2023 March 31, 2022 March 31, 2021

$ 88 $ 91 $ 92

Service cost $ 73 $ 88 $ 91

Interest cost 254 203 245

Expected return on assets ( 498 ) ( 581 ) ( 659 )

( 581 ) ( 659 ) ( 651 )

Amortization of prior service credit ( 7 ) ( 8 ) ( 8 )

Contractual termination benefit — 4 13

Settlement/curtailment (gain) loss ( 20 ) ( 18 ) 7

Recognition of actuarial (gain) loss ( 664 ) 537 ( 252 )

Net periodic pension (income) expense $ ( 978 ) $ 201 $ ( 566 )

The service cost component of net periodic pension (income) expense is presented in cost of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net in the Company’s statements of operations.

Subtotal ( 178 ) ( 294 ) ( 318 )

Settlement/curtailment loss (gain) 361 ( 20 ) ( 18 )

Recognition of actuarial loss (gain) 1,070 ( 664 ) 537

Net periodic pension expense (income) $ 1,253 $ ( 978 ) $ 201

The service cost component of net periodic pension expense (income) is presented in costs of services and selling, general and administrative and the other components of net periodic pension income are presented in other expense (income), net in the Company’s statements of operations.

The weighted-average rates used to determine net periodic pension cost were:

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employees and certain foreign employees.

For certain plans, the Company will match employee contributions.The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines.

For certain plans, the Company will match employee contributions.

The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines.

During fiscal 2023, 2022 and 2021, the Company contributed $ 203 million, $ 226 million and $ 221 million, respectively, to its defined contribution plans.

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Deferred Compensation Plans

Effective as of the HPES Merger, DXC assumed sponsorship of the Computer Sciences Corporation Deferred Compensation Plan, which was renamed the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”), and adopted the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”).

DXC sponsors two Deferred Compensation Plans, the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”), and the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”).

Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors.

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The Company's expense under the Plan totaled $ 0 million and $ 2 million for fiscal 2023 and 2022 respectively.

Note 15 - Income Taxes

The sources of (loss) income from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the United States, are as follows:

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

Domestic entities $ ( 206 ) $ ( 566 ) $ 975

Entities outside the United States ( 679 ) 1,707 ( 321 )

Total $ ( 885 ) $ 1,141 $ 654

The income tax expense (benefit) on income (loss) from continuing operations is comprised of:

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

Federal $ 96 $ ( 118 ) $ 730

State 39 ( 17 ) 257

Foreign 155 285 216

290 150 1,203

Federal ( 192 ) 9 ( 221 )

State ( 47 ) ( 9 ) ( 51 )

Foreign ( 370 ) 255 ( 131 )

( 609 ) 255 ( 403 )

Total income tax (benefit) expense $ ( 319 ) $ 405 $ 800

The current federal (benefit) and tax expense for fiscal years 2023, 2022, and 2021 includes a $( 61 ) million, $( 7 ) million and $( 4 ) million transition tax benefit, respectively.

The current expense (benefit) for fiscal years 2023, 2022 and 2021, includes interest and penalties of $ 1 million, $( 3 ) million and $ 2 million, respectively, for uncertain tax positions.

In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE.

HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded a $ 26 million tax indemnification receivable related to uncertain tax positions, a $ 53 million tax indemnification receivable related to other tax payables, and a $ 89 million tax indemnification payable related to other tax receivables.

In connection with the spin-off of the Company's former U.S.

public sector business (the "USPS Separation"), the Company entered into a tax matters agreement with Perspecta Inc.

(including its successors and permitted assigns, "Perspecta").

The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods.

The Company remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods.

Pursuant to the tax matters agreement, the Company recorded a $ 18 million tax indemnification receivable from Perspecta related to other tax payables and a $ 6 million tax indemnification payable to Perspecta related to income tax and other tax receivables.

In connection with the sale of the HPS business, the Company entered into a tax matters agreement with Dedalus.

Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of the HPS business.

The major elements contributing to the difference between the U.S.

federal statutory tax rate and the effective tax rate ("ETR") for continuing operations is below.

Fiscal Years Ended

March 31, 2023 March 31, 2022 March 31, 2021

Statutory rate ( 21.0 ) % 21.0 % 21.0 %

State income tax, net of federal tax ( 1.4 ) ( 6.9 ) 10.8

Foreign tax rate differential ( 2.3 ) 151.1 ( 198.4 )

Change in valuation allowances ( 1.3 ) ( 140.9 ) 239.3

Income tax and foreign tax credits ( 8.0 ) ( 15.2 ) ( 48.7 )

Change in uncertain tax positions 1.2 6.8 17.2

Withholding taxes 3.5 6.2 10.3

tax on foreign income 5.8 2.5 17.6

Excess tax benefits or expense for stock compensation 0.6 0.1 2.2

Capitalized transaction costs 0.2 0.2 0.5

Base erosion and transition taxes ( 9.1 ) 6.6 ( 0.7 )

Impact of business divestitures ( 7.6 ) 3.0 52.6

Granite trust capital loss — — ( 5.7 )

Indemnification costs 1.2 — —

Other items, net 2.2 1.0 4.3

Effective tax rate ( 36.0 ) % 35.5 % 122.3 %

In fiscal 2023, the ETR was primarily impacted by:

• A reduction in base erosion and transition taxes, which increased income tax benefit and decreased the ETR by $ 81 million and 9.1 %, respectively.

• Income tax and foreign tax credits, which increased income tax benefit and decreased the ETR by $ 71 million and 8.0 %, respectively, offset by tax expense on U.S.

international tax inclusions which decreased tax benefit and increased the ETR by $ 51 million and 5.8 %, respectively.

• Non-taxable gains and losses on business divestitures, which increased income tax benefit and decreased the ETR by $ 67 million and 7.6 %, respectively.

In fiscal 2022, the ETR was primarily impacted by:

• Income tax and foreign tax credits, which decreased income tax expense and decreased the ETR by $ 174 million and 15.2 %, respectively.

• Adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $ 78 million and 6.8 %, respectively.

In fiscal 2021, the ETR was primarily impacted by:

• Impact of the HHS and other business divestitures, which increased tax expense and increased the ETR $ 344 million and 52.6 %, respectively.

The HHS tax gain increased tax expense and the ETR as the tax basis of assets sold, primarily goodwill, was lower than the book basis.

• An increase in income tax and foreign tax credits, which decreased income tax expense and decreased the ETR by $ 319 million and 48.7 %, respectively.

• The Company recognized adjustments to uncertain tax positions that increased the overall income tax expense and the ETR by $ 112 million and 17.2 %, respectively.

The deferred tax assets (liabilities) were as follows:

(in millions) March 31, 2023 March 31, 2022

Deferred tax assets

Tax loss/credit carryforwards 2,327 2,360

Accrued interest 18 15

Operating lease liabilities

Contract accounting

Other assets 272 338

Total deferred tax assets 2,971 3,089

Valuation allowance ( 2,064 ) ( 2,133 )

Net deferred tax assets 907 956

Deferred tax liabilities

Depreciation and amortization ( 98 ) ( 430 )

Operating right-of-use asset ( 208 ) ( 227 )

Investment basis differences ( 8 ) ( 8 )

Employee benefits ( 103 ) ( 426 )

Other liabilities

( 198 ) ( 220 )

Total deferred tax liabilities ( 615 ) ( 1,311 )

Total net deferred tax assets (liabilities) $ 292 $ ( 355 )

Income tax related assets are included in the accompanying balance sheets as follows:

(in millions) March 31, 2023 March 31, 2022

Income tax receivables and prepaid taxes $ 60 $ 78

Income taxes receivable and prepaid taxes $ 192 $ 130

Deferred tax assets 460 221

Total $ 712 $ 429

Income tax related liabilities are included in the accompanying balance sheet as follows:

(in millions) March 31, 2023 March 31, 2022

Liability for uncertain tax positions $ ( 1 ) $ ( 34 )

Income taxes payable ( 119 ) ( 163 )

$ ( 120 ) $ ( 197 )

Deferred taxes ( 168 ) ( 576 )

Income taxes payable ( 16 ) ( 39 )

Liability for uncertain tax positions ( 403 ) ( 379 )

$ ( 587 ) $ ( 994 )

Total $ ( 707 ) $ ( 1,191 )

As of each reporting date, management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net deferred tax assets.

Objective verifiable evidence, which is historical in nature, carries more weight than subjective evidence, which is forward looking in nature.

A valuation allowance has been recorded against deferred tax assets of approximately $ 2,064 million as of March 31, 2023, due to uncertainties related to the ability to utilize these assets.

The net decrease in the valuation allowance of $ 66 million in fiscal 2023 was primarily due to a currency translation adjustment of $ 55 million.

The following table provides information on the Company's various tax carryforwards:

As of March 31, 2023 As of March 31, 2022

(in millions) Total

With No Expiration

With Expiration

Expiration Dates Through

Total With No Expiration With Expiration Expiration Dates Through

Net operating loss carryforwards

$ 70 $ 70 $ — N/A $ 88 $ 88 $ — N/A

$ 463 $ 217 $ 246 2043 $ 589 $ 243 $ 346 2042

$ 9,164 $ 5,370 $ 3,794 2040 $ 9,368 $ 5,635 $ 3,733 2039

Tax credit carryforwards

$ 19 $ — $ 19 2043 $ 5 $ — $ 5 2042

$ 4 $ — $ 4 2037 $ 5 $ 2 $ 3 2037

$ — $ — $ — N/A $ — $ — $ — N/A

Capital loss carryforwards

Federal $ 42 $ 42 $ — N/A $ 42 $ — $ 42 2026

State $ 46 $ 46 $ — N/A $ — $ — $ — N/A

Foreign $ 199 $ 199 $ — N/A $ 199 $ 199 $ — N/A

The Company also has federal and state 163(j) interest deduction carryforward attributes of approximately $ 23 million and $ 770 million, respectively, that have no expiration.

The majority of our global unremitted foreign earnings have been taxed or would be exempt from U.S.

tax upon repatriation.

Such earnings and all current foreign earnings are not indefinitely reinvested.

The following earnings are considered indefinitely reinvested:

approximately $ 484 million that could be subject to U.S.

federal tax when repatriated to the U.S.

under section 1.245A-5(b) of the final Treasury regulations;

and approximately $ 200 million of our accumulated earnings in India.

A portion of these indefinitely reinvested earnings may be subject to foreign and U.S.

state tax consequences when remitted.

The Company will continue to evaluate its position in the future based on its future strategy and cash needs.

Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.

ASC 740 also provides guidance on the accounting for and disclosure of liabilities for uncertain tax positions, interest and penalties.

In accordance with ASC 740, the Company’s liability for uncertain tax positions was as follows:

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022

Tax $ 399 $ 422

Interest 79 76

Penalties 18 20

Offset to receivable ( 91 ) ( 104 )

Net of tax attributes ( 1 ) ( 1 )

Total $ 404 $ 413

The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):

Fiscal Years Ended

(in millions) March 31, 2023 March 31, 2022 March 31, 2021

Balance at beginning of fiscal year $ 422 $ 354 $ 253

Gross increases related to prior year tax positions 31 61 60

Gross decreases related to prior year tax positions ( 17 ) ( 16 ) ( 30 )

Gross increases related to current year tax positions 8 93 102

Settlements and statute of limitation expirations ( 43 ) ( 33 ) ( 36 )

Acquisitions and dispositions — ( 36 ) 6

Foreign exchange and others ( 2 ) ( 1 ) ( 1 )

Balance at end of fiscal year $ 399 $ 422 $ 354

The Company’s liability for uncertain tax positions at March 31, 2023, March 31, 2022, and March 31, 2021, includes $ 368 million, $ 393 million and $ 316 million, respectively, related to amounts that, if recognized, would affect the effective tax rate (excluding related interest and penalties).

The increase related to prior year tax positions primarily relates to an increase in foreign tax credits.

The change in settlements and statute of limitation expirations primarily relates to amounts agreed to with tax authorities.

The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax expense.

During the year ended March 31, 2023, the Company had a net increase in interest expense of $ 3 million ($ 1 million net of tax) and a net decrease in accrued expense for penalties of $ 2 million and, as of March 31, 2023, recognized a liability for interest of $ 79 million ($ 61 million net of tax) and penalties of $ 18 million.

During the year ended March 31, 2022, the Company had net decrease in interest expense of $ 1 million ($ 1 million net of tax) and net decrease in accrued expense for penalties of $ 2 million, and as of March 31, 2022, recognized a liability for interest of $ 76 million ($ 60 million net of tax) and penalties of $ 20 million.

The Company is currently under examination in several tax jurisdictions.

A summary of the tax years that remain subject to examination in certain of the Company’s major tax jurisdictions are:

Jurisdiction:

Tax Years that Remain Subject to Examination

(Fiscal Year Ending):

United States – Federal 2009 and forward

United States – Various States 2009 and forward

Canada 2010 and forward

France 2016 and forward

Germany 2010 and forward

India 2001 and forward

2018 and forward

Tax Examinations

The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal 2009 through the tax year ended October 31, 2018.

With respect to CSC’s fiscal 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals.

The IRS examined several issues for these tax years that resulted in various audit adjustments.

The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs and tax planning strategies in previous years.

As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the U.S.

Tax Court, these matters are not fully reserved and would result in incremental federal and state tax expense and cash tax payments of approximately $ 477 million (including estimated interest and penalties) for the unreserved portion of these items if we do not prevail.

We have received notices of deficiency with respect to fiscal 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S.

We do not expect the U.S.

Tax Court matters to be resolved in the next 12 months.

The Company’s fiscal years 2009, 2010, 2011 and 2013 are in the U.S.

Tax Court, and consequently these years will remain open until such proceedings have concluded.

The statute of limitations on assessments related to a refund claim for fiscal year 2012 is open through February 28, 2025.

The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2020 to September 30, 2024.

The Company expects to reach resolution for fiscal and tax return years 2009 through 2020 no earlier than fiscal 2025.

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions.

Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future.

Note 16 - Stockholders' Equity

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Subject to all the rights of the preferred stock, dividends may be paid to holders of common stock as and when declared by the Board of Directors (the "Board").

The Company's charter requires that preferred stock must be all of one class but may be issued from time to time in one or more series, each of such series to have such full or limited voting powers, if any, and such designations, preferences and relative, participating, optional or other special rights or qualifications, limitations or restrictions as provided in a resolution adopted by the Board of Directors.

Each share of preferred stock will rank on a parity with each other share of preferred stock, regardless of series, with respect to the payment of dividends at the respectively designated rates and with respect to the distribution of capital assets according to the amounts to which the shares of the respective series are entitled.

Share Repurchase Program

On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board of Directors with an initial authorization of up to $ 2.0 billion for future repurchases of outstanding shares of DXC common stock.

On November 8, 2018, DXC announced that its board of directors approved an incremental $ 2.0 billion share repurchase authorization.

On February 2, 2022, DXC announced its intention to repurchase incrementally up to $ 1.0 billion of its outstanding shares of common stock in the open market.

An expiration date has not been established for this repurchase plan.

Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act as well as, to the extent applicable, other federal and state securities laws and other legal requirements.

On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board with an initial authorization of up to $ 2.0 billion for future repurchases of outstanding shares of DXC common stock.

On November 8, 2018, DXC announced that its Board approved an incremental $ 2.0 billion share repurchase authorization.

Under these approved share repurchase plans, on February 2, 2022, we announced our intention and subsequently completed the repurchase of $ 1.0 billion of our outstanding shares of common stock in the open market prior to the issuance of this Annual Report on Form 10-K.

On May 18, 2023, DXC announced that its Board approved an incremental $ 1.0 billion share repurchase authorization.

Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act of 1934, as amended, as well as, to the extent applicable, other federal and state securities laws and other legal requirements.

The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.

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Open market purchases 18,818,934 $ 33.67 $ 634

ASR 3,654,544 $ 54.73 $ 200

2022 Total 18,818,934 $ 33.67 $ 634

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As a result, the Company holds 3,333,592 treasury shares as of March 31, 2023.

The Board of Directors (the “Board”) has suspended the Company’s cash dividend payment beginning in the first quarter of fiscal 2021 to preserve cash and enhance financial flexibility in the current environment.

The Board has suspended the Company’s cash dividend payment beginning in the first quarter of fiscal 2021 to preserve cash and enhance financial flexibility in the current environment.

As of March 31, 2023 the Company does not intend to reinstate its quarterly cash dividends.

During fiscal 2020, the Company declared dividends of $ 0.84 per common share totaling $ 219 million.

Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive income (loss), net of taxes:

The following table shows the changes in accumulated other comprehensive loss, net of taxes:

(in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Available-for-sale Securities Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss

Balance at March 31, 2020 $ ( 851 ) $ ( 20 ) $ 9 $ 259 $ ( 603 )

Current-period other comprehensive loss ( 334 ) ( 15 ) — 0 — ( 349 )

Amounts reclassified from accumulated other comprehensive loss, net of taxes — ( 2 ) — ( 8 ) ( 10 )

Balance at March 31, 2020 $ ( 851 ) $ ( 20 ) $ 9 $ 259 $ ( 603 )

Current-period other comprehensive income (loss) 297 14 ( 9 ) — 302

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Balance at March 31, 2022 $ ( 651 ) $ 10 $ — $ 256 $ ( 385 )

Current-period other comprehensive (loss) income ( 334 ) ( 6 ) — — ( 340 )

Amounts reclassified from accumulated other comprehensive loss, net of taxes — ( 11 ) — ( 38 ) ( 49 )

Balance at March 31, 2023 $ ( 985 ) $ ( 7 ) $ — $ 218 $ ( 774 )

(1) Includes net cumulative foreign currency translation losses of $ 86 million upon sale of foreign entities primarily related to the HPS business divestiture.

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Note 17 - Stock Incentive Plans

The Compensation Committee of the Board of Directors has broad authority to grant awards and otherwise administer the DXC Employee Equity Plan.

The Compensation Committee of the Board has broad authority to grant awards and otherwise administer the DXC Employee Equity Plan.

The plan became effective March 30, 2017 and will continue in effect for a period of 10 years thereafter, unless terminated earlier by the Board.

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If the specified performance criteria are met, awards are settled for shares of DXC common stock and dividend equivalents upon the filing with the SEC of the Annual Report on Form 10-K for the last fiscal year of the performance period.

PSU awards include the potential for up to 25 % of the shares granted to be earned after the first and second fiscal years if certain of the Company's performance targets are met early, subject to vesting based on the participant's continued employment through the end of the three-year performance period.

Certain PSU awards include the potential for up to 25 % of the shares granted to be earned after the first and second fiscal years if certain of the Company's performance targets are met early, subject to vesting based on the participant's continued employment through the end of the three-year performance period.

Beginning in fiscal 2021, DXC issued awards that are considered to have a market condition.

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Contingent consideration $ — $ — $ 3

Dividends declared but not yet paid $ — $ — $ 55

Shares repurchased but not settled in cash (3)

(1) Income tax refunds were $ 43 million, $ 54 million, and $ 70 million for fiscal 2023, 2022, and 2021, respectively.

(2) There were $ 1,085 million, $ 763 million, and $ 216 million in modifications and terminations in fiscal 2022, 2021, and 2020, respectively, and net of $ 87 million change in lease classification from operating to finance lease in fiscal 2020,

Note 19 - Other (Income) Expense, Net

The following table summarizes components of other (income) expense, net:

(2) There were $ 1,142 million, $ 1,085 million, and $ 763 million in modifications and terminations in fiscal 2023, 2022, and 2021, respectively.

(3) On August 16, 2022, the U.S.

government enacted the IRA into law.

The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022.

In our cash flow statement we reflect the excise tax as a financing activity relating to the repurchase of common stock.

Note 19 - Other Expense (Income), Net

The following table summarizes components of other expense (income), net:

Fiscal Years Ended

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March 31, 2023 March 31, 2022 March 31, 2021

Non-service cost components of net periodic pension (income) expense $ ( 1,066 ) $ 110 $ ( 658 )

Foreign currency loss (gain) 13 14 ( 25 )

( 28 ) ( 22 ) ( 37 )

$ ( 1,081 ) $ 102 $ ( 720 )

Non-service cost components of net periodic pension expense resulted primarily from the actuarial gain of $ 664 million compared to the loss of $ 537 million prior year.

See Note 15 - Pension and Other Benefit Plans.

Foreign currency loss (gain) resulted from the movement of foreign currency exchange rates on the Company’s foreign currency denominated assets and liabilities, related hedges including options to manage its exposure to economic risk and the cost of the Company’s hedging program.

Other gain primarily relates to gain on sale of non-operating assets.

Non-service cost components of net periodic pension expense (income) $ 1,180 $ ( 1,066 ) $ 110

Foreign currency (gain) loss ( 15 ) 13 14

Gain on sale of assets ( 90 ) ( 88 ) ( 6 )

Other loss 9 60 ( 16 )

Total $ 1,084 $ ( 1,081 ) $ 102

Other expense (income), net, was $ 1,084 million and $( 1,081 ) million in fiscal 2023 and fiscal 2022, respectively, a change of $ 2,165 million compared to the prior fiscal year that was primarily due to:

• net periodic pension expense increased by $ 2,246 million primarily due to a $ 1,070 million mark-to-market pension loss in fiscal 2023 versus a $ 664 million gain in fiscal 2022, a $ 361 million settlement loss in fiscal 2023 related to the buy-out of a defined benefit pension plan in the U.K., and $ 131 million less pension income in fiscal 2023 due to changes in expected returns on assets and other actuarial assumptions.

See Note 14 - "Pension and Other Benefit Plans" for additional information.

• a foreign currency gain of $ 15 million in fiscal 2023 versus a $ 13 million loss in fiscal 2022 primarily due to movements of exchange rates on our foreign currency denominated assets and liabilities, related hedges including forward contracts to manage our exposure to economic risk, and the cost of our hedging program.

• a $ 2 million increase in gains from sales of assets.

• a $ 51 million decrease in other losses, primarily due to a greater amount of impairment losses in the comparative period.

Note 20 - Segment and Geographic Information

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• Applications.

We use advanced technologies and methods to accelerate the creation, modernization, delivery and maintenance of high-quality, secure applications allowing customers to innovate faster while reducing risk, time to market, and total cost of ownership.

We support customers across all industries, including public sector, insurance, banking and capital markets, and automotive.

• Business process services .

We perform the integration and optimization of front and back office processes, as well as agile process automation.

This helps companies to reduce cost and minimize business disruption, human error, and operational risk while improving customer experiences.

We help simplify, modernize, and accelerate mission-critical applications that support business agility and growth through our Applications services.

We are the engineers that enable our customers to take advantage of the latest digital platforms with both customized and pre-packaged applications, ensure resiliency, launch new products and enter new markets with minimal disruption.

We help customers define, execute and manage their enterprise applications strategy.

• Insurance Software and Business Process Services .

We partner with insurance clients, to modernize and run IT systems, provide proprietary modular insurance software and platforms, and operate the full spectrum of insurance business process services.

We also help operate and continuously improve bank cards, payment and lending processes and operations, and customer experience operations.

Global Infrastructure Services

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GIS offerings include:

• Cloud and Security.

We help customers rapidly modernize by adapting legacy apps to cloud, migrate the right workloads, and effectively manage their multi-cloud environments.

Our security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications and infrastructure.

• IT Outsourcing ("ITO").

Our ITO services help customers securely and cost-effectively run mission-critical systems and IT infrastructure.

We manage and simplify our customers’ existing IT investments, reduce the costs to run them and provide a path for customers to move portions of their IT estates to the cloud to drive innovation and additional savings.

Our Security services help customers assess risk and proactively address all facets of the security environment, from threat intelligence to compliance.

We leverage proven methodologies, intelligent automation and industry-leading partners to tailor security solutions to customers’ unique business needs.

Our experts weave cyber resilience into IT security, operations and culture.

Whether migrating to the cloud, protecting data with a Zero Trust strategy or managing a security operations center, our Security services enable our customers to focus on their business.

• Cloud Infrastructure and IT Outsourcing (“ITO”).

We enable customers to do Cloud Right™, making the right investments at the right time and on the right platforms.

We orchestrate hybrid cloud and multicloud environments, ensuring private and public clouds, servers and mainframes operate effectively together.

We provide companies with tailored plans for cloud migration and optimization to enable successful transformation.

We leverage our deep expertise in legacy IT and drive innovation with reliable, secure, mission-critical IT Outsourcing services – from compute and data center, to storage and backup, to network, to mainframe and to business continuity – providing a clear path to modernization.

• Modern Workplace.

We provide services to fit our customer’s employee, business and IT needs from intelligent collaboration, modern device management, digital support services, and mobility services.

Our focus on the employee experience provides a consumer-like, digital experience that fits the needs of today's professional.

Our Modern Workplace services put the employee experience first, helping them achieve new levels of productivity, engagement and collaboration while working seamlessly and securely on any device.

Organizations are empowered to deliver a consumer-like experience, centralize IT management and support services, and improve the total cost of ownership.

Segment Measures

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The Company does not allocate to its segments certain operating expenses managed at the corporate level.

These unallocated costs include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.

These unallocated costs generally include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs and amortization of acquired intangible assets.

Fiscal Years Ended

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Amortization of acquired intangibles ( 402 ) ( 434 ) ( 530 )

Merger related indemnification ( 46 ) — —

SEC matter ( 8 ) — —

Gains on dispositions 190 341 2,004

Pension and OPEB actuarial and settlement gains (losses) 684 ( 519 ) 244

Debt extinguishment cost ( 311 ) ( 41 ) —

Arbitration loss ( 29 ) — —

Impairment losses ( 19 ) ( 31 ) ( 190 )

Gain on arbitration award — — 632

Income (loss) before income taxes $ 1,141 $ 654 $ ( 5,228 )

Debt extinguishment cost — ( 311 ) ( 41 )

Pension and OPEB actuarial and settlement (losses) gains ( 1,431 ) 684 ( 519 )

(Loss) income before income taxes $ ( 885 ) $ 1,141 $ 654

Management does not use total assets by segment to evaluate segment performance or allocate resources.

As a result, assets are not tracked by segment and therefore, total assets by segment is not disclosed.

As a result, assets are not tracked by segment and therefore, total assets by segment are not disclosed.

Geographic Information

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United States $ 788 $ 975

United Kingdom 362 415

Australia 94 120

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No single customer exceeded 10% of the Company’s revenues during fiscal 2023, fiscal 2022 or fiscal 2021.

Note 21 - Revenue

Revenue Recognition

The following table presents DXC's revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:

Twelve Months Ended

(in millions) March 31, 2022 March 31, 2021 March 31, 2020

United States $ 4,775 $ 5,983 $ 7,225

2,295 2,413 2,776

Other Europe 5,117 5,129 5,121

Australia 1,549 1,529 1,487

Other International 2,529 2,675 2,968

Total Revenues $ 16,265 $ 17,729 $ 19,577

The revenue by geography pertains to both of the Company’s reportable segments.

Refer to Note 20 - "Segment and Geographic Information" for the Company’s segment disclosures.

Remaining Performance Obligations

As of March 31, 2022, approximately $ 22 billion of revenue is expected to be recognized from remaining performance obligations.

The Company expects to recognize revenue on approximately 39 % of these remaining performance obligations in fiscal 2023, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company's trade receivables and contract assets and contract liabilities:

(in millions) Balance Sheet Line Item March 31, 2022 March 31, 2021

Trade receivables, net Receivables and contract assets, net of allowance for doubtful accounts $ 2,694 $ 2,871

Contract assets Receivables and contract assets, net of allowance for doubtful accounts $ 371 $ 351

Contract liabilities Deferred revenue and advance contract payments and Non-current deferred revenue $ 1,915 $ 1,701

Change in contract liabilities were as follows:

(in millions) Twelve Months Ended March 31, 2022 Twelve Months Ended March 31, 2021

Balance, beginning of period $ 1,701 $ 1,756

Deferred revenue 3,099 2,933

Recognition of deferred revenue ( 2,770 ) ( 2,922 )

Currency translation adjustment ( 43 ) 128

( 72 ) ( 194 )

Balance, end of period $ 1,915 $ 1,701

(1) For fiscal 2021, Other included contract liabilities of $ 52 million related to the divested HHS business and $ 62 million related to the HPS business and other insignificant businesses reclassified to assets held for sale.

See note Note 3 - "Divestitures and Note 4 - "Assets Held for Sale" for more information.

The following tables provides information about the Company’s capitalized costs to obtain and fulfill a contract:

(in millions) March 31, 2022 March 31, 2021

Capitalized sales commission costs (1)

Transition and transformation contract costs, net (2)

Amortization expense of capitalized sales commission and transition and transformation contract costs were as follows:

Fiscal Years Ended

(in millions) March 31, 2022 March 31, 2021 March 31, 2020

Capitalized sales commission costs amortization (1)

$ 85 $ 70 $ 72

Transition and transformation contract cost amortization (2)

$ 227 $ 264 $ 280

Note 22 - Restructuring Costs

The Company recorded restructuring costs, net of reversals, of $ 318 million, $ 551 million and $ 252 million for fiscal 2022, 2021 and 2020, respectively.

The costs recorded during fiscal 2022 were largely the result of implementing the Fiscal 2022 Plan as described below.

The composition of restructuring liabilities by financial statement line items is as follows:

(in millions) March 31, 2022 March 31, 2021

Accrued expenses and other current liabilities $ 113 $ 225

Other long-term liabilities 39 45

Total $ 152 $ 270

Summary of Restructuring Plans

Fiscal 2022 Plan

During fiscal 2022, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2022 Plan”).

Also included in restructuring costs for the fiscal year ended March 31, 2022 is $ 18 million related to amortization of right-of-use assets and interest expense for leased facilities that we have vacated but that are being actively marketed for sublease, or we are in negotiations with the landlord to potentially terminate or modify those leases.

Fiscal 2021 Plan

During fiscal 2021, management approved global cost savings initiatives designed to better align the Company’s workforce and facility structures (the “Fiscal 2021 Plan”).

The Fiscal 2021 Plan includes workforce optimization programs and facilities and data center rationalization.

Costs incurred to date under the Fiscal 2021 Plan total $ 541 million, comprising $ 499 million in employee severance and $ 42 million of facilities costs.

Fiscal 2020 Plan

During fiscal 2020, management approved cost savings initiatives designed to reduce operating costs by re-balancing its workforce and facilities structures (the "Fiscal 2020 Plan").

The Fiscal 2020 Plan includes workforce optimization programs and facilities and data center rationalization.

Costs incurred to date under the Fiscal 2020 Plan total $ 294 million, comprising $ 277 million in employee severance and $ 17 million of facilities costs.

Other Prior Year Plans

In June 2017, management approved a post-HPES Merger restructuring plan to optimize the Company’s operations in response to a continuing business contraction.

Other prior year plans focus mainly on optimizing specific aspects of the global workforce, increasing the proportion of work performed in low-cost offshore locations and re-balancing the organizational structure.

Additionally, these plans included global facility restructuring, including a global data center restructuring program.

Costs incurred to date under other prior year plans total $ 1,478 million, comprising $ 1,141 million in employee severance and $ 337 million of facilities costs.

Acquired Restructuring Liabilities

As a result of the merger of Computer Sciences Corporation ("CSC") and HPES ("HPES Merger"), DXC acquired restructuring liabilities under restructuring plans that were initiated for HPES under plans approved by the HPE Board of Directors.

Restructuring activities, summarized by plan year, were as follows:

Restructuring Liability as of March 31, 2021 Costs Expensed,

Net of Reversals Costs Not Affecting Restructuring Liability (1)

Cash Paid Other (2)

Restructuring Liability as of March 31, 2022

Fiscal 2022 Plan

Workforce Reductions $ — $ 228 $ ( 5 ) $ ( 133 ) $ ( 6 ) $ 84

Facilities Costs — 92 ( 62 ) ( 30 ) 1 1

— $ 320 ( 67 ) ( 163 ) ( 5 ) 85

Fiscal 2021 Plan

Workforce Reductions $ 180 $ ( 2 ) $ — $ ( 142 ) $ ( 3 ) $ 33

Facilities Costs 3 5 ( 5 ) ( 2 ) — 1

183 3 ( 5 ) ( 144 ) ( 3 ) 34

Fiscal 2020 Plan

Workforce Reductions (3)

$ 27 $ ( 2 ) $ — $ ( 18 ) $ ( 1 ) $ 6

Facilities Costs — — — — — —

27 ( 2 ) — ( 18 ) ( 1 ) 6

Other Prior Year Plans

Workforce Reductions $ 19 $ 2 $ — $ ( 17 ) $ — $ 4

Facilities Costs 6 ( 1 ) 1 ( 4 ) — 2

25 1 1 ( 21 ) — 6

Acquired Liabilities

Workforce Reductions $ 34 $ ( 4 ) $ — $ ( 7 ) $ ( 2 ) $ 21

Facilities Costs 1 — — ( 1 ) — —

$ 35 ( 4 ) — ( 8 ) ( 2 ) 21

Total $ 270 $ 318 $ ( 71 ) $ ( 354 ) $ ( 11 ) $ 152

(1) Pension benefit augmentations recorded as a pension liability and asset impairments and restructuring costs associated with right-of-use assets.

(2) Foreign currency translation adjustments.

Restructuring Liability as of March 31, 2020 Costs Expensed,

Net of Reversals

Costs Not Affecting Restructuring Liability (1)

Cash Paid Other (2)

Restructuring Liability as of March 31, 2021

Fiscal 2021 Plan

Workforce Reductions $ — $ 501 $ ( 11 ) $ ( 313 ) $ 3 $ 180

Facilities Costs — 37 ( 17 ) ( 14 ) ( 3 ) 3

— 538 ( 28 ) ( 327 ) — 183

Fiscal 2020 Plan

Workforce Reductions (3)

$ 74 $ 8 $ 1 $ ( 60 ) $ 4 $ 27

Facilities Costs 2 ( 4 ) 4 ( 2 ) — —

76 4 5 ( 62 ) 4 27

Fiscal 2019 Plan

Workforce Reductions $ 25 $ ( 1 ) $ ( 2 ) $ ( 17 ) $ 2 $ 7

Facilities Costs 5 ( 2 ) 1 ( 1 ) 3 6

30 ( 3 ) ( 1 ) ( 18 ) 5 13

Other Prior Year Plans

Workforce Reductions $ 24 $ 12 $ ( 7 ) $ ( 19 ) $ 2 $ 12

Facilities Costs — — — — — —

24 12 ( 7 ) ( 19 ) 2 12

Acquired Liabilities

Workforce Reductions $ 39 $ 1 $ — $ ( 7 ) $ 1 $ 34

Facilities Costs 11 ( 1 ) 1 ( 9 ) ( 1 ) 1

50 — 1 ( 16 ) — 35

Total $ 180 $ 551 $ ( 30 ) $ ( 442 ) $ 11 $ 270

(1) Pension benefit augmentations recorded as a pension liability and asset impairment.

(2) Foreign currency translation adjustments.

(3) Fiscal 2020 workforce reductions includes a $ 14 million adjustment to restructuring expense related to the prior year.

Note 21 - Commitments and Contingencies

The Company signed long-term purchase agreements with certain software, hardware, telecommunication and other service providers to obtain favorable pricing and terms for services and products that are necessary for the operations of business activities.

Under the terms of these agreements, the Company is contractually committed to purchase specified minimums over periods ranging from one to seven years .

Under the terms of these agreements, the Company is contractually committed to purchase specified minimum amounts within defined time periods.

If the Company does not meet the specified minimums, the Company would have an obligation to pay the service provider all, or a portion, of the shortfall.

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(in millions)

Total $ 1,723

In the normal course of business, the Company may provide certain customers with financial performance guarantees, and at times performance letters of credit or surety bonds.

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Contingencies

Insurance Recovery re Kemper Litigation:

The Company previously disclosed litigation with Kemper Corporate Services, Inc., in which an arbitration award was issued against the Company in October 2017.

Following a series of appeals, the Company paid the balance of the judgment in February 2020, which net of insurance recovery, totaled $ 60 million.

The Company has since recovered an additional $ 37 million from its insurance carriers and continues to pursue additional recovery.

All material issues pertaining to this matter have concluded.

Forsyth, et al.

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On August 18, 2016, this purported class and collective action was filed in the U.S.

District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code.

Former business units of HPE now owned by the Company may be proportionately liable for any recovery by plaintiffs in this matter.

Plaintiffs seek to certify a nationwide class action under the ADEA comprised of all U.S.

residents employed by defendants who had their employment terminated pursuant to a work force reduction (“WFR”) plan and who were 40 years of age or older at the time of termination.

The class seeks to cover those impacted by WFRs on or after December 2014.

Plaintiffs also seek to represent a Rule 23 class under California law comprised of all persons 40 years of age or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012.

In January 2017, defendants filed a partial motion to dismiss and a motion to compel arbitration of claims by certain named and opt-in plaintiffs who had signed release agreements as part of their WFR packages.

In September 2017, the Court denied the partial motion to dismiss without prejudice, but granted defendants’ motions to compel arbitration for those named and opt-in plaintiffs.

The Court stayed the entire action pending arbitration for these individuals, and administratively closed the case.

A mediation was held in October 2018 with the 16 named and opt-in plaintiffs who were involved in the case at that time.

A settlement was reached, which included seven plaintiffs who were employed by former business units of HPE that are now owned by the Company.

In June 2019, a second mediation was held with 145 additional opt-in plaintiffs who were compelled to arbitration pursuant to their release agreements.

In December 2019, a settlement was reached with 142 of the opt-in plaintiffs, 35 of whom were employed by former business units of HPE that are now owned by the Company, and for which the Company was liable.

District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”) and California state law, in connection with workforce reductions that occurred in or after August 2012 in California, and in or after as early as December 2014 in other U.S.

Former business units of HPE now owned by the Company and former business units of the Company now owned by Peraton (formerly Perspecta), may be proportionately liable for any recovery by plaintiffs in this matter.

In December 2020, Plaintiffs filed a motion for preliminary certification of the collective action, which Defendants opposed.

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In February 2022, the notice period closed.

Former business units of the Company now owned by Perspecta may be proportionately liable for any recovery by plaintiffs in this matter.

Oracle America, Inc., et al.

Hewlett Packard Enterprise Company:

On March 22, 2016, Oracle filed a complaint against HPE in the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition.

The litigation relates in part to former business units of HPE that are now owned by the Company.

The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc.

Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business.

Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from HPE's own alleged conduct.

On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor.

Oracle appealed the judgment to the U.S.

Court of Appeals for the Ninth Circuit.

In August 2020, the court granted Oracle's appeal in part.

The case was then remanded to the District Court for further proceedings .

In January 2021, the District Court entered a scheduling order that provided for summary judgment briefing to be completed by May 2021 and a trial date in November 2021.

In June 2021, the Court issued a decision denying HPE’s motion for summary judgment and granting Oracle’s motion for summary judgment on various HPE defenses.

In November 2021, the court issued an order continuing the trial to May 2022.

The trial is scheduled to begin on May 23, 2022.

In re DXC Technology Company Securities Litigation:

Previously disclosed matters have been dismissed, with one case remaining, in the Superior Court of the State of California.

The case is currently stayed.

Securities Litigation:

Previously disclosed securities litigation matters have been dismissed, with one case remaining, in the Superior Court of the State of California.

On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company, directors of the Company, and a former officer of the Company, among other defendants.

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Thereafter, the state court lifted the stay and entered an order permitting additional briefing by the parties.

In March 2022, Plaintiffs filed an amended complaint.

In April 2022, the Company moved to dismiss the amended complaint.

A hearing on the Company’s motion to dismiss is scheduled for August 2022.

The Company believes that the final remaining lawsuit described above is also without merit, and it intends to vigorously defend it.

In March 2022, Plaintiffs filed an amended complaint, which the Company moved to dismiss.

In August 2022, the Court granted the Company’s motion to dismiss, but permitted Plaintiffs to amend and refile their complaint.

In September 2022, Plaintiffs filed a second amended complaint, which the Company moved to dismiss.

In January 2023, the Court issued an order denying the Company’s motion to dismiss the second amended complaint.

In March 2023, the Court entered a scheduling order setting a trial date for September 2025.

The case is now in discovery.

The Company believes that the final remaining lawsuit described above is also without merit, and intends to vigorously defend it.

Tax Examinations:

The Company is under IRS examination in the U.S.

on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain of our tax positions.

on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain tax positions, which are currently being contested in the U.S.

For more detail, see Note 15 - "Income Taxes" for further information.

In December 2019, the Company received a request for voluntary production of information in connection with an informal investigation by the U.S.

Securities and Exchange Commission.

The primary focus of the investigation was the Company’s historical reporting related to its non-GAAP adjustment for “transaction, separation, and integration-related costs,” including whether the disclosure the Company previously used to describe the non-GAAP adjustment was sufficiently broad to cover certain expenses the Company included as transaction, separation, and integration-related costs.

The non-GAAP costs at issue primarily consisted of expenses associated with the business combination that formed DXC in 2017.

The Company cooperated fully with the SEC’s informal investigation, and the new management team appointed beginning in September of 2019 proactively clarified and expanded the disclosure of the Company’s non-GAAP transaction, separation, and integration-related costs.

In addition, the new management team significantly reduced the transaction, separation, and integration-related costs.

In September 2022, the Company accrued $ 8 million, representing its estimate of the settlement costs based on its discussions with the SEC at that time.

In March 2023, the Company entered into an Offer of Settlement with the SEC and a Cease-and-Desist Order was entered.

The Company agreed to pay a civil penalty of $ 8 million and to implement certain remedial measures related to the Company’s non-GAAP policies and procedures within 120 days.

The Company has paid the civil penalty and intends to fully implement the remedial measures within the time provided.

This matter is otherwise closed.

In August 2022, the Company submitted an initial notification of voluntary self-disclosure to the U.S.

Department of the Treasury, Office of Foreign Assets Control (“OFAC”) regarding potential violations of U.S.

sanctions on Russia.

The self-disclosure pertains to the Company’s sale of Luxoft’s Russia business to IBS Holding LLC in April 2022, as part of the Company’s exit from the Russian market following Russia’s invasion of Ukraine.

The Company has also submitted an initial notification of voluntary self-disclosure to the U.S.

Department of Commerce, Bureau of Industry and Security (“BIS”) regarding potential export control violations in connection with its exit from the Russian market.

The Company’s review of potential sanctions violations is ongoing, and the Company may make further disclosures to relevant agencies as its review continues.

In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data