Leases

12 Months Ended

Dec. 31, 2022

Lease Accounting

Components of Lease Cost


	2022		2021		2020
Operating lease cost	$	133	$	145	$	137
Finance lease cost
Amortization of right-of-use assets	7		5		5
Interest on lease liabilities	3		4		3
Total finance lease cost	$	10	$	9	$	8
Sublease income	$	(55)	$	(59)	$	(60)

Supplemental Cash Flow Information


	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	137	$	140	$	133
Operating cash flows from finance leases	3		4		3
Financing cash flows from finance leases	5		4		5
Right-of-use assets obtained in exchange for lease obligations
Operating leases(a)	93		119		296
Finance leases	10		5		4
Operating lease liabilities transferred through refranchising	(14)		(25)		(3)
Finance lease and other debt obligations transferred through refranchising	—		(2)		(1)

(a) The year ended December 31, 2020, includes right-of-use assets acquired as part of the acquisition of Habit Burger Grill of $196 million.

Supplemental Balance Sheet Information


	2022			2021			Consolidated Balance Sheet
Assets
Operating lease right-of-use assets	$	742		$	809		Other assets
Finance lease right-of-use assets	33			37			Property, plant and equipment, net
Total right-of-use assets(a)	$	775		$	846

Liabilities
Current
Operating	$	79		$	88		Accounts payable and other current liabilities
Finance	8			7			Short-term borrowings
Non-current
Operating	731			793			Other liabilities and deferred credits
Finance	49			57			Long-term debt
Total lease liabilities(a)	$	867		$	945

Weighted-average Remaining Lease Term (in years)
Operating leases	10.8			10.9
Finance leases	11.6			12.1

Weighted-average Discount Rate
Operating leases	5.1		%	4.9		%
Finance leases	5.8		%	5.8		%

(a) U.S. operating lease right-of-use assets and liabilities totaled $515 million and $575 million, respectively, as of December 31, 2022, and $516 million and $577 million, respectively, as of December 31, 2021. These amounts primarily related to Taco Bell U.S. and the Habit Burger Grill including leases related to Company-operated restaurants, leases related to franchise-operated restaurants we sublease and the Taco Bell and Habit Burger Grill restaurant support center.

At December 31, 2022, KFC Russia operating and finance lease right-of-use assets of $25 million and $3 million, respectively, have been classified as held for sale and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheet (see Note 3). The associated KFC Russia operating and finance lease liabilities of $25 million and $3 million, respectively, have also been classified as held for sale and are included in Accounts payable and other current liabilities in our Consolidated Balance Sheet. Such amounts are not reflected in the Supplemental Balance Sheet Information above.

Maturity of Lease Payments and Receivables

Future minimum lease payments, including rental payments for lease renewal options we are reasonably certain to exercise, and amounts to be received as lessor or sublessor as of December 31, 2022, were as follows:


	Commitments				Lease Receivables
	Finance		Operating		Direct Financing		Operating
2023	$	10	$	116	$	3	$	79
2024	9		119		3		74
2025	7		109		3		71
2026	6		101		3		67
2027	6		92		2		61
Thereafter	32		524		19		479
Total lease payments/receipts	70		1,061		33		$	831
Less imputed interest/unearned income	(13)		(251)		(13)
Total lease liabilities/receivables	$	57	$	810	$	20

As of December 31, 2022, we have executed real estate leases that have not yet commenced with estimated future nominal lease payments of approximately $125 million, which are not included in the tables above. These leases are expected to commence in 2023, 2024 and 2025 with lease terms of up to 20 years.