Leases

6 Months Ended

Mar. 31, 2020

Leases of Lessee Disclosure [Text Block]

Leases

The Company leases real estate, vehicles and other equipment which are used in the Company’s manufacturing, administrative and research and development activities. The Company identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. The Company’s lease arrangements are generally classified as operating leases. These arrangements have remaining terms ranging from less than one year to approximately 25 years and the weighted-average remaining lease term of the Company’s leases is approximately 7.5 years. An option to renew or terminate the current term of a lease arrangement is included in the lease term if the Company is reasonably certain to exercise that option.

The Company does not recognize a right-of-use asset and lease liability for short-term leases, which have terms of 12 months or less, on its consolidated balance sheet. For the longer-term lease arrangements that are recognized on the Company’s consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs associated with the Company’s short-term leases, as well as variable costs relating to the Company’s lease arrangements, are not material to its consolidated financial results.

The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. The weighted-average incremental borrowing rate that has been applied to measure the Company’s lease liabilities is 2.3%.

The Company’s lease costs recorded in its consolidated statements of income for the three and six months ended March 31, 2020 were $32 million and $65 million, respectively. Cash payments arising from the Company’s lease arrangements are reflected on its condensed consolidated statement of cash flows as outflows used for operating activities. The right-of-use assets and lease liabilities recognized on the Company’s condensed consolidated balance sheet as of March 31, 2020 were as follows:



(Millions of dollars)	March 31, 2020
Right-of-use assets recorded in Other Assets	$	427
Current lease liabilities recorded in Payables, accrued expenses and other current liabilities	$	103
Non-current lease liabilities recorded in Deferred Income Taxes and Other Liabilities	$	345

The Company’s payments due under its operating leases are as follows:



(Millions of dollars)
Remaining for 2020	$	58
2021	102
2022	83
2023	55
2024	36
Thereafter	164
Total payments due	499
Less: imputed interest	50
Total	$	448

The Company’s future minimum rental commitments on non-cancelable leases at September 30, 2019, as disclosed in the Company’s 2019 Annual Report on Form 10-K, were as follows:



(Millions of dollars)
2020	$	122
2021	103
2022	83
2023	57
2024	56
Thereafter	123
Total	$	546