LEASES Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases of Lessee Disclosure [Text Block]

LEASES

Leased facilities for office, research and development, and storage and distribution purposes, comprise approximately 90% of the total lease obligation. Lease terms vary based on the nature of operations and the market dynamics in each country; however, all leased facilities are classified as operating leases with remaining lease terms between one year and 20 years. Most leases contain specific renewal options for periods ranging between one year and 10 years where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Certain leases also contain termination options that provide the flexibility to terminate the lease ahead of its expiration with sufficient advance notice. Periods covered by an option to terminate the lease were included in the non-cancellable lease term when exercise of the option was determined not to be reasonably certain. Judgment is required in assessing whether renewal and termination options are reasonably certain to be exercised. Factors are considered such as contractual terms compared to current market rates, leasehold improvements expected to have significant value, costs to terminate a lease and the importance of the facility to operations. Costs determined to be variable and not based on an index or rate were not included in the measurement of real estate lease liabilities. These variable costs include real estate taxes, insurance, utilities, common area maintenance and other operating costs. As the implicit rate on most leases is not readily determinable, an incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.

The remaining 10% of lease obligations are comprised of vehicles used primarily by salesforce and an R&D facility operated by a third party under management's direction. Vehicle lease terms vary by country with terms generally between one year and four years.

The following table summarizes the components of lease expense:



Dollars in Millions	Year Ended December 31, 2019
Operating lease cost	$	115
Variable lease cost	25
Short-term lease cost	20
Sublease income	(4		)
Total operating lease expense	$	156

Operating lease right-of-use assets and liabilities were as follows:



Dollars in Millions	December 31, 2019		January 1, 2019
Other non-current assets	$	704	$	543

Other current liabilities	133		40
Other non-current liabilities	672		548
Total liabilities	$	805	$	588

Future lease payments for non-cancellable operating leases as of December 31, 2019 were as follows:



Dollars in Millions
2020	$	165
2021	145
2022	130
2023	104
2024	68
Thereafter	354
Total future lease payments	966

Less imputed interest	161
Total lease liability	$	805

Future minimum lease payments under non-cancelable operating leases as of December 31, 2018 were approximately $100 million per year from 2019 through 2023 and $200 million thereafter.

Right-of-use assets obtained in exchange for new operating lease obligations were $231 million for the year ended December 31, 2019, primarily relates to $223 million of right-of-use assets acquired in the Celgene acquisition. Cash paid for amounts included in the measurement of operating lease liabilities was $79 million for the year ended December 31, 2019, net of a $33 million lease incentive received in the second quarter. The weighted-average remaining lease term was 9 years and the discount rate was 4% as of December 31, 2019.