LEASES

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

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 15 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 a research and development 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:

	Year Ended December 31,
Dollars in Millions	2021		2020		2019
Operating lease cost	$	220	$	194	$	115
Variable lease cost	44		50		25
Short-term lease cost	17		19		20
Sublease income	(7)		(4)		(4)
Total operating lease expense	$	274	$	259	$	156

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

	December 31,
Dollars in Millions	2021		2020
Other non-current assets	$	919	$	859
Other current liabilities	169		164
Other non-current liabilities	874		833
Total liabilities	$	1,043	$	997

Future lease payments for non-cancellable operating leases as of December 31, 2021 were as follows:

Dollars in Millions
2022	$	190
2023	176
2024	130
2025	105
2026	96
Thereafter	494
Total future lease payments	1,191
Less imputed interest	(148)
Total lease liability	$	1,043

Right-of-use assets obtained in exchange for new operating lease obligations were $228 million in 2021. Cash paid for amounts included in the measurement of operating lease liabilities was $189 million in 2021 and $164 million in 2020.

Undiscounted lease obligations for operating leases not yet commenced were approximately $793 million as of December 31, 2021. The obligation primarily relates to a research and development facility that is being constructed by the lessor and which is expected to be ready for use in 2022.

A right-of-use asset impairment charge of $31 million was incurred during 2020 due to a site vacancy and partial sublease. The fair value of the right-of-use asset was determined using an income approach incorporating potential future cash flows associated with the sublease of the building.

Supplemental balance sheet information related to leases was as follows:

	December 31,
	2021		2020
Weighted average remaining lease term	10 years		9 years
Weighted average discount rate	3	%	3	%