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Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

Note 14 – Leases

 

As discussed in Note 2, the Company adopted ASU 2016-02, Leases, as of January 1, 2019. As permitted by the standard, the Company did not restate its Consolidated Financial Statements for periods prior to the adoption date and the required disclosures presented below are prospective from the date of adoption forward. The Company’s operating leases are primarily for office space and certain computer and other equipment, and have terms ranging from one month to 18 years.

 

Accounting policy. The Company determines if an arrangement is a lease and its lease classification (operating or finance) at inception. Beginning in the first quarter of 2019, both operating and finance leases result in (1) a right-of-use (“ROU”) asset that represents our right to use the underlying asset for the lease term, and (2) a lease liability that represents our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are reflected in the following lines in the Company’s Consolidated Balance Sheet:

 

 

 

ROU Asset

 

Current Lease Liability

 

Non-Current Lease Liability

Operating lease

 

Other assets

 

Accrued expenses and other liabilities (current)

 

Other liabilities (non-current)

Finance lease

 

Property and equipment

 

Short-term debt

 

Long-term debt

These lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Most of the Company’s leases do not provide an implicit rate, so the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease pre-payments made and excludes lease incentives for operating leases. The Company’s expected life of a lease may include options to extend or terminate a lease when it is reasonably certain that the Company will exercise that option.

 

The Company has lease agreements with lease and non-lease components that are accounted for as a single lease component. Variable lease payments are expensed as incurred and represent amounts that are not fixed in nature, such as maintenance and other services provided by the lessor, and are not tied to an index or rate.

 

The components of lease expense were as follows:

 

 

Three Months Ended

 

Nine Months Ended

(In millions)

 

September 30, 2019

 

September 30, 2019

Operating lease costs

$

45

$

139

Finance lease costs:

 

 

 

 

Amortization of ROU assets

 

6

 

20

Interest on lease liabilities

 

-

 

2

Total finance lease costs

 

6

 

22

Variable lease costs

 

13

 

36

Total lease costs

$

64

$

197

Supplemental cash flow information related to leases was as follows:

 

 

Nine Months Ended

(In millions)

 

September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

 

 

Operating cash outflows from operating leases

$

126

Operating cash outflows from finance leases

$

2

Financing cash outflows from finance leases

$

17

 

 

 

ROU assets obtained in exchange for lease obligations:

 

 

Operating leases

$

70

Finance leases

$

60

Operating and finance lease ROU assets and lease liabilities were as follows at the balance sheet date:

(In millions)

 

September 30, 2019

Operating leases:

 

 

Operating lease ROU assets

$

565

 

 

 

Accrued expenses and other current liabilities

$

162

Other non-current liabilities

 

495

Total operating lease liabilities

$

657

 

 

 

Finance leases:

 

 

Property and equipment, gross

$

105

Accumulated depreciation

 

(17)

Property and equipment, net

$

88

 

 

 

Short-term debt

$

23

Long-term debt

 

64

Total finance lease liabilities

$

87

As of September 30, 2019, the weighted average remaining lease term was 5 years for operating leases and 5 years for finance leases, and the weighted average discount rate was 3.92% for operating leases and 3.84% for finance leases.

 

Maturities of lease liabilities as of September 30, 2019 were as follows:

(In millions)

Operating Leases

Finance Leases

2019

$

47

$

9

2020

 

177

 

25

2021

 

149

 

17

2022

 

129

 

16

2023

 

88

 

8

Thereafter

 

137

 

22

Total lease payments

 

727

 

97

Less: imputed interest

 

70

 

10

Total

$

657

$

87

Disclosures regarding minimum lease payments under previous lease accounting guidance can be found in the Company’s 2018 Form 10-K.