Leases (Tables)
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9 Months Ended |
Sep. 30, 2019 |
Leases |
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Schedule of various components of lease costs |
The following tables present the various components of lease costs: | | | | (Dollars in millions) | | | | For the three months ended September 30: | | 2019 | Finance lease cost | | $ | 7 | Operating lease cost | | | 423 | Short-term lease cost | | | 11 | Variable lease cost | | | 90 | Sublease income | | | (7) | Total lease cost | | $ | 523 |
| | | | (Dollars in millions) | | | | For the nine months ended September 30: | | 2019 | Finance lease cost | | $ | 14 | Operating lease cost | | | 1,243 | Short-term lease cost | | | 26 | Variable lease cost | | | 345 | Sublease income | | | (16) | Total lease cost | | $ | 1,613 |
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Schedule of supplemental information relating to the cash flows arising from lease transactions |
| | | | | (Dollars in millions) | | | | | For the nine months ended September 30: | | 2019 | | Cash paid for amounts included in the measurement of lease liabilities: | | | | | Operating cash outflows from finance leases | | $ | 7 | | Financing cash outflows from finance leases | | $ | 6 | | Operating cash outflows from operating leases | | $ | 1,154 | | ROU assets obtained in exchange for new finance lease liabilities | | $ | 149 | * | ROU assets obtained in exchange for new operating lease liabilities | | $ | 6,023 | * |
* Includes opening balance additions as a result of the adoption of the new lease guidance effective January 1, 2019. The post adoption addition of leases for the nine months ended September 30, 2019 was $1,221 million for operating leases and immaterial for finance leases. |
Schedule of weighted-average lease terms and discount rates |
| | | | | At September 30: | | 2019 | | Weighted-average remaining lease term — finance leases | | | 5.9 | yrs. | Weighted-average remaining lease term — operating leases | | | 5.3 | yrs. | Weighted-average discount rate — finance leases | | | 1.73 | % | Weighted-average discount rate — operating leases | | | 3.10 | % |
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Schedule of expected undiscounted cash out flows for operating and finance leases |
The following table presents a maturity analysis of the expected undiscounted cash out flows for operating and finance leases on an annual basis for the next five years and thereafter, at September 30, 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | Remainder of | | | | | | | | | | | | | | Beyond | | Imputed | | | | (Dollars in millions) | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2023 | | Interest* | | Total | Finance leases | | $ | 10 | | $ | 42 | | $ | 43 | | $ | 36 | | $ | 24 | | $ | 53 | | $ | (54) | | $ | 155 | Operating leases | | $ | 402 | | $ | 1,419 | | $ | 1,123 | | $ | 847 | | $ | 604 | | $ | 1,160 | | $ | (388) | | $ | 5,167 |
* Imputed interest represents the difference between undiscounted cash flows and discounted cash flows. |
Operating lease commitments |
The following table, which was included in the company’s 2018 Annual Report, depicts gross minimum rental commitments under noncancelable leases, amounts related to vacant space associated with workforce transformation, sublease income commitments and capital lease commitments at December 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Beyond | (Dollars in millions) | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2023 | Operating lease commitments | | | | | | | | | | | | | | | | | | | Gross minimum rental commitments | | | | | | | | | | | | | | | | | | | (including vacant space below) | | $ | 1,581 | | $ | 1,233 | | $ | 914 | | $ | 640 | | $ | 445 | | $ | 815 | Vacant space | | $ | 29 | | $ | 23 | | $ | 14 | | $ | 9 | | $ | 5 | | $ | 8 | Sublease income commitments | | $ | 11 | | $ | 7 | | $ | 5 | | $ | 4 | | $ | 4 | | $ | 2 | Capital lease commitments | | $ | 3 | | $ | 3 | | $ | 3 | | $ | 3 | | $ | 2 | | $ | 28 |
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Capital lease commitments |
The following table, which was included in the company’s 2018 Annual Report, depicts gross minimum rental commitments under noncancelable leases, amounts related to vacant space associated with workforce transformation, sublease income commitments and capital lease commitments at December 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Beyond | (Dollars in millions) | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | 2023 | Operating lease commitments | | | | | | | | | | | | | | | | | | | Gross minimum rental commitments | | | | | | | | | | | | | | | | | | | (including vacant space below) | | $ | 1,581 | | $ | 1,233 | | $ | 914 | | $ | 640 | | $ | 445 | | $ | 815 | Vacant space | | $ | 29 | | $ | 23 | | $ | 14 | | $ | 9 | | $ | 5 | | $ | 8 | Sublease income commitments | | $ | 11 | | $ | 7 | | $ | 5 | | $ | 4 | | $ | 4 | | $ | 2 | Capital lease commitments | | $ | 3 | | $ | 3 | | $ | 3 | | $ | 3 | | $ | 2 | | $ | 28 |
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Schedule of amounts included in the Consolidated Statement of Earnings related to lessor activity |
The following tables present amounts included in the Consolidated Statement of Earnings related to lessor activity: | | | | (Dollars in millions) | | | | For the three months ended September 30: | | 2019 | Lease income — sales-type and direct financing leases | | | | Sales-type lease selling price | | $ | 188 | Less: Carrying value of underlying assets, excluding unguaranteed residual value | | | 75 | Gross profit | | | 113 | Interest income on lease receivables | | | 71 | Total sales-type and direct financing lease income | | $ | 184 | Lease income — operating leases | | | 80 | Variable lease income | | | 12 | Total lease income | | $ | 276 |
| | | | (Dollars in millions) | | | | For the nine months ended September 30: | | 2019 | Lease income — sales-type and direct financing leases | | | | Sales-type lease selling price | | $ | 516 | Less: Carrying value of underlying assets, excluding unguaranteed residual value | | | 204 | Gross profit | | | 312 | Interest income on lease receivables | | | 222 | Total sales-type and direct financing lease income | | $ | 534 | Lease income — operating leases | | | 252 | Variable lease income | | | 38 | Total lease income | | $ | 824 |
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Schedule of maturity analysis of the lease payments due to IBM on sales-type and direct financing leases |
The following table presents a maturity analysis of the lease payments due to IBM on sales-type and direct financing leases over the next five years and thereafter, as well as a reconciliation of the undiscounted cash flows to the financing receivables recognized in the Consolidated Statement of Financial Position at September 30, 2019: | | | | | (Dollars in millions) | | Total | | Remainder of 2019 | | $ | 847 | | 2020 | | | 2,344 | | 2021 | | | 1,571 | | 2022 | | | 759 | | 2023 | | | 216 | | Thereafter | | | 43 | | Total undiscounted cash flows | | $ | 5,781 | | Present value of lease payments (recognized as financing receivables) | | | 5,337 | * | Difference between undiscounted cash flows and discounted cash flows | | $ | 444 | |
* The present value of the lease payments will not equal the financing receivables balances in the Statement of Financial Position, due to certain items including IDC's, allowance for credit losses and residual values, which are included in the financing receivables balance, but are not included in the future lease payments. |
Schedule of maturity analysis of the undiscounted lease payments due to IBM on operating leases |
The following table presents a maturity analysis of the undiscounted lease payments due to IBM on operating leases over the next five years and thereafter, at September 30, 2019: | | | | (Dollars in millions) | | Total | Remainder of 2019 | | $ | 90 | 2020 | | | 119 | 2021 | | | 33 | 2022 | | | 3 | 2023 | | | 0 | Thereafter | | | 0 | Total undiscounted cash flows | | $ | 245 |
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