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Leases (Tables)
9 Months Ended
Sep. 30, 2019
Leases  
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

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

%

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

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

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

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