LEASES (Notes)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

International Paper leases various real estate, including certain operating facilities, warehouses, office space and land. The Company also leases material handling equipment, vehicles, and certain other equipment. The Company's leases have remaining lease terms of one year to 97 years. Leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease. In addition, the Company has applied the practical expedient to account for the lease and non-lease components as a single lease component for all of the Company's leases.

Right of use (ROU) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Effective January 1, 2019, operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The Company's leases may include options to extend or terminate the lease. These options to extend are included in the lease term when it is reasonably certain that we will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to common area maintenance, insurance, taxes and utilities. Variable payments for equipment, vehicles, and leases within supply agreements primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of the Company's leases, the Company applies a portfolio approach using an estimated incremental borrowing rate to determine the initial present value of lease payments over the lease terms on a collateralized basis over a similar term, which is based on market and company specific information. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate, and apply the rate based on the currency of the lease, which is updated on a quarterly basis for measurement of new lease liabilities.

Components of Lease Expense

In millions	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease costs	$	39	$	115
Variable lease costs	16		53
Short-term lease costs	9		27
Finance lease cost
Amortization of lease assets	3		8
Interest on lease liabilities	1		3
Total lease cost, net	$	68	$	206

Supplemental Balance Sheet Information Related to Leases

In millions	Classification	September 30, 2019
Assets
Operating lease assets	Right-of-use assets	$	425
Finance lease assets	Plants, properties and equipment, net (a)	105
Total leased assets		$	530
Liabilities
Current
Operating	Other current liabilities	$	136
Finance	Notes payable and current maturities of long-term debt	13
Noncurrent
Operating	Long-term lease obligations	292
Finance	Long-term debt	91
Total lease liabilities		$	532

(a) Finance leases are recorded net of accumulated amortization of $37 million.

Lease Term and Discount Rate

In millions	September 30, 2019
Weighted average remaining lease term (years)
Operating leases	9.8 years
Finance leases	11.3 years
Weighted average discount rate
Operating leases	3.24	%
Finance leases	4.74	%

Supplemental Cash Flow Information Related to Leases

In millions	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows related to operating leases	$	110
Operating cash flows related to financing leases	3
Financing cash flows related to finance leases	7

Maturity of Lease Liabilities

	September 30, 2019
In millions	Operating Leases		Financing Leases		Total
2019 (remainder of year)	$	39	$	4	$	43
2020	138		17		155
2021	97		15		112
2022	64		13		77
2023	35		11		46
2024	18		10		28
Thereafter	95		65		160
Total lease payments	486		135		621
Less: Interest (a)	58		31		89
Present value of lease liabilities	$	428	$	104	$	532

(a) Calculated using the interest rate for each lease.

At December 31, 2018, total future minimum commitments under existing non-cancelable operating leases were as follows:

In millions	2019		2020		2021		2022		2023		Thereafter
Lease obligations	$	160	$	125	$	77	$	49	$	28	$	118