Leases

12 Months Ended

Feb. 01, 2020

In the first quarter of 2019, the Company adopted ASC 842, Leases, using the modified retrospective approach. Results for 2019 are presented under ASC 842, while prior periods consolidated financial statements have not been adjusted and continue to be presented under the accounting standards in effect at that time.

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.

The Company has provided residual value guarantees in connection with noncancelable operating leases of certain assets. For additional information, see Note 17, “Commitments and Contingencies.”

The following table provides the components of lease cost for operating leases for 2019:



	(in millions)
Operating Lease Costs (a)	$	769
Variable Lease Costs	100
Short-term Lease Costs	30
Total Lease Cost	$	899

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(a)	As discussed in Note 7, "Property and Equipment, Net," the Company recognized operating lease asset impairment charges of $65 million during 2019, which is included as additional operating lease costs.

The following table provides future maturities of operating lease liabilities as of February 1, 2020:



Fiscal Year	(in millions)
2020	$	674
2021	693
2022	619
2023	558
2024	481
Thereafter	1,475
Total Lease Payments	$	4,500
Less: Interest	(970		)
Present Value of Operating Lease Liabilities	$	3,530

As of February 1, 2020, the Company has additional operating lease commitments that have not yet commenced of approximately $264 million.

The following table provides the weighted-average remaining lease term and discount rate for operating leases with lease liabilities as of February 1, 2020:



Weighted Average Remaining Lease Term (years)	7.4
Weighted Average Discount Rate	6.2	%

During 2019, the Company paid $708 million for operating lease liabilities recorded on the balance sheet. These payments are included within the Operating Activities section of the 2019 Consolidated Statement of Cash Flows.

During 2019, the Company obtained $313 million of additional lease assets as a result of new operating lease obligations.

Finance Leases

The Company leases certain fulfillment equipment under finance leases that expire at various dates through 2023. The Company records finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the Consolidated Balance Sheet. Additionally, the Company records finance lease liabilities in Accrued Expenses and Other and Other Long-term Liabilities on the Consolidated Balance Sheet. Finance lease costs are comprised of the straight-line amortization of the lease asset and the accretion of interest expense under the effective interest method.

The Company recorded $21 million and $26 million of finance lease assets, net of accumulated amortization, in Property and Equipment, Net on the February 1, 2020 and February 2, 2019 Consolidated Balance Sheets, respectively. Additionally, the Company recorded finance lease liabilities of $8 million in Accrued Expenses and Other and $13 million in Other Long-term Liabilities on the February 1, 2020 Consolidated Balance Sheet, and $8 million in Accrued Expenses and Other and $19 million in Other Long-term Liabilities on the February 2, 2019 Consolidated Balance Sheet.

Asset Retirement Obligations

The Company has asset retirement obligations related to certain company-owned international stores that contractually obligate the Company to remove leasehold improvements at the end of a lease. The Company's liabilities for asset retirement obligations totaled $22 million as of February 1, 2020 and $18 million as of February 2, 2019. These liabilities are included in Other Long-term Liabilities on the Consolidated Balance Sheets.

Disclosures for 2018 and 2017

The following table provides rent expense, as presented under the prior accounting standard, for 2018 and 2017:



	2018			2017
	(in millions)
Store Rent:
Fixed Minimum	$	663		$	642
Contingent	72			67
Total Store Rent	735			709
Office, Equipment and Other	98			94
Gross Rent Expense	833			803
Sublease Rental Income	(2		)	(2		)
Total Rent Expense	$	831		$	801