Leases, Codification Topic 842

12 Months Ended

Mar. 31, 2022

(13) LEASES

Our leases primarily consist of facility leases for our offices and development studios, data centers, and server equipment, with remaining lease terms of up to 15 years. Our lease terms may include options to extend or terminate the lease. When it is reasonably certain that we will exercise that option, we include the renewals or reduced lease terms in our calculation of operating lease liabilities. Substantially all of our leases are classified as operating leases.

We determine if an arrangement is or contains a lease at contract inception. The contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining if a contract is or contains a lease, we apply judgment whether the contract provides the right to obtain substantially all of the economic benefits, the right to direct, or control the use of the identified asset throughout the period of use.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of future lease payments over the lease term. In determining the present value of the future lease payments, we use our incremental borrowing rate as none of our leases provide an implicit rate. Our incremental borrowing rate is an assumed rate based on our credit rating, credit history, current economic environment, and the lease term. Operating lease ROU assets are further adjusted for any payments made, incentives received, and initial direct costs incurred prior to the commencement date.

Operating lease ROU assets are amortized on a straight-line basis over the lease term and recognized as lease expense within cost of revenue or operating expenses on our Consolidated Statements of Operations. Operating lease liabilities decrease by lease payments we make over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Some of our operating leases contain lease and non-lease components. Non-lease components primarily include fixed payments for common area maintenance and utilities. We elected to account for lease and non-lease components as a single lease component. Variable lease and non-lease components are recognized on our Consolidated Statements of Operations as incurred.

The components of lease expenses for the fiscal years ended March 31, 2022, 2021, and 2020 are as follows (in millions):


	Year Ended March 31,
	2022		2021		2020
Operating lease costs	$	98	$	87	$	70
Variable lease costs	21		21		37
Short-term lease costs	2		2		14
Total lease expense	$	121	$	110	$	121

Supplemental cash and noncash information related to our operating leases for the fiscal years ended March 31, 2022, 2021, and 2020 are as follows (in millions):


	Year Ended March 31,
	2022		2021		2020
Cash paid for amounts included in the measurement of lease liability	$	97	$	85	$	69
ROU assets obtained in exchange for new lease obligations	$	150	$	90	$	52

Weighted average remaining lease term and discount rate at March 31, 2022 and 2021 are as follows:


	At March 31, 2022		At March 31, 2021
Lease term	6.8 years		7.2 years
Discount rate	2.5	%	2.7	%

Operating lease ROU assets and liabilities recorded on our Consolidated Balance Sheets as of March 31, 2022 and 2021 are as follows (in millions):


	As of March 31,				Balance Sheet Classification
	2022		2021
Operating lease ROU assets	$	314	$	242	Other assets

Operating lease liabilities	$	81	$	76	Accrued and other current liabilities
Noncurrent operating lease liabilities	272		202		Other liabilities
Total operating lease liabilities	$	353	$	278

Future minimum lease payments under operating leases as of March 31, 2022 were as follows (in millions):


Fiscal Years Ending March 31,
2023	$	86
2024	73
2025	56
2026	46
2027	31
Thereafter	93
Total future lease payments	385
Less imputed interest	(32)
Total operating lease liabilities	$	353

In addition to what is included in the table above, as of March 31, 2022, we have entered into three office leases and two equipment leases that have not yet commenced with aggregate future lease payments of approximately $138 million. These leases are expected to commence between fiscal year 2023 and fiscal year 2025, and will have lease terms ranging from 2 to 12 years.