Leases (Notes)

12 Months Ended

Dec. 26, 2020

Leases

Lessee

We determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of which include options to extend the lease term for up to five years, and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).

Components of lease cost are as follows:


	2020		2019
Operating lease cost (a)	$	539	$	474
Variable lease cost (b)	$	111	$	101
Short-term lease cost (c)	$	436	$	379

(a)Includes right-of-use asset amortization of $478 million and $412 million in 2020 and 2019, respectively.

(b)Primarily related to adjustments for inflation, common-area maintenance and property tax.

(c)Not recorded on our balance sheet.

Rent expense for the year ended December 29, 2018 was $771 million.

In 2020 and 2019, we recognized gains of $7 million and $77 million, respectively, on sale-leaseback transactions with terms under four years.

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:


	2020		2019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	555	$	478
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	621	$	479

Supplemental balance sheet information related to our operating leases is as follows:



	Balance Sheet Classification	2020		2019
Right-of-use assets	Other assets	$	1,670	$	1,548
Current lease liabilities	Accounts payable and other current liabilities	$	460	$	442
Non-current lease liabilities	Other liabilities	$	1,233	$	1,118

Weighted-average remaining lease term and discount rate for our operating leases are as follows:


	2020		2019
Weighted-average remaining lease term	6 years		6 years
Weighted-average discount rate	4	%	4	%

Maturities of lease liabilities by year for our operating leases are as follows:


2021	$	486
2022	385
2023	278
2024	194
2025	139
2026 and beyond	413
Total lease payments	1,895
Less: Imputed interest	(202)
Present value of lease liabilities	$	1,693

Lessor

We have various arrangements for certain foodservice and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.