Effective February 3, 2019 (the “adoption date”), we adopted ASC 842 Leases (the “new standard”). The new standard requires lessees to recognize a liability for lease obligations and a corresponding right of use asset on the balance sheet. The guidance also requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing and potential uncertainty of cash flows related to leases. We adopted the new standard using a modified retrospective transition method and applied the transition provisions at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings. We did not restate prior period financial statements.

The new standard includes several transition practical expedients that were available to reduce the burden of implementing the standard.

The following table summarizes changes in our Consolidated Balance Sheet upon adoption of the new standard:

(Dollars in Millions)
Assets
Property and equipment, net	$	(174	)	(a)
Operating leases		2,446		(b)
Other assets		(32	)	(c)
Total assets	$	2,240
Liabilities and Shareholders' Equity
Finance lease and financing obligations	$	(237	)	(a)
Operating leases		2,771		(b)
Accrued and other liabilities		(413	)	(c)
Deferred taxes		31		(d)
Shareholders' equity		88		(d)
Total liabilities and shareholders' equity	$	2,240

These adjustments represent non-cash activities for Statement of Cash Flow purposes.

The adoption of the new lease accounting standard did not have a material impact on our net income.

We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or which are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years and four to eight five-year renewal options.

Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.

Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized borrowing rate to calculate the present value of lease payments. For leases that commenced prior to the adoption date, we used the February 3, 2019 rate for a term consistent with the original lease term for operating leases and the rate on the lease commencement date for finance leases.

For leases with terms of 12 months or less, we elected the practical expedient to exclude them from the balance sheet and recognize expense on a straight-line basis over the lease term. For leases beginning, modified, or reassessed in 2019 and later, we elected the practical expedient to combine lease and non-lease components.

The following tables summarize our operating and finance leases and where they are presented in our Consolidated Financial Statements:

Consolidated Balance Sheet		February 1, 2020
(Dollars in Millions)	Classification	February 1, 2020
Assets
Operating leases	Operating leases	$	2,391
Finance leases	Property and equipment, net		672
Total operating and finance leases			3,063
Liabilities
Current
Operating leases	Current portion of operating leases		158
Finance leases	Current portion of finance lease and financing obligations		88
Noncurrent
Operating leases	Operating leases		2,619
Finance leases	Finance lease and financing obligations		877
Total operating and finance leases		$	3,742

Consolidated Statement of Income		2019
(Dollars in Millions)	Classification	2019
Operating leases	Selling, general, and administrative	$	314
Finance leases
Amortization of leased assets	Depreciation and amortization		72
Interest on lease liabilities	Interest expense, net		98
Total operating and finance leases		$	484

Rent expense charged to operations was $301 million for 2018 and $293 million for 2017.

Consolidated Statement of Cash Flows	2019
(Dollars in Millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	320
Operating cash flows from finance leases		98
Financing cash flows from finance leases		76

	February 1, 2020
(Dollars in Millions)	Operating Leases			Finance Leases			Total
2020	$	303		$	181		$	484
2021		303			162			465
2022		291			145			436
2023		276			124			400
2024		241			110			351
After 2024		3,426			1,750			5,176
Total lease payments		4,840			2,472			7,312
Amount representing interest		(2,063	)		(1,507	)		(3,570	)
Lease liabilities	$	2,777		$	965		$	3,742

Total lease payments include $3.0 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $1.5 billion related to options to extend finance lease terms that are reasonably certain of being exercised, and excludes $16.5 million of legally binding lease payments for leases signed, but not yet commenced.

The following table summarizes weighted-average remaining lease term and discount rates:

	February 1, 2020
Weighted-average remaining term (years)
Operating leases		20
Finance leases		17
Weighted-average discount rate
Operating leases		6	%
Finance leases		11	%

Historical failed sale-leasebacks that did not qualify for sale-leaseback accounting upon adoption of ASC 842 continue to be accounted for as financing obligations.

The following tables summarize our financing obligations and where they are presented in our Consolidated Financial Statements:

Consolidated Balance Sheet		February 1, 2020
(Dollars in Millions)	Classification	February 1, 2020
Assets
Financing obligations	Property and equipment, net	$	76
Liabilities
Current	Current portion of finance lease and financing obligations		36
Noncurrent	Finance lease and financing obligations		490
Total financing obligations		$	526

Consolidated Statement of Income		2019
(Dollars in Millions)	Classification	2019
Amortization of financing obligation assets	Depreciation and amortization	$	11
Interest on financing obligations	Interest expense, net		37
Total financing obligations		$	48

Consolidated Statement of Cash Flows	2019
(Dollars in Millions)	2019
Cash paid for amounts included in the measurement of financing obligations
Operating cash flows from financing obligations	$	37
Financing cash flows from financing obligations		37
Other financing obligations cash activity
Proceeds from financing obligations		11
(Gain) on extinguishment of debt		(9	)

In 2019, we purchased leased equipment that was accounted for as a financing obligation resulting in recognition of a $9 million gain on extinguishment of debt.

The following table summarizes future financing obligation payments by fiscal year:

(Dollars in Millions)	February 1, 2020
2020	$	69
2021		71
2022		68
2023		66
2024		60
After 2024		197
Total financing obligations payments		531
Non-cash gain on future sale of property		225
Amount representing interest		(230	)
Financing obligation liability	$	526

Total payments exclude $16 million of legally binding payments for contracts signed, but not yet commenced.

The following table summarizes the weighted-average remaining term and discount rate for financing obligations: