Notes to Financial Statements
NOTE 14 — LEASES
We have operating and finance leases for datacenters, corporate offices, research and development facilities, Microsoft Experience Centers, and certain equipment. Our leases have remaining lease terms of less than 1 year to 18 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
The components of lease expense were as follows:
(In millions) |
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Year Ended June 30, |
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2023 |
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2022 |
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2021 |
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Operating lease cost |
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$ |
2,875 |
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$ |
2,461 |
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$ |
2,127 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
1,352 |
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$ |
980 |
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$ |
921 |
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Interest on lease liabilities |
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501 |
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429 |
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386 |
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Total finance lease cost |
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$ |
1,853 |
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$ |
1,409 |
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$ |
1,307 |
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Supplemental cash flow information related to leases was as follows:
(In millions) |
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Year Ended June 30, |
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2023 |
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2022 |
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2021 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
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$ |
2,706 |
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$ |
2,368 |
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$ |
2,052 |
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Operating cash flows from finance leases |
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501 |
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429 |
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386 |
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Financing cash flows from finance leases |
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1,056 |
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896 |
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648 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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3,514 |
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5,268 |
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4,380 |
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Finance leases |
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3,128 |
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4,234 |
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3,290 |
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Supplemental balance sheet information related to leases was as follows:
(In millions, except lease term and discount rate) |
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June 30, |
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2023 |
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2022 |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
14,346 |
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$ |
13,148 |
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Other current liabilities |
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$ |
2,409 |
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$ |
2,228 |
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Operating lease liabilities |
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12,728 |
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11,489 |
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Total operating lease liabilities |
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$ |
15,137 |
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$ |
13,717 |
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Finance Leases |
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Property and equipment, at cost |
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$ |
20,538 |
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$ |
17,388 |
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Accumulated depreciation |
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(4,647 |
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(3,285 |
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Property and equipment, net |
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$ |
15,891 |
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$ |
14,103 |
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Other current liabilities |
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$ |
1,197 |
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$ |
1,060 |
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Other long-term liabilities |
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15,870 |
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13,842 |
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Total finance lease liabilities |
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$ |
17,067 |
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$ |
14,902 |
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Weighted Average Remaining Lease Term |
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Operating leases |
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8 years |
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8 years |
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Finance leases |
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11 years |
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12 years |
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Weighted Average Discount Rate |
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Operating leases |
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2.9% |
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2.1% |
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Finance leases |
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3.4% |
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3.1% |
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The following table outlines maturities of our lease liabilities as of June 30, 2023:
(In millions) |
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Year Ending June 30, |
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Operating Leases |
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Finance Leases |
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2024 |
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$ |
2,784 |
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$ |
1,747 |
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2025 |
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2,508 |
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2,087 |
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2026 |
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2,142 |
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1,771 |
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2027 |
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1,757 |
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1,780 |
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2028 |
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1,582 |
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1,787 |
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Thereafter |
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6,327 |
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11,462 |
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Total lease payments |
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17,100 |
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20,634 |
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Less imputed interest |
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(1,963 |
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(3,567 |
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Total |
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$ |
15,137 |
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$ |
17,067 |
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As of June 30, 2023, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $7.7 billion and $34.4 billion, respectively. These operating and finance leases will commence between fiscal year 2024 and fiscal year 2030 with lease terms of 1 year to 18 years.
