Notes to Financial Statements

NOTE 15 — LEASES

We have operating and finance leases for datacenters, corporate offices, research and development facilities, retail stores, and certain equipment. Our leases have remaining lease terms of 1 year to 20 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended June 30,

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

1,707

 

 

$

1,585

 

 

$

1,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

370

 

 

$

243

 

 

$

104

 

Interest on lease liabilities

 

 

247

 

 

 

175

 

 

 

68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total finance lease cost

 

$

617

 

 

$

418

 

 

$

172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information related to leases was as follows:

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended June 30,

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

1,670

 

 

$

1,522

 

 

$

1,157

 

Operating cash flows from finance leases

 

 

247

 

 

 

175

 

 

 

68

 

Financing cash flows from finance leases

 

 

221

 

 

 

144

 

 

 

46

 

 

 

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

2,303

 

 

 

1,571

 

 

 

1,270

 

Finance leases

 

 

2,532

 

 

 

1,933

 

 

 

1,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental balance sheet information related to leases was as follows:

 

(In millions, except lease term and discount rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 June 30,

 

2019

 

 

2018

 

 

 

 

Operating Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

7,379

 

 

$

6,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

1,515

 

 

$

1,399

 

Operating lease liabilities

 

 

6,188

 

 

 

5,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating lease liabilities

 

$

7,703

 

 

$

6,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, at cost

 

$

7,041

 

 

$

4,543

 

Accumulated depreciation

 

 

(774

)

 

 

(404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

$

6,267

 

 

$

4,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

317

 

 

$

176

 

Other long-term liabilities

 

 

6,257

 

 

 

4,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total finance lease liabilities

 

$

6,574

 

 

$

4,301

 

 

 

 

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

7 years

 

 

 

7 years

 

Finance leases

 

 

13 years

 

 

 

13 years

 

 

 

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

3.0%

 

 

 

2.7%

 

Finance leases

 

 

4.6%

 

 

 

5.2%

 

 

 

 

 

 

 

 

 

 

 

Maturities of lease liabilities were as follows:

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ending June 30,

 

Operating Leases

 

 

Finance Leases

 

 

 

 

2020

 

$

1,678

 

 

$

591

 

2021

 

 

1,438

 

 

 

616

 

2022

 

 

1,235

 

 

 

626

 

2023

 

 

1,036

 

 

 

631

 

2024

 

 

839

 

 

 

641

 

Thereafter

 

 

2,438

 

 

 

5,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total lease payments

 

 

8,664

 

 

 

8,776

 

Less imputed interest

 

 

(961

)

 

 

(2,202

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

7,703

 

 

$

6,574

 

 

 

 

 

 

 

 

 

 

As of June 30, 2019, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $2.3 billion and $6.1 billion, respectively. These operating and finance leases will commence between fiscal year 2020 and fiscal year 2022 with lease terms of 1 year to 15 years.