Notes to Financial Statements
NOTE 13 — 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 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) |
|
|
Three Months Ended December 31, |
|
|
|
Six Months Ended December 31, |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
$ |
503 |
|
|
$ |
478 |
|
|
$ |
1,001 |
|
|
$ |
943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
|
$ |
249 |
|
|
$ |
163 |
|
|
$ |
455 |
|
|
$ |
288 |
|
Interest on lease liabilities |
|
|
94 |
|
|
|
84 |
|
|
|
186 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance lease cost |
|
$ |
343 |
|
|
$ |
247 |
|
|
$ |
641 |
|
|
$ |
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information related to leases was as follows:
(In millions) |
|
Three Months Ended December 31, |
|
|
|
Six Months Ended December 31, |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
482 |
|
|
$ |
479 |
|
|
$ |
973 |
|
|
$ |
932 |
|
Operating cash flows from finance leases |
|
|
94 |
|
|
|
84 |
|
|
|
186 |
|
|
|
162 |
|
Financing cash flows from finance leases |
|
|
153 |
|
|
|
104 |
|
|
|
289 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
1,578 |
|
|
|
948 |
|
|
|
2,256 |
|
|
|
1,931 |
|
Finance leases |
|
|
1,193 |
|
|
|
863 |
|
|
|
1,828 |
|
|
|
2,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental balance sheet information related to leases was as follows:
(In millions, except lease term and discount rate) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
||||||
|
|
December 31, 2020 |
|
|
June 30, |
|
||
|
|
|
||||||
Operating Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
$ |
10,298 |
|
|
$ |
8,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
1,866 |
|
|
$ |
1,616 |
|
Operating lease liabilities |
|
|
8,875 |
|
|
|
7,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating lease liabilities |
|
$ |
10,741 |
|
|
$ |
9,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost |
|
$ |
12,694 |
|
|
$ |
10,371 |
|
Accumulated depreciation |
|
|
(1,840 |
) |
|
|
(1,385 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
10,854 |
|
|
$ |
8,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
$ |
699 |
|
|
$ |
540 |
|
Other long-term liabilities |
|
|
10,819 |
|
|
|
8,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance lease liabilities |
|
$ |
11,518 |
|
|
$ |
9,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
8 years |
|
|
|
8 years |
|
Finance leases |
|
|
12 years |
|
|
|
13 years |
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
2.3% |
|
|
|
2.7% |
|
Finance leases |
|
|
3.6% |
|
|
|
3.9% |
|
|
|
|
|
|
|
|
|
|
The following table outlines maturities of our lease liabilities as of December 31, 2020:
(In millions) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Year Ending June 30, |
|
Operating Leases |
|
|
Finance Leases |
|
||
|
|
|
||||||
2021 (excluding the six months ended December 31, 2020) |
|
$ |
1,099 |
|
|
$ |
533 |
|
2022 |
|
|
1,997 |
|
|
|
1,080 |
|
2023 |
|
|
1,811 |
|
|
|
1,092 |
|
2024 |
|
|
1,579 |
|
|
|
1,107 |
|
2025 |
|
|
1,280 |
|
|
|
1,431 |
|
Thereafter |
|
|
4,309 |
|
|
|
8,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease payments |
|
|
12,075 |
|
|
|
14,186 |
|
Less imputed interest |
|
|
(1,334 |
) |
|
|
(2,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,741 |
|
|
$ |
11,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $4.0 billion and $6.9 billion, respectively. These operating and finance leases will commence between fiscal year 2021 and fiscal year 2026 with lease terms of 1 year to 15 years.