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:
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(In millions) |
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Three Months Ended December 31, |
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Six Months Ended December 31, |
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2020 |
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2019 |
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2020 |
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2019 |
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Operating lease cost |
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$ |
503 |
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$ |
478 |
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$ |
1,001 |
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$ |
943 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
249 |
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$ |
163 |
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$ |
455 |
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$ |
288 |
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Interest on lease liabilities |
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94 |
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84 |
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186 |
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162 |
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Total finance lease cost |
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$ |
343 |
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$ |
247 |
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$ |
641 |
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$ |
450 |
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Supplemental cash flow information related to leases was as follows:
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(In millions) |
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Three Months Ended December 31, |
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Six Months Ended December 31, |
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2020 |
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2019 |
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2020 |
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2019 |
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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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$ |
482 |
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$ |
479 |
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$ |
973 |
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$ |
932 |
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Operating cash flows from finance leases |
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94 |
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84 |
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186 |
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162 |
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Financing cash flows from finance leases |
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153 |
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104 |
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289 |
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183 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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1,578 |
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|
948 |
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2,256 |
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1,931 |
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Finance leases |
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1,193 |
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863 |
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1,828 |
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2,352 |
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Supplemental balance sheet information related to leases was as follows:
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(In millions, except lease term and discount rate) |
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December 31, 2020 |
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June 30, |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
10,298 |
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$ |
8,753 |
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Other current liabilities |
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$ |
1,866 |
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$ |
1,616 |
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Operating lease liabilities |
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8,875 |
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7,671 |
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Total operating lease liabilities |
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$ |
10,741 |
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$ |
9,287 |
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Finance Leases |
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Property and equipment, at cost |
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$ |
12,694 |
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$ |
10,371 |
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Accumulated depreciation |
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(1,840 |
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(1,385 |
) |
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Property and equipment, net |
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$ |
10,854 |
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$ |
8,986 |
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Other current liabilities |
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$ |
699 |
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$ |
540 |
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Other long-term liabilities |
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10,819 |
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8,956 |
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Total finance lease liabilities |
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$ |
11,518 |
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$ |
9,496 |
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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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12 years |
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13 years |
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Weighted Average Discount Rate |
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Operating leases |
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2.3% |
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2.7% |
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Finance leases |
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3.6% |
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3.9% |
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The following table outlines maturities of our lease liabilities as of December 31, 2020:
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(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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2021 (excluding the six months ended December 31, 2020) |
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$ |
1,099 |
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$ |
533 |
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2022 |
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1,997 |
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1,080 |
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2023 |
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1,811 |
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1,092 |
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2024 |
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1,579 |
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1,107 |
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2025 |
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1,280 |
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1,431 |
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Thereafter |
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|
4,309 |
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8,943 |
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Total lease payments |
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|
12,075 |
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|
14,186 |
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Less imputed interest |
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(1,334 |
) |
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(2,668 |
) |
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Total |
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$ |
10,741 |
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$ |
11,518 |
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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.
