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 1 year to 15 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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2021 |
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2020 |
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2019 |
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Operating lease cost |
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$ |
2,127 |
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$ |
2,043 |
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$ |
1,707 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
921 |
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$ |
611 |
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$ |
370 |
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Interest on lease liabilities |
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386 |
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336 |
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247 |
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Total finance lease cost |
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$ |
1,307 |
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$ |
947 |
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$ |
617 |
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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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2021 |
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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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$ |
2,052 |
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$ |
1,829 |
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$ |
1,670 |
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Operating cash flows from finance leases |
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386 |
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336 |
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247 |
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Financing cash flows from finance leases |
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648 |
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409 |
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221 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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4,380 |
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3,677 |
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2,303 |
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Finance leases |
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3,290 |
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3,467 |
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2,532 |
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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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2021 |
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2020 |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
11,088 |
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$ |
8,753 |
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Other current liabilities |
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$ |
1,962 |
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$ |
1,616 |
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Operating lease liabilities |
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9,629 |
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7,671 |
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Total operating lease liabilities |
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$ |
11,591 |
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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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$ |
14,107 |
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$ |
10,371 |
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Accumulated depreciation |
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(2,306 |
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(1,385 |
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Property and equipment, net |
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$ |
11,801 |
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$ |
8,986 |
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Other current liabilities |
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$ |
791 |
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$ |
540 |
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Other long-term liabilities |
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11,750 |
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8,956 |
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Total finance lease liabilities |
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$ |
12,541 |
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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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2.2% |
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2.7% |
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Finance leases |
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3.4% |
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3.9% |
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The following table outlines maturities of our lease liabilities as of June 30, 2021:
(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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2022 |
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$ |
2,125 |
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$ |
1,179 |
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2023 |
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1,954 |
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1,198 |
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2024 |
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1,751 |
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1,211 |
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2025 |
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1,463 |
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1,537 |
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2026 |
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1,133 |
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1,220 |
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Thereafter |
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4,111 |
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8,856 |
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Total lease payments |
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12,537 |
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15,201 |
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Less imputed interest |
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(946 |
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(2,660 |
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Total |
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$ |
11,591 |
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$ |
12,541 |
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As of June 30, 2021, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $5.4 billion and $7.3 billion, respectively. These operating and finance leases will commence between fiscal year 2022 and fiscal year 2026 with lease terms of 1 year to 15 years.
During fiscal year 2020, we recorded an impairment charge of $161 million to operating lease right-of-use assets due to the closing of our Microsoft Store physical locations.