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 less than 1 year to 19 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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2022 |
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2021 |
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2022 |
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2021 |
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Operating lease cost |
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$ |
684 |
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$ |
469 |
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$ |
1,346 |
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$ |
1,057 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
457 |
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$ |
264 |
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$ |
646 |
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$ |
490 |
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Interest on lease liabilities |
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119 |
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107 |
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232 |
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211 |
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Total finance lease cost |
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$ |
576 |
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$ |
371 |
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$ |
878 |
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$ |
701 |
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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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2022 |
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2021 |
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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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$ |
645 |
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$ |
441 |
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$ |
1,299 |
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$ |
1,007 |
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Operating cash flows from finance leases |
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119 |
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107 |
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232 |
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211 |
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Financing cash flows from finance leases |
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262 |
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222 |
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|
518 |
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422 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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525 |
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1,559 |
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1,714 |
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2,730 |
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Finance leases |
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598 |
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985 |
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1,209 |
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2,374 |
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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, 2022 |
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June 30, 2022 |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
13,624 |
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$ |
13,148 |
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Other current liabilities |
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$ |
2,287 |
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$ |
2,228 |
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Operating lease liabilities |
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|
11,998 |
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11,489 |
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Total operating lease liabilities |
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$ |
14,285 |
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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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$ |
18,514 |
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$ |
17,388 |
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Accumulated depreciation |
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(3,920 |
) |
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(3,285 |
) |
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Property and equipment, net |
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$ |
14,594 |
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$ |
14,103 |
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Other current liabilities |
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$ |
1,105 |
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$ |
1,060 |
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Other long-term liabilities |
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14,479 |
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13,842 |
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Total finance lease liabilities |
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$ |
15,584 |
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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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2.5% |
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2.1% |
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Finance leases |
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3.2% |
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3.1% |
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The following table outlines maturities of our lease liabilities as of December 31, 2022:
|
(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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2023 (excluding the six months ended December 31, 2022) |
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$ |
1,320 |
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$ |
790 |
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2024 |
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|
2,498 |
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1,598 |
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2025 |
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2,217 |
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1,912 |
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2026 |
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1,847 |
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1,595 |
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2027 |
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1,533 |
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1,603 |
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Thereafter |
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|
6,528 |
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|
11,196 |
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Total lease payments |
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|
15,943 |
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|
18,694 |
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Less imputed interest |
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(1,658 |
) |
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(3,110 |
) |
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Total |
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$ |
14,285 |
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$ |
15,584 |
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As of December 31, 2022, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $6.3 billion and $19.7 billion, respectively. These operating and finance leases will commence between fiscal year 2023 and fiscal year 2028 with lease terms of less than 1 year to 18 years.
