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 may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. As of September 30, 2017 and June 30, 2017, assets recorded under finance leases were $3.4 billion and $2.7 billion, respectively, and accumulated depreciation associated with finance leases was $209 million and $161 million, respectively.

The components of lease expense were as follows:

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2017

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

388

 

 

$

260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease cost

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

48

 

 

$

15

 

Interest on lease liabilities

 

 

30

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total finance lease cost

 

$

78

 

 

$

   27

 

 

 

 

 

 

 

 

 

 

Other information related to leases was as follows:

 

(In millions, except lease term and discount rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2017

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flows Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

369

 

 

$

267

 

Operating cash flows from finance leases

 

 

30

 

 

 

12

 

Financing cash flows from finance leases

 

 

25

 

 

 

6

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Operating leases

 

 

391

 

 

 

55

 

Finance leases

 

 

728

 

 

 

267

 

 

 

 

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

7 years

 

 

 

5 years

 

Finance leases

 

 

14 years

 

 

 

12 years

 

 

 

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

2.5

%

 

 

2.3

%

Finance leases

 

 

4.7

%

 

 

5.1

%

 

 

 

 

 

 

 

 

 

Future minimum lease payments under non-cancellable leases as of September 30, 2017 were as follows:

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ending June 30,

 

Operating Leases

 

 

Finance Leases

 

 

 

 

2018 (excluding the three months ended September 30, 2017)

 

$

1,110

 

 

$

205

 

2019

 

 

1,385

 

 

 

281

 

2020

 

 

1,267

 

 

 

287

 

2021

 

 

1,022

 

 

 

293

 

2022

 

 

833

 

 

 

299

 

Thereafter

 

 

2,333

 

 

 

3,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total future minimum lease payments

 

 

7,950

 

 

 

4,498

 

Less imputed interest

 

 

(930

)

 

 

(1,225

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

7,020

 

 

$

3,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported as of September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

1,252

 

 

$

146

 

Operating lease liabilities

 

 

5,768

 

 

 

0

 

Other long-term liabilities

 

 

0

 

 

 

3,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

7,020

 

 

$

3,273

 

 

 

 

 

 

 

 

 

 

As of September 30, 2017, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $219 million and $2.3 billion, respectively. These operating and finance leases will commence between fiscal year 2018 and fiscal year 2019 with lease terms of 1 year to 20 years.