Leases

12 Months Ended

Dec. 31, 2019

Note 6 - Leases

The components of lease expense were as follows (in millions):



	Year Ended December 31, 2019
Lease cost
Finance lease cost:
Amortization of assets	$	150
Interest of lease liabilities	15
Operating lease cost	321
Short-term lease cost	28
Variable lease cost	100
Sublease income	(2		)
Total lease cost	$	612

Supplemental cash flow information related to leases was as follows (in millions):



	Year Ended December 31, 2019
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from financing leases	$	12
Operating cash flows from operating leases	275
Financing cash flows from financing leases	138
Right-of-use assets obtained in exchange for lease obligations:
Operating lease liabilities	$	918
Finance lease liabilities	251

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):



	As of December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	1,594
Operating lease liability, current	196
Operating lease liabilities, non-current	1,523
Total operating lease liabilities	$	1,719



	As of December 31, 2019
Finance Leases
Property and equipment, at cost	$	539
Accumulated depreciation	(247		)
Property and equipment, net	$	292
Other current liabilities	$	165
Other long-term liabilities	143
Total finance leases liabilities	$	308



	As of December 31, 2019
Weighted-average remaining lease term
Operating leases	16 years
Finance leases	2 years
Weighted-average discount rate
Operating leases	7.1	%
Finance leases	5.0	%

Maturities of lease liabilities were as follows (in millions):



	As of December 31, 2019
	Operating Leases			Finance Leases
2020	216			176
2021	248			115
2022	283			32
2023	244			—
2024	201			—
Thereafter	2,195			—
Total undiscounted lease payments	3,387			323
Less: imputed interest	(1,668		)	(15		)
Total lease liabilities	$	1,719		$	308

As of December 31, 2019, the Company had additional operating leases and finance leases, primarily for corporate offices and servers, that have not yet commenced of $405 million and $23 million, respectively. These operating and finance leases will commence between fiscal year 2020 and fiscal year 2022 with lease terms of 1 year to 11 years.

Supplemental Information for Comparative Periods

Prior to the adoption of ASC 842, future minimum payments for noncancellable operating leases as of December 31, 2018 were as follows (in millions):



	Operating Leases
2019	$	263
2020	257
2021	224
2022	193
2023	163
Thereafter	1,928
Total	$	3,028

Office and data center rent expense was $194 million and $221 million for the years ended December 31, 2017 and 2018, respectively.

Mission Bay 1 & 2

In 2015, the Company entered into a joint venture (“JV”) agreement with a real estate developer (“JV Partner”) to develop land (“the Land”) in San Francisco to construct the Company’s new headquarters (the “Headquarters”). The Headquarters will consist of two adjacent office buildings totaling approximately 423,000 rentable square feet. In connection with the JV arrangement, the Company had acquired a 49% interest in the JV, the principal asset of which was the Land.

In 2016, the Company and the JV Partner agreed to dissolve the JV and terminate the Company’s commitment to the lease of the Headquarters (together “the real estate transaction”) and the Company retained a 49% indirect interest in the Land (“Indirect Interest”). Under the terms of the real estate transaction, the Company obtained the rights and title to the partially constructed building, will complete the development of the two office buildings and retain a 100% ownership in the buildings. In connection with the real estate transaction, the Company also executed two 75-year land lease agreements (“Land Leases”). As of December 31, 2019, commitments under the Land Leases total $164 million until February 2032. After 2032, the annual rent amount will adjust annually based on the prevailing consumer price index.

The real estate transaction is accounted for as a financing transaction of the Company’s 49% Indirect Interest due to the Company’s continuing involvement through a purchase option on the Indirect Interest. As a financing transaction, the cash and deferred sales proceeds received from the real estate transaction are recorded as a financing obligation. As of December 31, 2019, the Company’s Indirect Interest of $65 million is included in property and equipment, net and a corresponding financing obligation of $78 million is included in other long-term liabilities. Future land lease payments of $1.7 billion will be allocated 49% to the financing obligation of the Indirect Interest and 51% to the operating lease of land.

Future minimum payments related to the financing obligations as of December 31, 2019 are summarized below (in millions):



	Future Minimum Payments
Fiscal Year Ending December 31,
2020	$	6
2021	6
2022	6
2023	6
2024	6
Thereafter	827
Total	$	857

Leases