New Lease Accounting Standard

9 Months Ended

Oct. 27, 2019

Method and Impact of Adoption

On January 28, 2019, we adopted the new lease accounting standard using the optional transition method by recognizing a cumulative-effect adjustment to the consolidated balance sheet and not adjusting comparative information for prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance, which allowed us not to reassess (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases.

The cumulative-effect adjustment upon adoption of the new lease accounting standard resulted in the recognition of $470 million of operating lease assets and $500 million of operating lease liabilities on our Consolidated Balance Sheet. The difference of $30 million represents deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of operating lease assets.

Lease Obligations

Our lease obligations consist of operating leases for our headquarters complex, domestic and international office facilities, and data center space, with lease periods expiring between fiscal years 2020 and 2035.

Future minimum lease payments under our non-cancelable operating leases as of October 27, 2019, are as follows:



	Operating Lease Obligations
	(In millions)
Fiscal Year:
2020 (excluding first nine months of fiscal year 2020)	$	28
2021	112
2022	104
2023	83
2024	60
2025 and thereafter	282
Total	669
Less imputed interest	111
Present value of net future minimum lease payments	558
Less short-term operating lease liabilities	89
Long-term operating lease liabilities	$	469

In addition to our existing operating lease obligations, we have entered into an operating lease that will commence in fiscal year 2021 with a lease term of 7 years for $62 million.

Future minimum lease payments under our non-cancelable operating leases as of January 27, 2019, based on the previous lease accounting standard, are as follows:



	Lease Obligations
	(In millions)
Fiscal Year:
2020	$	100
2021	97
2022	90
2023	77
2024	54
2025 and thereafter	265
Total	$	683

Operating lease expense for the third quarter and first nine months of fiscal year 2020 was $28 million and $83 million, respectively. Operating lease expense for the third quarter and first nine months of fiscal year 2019 was $22 million and $58 million, respectively. Short-term and variable lease expenses for the third quarter and first nine months of fiscal year 2020 were not significant.

Other information related to leases was as follows:



	Three Months Ended		Nine Months Ended
	October 27, 2019		October 27, 2019
	(In millions)
Supplemental cash flows information
Operating cash flows used for operating leases	$	28	$	78
Operating lease assets obtained in exchange for lease obligations	$	14	$	122

As of October 27, 2019, our operating leases had a weighted average remaining lease term of 8.5 years and a weighted average discount rate of 3.68%.