Leases

6 Months Ended

Jun. 30, 2019

9. Leases

The Company, as lessee, has entered into various lease and sublease agreements for office space and other equipment. At contract inception, the Company determines that an arrangement contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For contracts that contain a lease, the Company recognizes the ROU asset in Other assets and the lease liability in Other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are determined using the Company’s incremental borrowing rate based upon information available at commencement date to recognize the present value of lease payments over the lease term. The ROU asset also includes lease payments and excludes lease incentives. Lease terms may include options to extend or terminate the lease and are included in the lease measurement when it is reasonably certain that the Company will exercise that option.

The Company has lease agreements with lease and non-lease components. The Company elected the practical expedient to not separate lease and non-lease components and accounted for these items as a single lease component for all asset classes.

The majority of the Company’s leases and subleases are operating leases related to office space. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term.

The Company has operating leases with remaining lease terms of less than one year to 12 years. The remaining lease terms for the subleases are less than one year to 10 years.

ROU Asset and Lease Liability

The ROU assets and lease liabilities for operating leases were:



	June 30, 2019
	(In millions)
ROU asset (1)	$	1,494
Lease liability (1)	$	1,660

__________________


(1)	Assets and liabilities include amounts recognized upon adoption of new guidance. See Note 1.

Lease Costs

The components of operating lease costs were as follows:



	Three Months Ended June 30,			Six Months Ended June 30,
	2019
	(In millions)
Operating lease cost	$	72		$	144
Variable lease cost	15			23
Sublease income	(22		)	(43		)
Net lease cost	$	65		$	124

Operating lease expense was $85 million and $171 million for the three months and six months ended June 30, 2018, respectively. Non-cancelable sublease income was $18 million and $30 million for the three months and six months ended June 30, 2018, respectively.

Other Information

Supplemental other information related to operating leases was as follows:



	June 30, 2019
	(Dollars in millions)
Cash paid for amounts included in the measurement of lease liability - operating cash flows	$	135
ROU assets obtained in exchange for new lease liabilities	$	216
Weighted-average remaining lease term	8 years
Weighted-average discount rate	3.3		%

Maturities of Lease Liabilities

Maturities of operating lease liabilities were as follows:



	June 30, 2019
	(In millions)
Remainder of 2019	$	154
2020	274
2021	247
2022	213
2023	201
Thereafter	832
Total undiscounted cash flows	1,921
Less: interest	261
Present value of lease liability	$	1,660

Future minimum gross rental payments relating to lease arrangements in effect as determined prior to the adoption of ASU 2016-02 are as follows:



	December 31, 2018
	(In millions)
2019	$	292
2020	282
2021	260
2022	224
2023	209
Thereafter	859
Total	$	2,126

See Note 6 for information about the Company’s investments in leased real estate, leveraged and direct financing leases.