Leases (Notes)

6 Months Ended

Mar. 31, 2020

Leases, Codification Topic 842 [Abstract]

Leases of Lessee Disclosure [Text Block]

Leases

The Company enters into various arrangements for office, warehouse and data center facilities, network equipment and vehicles. The Company assesses whether an arrangement contains a lease at contract inception. When an arrangement contains a lease, the Company records a right-of-use asset and lease liability. Right-of-use 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 payments for the right to use the asset.

Right-of-use assets and lease liabilities are recognized at the lease commencement date at the present value of future payments over the lease term. The present value of future payments is discounted using the rate implicit in the lease, when available. However, as most of the Company's leases do not provide an implicit interest rate, the present value is calculated using the

Company's incremental borrowing rate, which represents the interest rate the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

Options to extend or terminate a lease are included in the calculation of the lease term to the extent that the option is reasonably certain of exercise. For the majority of the Company's leases, the Company has concluded that it is not reasonably certain it would exercise such options, therefore the lease term is generally the non-cancelable period stated within the lease. The Company has elected to not record a right-of-use asset and lease liability for short term leases with an initial term of 12 months or less. The Company's leases have remaining lease terms ranging from 1 month to 9.7 years.

The following table details the components of net lease expense for the three and six months ended March 31, 2020:


In millions	Three months ended March 31, 2020		Six months ended March 31, 2019
Operating lease cost ⁽¹⁾	$	16	$	34
Short-term lease cost⁽¹⁾	1		3
Variable lease cost⁽¹⁾⁽²⁾	4		9
Finance lease amortization of right-of-use assets⁽¹⁾	1		2
Sublease income⁽³⁾	(1)		(3)
Total lease cost	$	21	$	45

⁽¹⁾Allocated between Cost of products and services, and Operating expenses.

⁽²⁾Includes real estate taxes and other charges for non-lease services payable to lessors and recognized in the period incurred.

⁽³⁾Included in Other income, net.

The Company's right-of-use assets and lease liabilities for financing leases are included in the Condensed Consolidated Balance Sheet as follows:


In millions	March 31, 2020
ASSETS
Property, plant and equipment, net	$	6

LIABILITIES
Other current liabilities	8
Other liabilities	6

The following table presents the Company's annual maturity of lease payments, weighted average remaining lease term and weighted average interest rate for operating and financing leases as of March 31, 2020:


In millions	Operating Leases			Financing Leases
Remaining six months of 2020	$	32		$	6
2021	50			6
2022	44			2
2023	31			1
2024	23			—
2025	12			—
2026 and thereafter	20			—
Total lease payments	212			15
Less: imputed interest	(29)			(1)
Total lease liability	$	183		$	14
Weighted average remaining lease term	4.7 years			2.1 years
Weighted average interest rate	6.3		%	6.1		%

The following table presents the Company's future minimum lease payments under non-cancelable leases as of September 30, 2019, prior to the adoption of ASC 842:


In millions	Operating Leases		Capital Leases
2020	$	51	$	12
2021	39		6
2022	33		2
2023	22		—
2024	17		—
2025 and thereafter	29		—
Total lease payments	$	191	20
Less: imputed interest			(1)
Total lease liability			$	19

The capital lease obligation as of September 30, 2019 included $11 million and $8 million within Other current liabilities and Other liabilities, respectively.

The Company outsources certain delivery services associated with its Enterprise Cloud and Managed Services, which included the sale of specified assets owned by the Company that were leased-back by the Company and are accounted for as a finance lease. As of March 31, 2020 and September 30, 2019, finance lease obligations associated with these sale leaseback agreements were $9 million and $13 million, respectively.