Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Components of Lease Expense

	Three months ended September 30, 2019			Nine months ended September 30, 2019
	(in millions)
Operating lease cost (1)	$	6		$	18
Finance lease cost
Amortization of right-of-use assets (2)	$	2		$	7
Interest on lease liabilities (3)		1			3
Total finance lease cost	$	3		$	10
Sublease income (1)		(1	)		(3	)
Total lease cost, net	$	8		$	25

(1) Operating lease costs, net of sublease income, are included within operating expenses in our unaudited condensed consolidated statement of operations. During the three and nine months ended September 30, 2018, we recorded operating lease expense of $5 million and $15 million, respectively; and sublease income of $1 million and $2 million, respectively, in our unaudited condensed consolidated statement of operations in accordance with ASC 840.  

(2) Amount is included in depreciation expense in our unaudited condensed consolidated statement of operations. During the three and nine months ended September 30, 2018, we recorded depreciation expense of $1 million and $2 million, respectively, related to our Headquarters Lease in our unaudited condensed consolidated statement of operations in accordance with ASC 840.

(3) Amount is included in interest expense in our unaudited condensed consolidated statement of operations. During the three and nine months ended September 30, 2018, we recorded interest expense of $2 million and $5 million, respectively, related to our Headquarters Lease in our unaudited condensed consolidated statement of operations in accordance with ASC 840.

Additional Information Related to Leases

Additional information related to our leases is as follows for the periods presented:  

	Nine months ended September 30, 2019
Supplemental Cash Flows Information:	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	20
Operating cash outflows from finance lease		3
Financing cash outflows from finance lease (1)		4
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases (2)	$	104
Finance lease (3)		88

(1) Amount is included in other financing activities, net on the unaudited condensed consolidated statement of cash flows.

(2) Amount includes operating leases existing on January 1, 2019 of $88 million and those that commenced during the nine months ended September 30, 2019 of $16 million.

(3) Amount represents the finance lease liability arising from obtaining the ROU asset related to our Headquarters Lease, which was recognized upon the adoption of ASC 842 on January 1, 2019.

	As of September 30, 2019
Weighted-average remaining lease term:
Operating leases	4.6 years
Finance lease	11.3 years
Weighted-average discount rate:
Operating leases		4.16%
Finance lease		4.49%

Summary of Future Lease Payments Under Non-Cancellable Leases

Future lease payments under non-cancellable leases as of September 30, 2019 were as follows:

Year Ending December 31,	Operating Leases			Finance Lease
	(in millions)
2019 (excluding the nine months ended September 30, 2019)	$	4		$	2
2020		23			9
2021		21			10
2022		19			10
2023		13			10
Thereafter		14			67
Total future lease payments		94			108
Less imputed interest		(9	)		(24	)
Total lease liabilities	$	85		$	84
Reported on unaudited condensed consolidated balance sheet as of September 30, 2019	Operating Leases			Finance Lease
	(in millions)
Accrued expenses and other current liabilities	$	19		$	5
Other long-term liabilities		66			79
Total lease liabilities	$	85		$	84

Future Minimum Commitments Under Our Corporate Headquarters Lease and Other Non-Cancelable Operating Leases

As of December 31, 2018, future minimum lease commitments under our Headquarters Lease and other non-cancelable operating leases for office space with terms of more than one year and contractual sublease income were as follows:

Year	Headquarters Lease (1)		Other Operating Leases		Sublease Income			Total Lease Commitments (Net of Sublease Income)
	(in millions)
2019		9	$	19	$	(3	)	$	25
2020		9		18		(2	)		25
2021		10		16		(2	)		24
2022		10		16		(2	)		24
2023		10		9		—			19
Thereafter		67		9		—			76
Total	$	115	$	87	$	(9	)	$	193

(1) Amount includes an $83 million financing obligation in other long-term liabilities on our consolidated balance sheet at December 31, 2018, related to the Headquarters Lease.

Accounting Standards Update 2016-02

Adoption of ASC 842 on Unaudited Condensed Consolidated Balance Sheet

The effect on our unaudited condensed consolidated balance sheet as of January 1, 2019 from the adoption of ASC 842 is as follows:

	Balance at December 31, 2018		Adjustments due to ASC 842			Balance at January 1, 2019
	(in millions)
Assets:
Prepaid expenses and other current assets	$	33	$	(3	)	$	30
Property and equipment, net (1)		253		8			261
Operating lease right-of-use assets (1)		—		75			75
Deferred income taxes, net		27		(1	)		26
Other long-term assets		98		(2	)		96
Liabilities:
Accrued expenses and other current liabilities (2)		151		21			172
Other long-term liabilities (1)		282		53			335
Retained earnings (3)	$	1,043	$	3		$	1,046

(1) Refer to the below discussion regarding the transition accounting for operating and finance leases upon adoption of ASC 842.

(2) This adjustment primarily represents the short-term portion of operating and finance lease obligations recorded upon adoption of ASC 842, discussed below.

(3) Represents a cumulative-effect adjustment of $3 million, net of tax to our beginning balance of retained earnings recorded upon adoption of ASC 842.