We determine whether a contract is or contains a lease at inception of a contract. We define a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means that we have both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

Our lease contracts contain both lease and non-lease components. We account separately for the lease and non-lease components of our office space leases and certain other leases, such as data center leases. We allocate the consideration in the contract to the lease and non-lease components based on each component’s relative standalone price. We determine standalone prices for the lease components based on the prices for which other lessors lease similar assets on a standalone basis. We determine standalone prices for the non-lease component based on the prices that third-party suppliers charge for services for similar assets on a standalone basis. If observable standalone prices are not readily available, we estimate the standalone prices based on other available observable information. However, for certain categories of equipment leases, such as network equipment and others, we account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases that have similar characteristics, we apply a portfolio approach to effectively account for operating lease right-of-use ROU assets and operating lease liabilities.

The Company uses its estimated incremental borrowing rate as the discount rate in measuring the present value of our lease payments given the rate implicit in our leases is not typically readily determinable. Given we do not currently borrow on a collateralized basis, our incremental borrowing rate is estimated to approximate the interest rate in which the Company would expect to pay on a collateralized basis over a similar term and payments, and in economic environments where the leased asset is located. We use the portfolio approach to determine the discount rate for leases with similar characteristics or when the Company is reasonably certain that doing so would not materially affect the accounting for those leases to which a single discount rate is applied.

We establish assets and liabilities for the estimated construction costs incurred under lease arrangements where we are considered the owner for accounting purposes only, or build-to-suit leases, to the extent we are involved in the construction of structural improvements or take construction risk prior to commencement of a lease. Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance under GAAP. If we continue to be the deemed owner, for accounting purposes, the facilities are accounted for as finance obligations.

Our office space leases, exclusive of our Headquarters Lease, are operating leases, which we lease an aggregate of approximately 485,000 square feet of office space at approximately 35 other locations across North America, Europe, Asia Pacific and South America, in cities such as New York, London, Sydney, Barcelona, Buenos Aires and Paris, primarily for our sales offices, subsidiary headquarters, and international management teams, pursuant to leases with various expiration dates, with the latest expiring in June 2027.

Operating lease ROU assets and liabilities are recognized at lease commencement date, or the date the lessor makes the leased asset available for use, based on the present value of lease payments over the lease term using the Company’s estimated incremental borrowing rate. ROU assets related to operating leases comprise the initial lease liability, and are then adjusted for any prepaid or deferred rent payments, unamortized initial direct costs, and lease incentives received. Amortization expense for operating lease ROU assets and interest accretion on operating lease liabilities are recognized as a single operating lease cost in our consolidated statement of operations, which results effectively in recognition of rent expense on a straight-line basis over the lease period. The carrying amount of operating lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable; and (2) reduced to reflect lease payments made during the period. We

present the combination of both the amortization of operating lease ROU assets and the change in the operating lease liabilities in the same line item in the adjustments to reconcile net income to net cash provided by operating activities in our consolidated statement of cash flows. Lease incentives are recognized as reductions of rental expense on a straight-line basis over the term of the lease. Certain of our operating leases include options to extend the lease terms for up to 6 years and/or terminate the leases within 1 year, which we include in our lease term if we are reasonably certain to exercise these options. Payments under our operating leases are primarily fixed, however, certain of our operating lease agreements include rental payments which are adjusted periodically for inflation. We recognize these costs as variable lease costs on our consolidated statement of operations, which were not material during the years ended December 31, 2020, 2019 and 2018. In addition, our short-term lease costs were not material in any period.

We also establish assets and liabilities for the present value of estimated future costs to return certain of our leased facilities to their original condition for asset retirement obligations. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated restoration costs and are included in other long-term liabilities on our consolidated balance sheet. Our asset retirement obligations were not material as of December 31, 2020 and December 31, 2019, respectively.

Finance lease ROU assets and finance lease liabilities are recognized at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease ROU assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease ROU assets and interest accretion on finance lease liabilities are recorded to depreciation and interest expense, respectively, in our consolidated statement of operations.

In June 2013, we entered into our Headquarters Lease of an approximately 280,000 square foot rental building in Needham, Massachusetts, for an initial term of 15 years and 7 months or through December 2030. The Company also has an option to extend the term of the Headquarters Lease for two consecutive terms of five years each. Our Headquarters Lease was accounted for as a finance lease upon the adoption of ASC 842 on January 1, 2019.

Operating and finance lease assets and liabilities are included on our consolidated balance sheet as follows for the period presented:

		December 31,		December 31,
	Consolidated Balance Sheet Location	2020		2019
		(in millions)
Noncurrent Lease Assets:
Finance lease	Property and equipment, net	$	95	$	105
Operating lease	Operating lease right-of-use-assets		54		74
	Total noncurrent lease assets	$	149	$	179


Current Lease Liabilities:
Finance lease	Accrued expenses and other current liabilities	$	5	$	5
Operating lease	Accrued expenses and other current liabilities		21		20
	Total current lease liabilities		26		25

Noncurrent Lease Liabilities:
Finance lease	Finance lease obligation, net of current portion		71		78
Operating lease	Operating lease liabilities, net of current portion		46		64
	Total noncurrent lease liabilities		117		142

	Total lease liabilities	$	143	$	167

As of December 31, 2020, we did not have any additional operating or finance leases that have not yet commenced but that create significant rights and obligations for us.

	Year ended December 31,
	2020			2019
	(in millions)
Operating lease cost (1)	$	28		$	24
Finance lease cost:
Amortization of right-of-use assets (2)	$	10		$	9
Interest on lease liabilities (3)		4			4
Total finance lease cost	$	14		$	13
Sublease income on operating leases (1)		(3	)		(3	)
Total lease cost, net	$	39		$	34

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

	Year ended December 31,
	2020		2019
Supplemental Cash Flows Information:	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	26	$	26
Operating cash outflows from finance lease		4		4
Financing cash outflows from finance lease		6		5

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases (1)	$	4	$	106
Finance lease (2)		—		88

	Year ended December 31,
	2020			2019
Weighted-average remaining lease term:
Operating leases	3.7 years			4.4 years
Finance lease	10.0 years			11.0 years

Weighted-average discount rate:
Operating leases		3.99	%		4.11	%
Finance lease		4.49	%		4.49	%

Future lease payments under non-cancelable leases as of December 31, 2020 were as follows:

Year Ending December 31,	Operating Leases			Finance Lease
	(in millions)
2021	$	25		$	10
2022		21			10
2023		13			10
2024		8			10
2025		3			10
Thereafter		2			46
Total future lease payments		72			96
Less imputed interest		(5	)		(20	)
Total lease liabilities	$	67		$	76