Leases

12 Months Ended

Jan. 29, 2021

Leases:

The Company occupies most of its facilities under operating leases. Certain equipment also is leased under short-term or cancelable operating leases.

Effective upon the adoption of ASU 2016-02, the Company recognizes a right of use (ROU) asset and a lease liability upon the commencement of its operating leases. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The lease term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise those rights. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives.

The Company recognizes lease costs on a straight-line basis over the remaining lease term, except for variable lease payments that are expensed in the period in which the obligation for those payments is incurred.

For its facility leases, the Company combines and accounts for lease and non-lease components together as a single component. The Company does not recognize lease liabilities and ROU assets for facility leases with original terms of 12 months or less. ROU assets are evaluated for impairment as a long-lived asset.

Total operating lease cost is comprised of the following:


	Year Ended
	January 29, 2021		January 31, 2020
	(in millions)
Operating lease cost	$	74	$	64
Variable lease cost	21		15
Short-term lease cost	35		4
Sublease income	(2)		(3)
Total lease cost	$	128	$	80

Lease cost and sublease income are included primarily in cost of revenues and SG&A, except for $1 million and $5 million of impairment of right of use assets for fiscal 2021 and fiscal 2020, respectively, that are included in acquisition and integration costs.

Rental expense for facilities and equipment under ASC 840 was $46 million in fiscal 2019.

The Company's ROU assets and lease liabilities consisted of the following:


	Balance Sheet line item	January 29, 2021		January 31, 2020
		(in millions)
Operating lease ROU asset	Operating lease right of use assets	$	236	$	190

Operating lease current liability	Other accrued liabilities	49		34
Operating lease non-current liability	Operating lease liabilities	205		172
Total operating lease liabilities		$	254	$	206

Other supplemental operating lease information consists of the following:


	Year Ended
	January 29, 2021		January 31, 2020
	(in millions)
Cash paid for amounts included in the measurement of operating lease liabilities	$	77	$	64
ROU assets obtained in exchange for new operating lease obligations	$	110	$	79

Maturities of operating lease liabilities as of January 29, 2021 were as follows:


Fiscal Year Ending	Total
	(in millions)
2022	$	57
2023	58
2024	47
2025	37
2026	29
Thereafter	54
Total minimum lease payments	282
Less: imputed interest	(28)
Present value of operating lease liabilities	$	254

The weighted-average remaining lease term and the weighted-average discount rate was 5 years and 3.5% as of January 29, 2021, respectively, and 6 years and 4.5% as of January 31, 2020, respectively.

The Company leases IT equipment and hardware to its customers. All of the Company’s lessor arrangements are operating leases. Operating lease revenue is recognized on a straight-line basis over the term of the lease.

During the twelve months ended January 29, 2021, operating lease income was $40 million. Operating lease income is reported as revenue on the consolidated statements of income. As of January 29, 2021, the undiscounted future payments from our sublease arrangements is $12 million, which are expected to be received during fiscal 2022.