Leases

9 Months Ended

May 31, 2020

The Company leases certain retail stores, warehouses, distribution centers, office space, land and equipment. For leases in the United States, the initial lease term is typically 15 to 25 years, followed by additional terms containing renewal options typically at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or the date the Company has the right to control the property. The Company recognizes operating lease rent expense on a straight-line basis over the term of the lease. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales. See note 17, new accounting pronouncements for additional information.

Supplemental balance sheet information related to leases were as follows (in millions):


	May 31, 2020
Operating Leases:
Operating lease right-of-use assets	$	21,609

Operating lease obligations - current	2,288
Operating lease obligations - non current	21,943
Total operating lease obligations	$	24,231
Finance Leases:
Right-of-use assets included in:
Property, plant and equipment, net	$	770
Lease obligations included in:
Accrued expenses and other liabilities	47
Other non-current liabilities	1,008
Total finance lease obligations	$	1,055

Supplemental income statement information related to leases were as follows (in millions):


	Three months ended May 31, 2020		Nine months ended May 31, 2020
Operating lease cost
Fixed	$	827	$	2,496
Variable ¹	167		595
Finance lease cost
Amortization	$	10	$	29
Interest	14		42
Sublease income	(25)		(56)
Impairment of right-of-use assets²	170		182
Impairment of finance lease assets²	21		24
Gains on sale-leaseback transactions³	84		224

¹Includes real estate property taxes, common area maintenance, insurance and rental payments based on sales volume.

²For the three and nine months ended May 31, 2020, total impairments include $153 million and $166 million, respectively, related to Transformational Cost Management and Store Optimization programs. See note 3, exit and disposal activities.

³Recorded within selling, general and administrative expenses.

Other supplemental information were as follows (in millions):


	Nine months ended May 31, 2020

Cash paid for amounts included in the measurement of lease obligations
Operating cash flows from operating leases	$	2,521
Operating cash flows from finance leases	36
Financing cash flows from finance leases	39
Total	$	2,596
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	1,954
Finance leases	65
Total	$	2,019

Average lease term and discount rate as of May 31, 2020 were as follows:


	May 31, 2020
Weighted average remaining lease term in years:
Operating leases	10.9
Finance leases	20.8

Weighted average discount rate
Operating leases	4.91	%
Finance leases	5.41	%

The aggregate future lease payments for operating and finance leases as of May 31, 2020 were as follows (in millions):


Fiscal year	Finance lease		Operating lease
2020 (Remaining period)	$	24	$	859
2021	95		3,390
2022	93		3,244
2023	93		3,091
2024	92		2,943
2025	90		2,770
Later	1,212		15,057
Total undiscounted minimum lease payments	$	1,699	$	31,354
Less: Present value discount	(644)		(7,123)
Lease liability	$	1,055	$	24,231

Leases