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Leases

6 Months Ended

Feb. 28, 2022

Note 5. Leases

The Company leases certain retail stores, clinics, warehouses, distribution centers, office space, land, and equipment. For the majority of leases in the U.S., 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. Lease commencement is 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.

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


Balance sheet supplemental information:	February 28, 2022		August 31, 2021
Operating Leases:
Operating lease right-of-use assets	$	21,730	$	21,893

Operating lease obligations - current	2,277		2,259
Operating lease obligations - non-current	21,951		22,153
Total operating lease obligations	$	24,228	$	24,412
Finance Leases:
Right-of-use assets included in:
Property, plant and equipment, net	$	712	$	725
Lease obligations included in:
Accrued expenses and other liabilities	38		37
Other non-current liabilities	965		974
Total finance lease obligations	$	1,003	$	1,010

Supplemental Statement of earnings information related to leases were as follows (in millions):


	Three months ended February 28,				Six months ended February 28,
Statement of earnings supplemental information:	2022		2021		2022		2021
Operating lease cost
Fixed	$	815	$	818	$	1,619	$	1,606
Variable 1	197		159		402		319
Finance lease cost
Amortization	$	11	$	11	$	22	$	22
Interest	13		13		26		26

Sublease income	$	26	$	21	$	51	$	41
Impairment of right-of-use assets	3		5		71		15

Gain on sale and leaseback 2	148		95		235		187

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

2Recorded within selling, general and administrative expenses.

Other supplemental information related to leases were as follows (in millions):


	Six months ended February 28,
Other supplemental information:		2022		2021

Cash paid for amounts included in the measurement of lease obligations:
Operating cash outflows from operating leases		$	1,666	$	1,702
Operating cash outflows from finance leases		23		24
Financing cash outflows from finance leases		21		20
Total		$	1,710	$	1,746

Right-of-use assets obtained in exchange for new lease obligations:
Operating leases		$	1,005	$	1,492
Finance leases		11		—
Total		$	1,016	$	1,492

Weighted average lease terms and discount rates for real estate leases were as follows:


Weighted average terms and discount rates:	February 28, 2022		August 31, 2021
Weighted average remaining lease term in years:
Operating leases	10.2		10.3
Finance leases	19.6		20.2

Weighted average discount rate:
Operating leases	4.74	%	4.77	%
Finance leases	5.18	%	5.18	%

The aggregate future lease payments for operating and finance leases as of February 28, 2022 were as follows (in millions):


Future lease payments:
Fiscal year	Finance lease		Operating lease
2022 (Remaining period)	$	45	$	1,734
2023	89		3,388
2024	89		3,280
2025	88		3,166
2026	87		3,056
2027	87		2,942
Later	1,067		13,041
Total undiscounted minimum lease payments	$	1,551	$	30,607
Less: Present value discount	(548)		(6,379)
Lease liability	$	1,003	$	24,228

Leases