Leases

12 Months Ended

Dec. 31, 2019

PayPal enters into various leases, which are primarily real estate operating leases. We use these properties for executive and administrative offices, data centers, product development offices, and customer service and operations centers. Our leases have remaining lease terms of less than one year to eleven years. Many leases include one or more renewal or termination options. These options are not included in our determination of the lease term at commencement unless it is reasonably certain the Company will exercise the option. When we reach a decision to exercise a lease renewal or termination option, we recognize the associated impact to the ROU asset and lease liability.

While a majority of lease payments are based on the stated rate in the lease, some lease payments are subject to annual changes based on the Consumer Price Index or another referenced index. While lease liabilities are not re-measured as a result of changes to the relevant index, such changes to these indices are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. All of PayPal’s variable lease payments are based on an index or rate.

The short-term lease exemption has been adopted for all leases with a duration of less than 12 months.

PayPal’s lease portfolio contains a small number of subleases. A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements.

The components of lease expense were as follows:



	December 31, 2019
	(In millions, except weighted average figures)
Lease expense
Operating lease expense	$	136
Sublease income	(6		)
Total lease expense	$	130

Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	131
Right-of-use assets obtained in exchange for new operating lease liabilities	$	598		⁽¹⁾

Operating leases:
Operating lease right-of-use assets	$	479
Other current lease liabilities	104
Operating lease liabilities	403
Total operating lease liabilities	$	507
Weighted-average remaining lease term	5.8 years
Weighted-average discount rate	5		%

⁽¹⁾Includes opening balance additions of $498 million for operating leases as a result of the adoption of the new lease accounting guidance effective January 1, 2019.

Future minimum lease payments for our operating leases as of December 31, 2019 were as follows:



	Operating Leases
Fiscal years:	(In millions)
2020	$	125
2021	111
2022	77
2023	58
2024	51
Thereafter	163
Total	$	585
Less: present value discount	(78		)
Lease liability	$	507

Future minimum lease payments for our operating leases as of December 31, 2018, prior to the adoption of new lease accounting guidance as described in “Note 1—Overview and Summary of Significant Accounting Policies,” were as follows:



	Operating Leases
Fiscal years:	(In millions)
2019	$	124
2020	111
2021	96
2022	81
2023	63
Thereafter	189
Total minimum lease payments	$	664

Operating lease amounts include minimum lease payments under our non-cancelable operating leases primarily for office and data center facilities. The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases. We recognize rent expense under such agreements on a straight-line basis. Rent expense for the years ended December 31, 2019, 2018, and 2017 totaled $130 million, $94 million, and $69 million, respectively.

As of December 31, 2019, we also have additional operating leases that have not yet commenced, primarily for real estate and data centers, with minimum lease payments aggregating to $189 million. These operating leases will commence between fiscal years 2020 and 2021 with lease terms of one year to ten years.