Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

LEASES

In the normal course of its business, Linde enters into various leases as the lessee, primarily involving manufacturing and distribution equipment and office space. Linde determines whether a contract is or contains a lease at contract inception. Total lease and rental expenses related to operating lease right of use assets for the twelve months ended December 31, 2021 and 2020 was $317 million, and $341 million respectively. Operating leases costs are included in selling, general and administrative expenses and cost of sales, exclusive of depreciation and amortization. The related assets and obligations are included in other long term assets and other current liabilities and other long term liabilities, respectively. Total lease and rental expenses related to finance lease right of use assets for the twelve months ended December 31, 2021 and 2020 was $51 million and $44 million, respectively, and the costs are included in depreciation and amortization and interest. Related assets and obligations are included in other long term assets and other current liabilities and other long term liabilities, respectively. Linde includes renewal options that are reasonably certain to be exercised as part of the lease term. Operating and financing lease expenses above include short term and variable lease costs which are immaterial.

As most leases do not provide an implicit rate, Linde uses the applicable incremental borrowing rate at lease commencement to measure lease liabilities and right-of-use assets. Linde determines incremental borrowing rates through market sources.

The company has elected to apply the short-term lease exception for all underlying asset classes. Short-term leases are leases that, at the commencement date, have a lease term of twelve months or less and do not include a purchase option that the lessee is reasonably certain to exercise. Leases that meet the short-term lease definition are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term.

Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance. The company does not have material variable lease payments.

Gains and losses on sale and leaseback transactions were immaterial. Operating cash flows used for operating leases for the twelve months ended December 31, 2021 and 2020 were $290 million and $317 million, respectively. Cash flows used for finance leases for the same period were immaterial.

Supplemental balance sheet information related to leases is as follows:

(Millions of dollars)	December 31, 2021		December 31, 2020
Operating Leases
Operating lease right-of-use assets	$	853	$	935
Other current liabilities	215		237
Other long-term liabilities	618		669
Total operating lease liabilities	833		906
Finance Leases
Finance lease right-of-use assets	163		155
Other current liabilities	47		38
Other long-term liabilities	129		125
Total finance lease liabilities	$	176	$	163

Supplemental operating lease information:

	December 31, 2021		December 31, 2020
Weighted average lease term (years)	9		9
Weighted average discount rate	2.91	%	2.83	%

Future operating and finance lease payments as of December 31, 2021 are as follows (millions of dollars):

Period	Operating Leases		Financing Leases
2022	$	227	$	54
2023	162		40
2024	116		29
2025	84		20
2026	61		11
Thereafter	281		67
Total future undiscounted lease payments	931		221
Less imputed interest	(98)		(45)
Total reported lease liability	$	833	$	176

Leases

LEASES

In the normal course of its business, Linde enters into various leases as the lessee, primarily involving manufacturing and distribution equipment and office space. Linde determines whether a contract is or contains a lease at contract inception. Total lease and rental expenses related to operating lease right of use assets for the twelve months ended December 31, 2021 and 2020 was $317 million, and $341 million respectively. Operating leases costs are included in selling, general and administrative expenses and cost of sales, exclusive of depreciation and amortization. The related assets and obligations are included in other long term assets and other current liabilities and other long term liabilities, respectively. Total lease and rental expenses related to finance lease right of use assets for the twelve months ended December 31, 2021 and 2020 was $51 million and $44 million, respectively, and the costs are included in depreciation and amortization and interest. Related assets and obligations are included in other long term assets and other current liabilities and other long term liabilities, respectively. Linde includes renewal options that are reasonably certain to be exercised as part of the lease term. Operating and financing lease expenses above include short term and variable lease costs which are immaterial.

As most leases do not provide an implicit rate, Linde uses the applicable incremental borrowing rate at lease commencement to measure lease liabilities and right-of-use assets. Linde determines incremental borrowing rates through market sources.

The company has elected to apply the short-term lease exception for all underlying asset classes. Short-term leases are leases that, at the commencement date, have a lease term of twelve months or less and do not include a purchase option that the lessee is reasonably certain to exercise. Leases that meet the short-term lease definition are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term.

Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance. The company does not have material variable lease payments.

Gains and losses on sale and leaseback transactions were immaterial. Operating cash flows used for operating leases for the twelve months ended December 31, 2021 and 2020 were $290 million and $317 million, respectively. Cash flows used for finance leases for the same period were immaterial.

Supplemental balance sheet information related to leases is as follows:

(Millions of dollars)	December 31, 2021		December 31, 2020
Operating Leases
Operating lease right-of-use assets	$	853	$	935
Other current liabilities	215		237
Other long-term liabilities	618		669
Total operating lease liabilities	833		906
Finance Leases
Finance lease right-of-use assets	163		155
Other current liabilities	47		38
Other long-term liabilities	129		125
Total finance lease liabilities	$	176	$	163

Supplemental operating lease information:

	December 31, 2021		December 31, 2020
Weighted average lease term (years)	9		9
Weighted average discount rate	2.91	%	2.83	%

Future operating and finance lease payments as of December 31, 2021 are as follows (millions of dollars):

Period	Operating Leases		Financing Leases
2022	$	227	$	54
2023	162		40
2024	116		29
2025	84		20
2026	61		11
Thereafter	281		67
Total future undiscounted lease payments	931		221
Less imputed interest	(98)		(45)
Total reported lease liability	$	833	$	176