Leases

12 Months Ended

Dec. 31, 2019

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, 2019 was $364 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, 2019 was $31 million, and the costs are included in depreciation and amortization and interest. Related assets and obligations are included in property, plant and equipment - net and debt, 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, 2019 was $341 million. 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, 2019
Operating Leases
Operating lease right-of-use assets	1,025
Other current liabilities	260
Other long-term liabilities	716
Total operating lease liabilities	976
Finance Leases
Finance lease right-of-use assets	140
Current portion of long-term debt	32
Long Term debt	117
Total finance lease liabilities	149

Supplemental operating lease information:

	December 31, 2019
Weighted average lease term (years)	7
Weighted average discount rate	2.97	%

Future operating and finance lease payments as of December 31, 2019 are as follows (millions of dollars):

Period	Operating Leases			Financing Leases
2020	$	275		$	38
2021	208			31
2022	163			27
2023	110			18
2024	75			10
Thereafter	251			81
Total future undiscounted lease payments	1,082			205
Less imputed interest	(106		)	(56		)
Total reported lease liability	$	976		$	149

Prior to the adoption of the new lease accounting standard, operating and finance lease commitments on an undiscounted basis were approximately $1.3 billion and $104 million, respectively, at December 31, 2018 under long-term non-cancelable leases. The amounts payable for operating leases were as follows:

(Millions of dollars)	Operating Leases
2019	$	305
2020	236
2021	186
2022	145
2023	102
Thereafter	326
Total	$	1,300

In limited instances Linde acts as a lessor, primarily for assets to provide industrial gas to specific customers. These leases are not significant to the consolidated balance sheets or consolidated statements of income.

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, 2019 was $364 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, 2019 was $31 million, and the costs are included in depreciation and amortization and interest. Related assets and obligations are included in property, plant and equipment - net and debt, 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, 2019 was $341 million. 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, 2019
Operating Leases
Operating lease right-of-use assets	1,025
Other current liabilities	260
Other long-term liabilities	716
Total operating lease liabilities	976
Finance Leases
Finance lease right-of-use assets	140
Current portion of long-term debt	32
Long Term debt	117
Total finance lease liabilities	149

Supplemental operating lease information:

	December 31, 2019
Weighted average lease term (years)	7
Weighted average discount rate	2.97	%

Future operating and finance lease payments as of December 31, 2019 are as follows (millions of dollars):

Period	Operating Leases			Financing Leases
2020	$	275		$	38
2021	208			31
2022	163			27
2023	110			18
2024	75			10
Thereafter	251			81
Total future undiscounted lease payments	1,082			205
Less imputed interest	(106		)	(56		)
Total reported lease liability	$	976		$	149

Prior to the adoption of the new lease accounting standard, operating and finance lease commitments on an undiscounted basis were approximately $1.3 billion and $104 million, respectively, at December 31, 2018 under long-term non-cancelable leases. The amounts payable for operating leases were as follows:

(Millions of dollars)	Operating Leases
2019	$	305
2020	236
2021	186
2022	145
2023	102
Thereafter	326
Total	$	1,300

In limited instances Linde acts as a lessor, primarily for assets to provide industrial gas to specific customers. These leases are not significant to the consolidated balance sheets or consolidated statements of income.