The Company has lease agreements primarily for office facilities, transponder agreements and other equipment leases. At contract inception, the Company determines if a contract is or contains a lease and whether it is an operating or finance lease. The Company does not separate lease components from nonlease components for real estate leases.

For operating leases that have a lease term of greater than one year, the Company initially recognizes operating lease liabilities and ROU assets at the lease commencement date, which is the date that the lessor makes an underlying asset available for use by the Company. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the present value of the Company’s obligation to make lease payments, primarily escalating fixed payments, over the lease term. The discount rate used to determine the present value of the lease payments is generally the Company’s incremental borrowing rate because the rate implicit in the lease is generally not readily determinable. The incremental borrowing rate for the lease term is determined by adjusting the Company’s unsecured borrowing rate for a similar term to approximate a collateralized borrowing rate. The Company's lease terms for each of its leases represents the noncancelable period for which the Company has the right to use an underlying asset,

together with all of the following: (i) periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; (ii) periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option; and (iii) periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. The Company recognizes lease payments as lease expense on a straight-line basis over the lease term.

The Company’s operating ROU assets are included in Other non-current assets and the Company’s current and non-current operating lease liabilities are included in Accounts payable, accrued expenses and other current liabilities and Other liabilities, respectively, in the Company’s Balance Sheet (See Note 14—Additional Financial Information).

The following amounts were recorded in the Company’s Balance Sheet relating to its operating leases and other supplemental information:

	As of December 31, 2019
	(in millions)
ROU assets	$	533
Lease liabilities
Current lease liabilities	$	142
Non-current lease liabilities		429

Total lease liabilities	$	571
Other supplemental information
Weighted average remaining lease term	7 years
Weighted average discount rate		3	%

The following table presents information about the Company’s lease costs and supplemental cash flows information for leases:

	For the three months ended December 31, 2019		For the six months ended December 31, 2019
	(in millions)
Lease costs
Total lease costs^(a)	$	31	$	61
Supplemental cash flows information
Operating cash flows from operating leases	$	43	$	81

The following table presents the lease payments relating to the Company’s operating leases:

	As of December 31, 2019
	(in millions)
Fiscal Year
2020	$	80
2021		126
2022		91
2023		86
2024		82
Thereafter		194

Total lease payments^(a)		659
Less: imputed interest		(88	)

Present value of operating lease liabilities	$	571

The Company’s lessor arrangements primarily relate to its owned production and office facilities at the FOX Studios lot, which is located in Los Angeles, California. The Company is responsible for the management of the FOX Studios lot, which includes managing and providing facilities, studio operations, and production services, which until 2026 will predominantly be utilized by Disney productions. The Company leases production and office space on the FOX Studios lot to 21CF for an initial term of seven years, subject to two five-year renewal options exercisable by 21CF. The Company will receive approximately $50 million annually in lease payments over the lease term.

The Company recorded total lease income of approximately $10 million and $25 million for the three and six months ended December 31, 2019, respectively, which is included in Revenues in the Statements of Operations. The Company recognizes lease payments for operating leases as revenue on a straight-line basis over the lease term and variable lease payments as revenue in the period incurred.