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Leases

3 Months Ended

Mar. 31, 2019

Lease commitments

Effective January 1, 2019, the Firm adopted new guidance that requires lessees to recognize on the Consolidated balance sheets all leases with lease terms greater than twelve months as a lease liability with a corresponding right-of-use (“ROU”) asset. Accordingly, the Firm recognized operating lease liabilities and ROU assets of $8.2 billion and $8.1 billion, respectively. The adoption of the new lease guidance did not have a material impact on the Firm’s Consolidated statements of income. The change in accounting due to the adoption of the new lease guidance did not result in a material change to the future net minimum rental payments/receivables or to the net rental expense when compared to December 31, 2018.

Firm as lessee

At March 31, 2019, JPMorgan Chase and its subsidiaries were obligated under a number of noncancelable leases, predominantly operating leases for premises and equipment used primarily for business purposes. These leases generally have terms of 20 years or less. Certain of these leases contain renewal options and/or escalation clauses that will increase rental payments based on maintenance, utility and tax increases, or may require the Firm to perform restoration work on the leased premises. None of these lease agreements impose restrictions on the Firm’s ability to pay dividends, engage in debt or equity financing transactions or enter into further lease agreements.

Operating lease liabilities and ROU assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the Firm’s collateralized borrowing rate for financing instruments of a similar term and are included in accounts payable and other liabilities. The operating lease ROU asset, included in premises and equipment, also includes any lease prepayments made, plus initial direct costs incurred, less any lease incentives received. Rental expense associated with operating leases is recognized on a straight-line basis over the lease term, and generally included in occupancy expense in the Consolidated statements of income.

The following table provides information related to the Firm's operating leases:



As of March 31, (in millions, except where otherwise noted)
	2019
Right-of-use assets	$	8,272
Lease liabilities	8,562

Weighted average remaining lease term (in years)	8.7
Weighted average discount rate	3.74		%

Three months ended March 31, (in millions)
	2019
Rental expense
Gross rental expense	$	514
Sublease rental income	(46		)
Net rental expense	$	468

Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows	$	389
Supplemental non-cash information
Right-of-use assets obtained in exchange for operating lease obligations	$	365

The following table presents required future minimum rental payments under operating leases with noncancelable lease terms that expire after March 31, 2019:



Year ended December 31, (in millions)
2019 (excluding three months ended March 31, 2019)	$	1,198
2020	1,515
2021	1,335
2022	1,138
2023	966
After 2023	4,043
Total future minimum lease payments	10,195
Less: Imputed interest	(1,633		)
Total	$	8,562

In addition to the table above, as of March 31, 2019, the Firm had $1.3 billion of minimum lease payments on operating leases that were signed but had not yet commenced. These operating leases will commence between 2019 and 2022 with lease terms up to 25 years.

Firm as lessor

The Firm provides auto and equipment lease financing to its customers through lease arrangements with lease terms that may contain renewal, termination and/or purchase options. Generally the Firm’s lease financings are operating leases. These assets are recognized in other assets on the Firm’s Consolidated balance sheets and are depreciated on a straight-line basis over the lease term to reduce the asset to its estimated residual value. Depreciation expense is included in technology, communications and equipment expense in the Consolidated statements of income. The Firm’s lease income is generally recognized on a straight-

line basis over the lease term and is included in other income in the Consolidated statements of income.

On a periodic basis, the Firm assesses leased assets for impairment, and if the carrying amount of the leased asset exceeds the undiscounted cash flows from the lease payments and the estimated residual value upon disposition of the leased asset, an impairment loss is recognized.

The risk of loss on auto and equipment leased assets relating to the residual value of the leased assets is monitored through projections of the asset residual values at lease origination and periodic review of residual values, and is mitigated through arrangements with certain manufacturers or lessees.

The following table presents the carrying value of assets subject to leases reported on the Consolidated balance sheets:



(in millions)	March 31, 2019		December 31, 2018
Carrying value of assets subject to operating leases, net of accumulated depreciation	$	22,052	$	21,428
Accumulated depreciation	5,555		5,303

The following table presents the Firm’s operating lease income and the related depreciation expense on the Consolidated statements of income:



Three months ended March 31, (in millions)	2019		2018
Operating lease income	$	1,316	$	1,047
Depreciation expense	997		811

The following table presents future minimum operating lease payments expected to be received as of March 31, 2019:



Year ended December 31, (in millions)
2019 (excluding three months ended March 31, 2019)	$	2,964
2020	2,964
2021	1,424
2022	206
2023	66
After 2023	134
Total future minimum lease payments	$	7,758

Leases