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Leases

6 Months Ended

Jun. 30, 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 June 30, 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, determined based on the contractual maturity of the lease, and include periods covered by options to extend or terminate the lease when the Firm is reasonably certain that it will exercise those options. 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. Certain of these leases contain escalation clauses that will increase rental payments based on maintenance, utility and tax increases, which are non-lease components. The Firm elected not to separate lease and non-lease components of a contract for its real estate leases. As such, real estate lease payments represent payments on both lease and non-lease components.

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 tables provide information related to the Firm’s operating leases:



As of June 30, (in millions, except where otherwise noted)
	2019
Right-of-use assets	$	8,118
Lease liabilities	8,404

Weighted average remaining lease term (in years)	8.7
Weighted average discount rate	3.75		%

Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows	$	778
Supplemental non-cash information
Right-of-use assets obtained in exchange for operating lease obligations	$	587



(in millions)	Three months ended June 30, 2019			Six months ended June 30, 2019
Rental expense
Gross rental expense	$	506		$	1,020
Sublease rental income	(42		)	(88		)
Net rental expense	$	464		$	932

The following table presents future payments under operating leases as of June 30, 2019:



Year ended December 31, (in millions)
2019 (excluding six months ended June 30, 2019)	$	787
2020	1,535
2021	1,356
2022	1,161
2023	988
After 2023	4,180
Total future minimum lease payments	10,007
Less: Imputed interest	(1,603		)
Total	$	8,404

In addition to the table above, as of June 30, 2019, the Firm had additional future operating lease commitments of $1.5 billion 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)	June 30, 2019		December 31, 2018
Carrying value of assets subject to operating leases, net of accumulated depreciation	$	22,406	$	21,428
Accumulated depreciation	5,643		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 June 30,				Six months ended June 30,
(in millions)	2019		2018		2019		2018
Operating lease income	$	1,327	$	1,112	$	2,643	$	2,159
Depreciation expense	988		852		1,985		1,663

The following table presents future receipts under operating leases as of June 30, 2019:



Year ended December 31, (in millions)
2019 (excluding six months ended June 30, 2019)	$	2,107
2020	3,381
2021	1,866
2022	386
2023	69
After 2023	136
Total future minimum lease payments	$	7,945

Leases