Leases

12 Months Ended

May 31, 2020

Leases [Abstract]

Leases

NOTE 19 — LEASES

Lease expense is recognized in Cost of sales or Operating overhead expense within the Consolidated Statements of Income, based on the underlying nature of the leased asset. For the fiscal year ended May 31, 2020, lease expense primarily consisted of operating lease costs of $569 million, along with $337 million primarily related to variable lease costs which includes an immaterial amount of short-term lease costs. As of and for the fiscal year ended May 31, 2020, finance leases were not a material component of the Company's lease portfolio.

Amounts of future undiscounted cash flows related to operating lease payments over the lease term are as follows and are reconciled to the present value of the operating lease liabilities as recorded on the Consolidated Balance Sheets:

(Dollars in millions)	AS OF MAY 31, 2020(1)
Fiscal 2021	$	550
Fiscal 2022	514
Fiscal 2023	456
Fiscal 2024	416
Fiscal 2025	374
Thereafter	1,474
Total undiscounted future cash flows related to lease payments	$	3,784
Less: Interest	426
Present value of lease liabilities	$	3,358

(1) Excludes $67 million of future operating lease payments for lease agreements signed but not yet commenced.

In accordance with Topic 840, rent expense, excluding executory costs, was $829 million and $820 million for the fiscal years ended May 31, 2019 and 2018, respectively. Amounts of minimum future annual commitments under non-cancelable operating and capital leases in accordance with Topic 840 were as follows:

	AS OF MAY 31, 2019
(Dollars in millions)	OPERATING LEASES		CAPITAL LEASES AND OTHER FINANCING OBLIGATIONS(1)		TOTAL
Fiscal 2020	$	553	$	32	$	585
Fiscal 2021	513		34		547
Fiscal 2022	441		40		481
Fiscal 2023	386		37		423
Fiscal 2024	345		34		379
Thereafter	1,494		197		1,691
TOTAL	$	3,732	$	374	$	4,106

(1) Capital leases and other financing obligations include payments related to build-to-suit lease arrangements.

The following table includes the weighted average remaining lease terms, in years, and the weighted average discount rate used to calculate the present value of operating lease liabilities:

	AS OF MAY 31,
	2020
Weighted-average remaining lease term (years)	8.7
Weighted-average discount rate	2.4	%

The following table includes supplemental cash and non-cash information related to operating leases:

	FISCAL YEAR ENDED
(Dollars in millions)	MAY 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	532
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities(1)	$	705

(1)

Excludes the amount initially capitalized in conjunction with the adoption of Topic 842.