Leases

12 Months Ended

Aug. 31, 2023

Leases

We have finance and operating leases through which we obtain the right to use facilities, land, and equipment that support our business operations. Our finance leases consist primarily of (i) gas and other supply agreements that are deemed to contain embedded leases and (ii) equipment leases. Our operating leases consist primarily of offices, laboratories, other facilities, and land. Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 99 years for land.

Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a lease. Our assessment includes determining whether we or the supplier control the assets used to fulfill the agreements by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of the output of the assets. Our gas supply arrangements generally are deemed to contain a lease because we have the right to substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets. In determining the lease term, we assess whether we are reasonably certain to exercise any options to renew or terminate a lease or to purchase the right-of-use asset. Measuring the present value of the initial lease liability requires judgment to determine the discount rate, which we base on interest rates for borrowings with similar terms and collateral issued by entities with credit ratings similar to ours.

The components of lease cost are presented below:


For the year ended	2023		2022		2021

Finance lease cost
Amortization of right-of-use asset	$	105	$	99	$	69
Interest on lease liability	24		24		20
Operating lease cost(1)	137		125		108
	$	266	$	248	$	197

(1)Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.

Supplemental cash flow information related to leases was as follows:


For the year ended	2023		2022		2021

Cash flows used for operating activities
Finance leases	$	24	$	23	$	21
Operating leases	139		110		106
Cash flows used for financing activities – Finance leases	109		103		85
Noncash acquisitions of right-of-use assets
Finance leases	508		309		395
Operating leases	57		197		27

Supplemental balance sheet information related to leases was as follows:


As of	August 31, 2023			September 1, 2022

Finance lease right-of-use assets (included in property, plant, and equipment)	$	1,311		$	904
Current operating lease liabilities (included in accounts payable and accrued expenses)	66			60

Weighted-average remaining lease term (in years)
Finance leases	9			12
Operating leases	11			12
Weighted-average discount rate
Finance leases	3.86		%	2.65		%
Operating leases	3.21		%	2.90		%

As of August 31, 2023, maturities of lease liabilities by fiscal year were as follows:


For the year ending	Finance Leases		Operating Leases

2024	$	219	$	62
2025	200		77
2026	190		76
2027	185		76
2028	178		74
2029 and thereafter	506		453
Less imputed interest	(197)		(149)
	$	1,281	$	669

The table above excludes obligations for leases that have been executed but have not yet commenced. As of August 31, 2023, excluded obligations consisted of $170 million of finance lease obligations over a weighted-average period of 12 years for gas supply arrangements deemed to contain embedded leases and equipment leases. We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.

[Operating] Leases