New Accounting Standard

6 Months Ended

Jun. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

NEW ACCOUNTING STANDARDS

Leases. Effective January 1, 2019, FCX adopted the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) that requires lessees to recognize most leases on the balance sheet. FCX elected the practical expedients allowing it to (i) apply the provisions of the updated lease guidance at the effective date, without adjusting the comparative periods presented and (ii) not reassess lease contracts, lease classification and initial direct costs of leases existing at adoption. FCX also elected an accounting policy to not recognize a lease asset and liability for leases with a term of 12 months or less and a purchase option that is not expected to be exercised.

FCX leases various types of properties, including offices and equipment under non-cancelable leases. Nearly all of FCX’s leases were considered operating leases under the new ASU. Adoption of this ASU resulted in the recognition of $243 million in lease right-of-use assets and lease liabilities as of January 1, 2019.

The components of FCX’s leases presented in the consolidated balance sheet as of June 30, 2019, follow (in millions):



Lease right-of-use assets (included in property, plant, equipment and mine development costs, net)	$	242

Short-term lease liabilities (included in accounts payable and accrued liabilities)	$	47
Long-term lease liabilities (included in other liabilities)	216
Total lease liabilities	$	263

Operating lease costs, primarily included in production and delivery expense in the consolidated statement of operations, are as follows (in millions):



	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019

Operating leases	$	21	$	33
Variable and short-term leases	19		40
Total lease costs	$	40	$	73

Lease costs totaled $80 million for the year 2018.

FCX paid $20 million during the first six months of 2019 for lease liabilities recorded in the consolidated balance sheet (primarily included in operating cash flows in the consolidated statements of cash flows). As of June 30, 2019, the weighted-average discount rate used to determine the lease liabilities was 5.2 percent and the weighted-average remaining lease term was 8.8 years.

The future minimum payments for leases presented in the consolidated balance sheets at June 30, 2019, follow (in millions):



Remaining six months of 2019	$	27
2020	54
2021	40
2022	33
2023	30
Thereafter	158
Total payments	342
Less amount representing interest	(79		)
Present value of net minimum lease payments	263
Less current portion	(47		)
Long-term portion	$	216

Financial Instruments. In June 2016, FASB issued an ASU that requires entities to estimate all expected credit losses for most financial assets held at the reporting date based on an expected loss model, which requires consideration of historical experience, current conditions, and reasonable and supportable forecasts. This ASU also requires enhanced disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. For public companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. FCX does not expect this guidance to have a material impact on its consolidated financial statements.