Leases

9 Months Ended

Apr. 25, 2020

Leases [Abstract]

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (IT) and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of April 25, 2020, our operating lease right-of-use assets were $930 million and were recorded in other assets, and our operating lease liabilities were $998 million, of which $344 million was included in other current liabilities and $654 million was included in other long-term liabilities. The weighted-average lease term was 4.0 years and the weighted-average discount rate was 1.7% as of April 25, 2020.

The components of our lease expenses were as follows (in millions):

	April 25, 2020
	Three Months Ended		Nine Months Ended
Operating lease expense	$	101	$	315
Short-term lease expense	18		51
Variable lease expense	37		116
Total lease expense	$	156	$	482

Supplemental information related to our operating leases is as follows:

	Nine Months Ended
In millions:	April 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	309
Right-of-use assets obtained in exchange for operating leases liabilities	$	120

The maturities of our operating leases (undiscounted) as of April 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	100
2021	328
2022	221
2023	171
2024	104
Thereafter	109
Total lease payments	1,033
Less interest	(35		)
Total	$	998

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the third quarter and first nine months of fiscal 2020 was $23 million and $72 million, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	207
2021	923
2022	517
2023	302
2024	149
Thereafter	71
Total	2,169
Less: Present value of lease payments	2,048
Difference between undiscounted cash flows and discounted cash flows	$	121

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	April 25, 2020			July 27, 2019
Operating lease assets	$	348		$	485
Accumulated depreciation	(197		)	(306		)
Operating lease assets, net	$	151		$	179

Our lease income for the third quarter and first nine months of fiscal 2020 was $49 million and $143 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	30
2021	74
2022	28
2023	6
Total	$	138

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (IT) and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of April 25, 2020, our operating lease right-of-use assets were $930 million and were recorded in other assets, and our operating lease liabilities were $998 million, of which $344 million was included in other current liabilities and $654 million was included in other long-term liabilities. The weighted-average lease term was 4.0 years and the weighted-average discount rate was 1.7% as of April 25, 2020.

The components of our lease expenses were as follows (in millions):

	April 25, 2020
	Three Months Ended		Nine Months Ended
Operating lease expense	$	101	$	315
Short-term lease expense	18		51
Variable lease expense	37		116
Total lease expense	$	156	$	482

Supplemental information related to our operating leases is as follows:

	Nine Months Ended
In millions:	April 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	309
Right-of-use assets obtained in exchange for operating leases liabilities	$	120

The maturities of our operating leases (undiscounted) as of April 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	100
2021	328
2022	221
2023	171
2024	104
Thereafter	109
Total lease payments	1,033
Less interest	(35		)
Total	$	998

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the third quarter and first nine months of fiscal 2020 was $23 million and $72 million, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	207
2021	923
2022	517
2023	302
2024	149
Thereafter	71
Total	2,169
Less: Present value of lease payments	2,048
Difference between undiscounted cash flows and discounted cash flows	$	121

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	April 25, 2020			July 27, 2019
Operating lease assets	$	348		$	485
Accumulated depreciation	(197		)	(306		)
Operating lease assets, net	$	151		$	179

Our lease income for the third quarter and first nine months of fiscal 2020 was $49 million and $143 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	30
2021	74
2022	28
2023	6
Total	$	138

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (IT) and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of April 25, 2020, our operating lease right-of-use assets were $930 million and were recorded in other assets, and our operating lease liabilities were $998 million, of which $344 million was included in other current liabilities and $654 million was included in other long-term liabilities. The weighted-average lease term was 4.0 years and the weighted-average discount rate was 1.7% as of April 25, 2020.

The components of our lease expenses were as follows (in millions):

	April 25, 2020
	Three Months Ended		Nine Months Ended
Operating lease expense	$	101	$	315
Short-term lease expense	18		51
Variable lease expense	37		116
Total lease expense	$	156	$	482

Supplemental information related to our operating leases is as follows:

	Nine Months Ended
In millions:	April 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	309
Right-of-use assets obtained in exchange for operating leases liabilities	$	120

The maturities of our operating leases (undiscounted) as of April 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	100
2021	328
2022	221
2023	171
2024	104
Thereafter	109
Total lease payments	1,033
Less interest	(35		)
Total	$	998

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the third quarter and first nine months of fiscal 2020 was $23 million and $72 million, respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	207
2021	923
2022	517
2023	302
2024	149
Thereafter	71
Total	2,169
Less: Present value of lease payments	2,048
Difference between undiscounted cash flows and discounted cash flows	$	121

Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	April 25, 2020			July 27, 2019
Operating lease assets	$	348		$	485
Accumulated depreciation	(197		)	(306		)
Operating lease assets, net	$	151		$	179

Our lease income for the third quarter and first nine months of fiscal 2020 was $49 million and $143 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of April 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining three months)	$	30
2021	74
2022	28
2023	6
Total	$	138