Effective February 3, 2019 (the “adoption date”), we adopted ASC 842 Leases (the “new standard”). The new standard requires lessees to recognize a liability for lease obligations and a corresponding right of use asset on the balance sheet. The guidance also requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing and potential uncertainty of cash flows related to leases. We adopted the new standard using a modified retrospective transition method and applied the transition provisions at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings. We did not restate prior period financial statements.

The new standard includes several transition practical expedients that were available to reduce the burden of implementing the standard.

The following table summarizes changes in our Consolidated Balance Sheet upon adoption of the new standard:

(Dollars in Millions)
Assets
Property and equipment, net	$	(174	)	(a)
Operating leases		2,446		(b)
Other assets		(32	)	(c)
Total assets	$	2,240

Liabilities and Shareholders' Equity
Finance lease and financing obligations	$	(237	)	(a)
Operating leases		2,771		(b)
Accrued and other liabilities		(413	)	(c)
Deferred taxes		31		(d)
Shareholders' equity		88		(d)
Total liabilities and shareholders' equity	$	2,240

These adjustments represent non-cash activities for Statement of Cash Flow purposes.

Adoption of the new standard is not expected to have a material impact on our net income prospectively. We expect increases in Selling, general and administrative expenses to be more than offset by decreases in Depreciation and amortization and Interest expense. Substantially all of the expected income statement changes are due to the reversal of accounting for build-to-suit arrangements where construction is complete, which were accounted for as operating or finance leases in accordance with the transition provisions of ASC 842.

We lease certain property and equipment used in our operations. Some of our store leases include additional rental payments based on a percentage of sales over contractual levels or which are adjusted periodically for inflation. Our typical store lease has an initial term of 20 to 25 years and four to eight five-year renewal options.

Lease assets represent our right to use an underlying asset for the lease term. Lease assets are recognized at commencement date based on the value of the lease liability and are adjusted for any lease payments made to the lessor at or before commencement date, minus any lease incentives received and any initial direct costs incurred by the lessee.

Lease liabilities represent our contractual obligation to make lease payments. At the commencement date, the lease liabilities equal the present value of minimum lease payments over the lease term. As the implicit interest rate is not readily identifiable in our leases, we estimate our collateralized borrowing rate to calculate the present value of lease payments. For leases that commenced prior to the adoption date, we used the February 3, 2019 rate for a term consistent with the original lease term for operating leases and the rate on the lease commencement date for finance leases.

For leases with terms of 12 months or less, we elected the practical expedient to exclude them from the balance sheet and recognize expense on a straight-line basis over the lease term. For leases beginning, modified, or reassessed in 2019 and later, we elected the practical expedient to combine lease and non-lease components.

The following tables summarize our operating and finance leases and where they are presented in our Consolidated Financial Statements:

Consolidated Balance Sheet		November 2, 2019
(Dollars in Millions)	Classification	November 2, 2019
Assets
Operating leases	Operating leases	$	2,427
Finance leases	Property and equipment, net		617
Total operating and finance leases			3,044
Liabilities
Current
Operating leases	Current portion of operating leases		162
Finance leases	Current portion of finance lease and financing obligations		74
Noncurrent
Operating leases	Operating leases		2,643
Finance leases	Finance lease and financing obligations		836
Total operating and finance leases		$	3,715

Consolidated Statement of Income		Three Months Ended November 2, 2019		Nine Months Ended November 2, 2019
(Dollars in Millions)	Classification	Three Months Ended November 2, 2019		Nine Months Ended November 2, 2019
Operating leases	Selling, general, and administrative	$	79	$	236
Finance leases
Amortization of leased assets	Depreciation and amortization		18		53
Interest on lease liabilities	Interest expense, net		25		73
Total operating and finance leases		$	122	$	362

Consolidated Statement of Cash Flows		Nine Months Ended November 2, 2019
(Dollars in Millions)	Classification
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	249
Operating cash flows from finance leases			73
Financing cash flows from finance leases			56

	November 2, 2019
(Dollars in Millions)	Operating Leases			Finance Leases			Total
2019	$	66		$	43		$	109
2020		311			176			487
2021		303			156			459
2022		290			139			429
2023		275			117			392
After 2023		3,660			1,765			5,425
Total lease payments		4,905			2,396			7,301
Amount representing interest		(2,100	)		(1,486	)		(3,586	)
Lease liabilities	$	2,805		$	910		$	3,715

Total lease payments include $2.9 billion related to options to extend operating lease terms that are reasonably certain of being exercised and $1.5 billion related to options to extend finance lease terms that are reasonably certain of being exercised.

The following table summarizes weighted-average remaining lease term and discount rates:

	November 2, 2019
Weighted-average remaining term (years)
Operating leases		20
Finance leases		17
Weighted-average discount rate
Operating leases		6	%
Finance leases		11	%

Historical failed sale-leasebacks that did not qualify for sale-leaseback accounting upon adoption of ASC 842 continue to be accounted for as financing obligations.

The following tables summarize our financing obligations and where they are presented in our Consolidated Financial Statements:

Consolidated Balance Sheet
(Dollars in Millions)	Classification	November 2, 2019
Assets
Financing obligations	Property and equipment, net	$	78
Liabilities
Current	Current portion of finance lease and financing obligations		36
Noncurrent	Finance lease and financing obligations		496
Total financing obligations		$	532

Consolidated Statement of Income		Three Month Ended November 2, 2019		Nine Months Ended November 2, 2019
(Dollars in Millions)	Classification	Three Month Ended November 2, 2019		Nine Months Ended November 2, 2019
Amortization of financing obligation assets	Depreciation and amortization	$	3	$	8
Interest on financing obligations	Interest expense, net		9		28
Total financing obligations		$	12	$	36

Consolidated Statement of Cash Flows		Nine Months Ended November 2, 2019
(Dollars in Millions)	Classification	Nine Months Ended November 2, 2019
Cash paid for amounts included in the measurement of financing obligations
Operating cash flows from financing obligations		$	28
Financing cash flows from financing obligations			32
Proceeds from financing obligations			11
Gain on extinguishment of debt			(9	)

In October 2019, we purchased leased equipment that was accounted for as a financing obligation and resulted in recognition of a $9 million gain on extinguishment of debt.

The following table summarizes future financing obligation payments by fiscal year:

(Dollars in Millions)	November 2, 2019
2019	$	12
2020		71
2021		71
2022		68
2023		66
After 2023		249
Total financing obligations payments		537
Non-cash gain on future sale of property		228
Amount representing interest		(233	)
Financing obligation liability	$	532

The following table summarizes the weighted-average remaining term and discount rate for financing obligations: