Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using a modified retrospective approach for leases existing at or entered into after the effective date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. The standard requires the recognition of right-of-use assets and lease liabilities for operating leases on the Company's Consolidated Balance Sheets. The accounting for finance leases remained unchanged. There was no effect of adopting Topic 842 on member's equity, operating income, or net income. Results for reporting periods beginning after January 1, 2019, are presented under Topic 842, while prior period amounts have not been adjusted.

The Company has substantial lease commitments for locomotives, freight cars, office buildings, operating facilities, and other property. Many of the Company's leases provide the option to purchase the leased item at fair market value or a fixed purchase price at the end of the lease, and some leases include early buyout options at a fixed purchase price. Also, many of the Company's leases include both fixed rate and fair market value renewal options.

As the implicit interest rate is not readily available for most leases, the Company used its incremental borrowing rate to determine the present value of lease payments at the transition date. The Company has lease agreements that contain both lease and non-lease components, but only freight cars are accounted for as a single lease component. BNSF has applied the short-term lease exemption to all asset classes, and as a result, short-term leases are not recognized on the Consolidated Balance Sheets. Variable lease costs, sublease income and lessor transactions were not significant.

The following table shows the components of lease expense (in millions):



Lease Cost	Three Months Ended March 31, 2019
Operating lease cost	$	121
Finance lease cost:
Amortization of right-of-use assets	10
Interest on lease liabilities	6
Short-term lease cost	20
Total lease cost	$	157

Supplemental balance sheet information related to leases was as follows (in millions):



Operating Leases	March 31, 2019
Operating lease right-of-use assets	$	2,609

Accounts payable and other current liabilities	$	461
Operating lease liabilities	1,809
Total operating lease liabilities	$	2,270



Finance Leases	March 31, 2019
Property and equipment	$	795
Accumulated depreciation	(323		)
Property and equipment, net	$	472

Long-term debt due within one year	$	48
Long-term debt	361
Total finance lease liabilities	$	409

Supplemental cash flow information related to leases was as follows (in millions):



Cash Flow	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows for operating leases	$	180
Financing cash flows for finance leases	$	10
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	87

Other information related to leases was as follows:



Other Information	March 31, 2019
Weighted-average remaining lease term (in years):
Operating leases	8.1
Finance leases	5.4
Weighted-average discount rate:
Operating leases	3.7	%
Finance leases	6.3	%

Maturities of lease liabilities as of March 31, 2019 are summarized as follows (in millions):



March 31,	Operating Leases			Finance Leases
2019	$	228		$	55
2020	510			69
2021	437			200
2022	345			35
2023	298			28
Thereafter	802			101
Total lease payments	2,620			488
Less amount representing interest	(350		)	(79		)
Total	$	2,270		$	409

Future minimum lease payments as of December 31, 2018 are summarized as follows (in millions):



December 31,	Operating Leases		Capital Leases
2019	$	400	$	72
2020	496		69
2021	421		200
2022	328		35
2023	289		28
Thereafter	787		101
Total lease payments	$	2,721	505
Less amount representing interest			(86		)
Total			$	419