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Occupancy Expense and Information Systems and Communications Expense
 12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
Upon adoption of Topic 842 on January 1, 2019, we recognized right-of-use assets of approximately $0.91 billion and lease liabilities of approximately $1.06 billion.
Occupancy expense and information systems and communications expense include depreciation of buildings, leasehold improvements, computer hardware and software, equipment, furniture and fixtures, and amortization of lease right-of-use assets. Total depreciation and amortization expense in 2020, 2019 and 2018 was $858 million, $842 million and $599 million, respectively. We recorded a repositioning charge of $51 million in occupancy expenses in 2020, consisting of a $46 million impairment of right-of-use assets and consisting of $5 million for one-time repairs.
We use our incremental borrowing rate to determine the present value of the lease payments for finance and operating leases described below. Additionally, we do not separate nonlease components such as real estate taxes and common area maintenance from base lease payments.
As of December 31, 2020 and 2019, an aggregate net book value of $55 million and $78 million, respectively, for the finance lease related to our One Lincoln Street Boston headquarters was recorded in premises and equipment, with the related liability of $103 million and $136 million, respectively, recorded in long-term debt, in our consolidated statement of condition.
Finance lease right-of-use asset amortization is recorded in occupancy expense on a straight-line basis in our consolidated statement of income over the respective lease term. As of December 31, 2020, accumulated amortization of the finance lease right-of-use asset was $75 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2020 and 2019, interest expense related to the finance lease obligation reflected in NII was $9 million and $11 million, respectively.
As of December 31, 2020, an aggregate net book value of $720 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $891 million recorded in
accrued expenses and other liabilities in our consolidated statement of condition.
We have entered into non-cancellable operating leases for premises and equipment. Nearly all of these leases include renewal options, and only those reasonably certain of being exercised are included in the term of the lease. Costs for operating leases are recorded on a straight-line basis which includes both interest expense and right-of-use asset amortization. Operating lease costs for office space are recorded in occupancy expense. Costs related to operating leases for equipment are recorded in information systems and communications expense.
As of December 31, 2020, we have additional operating leases, primarily for office space, that have not yet commenced of approximately $462 million of undiscounted future minimum lease payments. These leases will commence between fiscal year 2021 and fiscal year 2023 with lease terms of 10 to 15 years. The majority of these future payments relate to the new Boston headquarters lease executed in the first quarter of 2019, replacing the One Lincoln Street Boston property.
None of our leases contain residual value guarantees.
The following table presents lease costs, sublease rental income, cash flows and new leases arising from lease transactions for 2020:
Years Ended December 31,
(In millions)20202019
Finance lease:
Amortization of right-of-use assets$20 $21 
Interest on lease liabilities9 11 
Total finance lease expense29 32 
Sublease income (11)(9)
Net finance lease expense18 23 
Operating lease:
Operating lease expense169 179 
Sublease income (16)(6)
Net operating lease expense153 173 
Net lease expense$171 $196 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$9 $11 
Operating cash flows from operating leases192 201 
Financing cash flows from finance leases33 54 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$38 $120 
Finance leases— — 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2020:
(In millions)Operating LeasesFinance LeasesTotal
2021$186 $41 $227 
2022167 41 208 
2023147 31 178 
2024112 — 112 
202593 — 93 
Thereafter275 — 275 
Total future minimum lease payments980 113 1,093 
Less imputed interest(89)(10)(99)
     Total$891 $103 $994 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2020:
December 31, 2020December 31, 2019
Weighted-average remaining lease term (in years):
     Finance leases2.73.8
     Operating leases7.17.6
Weighted-average discount rate:
     Finance leases7 %7 %
     Operating leases3 %3 %
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
Upon adoption of Topic 842 on January 1, 2019, we recognized right-of-use assets of approximately $0.91 billion and lease liabilities of approximately $1.06 billion.
Occupancy expense and information systems and communications expense include depreciation of buildings, leasehold improvements, computer hardware and software, equipment, furniture and fixtures, and amortization of lease right-of-use assets. Total depreciation and amortization expense in 2020, 2019 and 2018 was $858 million, $842 million and $599 million, respectively. We recorded a repositioning charge of $51 million in occupancy expenses in 2020, consisting of a $46 million impairment of right-of-use assets and consisting of $5 million for one-time repairs.
We use our incremental borrowing rate to determine the present value of the lease payments for finance and operating leases described below. Additionally, we do not separate nonlease components such as real estate taxes and common area maintenance from base lease payments.
As of December 31, 2020 and 2019, an aggregate net book value of $55 million and $78 million, respectively, for the finance lease related to our One Lincoln Street Boston headquarters was recorded in premises and equipment, with the related liability of $103 million and $136 million, respectively, recorded in long-term debt, in our consolidated statement of condition.
Finance lease right-of-use asset amortization is recorded in occupancy expense on a straight-line basis in our consolidated statement of income over the respective lease term. As of December 31, 2020, accumulated amortization of the finance lease right-of-use asset was $75 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2020 and 2019, interest expense related to the finance lease obligation reflected in NII was $9 million and $11 million, respectively.
As of December 31, 2020, an aggregate net book value of $720 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $891 million recorded in
accrued expenses and other liabilities in our consolidated statement of condition.
We have entered into non-cancellable operating leases for premises and equipment. Nearly all of these leases include renewal options, and only those reasonably certain of being exercised are included in the term of the lease. Costs for operating leases are recorded on a straight-line basis which includes both interest expense and right-of-use asset amortization. Operating lease costs for office space are recorded in occupancy expense. Costs related to operating leases for equipment are recorded in information systems and communications expense.
As of December 31, 2020, we have additional operating leases, primarily for office space, that have not yet commenced of approximately $462 million of undiscounted future minimum lease payments. These leases will commence between fiscal year 2021 and fiscal year 2023 with lease terms of 10 to 15 years. The majority of these future payments relate to the new Boston headquarters lease executed in the first quarter of 2019, replacing the One Lincoln Street Boston property.
None of our leases contain residual value guarantees.
The following table presents lease costs, sublease rental income, cash flows and new leases arising from lease transactions for 2020:
Years Ended December 31,
(In millions)20202019
Finance lease:
Amortization of right-of-use assets$20 $21 
Interest on lease liabilities9 11 
Total finance lease expense29 32 
Sublease income (11)(9)
Net finance lease expense18 23 
Operating lease:
Operating lease expense169 179 
Sublease income (16)(6)
Net operating lease expense153 173 
Net lease expense$171 $196 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$9 $11 
Operating cash flows from operating leases192 201 
Financing cash flows from finance leases33 54 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$38 $120 
Finance leases— — 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2020:
(In millions)Operating LeasesFinance LeasesTotal
2021$186 $41 $227 
2022167 41 208 
2023147 31 178 
2024112 — 112 
202593 — 93 
Thereafter275 — 275 
Total future minimum lease payments980 113 1,093 
Less imputed interest(89)(10)(99)
     Total$891 $103 $994 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2020:
December 31, 2020December 31, 2019
Weighted-average remaining lease term (in years):
     Finance leases2.73.8
     Operating leases7.17.6
Weighted-average discount rate:
     Finance leases7 %7 %
     Operating leases3 %3 %