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Occupancy Expense and Information Systems and Communications Expense
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
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 2022, 2021 and 2020 was $842 million, $859 million and $858 million, respectively.
In the fourth quarter of 2022 we completed a sale leaseback transaction of two owned properties in the United States of America. Under the transaction, land, buildings and building improvements were sold for net proceeds of $27 million. We recognized a gain of $11 million on the sale which is presented within Occupancy expense. The initial term of the subsequent leases is 3 years and they are recognized as operating leases.
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, 2022, we had finance leases for information technology equipment of $167 million recorded in premises and equipment, with the related liability of $176 million recorded in long-term debt, in our consolidated statement of condition. As of December 31, 2021, we had finance leases related to our One Lincoln Street Boston headquarters and information technology equipment of an aggregate net book value of $135 million recorded in premises and equipment, and the related liability of $164 million recorded in long-term debt, in our consolidated statement of condition. In December 2022, modifications were made to our One Lincoln Street Boston lease preparing for its expiration in 2023, resulting in reclassification from a finance lease to an operating lease.
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, 2022, accumulated amortization of the finance lease right-of-use asset was $40 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2022 and 2021, interest expense related to the finance lease obligation reflected in NII was $6 million and $6 million, respectively.
As of December 31, 2022, an aggregate net book value of $500 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $630 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, 2022, we have an additional operating lease, primarily for office space, that has not yet commenced with approximately $455 million of undiscounted future minimum lease payments. This lease will commence in fiscal year 2023 with 15 year lease term. 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 2022:
Years Ended December 31,
(In millions)20222021
Finance lease:
Amortization of right-of-use assets$50 $27 
Interest on lease liabilities6 6 
Total finance lease expense56 33 
Sublease income (10)(11)
Net finance lease expense46 22 
Operating lease:
Operating lease expense130 147 
Sublease income (16)(18)
Net operating lease expense114 129 
Net lease expense$160 $151 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$6 $6 
Operating cash flows from operating leases161 198 
Financing cash flows from finance leases58 47 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$88 $69 
Finance leases99 108 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2022:
(In millions)Operating LeasesFinance LeasesTotal
2023$189 $50 $239 
2024125 52 177 
2025107 52 159 
202684 31 115 
202770 — 70 
Thereafter101 — 101 
Total future minimum lease payments676 185 861 
Less imputed interest(46)(9)(55)
     Total$630 $176 $806 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2022 and 2021:
December 31, 2022December 31, 2021
Weighted-average remaining lease term (in years):
     Finance leases3.52.6
     Operating leases5.05.8
Weighted-average discount rate:
     Finance leases3 %4 %
     Operating leases3 %3 %
Occupancy Expense and Information Systems and Communications Expense Occupancy Expense and Information Systems and Communications Expense
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 2022, 2021 and 2020 was $842 million, $859 million and $858 million, respectively.
In the fourth quarter of 2022 we completed a sale leaseback transaction of two owned properties in the United States of America. Under the transaction, land, buildings and building improvements were sold for net proceeds of $27 million. We recognized a gain of $11 million on the sale which is presented within Occupancy expense. The initial term of the subsequent leases is 3 years and they are recognized as operating leases.
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, 2022, we had finance leases for information technology equipment of $167 million recorded in premises and equipment, with the related liability of $176 million recorded in long-term debt, in our consolidated statement of condition. As of December 31, 2021, we had finance leases related to our One Lincoln Street Boston headquarters and information technology equipment of an aggregate net book value of $135 million recorded in premises and equipment, and the related liability of $164 million recorded in long-term debt, in our consolidated statement of condition. In December 2022, modifications were made to our One Lincoln Street Boston lease preparing for its expiration in 2023, resulting in reclassification from a finance lease to an operating lease.
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, 2022, accumulated amortization of the finance lease right-of-use asset was $40 million. Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense. In 2022 and 2021, interest expense related to the finance lease obligation reflected in NII was $6 million and $6 million, respectively.
As of December 31, 2022, an aggregate net book value of $500 million for the operating lease right-of-use assets is recorded in other assets, with the related lease liability of $630 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, 2022, we have an additional operating lease, primarily for office space, that has not yet commenced with approximately $455 million of undiscounted future minimum lease payments. This lease will commence in fiscal year 2023 with 15 year lease term. 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 2022:
Years Ended December 31,
(In millions)20222021
Finance lease:
Amortization of right-of-use assets$50 $27 
Interest on lease liabilities6 6 
Total finance lease expense56 33 
Sublease income (10)(11)
Net finance lease expense46 22 
Operating lease:
Operating lease expense130 147 
Sublease income (16)(18)
Net operating lease expense114 129 
Net lease expense$160 $151 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$6 $6 
Operating cash flows from operating leases161 198 
Financing cash flows from finance leases58 47 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$88 $69 
Finance leases99 108 
The following table presents future minimum lease payments under non-cancellable leases as of December 31, 2022:
(In millions)Operating LeasesFinance LeasesTotal
2023$189 $50 $239 
2024125 52 177 
2025107 52 159 
202684 31 115 
202770 — 70 
Thereafter101 — 101 
Total future minimum lease payments676 185 861 
Less imputed interest(46)(9)(55)
     Total$630 $176 $806 
The following table presents details related to remaining lease terms and discount rate as of December 31, 2022 and 2021:
December 31, 2022December 31, 2021
Weighted-average remaining lease term (in years):
     Finance leases3.52.6
     Operating leases5.05.8
Weighted-average discount rate:
     Finance leases3 %4 %
     Operating leases3 %3 %