13 Leases
As part of its normal business operations, the Group as a lessee enters into a number of lease agreements mainly for office space. Certain lease agreements include rental payments adjusted periodically for inflation. Renewal or termination options that are reasonably certain of exercise by the lessee are included in the lease term. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
In line with the elected transition method provided by ASU 2018-11 “Targeted Improvements“, the comparative lease information was not restated and continues to be reported in line with the requirements in ASC 840 Leases.
Lease liabilities and right-of-use assets
Lease liabilities and right-of-use assets for operating leases as of 31 December were as follows:
USD millions |
2019 |
|---|---|
Operating lease right-of-use assets |
485 |
Operating lease liabilities |
531 |
Operating lease right-of-use assets are included in “Other assets“ and operating lease liabilities are included in “Accrued expenses and other liabilities“ on the balance sheet.
Maturity of lease liabilities
As of 31 December 2019, the total undiscounted cash flows due to operating leases for the next five years and thereafter were as follows:
USD millions |
2019 |
|---|---|
2020 |
89 |
2021 |
77 |
2022 |
69 |
2023 |
61 |
2024 |
55 |
After 2024 |
239 |
Total undiscounted cash flows |
590 |
Less imputed interest |
–59 |
Total lease liability |
531 |
Undiscounted sublease cash flows over the next four years are USD 15 million.
The discount rates used to determine the lease liability reflect the collateralised borrowing rates for the Group, where the underlying collateral is assumed to be real estate.
The weighted average discount rate for operating leases as of 31 December 2019 was 2.5%. The weighted average remaining lease term for operating leases as of 31 December 2019 was 8.9 years.
As of 31 December 2018, future minimum lease commitments as determined prior to the adoption of ASU 2016-02 were as follows:
USD millions |
2018 |
|---|---|
2019 |
86 |
2020 |
78 |
2021 |
63 |
2022 |
57 |
2023 |
49 |
After 2023 |
255 |
Total operating lease commitments |
588 |
Less minimum non-cancellable sublease rentals |
–12 |
Total net future minimum lease commitments |
576 |
Lease cost
The composition of total lease cost for all operating leases for the year ended 31 December was as follows:
USD millions |
2018 |
2019 |
||||
|---|---|---|---|---|---|---|
|
||||||
Fixed operating lease cost |
|
87 |
||||
Other lease cost1 |
|
3 |
||||
Total operating lease cost2 |
86 |
90 |
||||
Less sublease income from operating leases |
–2 |
–9 |
||||
Total lease cost |
84 |
81 |
||||
Other information
For the year ended 31 December 2019, cash paid for amounts included in the measurement of operating lease liabilities was USD 91 million and right-of-use assets obtained in exchange for new operating lease liabilities were USD 68 million.