LEASES (Notes)

9 Months Ended

Jul. 31, 2020

13.

LEASES

We determine whether an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and non-current) on our condensed consolidated balance sheet. Finance leases are included in property, plant and equipment, other accrued liabilities, and other long-term liabilities in our condensed consolidated balance sheet. Our finance lease and lessor arrangements are immaterial.

ROU assets and lease obligations are recognized based on their present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the lease term and economic environment to discount lease obligations. ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. We initially measure payments based on an index by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease liability and are recognized as they are incurred.

We have operating leases for items including office space, order fulfillment, sales and service centers, R&D and certain equipment, primarily automobiles. Our leases have remaining terms of up to 14 years, some of which may include options to extend the leases for 3 to 6 years. We consider options to renew in our lease terms and measurement of ROU assets and lease liabilities if we determine they are reasonably certain to be exercised.

As of July 31, 2020, the weighted average lease term of our operating leases was 7.4 years and the weighted average discount rate of our operating leases was 3%.

Operating lease cost for the three and nine months ended July 31, 2020 was $13 million and $36 million, respectively, and variable lease cost was $4 million and $12 million, respectively. Short-term lease and finance lease costs were immaterial for both the three and nine months ended July 31, 2020.

Supplemental cash flow information related to leases was as follows:



	Nine Months Ended
	July 31, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	35
ROU assets obtained in exchange for operating lease obligations	$	62

Amounts related to finance lease activities for the nine months ended July 31, 2020 were not material.

Maturity Analysis of Liabilities

Future minimum rents payable as of July 31, 2020 under non-cancellable leases with initial terms exceeding one year reconcile to lease liabilities included in the condensed consolidated balance sheet as follows:



	Operating Leases
	(in millions)
2020 (remainder)	$	13
2021	47
2022	38
2023	26
2024	17
Thereafter	82
Total undiscounted lease liability	223
Imputed interest	25
Total discounted lease liability	$	198

Prior to the adoption of the new lease accounting standard, future minimum lease payments as of October 31, 2019 as reported in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under non-cancellable leases with initial terms exceeding twelve months were as follows:



	Operating Leases
	(in millions)
2020	$	48
2021	40
2022	31
2023	19
2024	12
Thereafter	46
Total future minimum lease payments	$	196

As of July 31, 2020, we did not have material leases that had not yet commenced.

Lessor Disclosure

Rental income from leasing out excess facilities was $2 million and $8 million for the three and nine months ended July 31, 2020, respectively, and is included in other operating expense (income), net. Other lessor arrangements were immaterial.