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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2020
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies
NATURE OF BUSINESS The Company franchises and operates McDonald’s restaurants in the global restaurant industry. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees or affiliates under license agreements. The following table presents restaurant information by ownership type:
Restaurants at December 31, | 2020 |  | 2019 |  | 2018
Conventional franchised | 21,712 |  |  | 21,837 |  |  | 21,685 |
Developmental licensed | 7,663 |  |  | 7,648 |  |  | 7,225 |
Foreign affiliated | 7,146 |  |  | 6,574 |  |  | 6,175 |
Total Franchised | 36,521 |  |  | 36,059 |  |  | 35,085 |
Company-operated | 2,677 |  |  | 2,636 |  |  | 2,770 |
Total Systemwide restaurants | 39,198 |  |  | 38,695 |  |  | 37,855 |
The results of operations of restaurant businesses purchased and sold in transactions with franchisees were not material either individually or in the aggregate to the consolidated financial statements for periods prior to purchase and sale. CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates owned 50% or less (primarily McDonald’s China and Japan) are accounted for by the equity method. On an ongoing basis, the Company evaluates its business relationships such as those with franchisees, joint venture partners, developmental licensees, suppliers and advertising cooperatives to identify potential variable interest entities. Generally, these businesses qualify for a scope exception under the variable interest entity consolidation guidance. The Company has concluded that consolidation of any such entity is not appropriate for the periods presented. ESTIMATES IN FINANCIAL STATEMENTS The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION Generally, the functional currency of operations outside the U.S. is the respective local currency. RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements Financial Instruments - Credit Losses In June 2016, the Financial Accounting Standards Board ("FASB") issued guidance codified in ASC Topic 326, "Financial Instruments – Credit Losses: Measurements of Credit Losses on Financial Instruments". The standard replaces the incurred loss impairment methodology in prior GAAP with a methodology that instead reflects a current estimate of all expected credit losses on financial assets, including receivables. The guidance requires that an entity measure and recognize expected credit losses at the time the asset is recorded, while considering a broader range of information to estimate credit losses including country specific macroeconomic conditions that correlate with historical loss experience, delinquency trends and aging behavior of receivables, among others. The Company adopted this guidance effective January 1, 2020, prospectively, and the adoption of this standard did not have a material impact on the consolidated financial statements. The Company had an Allowance for bad debts of $55.3 million as of December 31, 2020 recorded as a reduction to Accounts and notes receivable on the Consolidated Balance Sheet. Recent Accounting Pronouncements Not Yet Adopted Income Taxes In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including applicable interim periods. The Company anticipates the adoption of ASU 2019-12 will not have a material impact on its consolidated financial statements. REVENUE RECOGNITION The Company's revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees, developmental licensees and affiliates. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees. Revenues from restaurants licensed to developmental licensees and affiliates include a royalty based on a percent of sales, and generally include initial fees. The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology platforms, revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand, and third party revenues for the Dynamic Yield business. Sales by Company-operated restaurants are recognized on a cash basis at the time of the underlying sale and are presented net of sales tax and other sales-related taxes. Royalty revenues are based on a percent of sales and recognized at the time the underlying sales occur. Rental income includes both minimum rent payments, which are recognized straight-line over the franchise term (with the exception of rent concessions as a result of COVID-19 – refer to the Leasing section that follows), and variable rent payments based on a percent of sales, which are recognized at the time the underlying sales occur. Initial fees are recognized as the Company satisfies the performance obligation over the franchise term, which is generally 20 years. The Company provides goods or services related to various technology platforms to certain franchisees that are distinct from the franchise agreement because they do not require integration with other goods or services we provide. The Company has determined that it is the principal in these arrangements. Accordingly, the related revenue is presented on a gross basis on the Consolidated Statement of Income. These revenues are recognized as the goods or services are transferred to the franchisee, and related expenses are recognized as incurred. Brand licensing arrangement revenues are based on a percent of sales and are recognized at the time the underlying sales occur. Dynamic Yield third party revenues are generated from providing software as a service solutions to customers and are recognized over the applicable subscription period as the service is performed. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings–up to 40 years; leasehold improvements–the lesser of useful lives of assets or lease terms, which generally include certain option periods; and equipment–3 to 12 years. CAPITALIZED SOFTWARE Capitalized software is stated at cost and amortized using the straight-line method over the estimated useful life of the software, which primarily ranges from 2 to 7 years. Customer facing software is typically amortized over a shorter useful life, while back office and Corporate systems may have a longer useful life. Capitalized software less accumulated amortization is recorded within Miscellaneous other assets on the Consolidated Balance Sheet and was (in millions): 2020-$691.2; 2019-$665.4; 2018-$609.7. T LONG-LIVED ASSETS Long-lived assets are reviewed for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of annually reviewing McDonald’s restaurant assets for potential impairment, assets are initially grouped together in the U.S. at a field office level, and internationally, at a market level. The Company manages its restaurants as a group or portfolio with significant common costs and promotional activities; as such, an individual restaurant’s cash flows are not generally independent of the cash flows of others in a market. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows produced by each individual restaurant within the asset grouping is compared to its carrying value. If an individual restaurant is determined to be impaired, the loss is measured by the excess of the carrying amount of the restaurant over its fair value as determined by an estimate of discounted future cash flows. Losses on assets held for disposal are recognized when management and the Board of Directors, as required, have approved and committed to a plan to dispose of the assets, the assets are available for disposal and the disposal is probable of occurring within 12 months, and the net sales proceeds are expected to be less than its net book value, among other factors. Generally, such losses are related to restaurants that have closed and ceased operations as well as other assets that meet the criteria to be considered “held for sale" GOODWILL Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurants and other businesses. The Company's goodwill primarily results from purchases of McDonald's restaurants from franchisees and ownership increases in subsidiaries or affiliates, and it is generally assigned to the reporting unit (defined as each individual market) expected to benefit from the synergies of the combination. If a Company-operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the reporting unit. The following table presents the 2020 activity in goodwill by segment:
In millions | U.S. | International Operated Markets | International Developmental Licensed Markets & Corporate | Consolidated
Balance at December 31, 2019 | $ | 1,615.8 |  |  | $ | 1,061.6 |  |  | $ | — |  |  | $ | 2,677.4 |
Business acquisitions | 9.8 |  |  | — |  |  | — |  |  | 9.8 |
Net restaurant purchases (sales) | (0.1) |  |  | 9.8 |  |  | — |  |  | 9.7 |
Impairment losses | — |  |  | — |  |  | — |  |  | — |
Currency translation | — |  |  | 76.2 |  |  | — |  |  | 76.2 |
Balance at December 31, 2020 | $ | 1,625.5 |  |  | $ | 1,147.6 |  |  | $ | — |  |  | $ | 2,773.1 |
The Company conducts goodwill impairment testing in the fourth quarter of each year or whenever indicators of impairment exists. If an indicator of impairment exists, the goodwill impairment test compares the fair value of a reporting unit, generally based on discounted future cash flows, with its carrying amount including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. In the current period, the Company performed a qualitative assessment and did not identify any indicators of impairment. Historically, goodwill impairment has not significantly impacted the consolidated financial statements. Goodwill on the Consolidated Balance Sheet reflects accumulated impairment losses of $14.5 million and $113.9 million as of December 31, 2020 and 2019, respectively. ADVERTISING COSTS INCOME TAXES Income Tax Uncertainties The Company, like other multi-national companies, is regularly audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax liabilities are recorded when, in management’s judgment, a tax position does not meet the more likely than not threshold for recognition. For tax positions that meet the more likely than not threshold, a tax liability may still be recorded depending on management’s assessment of how the tax position will ultimately be settled. The Company records interest and penalties on unrecognized tax benefits in the provision for income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting basis and the tax basis of existing assets and liabilities. The Company records a valuation allowance to reduce its deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax strategies, including the sale of appreciated assets, in assessing the need for the valuation allowance, if these estimates and assumptions change in the future, the Company may be required to adjust its valuation allowance. This could result in a charge to, or an increase in, income in the period such determination is made. Refer to the Income Taxes footnote on page 53 for additional information FAIR VALUE MEASUREMENTS The Company measures certain financial assets and liabilities at fair value on a recurring basis, and certain non-financial assets and liabilities on a nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows: ▪Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. ▪Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. ▪Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. Certain of the Company’s derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves, option volatilities and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company. ▪Certain Financial Assets and Liabilities Measured at Fair Value The following tables present financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance:
December 31, 2020 |  |  |  |  |  |
In millions | Level 1 (1) |  | Level 2 |  | Carrying Value
Derivative assets | $ | 185.6 |  |  | $ | 41.4 |  |  |  | $ | 227.0 |
Derivative liabilities |  |  | $ | (97.5) |  |  |  | $ | (97.5) |
December 31, 2019 |  |  |  |  |  |
In millions | Level 1 (1) |  | Level 2 |  | Carrying Value
Derivative assets | $ | 179.1 |  |  | $ | 45.6 |  |  |  | $ | 224.7 |
Derivative liabilities |  |  | $ | (11.3) |  |  |  | $ | (11.3) |
(1) Level 1 is comprised of derivatives that hedge market driven changes in liabilities associated with the Company’s supplemental benefit plans. ▪Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). For the year ended December 31, 2020, the Company did not record any material fair value adjustments to long-lived assets (including goodwill). ▪Certain Financial Assets and Liabilities not Measured at Fair Value At December 31, 2020, the fair value of the Company’s debt obligations was estimated at $43.7 billion, compared to a carrying amount of $37.4 billion. The fair value was based on quoted market prices, Level 2 within the valuation hierarchy. The carrying amount for both cash equivalents and notes receivable approximate fair value. FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes. The Company documents its risk management objective and strategy for undertaking hedging transactions, as well as all relationships between hedging instruments and hedged items. The Company’s derivatives that are designated for hedge accounting consist mainly of interest rate swaps, foreign currency forwards, and cross-currency interest rate swaps, and are classified as either fair value, cash flow or net investment hedges. Further details are explained in the "Fair Value," "Cash Flow" and "Net Investment" hedge sections. The Company enters into certain derivatives that are not designated for hedge accounting. The Company has entered into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. The Company has also entered into certain derivatives to mitigate the share price risk related to its sale of stock in McDonald’s Japan. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. Further details are explained in the “Undesignated Derivatives” section. All derivatives (including those not designated for hedge accounting) are recognized on the Consolidated Balance Sheet at fair value and classified based on the instruments’ maturity dates. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to AOCI and/or current earnings. The following table presents the fair values of derivative instruments included on the Consolidated Balance Sheet as of December 31, 2020 and 2019:
| Derivative Assets |  | Derivative Liabilities
In millions | Balance Sheet Classification |  | 2020 |  | 2019 |  | Balance Sheet Classification |  | 2020 |  | 2019
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |
Foreign currency | Prepaid expenses and other current assets |  |  |  | $ | 10.0 |  |  | Accrued payroll and other liabilities |  | $ | (64.5) |  |  | $ | (5.2) |
Interest rate | Prepaid expenses and other current assets |  |  |  |  |  | Accrued payroll and other liabilities |  |  |  | — |
Foreign currency | Miscellaneous other assets |  | $ | 5.6 |  |  | 9.5 |  |  | Other long-term liabilities |  | (15.0) |  |  | (1.2) |
Interest rate | Miscellaneous other assets |  | 35.8 |  |  | 12.1 |  |  | Other long-term liabilities |  |  |  | — |
Total derivatives designated as hedging instruments |  | $ | 41.4 |  |  | $ | 31.6 |  |  |  |  | $ | (79.5) |  |  | $ | (6.4) |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |
Equity | Prepaid expenses and other current assets |  | $ | 185.6 |  |  | $ | 1.6 |  |  | Accrued payroll and other liabilities |  | $ | (8.6) |  |  | $ | (0.1) |
Foreign currency | Prepaid expenses and other current assets |  |  |  | 12.4 |  |  | Accrued payroll and other liabilities |  | (9.4) |  |  | (4.8) |
Equity | Miscellaneous other assets |  |  |  | 179.1 |  |  |  |  |  |  |
Total derivatives not designated as hedging instruments |  | $ | 185.6 |  |  | $ | 193.1 |  |  |  |  | $ | (18.0) |  |  | $ | (4.9) |
Total derivatives |  | $ | 227.0 |  |  | $ | 224.7 |  |  |  |  | $ | (97.5) |  |  | $ | (11.3) |
The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the year ended December 31, 2020 and 2019, respectively:
| Location of Gain or Loss Recognized in Income on Derivative | Gain (Loss) Recognized in AOCI |  |  | Gain (Loss) Reclassified into Income from AOCI |  |  | Gain (Loss) Recognized in Income on Derivative
In millions |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019
Foreign currency | Nonoperating income/expense | $ | (76.6) |  |  |  | $ | 22.5 |  |  |  | $ | (2.1) |  |  |  | $ | 50.3 |  |  |  |  |  |  |
Interest rate | Interest expense | (90.8) |  |  |  |  |  |  | (5.4) |  |  |  | (1.3) |  |  |  |  |  |  |
Cash flow hedges | $ | (167.4) |  |  |  | $ | 22.5 |  |  |  | $ | (7.5) |  |  |  | $ | 49.0 |  |  |  |  |  |  |
Foreign currency denominated debt | Nonoperating income/expense | $ | (989.7) |  |  |  | $ | 317.3 |  |  |  | $ | 33.7 |  |  |  |  |  |  |  |  |  |
Foreign currency derivatives | Nonoperating income/expense | (12.3) |  |  |  | 11.8 |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency derivatives(1) | Interest expense |  |  |  |  |  |  |  |  |  |  |  |  | $ | 14.7 |  |  |  | $ | 11.7 |
Net investment hedges | $ | (1,002.0) |  |  |  | $ | 329.1 |  |  |  | $ | 33.7 |  |  |  |  |  |  | $ | 14.7 |  |  |  | $ | 11.7 |
Foreign currency | Nonoperating income/expense |  |  |  |  |  |  |  |  |  |  |  |  | $ | (29.0) |  |  |  | $ | 14.2 |
Equity | Selling, general & administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  | 44.4 |  |  |  | 71.8 |
Equity | Other operating income/ expense, net |  |  |  |  |  |  |  |  |  |  |  |  | (16.0) |  |  |  |
Undesignated derivatives |  |  |  |  |  |  |  |  |  |  |  |  | $ | (0.6) |  |  |  | $ | 86.0 |
(1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.
Fair Value Hedges The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At December 31, 2020, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $1.1 billion, which included an increase of $35.8 million of cumulative hedging adjustments. For the year ended December 31, 2020, the Company recognized a $23.7 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense. Cash Flow Hedges The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover the next 18 months for certain exposures and are denominated in various currencies. As of December 31, 2020, the Company had derivatives outstanding with an equivalent notional amount of $1.2 billion that hedged a portion of forecasted foreign currency denominated cash flows. Based on market conditions at December 31, 2020, the $111.3 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on earnings over the next 12 months. Net Investment Hedges The Company primarily uses foreign currency denominated debt (third party and intercompany) to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of Other comprehensive income ("OCI") and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of December 31, 2020, $13.3 billion of the Company's third party foreign currency denominated debt and $843.2 million of intercompany foreign currency denominated debt were designated to hedge investments in certain foreign subsidiaries and affiliates. Undesignated Derivatives The Company enters into certain derivatives that are not designated for hedge accounting, therefore the changes in the fair value of these derivatives are recognized immediately in earnings together with the gain or loss from the hedged balance sheet position. As an example, the Company enters into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. Changes in the fair value of these derivatives are recorded in selling, general & administrative expenses together with the changes in the supplemental benefit plan liabilities. The Company may also use certain derivatives to mitigate the share price risk related to its sale of stock in McDonald’s Japan. The changes in the fair value of the undesignated derivatives used for the most recent sale transaction were recognized immediately in earnings in Other operating (income) expense, net. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position. Credit Risk The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at December 31, 2020 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in the financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At December 31, 2020, the Company was required to post an immaterial amount of collateral due to the negative fair value of certain derivative positions. The Company's counterparties were not required to post collateral on any derivative position, other than on certain hedges of the Company’s supplemental benefit plan liabilities where the counterparties were required to post collateral on their liability positions. SHARE-BASED COMPENSATION The Company has a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and restricted stock units (“RSUs”) to employees and nonemployee directors. Share-based compensation, which includes the portion vesting of all share-based awards granted based on the grant date fair value, is generally amortized on a straight-line basis over the vesting period in Selling, general & administrative expenses. The fair value of each stock option granted is estimated on the date of grant using a closed-form pricing model. The pricing model requires assumptions, which impact the assumed fair value, including the expected life of the stock option, the risk-free interest rate, expected volatility of the Company’s stock over the expected life and the expected dividend yield. The Company uses historical data to determine these assumptions and if these assumptions change significantly for future grants, share-based compensation expense will fluctuate in future years. In addition, the Company estimates forfeitures when determining the amount of compensation costs to be recognized each period. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant. For performance-based RSUs, the Company includes a relative Total Shareholder Return ("TSR") modifier to determine the number of shares earned at the end of the performance period. The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model. Refer to the Share-based Compensation footnote on page 58 for additional information. Diluted earnings per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation calculated using the treasury stock method, of (in millions of shares): 2020–5.5; 2019–6.8; 2018–7.3. Share-based compensation awards that were not included in diluted weighted-average shares because they would have been antidilutive were (in millions of shares): 2020–1.8; 2019–0.1; 2018–0.5.CASH AND EQUIVALENTS The Company considers short-term, highly liquid investments with an original maturity of 90 days or less to be cash equivalents.
Leasing Arrangements |
Leasing Arrangements
The Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Company’s discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years. The following table provides detail of rent expense:
In millions | 2020 |  | 2019 |  | 2018
Restaurants | $ | 1,399.5 |  |  | $ | 1,530.4 |  |  | $ | 1,433.9 |
Other | 79.8 |  |  | 76.4 |  |  | 87.9 |
Total rent expense | $ | 1,479.3 |  |  | $ | 1,606.8 |  |  | $ | 1,521.8 |
Rent expense included percent rents in excess of minimum rents (in millions) as follows–Company-operated restaurants: 2020–$53.7; 2019–$74.4; 2018–$82.1. Franchised restaurants: 2020–$136.5; 2019–$200.7; 2018–$200.8. These variable rent payments are based on a percent of sales and as sales have decreased in 2020 as a result of COVID-19, the related rent expense has also decreased as compared to the prior year. The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the sales performance of the restaurant remains strong. Therefore, the Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company, and are not currently a future obligation. The Company's lease portfolio includes both operating and finance leases, however as of December 31, 2020, the vast majority of the portfolio was classified as operating leases. As the rate implicit in each lease is not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. The weighted average discount rate used for leases was 3.8% as of December 31, 2020 and 4.0% as of December 31, 2019. As of December 31, 2020, maturities of lease liabilities for our lease portfolio were as follows:
In millions | Total *
2021 | $ | 1,230.7 |
2022 | 1,197.7 |
2023 | 1,159.8 |
2024 | 1,124.0 |
2025 | 1,082.1 |
Thereafter | 14,295.7 |
Total lease payments | 20,090.0 |
Less: imputed interest | (6,067.2) |
Present value of lease liability | $ | 14,022.8 |
* Total lease payments include option periods that are reasonably assured of being exercised. See contractual cash outflows for leases within the Contractual Obligations and Commitments section on page 24. The increase in the present value of the lease liability since December 31, 2019 is approximately $0.6 billion. The lease liability will continue to be impacted by new leases, lease modifications, lease terminations, reevaluation of lease terms, and foreign currency. As of December 31, 2020 and December 31, 2019, the Weighted Average Lease Term remaining that is included in the maturities of lease liabilities was 20 years.
Organization, Consolidation and Presentation of Financial Statements Disclosure | BASIS OF PRESENTATION Prior to January 1, 2020, the Company presented both expenditures and receipts related to technology fees charged to franchisees and revenues related to certain licensing arrangements within Other operating (income) expense, net, because these activities were not part of the Company’s ongoing major or central operations. Effective January 1, 2020, the Company is presenting the revenues and expenses related to these activities within Other revenues and Other restaurant expenses, respectively, in the Consolidated Statement of Income. The change in presentation was applied retrospectively to all periods presented and had no effect on Operating income, Net income, or Earnings per share.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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