Leases

12 Months Ended

Sep. 01, 2022

We have finance and operating leases through which we obtain the right to use facilities, land, and equipment that support our business operations. Our finance leases consist primarily of gas or other supply agreements that are deemed to contain embedded leases. Our operating leases consist primarily of offices, laboratories, other facilities, and land. Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 30 years for land.

Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a lease. Our assessment includes determining whether we or the supplier control the assets used to fulfill the agreements by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of the output of the assets. Our gas supply arrangements generally are deemed to contain a lease because we have the right to substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets. In determining the lease term, we assess whether we are reasonably certain to exercise any options to renew or terminate a lease or to purchase the right-of-use asset. Measuring the present value of the initial lease liability requires judgment to determine the discount rate, which we base on interest rates for borrowings with similar terms and collateral issued by entities with credit ratings similar to ours.

The components of lease cost are presented below:


For the year ended	2022		2021		2020

Finance lease cost
Amortization of right-of-use asset	$	99	$	69	$	140
Interest on lease liability	24		20		22
Operating lease cost(1)	125		108		102
	$	248	$	197	$	264

(1)Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.

Supplemental cash flow information related to leases was as follows:


For the year ended	2022		2021		2020

Cash flows used for operating activities
Finance leases	$	23	$	21	$	24
Operating leases(1)	110		106		39
Cash flows used for financing activities – Finance leases	103		85		248
Noncash acquisitions of right-of-use assets
Finance leases	309		395		107
Operating leases	197		27		11

(1)Includes $48 million of reimbursements received for tenant improvements for 2020.

Supplemental balance sheet information related to leases was as follows:


As of	2022			2021

Finance lease right-of-use assets (included in property, plant, and equipment and assets held for sale)	$	904		$	766
Current operating lease liabilities (included in accounts payable and accrued expenses)	60			55

Weighted-average remaining lease term (in years)
Finance leases	12			11
Operating leases	12			12
Weighted-average discount rate
Finance leases	2.65		%	3.14		%
Operating leases	2.90		%	2.63		%

As of September 1, 2022, maturities of lease liabilities were as follows:


For the year ending	Finance Leases		Operating Leases

2023	$	123	$	66
2024	100		80
2025	87		70
2026	87		67
2027	86		64
2028 and thereafter	534		463
Less imputed interest	(131)		(140)
	$	886	$	670

The table above excludes obligations for leases that have been executed but have not yet commenced. As of September 1, 2022, excluded obligations consisted of $212 million of finance lease obligations over a weighted-average period of 14 years for gas supply arrangements deemed to contain embedded leases. We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.

Leases