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Leases | 12 Months Ended
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Dec. 31, 2022
Leases [Abstract] |
Leases | Leases Leasing Arrangements We lease certain offices, manufacturing buildings, transportation equipment, machinery, computers and other equipment. Our most significant lease liabilities relate to real estate leases. These leases include renewal, termination or purchase options, and we have assessed these to determine whether it is reasonably certain for us to exercise any of the previously mentioned options. All periods relating to options that are reasonably certain to be exercised have been included in the lease term of the respective leases. We did not identify any events or conditions during the 12 month period ended December 31, 2022 to indicate that a reassessment or re-measurement of our existing leases was required. There also were no impairment indicators identified during the 12 month period ended December 31, 2022 that required an impairment test for the Company’s ROU assets. Our current lease liabilities of $69 million for both December 31, 2022 and 2021 are included in "Accrued and other current liabilities." Our non-current lease liabilities of $249 million and $243 million are included in "Other non-current accrued liabilities" as of December 31, 2022 and 2021, respectively. Our ROU asset balances are included in "Other non-current assets." The net balance of our ROU assets as of December 31, 2022 and 2021 was $310 million and $304 million, respectively. These balances include an immaterial amount related to finance leases. The components of our lease cost were as follows:
| Year Ended December 31, |
(in millions) | 2022 | 2021 | 2020 |
Lease cost |  |  |  |
Operating lease cost | $ | 83 |  | $ | 84 |  | $ | 77 |  |
Short-term lease cost | 2 |  | 2 |  | 2 |  |
Variable lease cost | 21 |  | 23 |  | 22 |  |
Total lease cost | $ | 106 |  | $ | 109 |  | $ | 101 |  |
The supplemental cash flow information related to leases are as follows:
| Year Ended December 31,
(in millions) | 2022 | 2021 | 2020
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 82 |  | $ | 83 |  | $ | 75 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | 94 |  | $ | 109 |  | $ | 64 |
Information relating to the lease term and discount rate are as follows:
| Year Ended December 31,
| 2022 | 2021
Weighted-average remaining lease term (years) |  |
Operating leases | 7 Years | 7 Years
Weighted-average discount rate |  |
Operating leases | 2.3% | 2.2%
As of December 31, 2022, the maturities of operating lease liabilities were as follows:
(in millions) |  |
2023 | $ | 71 |  |
2024 | 58 |  |
2025 | 45 |  |
2026 | 35 |  |
2027 | 28 |  |
Thereafter | 78 |  |
Total lease payments | 315 |  |
Less: Imputed interest | (22) |  |
Total | $ | 293 |  |
Lessor arrangements In addition to manufacturing and selling equipment, we also lease equipment to customers in exchange for consideration. These arrangements are generally short term in nature and predominantly involve the rental of pumps and accessories within the Water Infrastructure segment. Rental arrangements generally do not provide the customer the right to purchase the equipment as Xylem’s strategy is to rent these items over their useful lives. Customers may be billed based on daily, weekly or monthly rates depending on the expected rental period. We assessed that these arrangements constitute a lease under ASC 842, and have recognized them as operating leases. In situations where arrangements contain both the sale of products and a leasing component, contract consideration is allocated based on relative standalone selling price. Total revenue from lease arrangements was $228 million, $197 million and $195 million for the 12-month period ended December 31, 2022, 2021 and 2020, respectively. Our gross assets available for rent were $263 million and $251 million as of December 31, 2022 and 2021, respectively. The accumulated amortization related to our gross assets was $161 million and $158 million as of December 31, 2022 and 2021, respectively. Depreciation expense for these assets was $27 million, $24 million and $25 million for the 12 month period ended December 31, 2022, 2021 and 2020, respectively.
Leases | Leases Leasing Arrangements We lease certain offices, manufacturing buildings, transportation equipment, machinery, computers and other equipment. Our most significant lease liabilities relate to real estate leases. These leases include renewal, termination or purchase options, and we have assessed these to determine whether it is reasonably certain for us to exercise any of the previously mentioned options. All periods relating to options that are reasonably certain to be exercised have been included in the lease term of the respective leases. We did not identify any events or conditions during the 12 month period ended December 31, 2022 to indicate that a reassessment or re-measurement of our existing leases was required. There also were no impairment indicators identified during the 12 month period ended December 31, 2022 that required an impairment test for the Company’s ROU assets. Our current lease liabilities of $69 million for both December 31, 2022 and 2021 are included in "Accrued and other current liabilities." Our non-current lease liabilities of $249 million and $243 million are included in "Other non-current accrued liabilities" as of December 31, 2022 and 2021, respectively. Our ROU asset balances are included in "Other non-current assets." The net balance of our ROU assets as of December 31, 2022 and 2021 was $310 million and $304 million, respectively. These balances include an immaterial amount related to finance leases. The components of our lease cost were as follows:
| Year Ended December 31, |
(in millions) | 2022 | 2021 | 2020 |
Lease cost |  |  |  |
Operating lease cost | $ | 83 |  | $ | 84 |  | $ | 77 |  |
Short-term lease cost | 2 |  | 2 |  | 2 |  |
Variable lease cost | 21 |  | 23 |  | 22 |  |
Total lease cost | $ | 106 |  | $ | 109 |  | $ | 101 |  |
The supplemental cash flow information related to leases are as follows:
| Year Ended December 31,
(in millions) | 2022 | 2021 | 2020
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 82 |  | $ | 83 |  | $ | 75 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | 94 |  | $ | 109 |  | $ | 64 |
Information relating to the lease term and discount rate are as follows:
| Year Ended December 31,
| 2022 | 2021
Weighted-average remaining lease term (years) |  |
Operating leases | 7 Years | 7 Years
Weighted-average discount rate |  |
Operating leases | 2.3% | 2.2%
As of December 31, 2022, the maturities of operating lease liabilities were as follows:
(in millions) |  |
2023 | $ | 71 |  |
2024 | 58 |  |
2025 | 45 |  |
2026 | 35 |  |
2027 | 28 |  |
Thereafter | 78 |  |
Total lease payments | 315 |  |
Less: Imputed interest | (22) |  |
Total | $ | 293 |  |
Lessor arrangements In addition to manufacturing and selling equipment, we also lease equipment to customers in exchange for consideration. These arrangements are generally short term in nature and predominantly involve the rental of pumps and accessories within the Water Infrastructure segment. Rental arrangements generally do not provide the customer the right to purchase the equipment as Xylem’s strategy is to rent these items over their useful lives. Customers may be billed based on daily, weekly or monthly rates depending on the expected rental period. We assessed that these arrangements constitute a lease under ASC 842, and have recognized them as operating leases. In situations where arrangements contain both the sale of products and a leasing component, contract consideration is allocated based on relative standalone selling price. Total revenue from lease arrangements was $228 million, $197 million and $195 million for the 12-month period ended December 31, 2022, 2021 and 2020, respectively. Our gross assets available for rent were $263 million and $251 million as of December 31, 2022 and 2021, respectively. The accumulated amortization related to our gross assets was $161 million and $158 million as of December 31, 2022 and 2021, respectively. Depreciation expense for these assets was $27 million, $24 million and $25 million for the 12 month period ended December 31, 2022, 2021 and 2020, respectively.

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