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LEASES | 12 Months Ended
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Jun. 30, 2021
Leases [Abstract] |
Leases | LEASES For further information on the Company's policies relating to leases see Note 2 – Summary of Significant Accounting Policies. The Company has operating and finance leases primarily for real estate properties, including corporate offices, facilities to support the Company’s manufacturing, assembly, research and development and distribution operations and retail stores, as well as information technology equipment, automobiles and office equipment, with remaining terms of approximately 1 year to 58 years. Some of the Company’s lease contracts include options to extend the leases for up to 30 years, while others include options to terminate the leases within 23 years. A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows:
|  | June 30
(In millions) |  | 2021 |  | 2020
Total lease cost |  |  |  |
Finance lease cost: |  |  |  |
Amortization of right-of-use assets |  | $ | 9 |  |  | $ | 11 |
Interest on lease liabilities |  | — |  |  | 1 |
Operating lease cost |  | 470 |  |  | 625 |
Short-term lease cost |  | 19 |  |  | 24 |
Variable lease cost |  | 301 |  |  | 158 |
Total |  | $ | 799 |  |  | $ | 819 |
Other information |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 451 |  |  | $ | 426 |
Financing cash flows from finance leases |  | $ | 12 |  |  | $ | 12 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 267 |  |  | $ | 266 |
Right-of-use assets obtained in exchange for new finance lease liabilities |  | $ | 44 |  |  | $ | 1 |
Weighted-average remaining lease term – finance leases |  | 3 years |  | 2 years
Weighted-average remaining lease term – operating leases |  | 10 years |  | 11 years
Weighted-average discount rate – finance leases |  | 1.1 | % |  | 2.7 | %
Weighted-average discount rate – operating leases |  | 2.3 | % |  | 2.5 | %
The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows:
(In millions) |  | Operating Leases |  | Finance Leases
Fiscal 2022 |  | $ | 431 |  |  | $ | 18 |
Fiscal 2023 |  | 394 |  |  | 14 |
Fiscal 2024 |  | 345 |  |  | 12 |
Fiscal 2025 |  | 288 |  |  | 1 |
Fiscal 2026 |  | 246 |  |  | 1 |
Thereafter |  | 1,155 |  |  | — |
Total future minimum lease payments |  | 2,859 |  |  | 46 |
Less imputed interest |  | (329) |  |  | (1) |
Total |  | $ | 2,530 |  |  | $ | 45 |
Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows:
|  | June 30
|  | 2021 |  | 2020
(In millions) |  | Operating Leases |  | Finance Leases |  | Operating Leases |  | Finance Leases
Total current liabilities |  | $ | 379 |  |  | $ | 18 |  |  | $ | 375 |  |  | $ | 8 |
Total noncurrent liabilities |  | 2,151 |  |  | 27 |  |  | 2,278 |  |  | 5 |
Total |  | $ | 2,530 |  |  | $ | 45 |  |  | $ | 2,653 |  |  | $ | 13 |
The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt, respectively, in the accompanying consolidated balance sheets as of June 30, 2021 and 2020. As a result of the continued challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $71 million and $215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2021 and 2020, respectively. The fiscal 2021 impairments related to other assets (i.e. rights associated with commercial operating leases) of $27 million, operating lease right-of-use assets of $25 million and the related property, plant and equipment in certain freestanding stores of $19 million. The fiscal 2020 impairments related to operating lease ROU assets of $131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $84 million, combined. A summary of impairment charges is as follows:
|  | June 30
(In millions) |  | 2021 |  | 2020
Product Category |  | Impairment Charge |  | Impairment Charge
Skin care |  | $ | 1 |  |  | $ | 22 |
Makeup |  | 52 |  |  | 160 |
Fragrance |  | 14 |  |  | 18 |
Hair care |  | 4 |  |  | 14 |
Other |  | — |  |  | 1 |
Total |  | $ | 71 |  |  | $ | 215 |
Region |  |  |  |
The Americas |  | $ | 23 |  |  | $ | 103 |
Europe, the Middle East & Africa |  | 48 |  |  | 104 |
Asia/Pacific |  | — |  |  | 8 |
Total |  | $ | 71 |  |  | $ | 215 |
As of June 30, 2021, the Company has additional operating lease obligations, relating primarily to facilities to support the Company’s manufacturing operations, retail stores, and corporate offices, that have not yet commenced of $37 million. These leases will commence between fiscal 2022 and fiscal 2026 with lease terms of 1 year to 10 years.
Leases | LEASES For further information on the Company's policies relating to leases see Note 2 – Summary of Significant Accounting Policies. The Company has operating and finance leases primarily for real estate properties, including corporate offices, facilities to support the Company’s manufacturing, assembly, research and development and distribution operations and retail stores, as well as information technology equipment, automobiles and office equipment, with remaining terms of approximately 1 year to 58 years. Some of the Company’s lease contracts include options to extend the leases for up to 30 years, while others include options to terminate the leases within 23 years. A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows:
|  | June 30
(In millions) |  | 2021 |  | 2020
Total lease cost |  |  |  |
Finance lease cost: |  |  |  |
Amortization of right-of-use assets |  | $ | 9 |  |  | $ | 11 |
Interest on lease liabilities |  | — |  |  | 1 |
Operating lease cost |  | 470 |  |  | 625 |
Short-term lease cost |  | 19 |  |  | 24 |
Variable lease cost |  | 301 |  |  | 158 |
Total |  | $ | 799 |  |  | $ | 819 |
Other information |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 451 |  |  | $ | 426 |
Financing cash flows from finance leases |  | $ | 12 |  |  | $ | 12 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  | $ | 267 |  |  | $ | 266 |
Right-of-use assets obtained in exchange for new finance lease liabilities |  | $ | 44 |  |  | $ | 1 |
Weighted-average remaining lease term – finance leases |  | 3 years |  | 2 years
Weighted-average remaining lease term – operating leases |  | 10 years |  | 11 years
Weighted-average discount rate – finance leases |  | 1.1 | % |  | 2.7 | %
Weighted-average discount rate – operating leases |  | 2.3 | % |  | 2.5 | %
The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows:
(In millions) |  | Operating Leases |  | Finance Leases
Fiscal 2022 |  | $ | 431 |  |  | $ | 18 |
Fiscal 2023 |  | 394 |  |  | 14 |
Fiscal 2024 |  | 345 |  |  | 12 |
Fiscal 2025 |  | 288 |  |  | 1 |
Fiscal 2026 |  | 246 |  |  | 1 |
Thereafter |  | 1,155 |  |  | — |
Total future minimum lease payments |  | 2,859 |  |  | 46 |
Less imputed interest |  | (329) |  |  | (1) |
Total |  | $ | 2,530 |  |  | $ | 45 |
Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows:
|  | June 30
|  | 2021 |  | 2020
(In millions) |  | Operating Leases |  | Finance Leases |  | Operating Leases |  | Finance Leases
Total current liabilities |  | $ | 379 |  |  | $ | 18 |  |  | $ | 375 |  |  | $ | 8 |
Total noncurrent liabilities |  | 2,151 |  |  | 27 |  |  | 2,278 |  |  | 5 |
Total |  | $ | 2,530 |  |  | $ | 45 |  |  | $ | 2,653 |  |  | $ | 13 |
The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt, respectively, in the accompanying consolidated balance sheets as of June 30, 2021 and 2020. As a result of the continued challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $71 million and $215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2021 and 2020, respectively. The fiscal 2021 impairments related to other assets (i.e. rights associated with commercial operating leases) of $27 million, operating lease right-of-use assets of $25 million and the related property, plant and equipment in certain freestanding stores of $19 million. The fiscal 2020 impairments related to operating lease ROU assets of $131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $84 million, combined. A summary of impairment charges is as follows:
|  | June 30
(In millions) |  | 2021 |  | 2020
Product Category |  | Impairment Charge |  | Impairment Charge
Skin care |  | $ | 1 |  |  | $ | 22 |
Makeup |  | 52 |  |  | 160 |
Fragrance |  | 14 |  |  | 18 |
Hair care |  | 4 |  |  | 14 |
Other |  | — |  |  | 1 |
Total |  | $ | 71 |  |  | $ | 215 |
Region |  |  |  |
The Americas |  | $ | 23 |  |  | $ | 103 |
Europe, the Middle East & Africa |  | 48 |  |  | 104 |
Asia/Pacific |  | — |  |  | 8 |
Total |  | $ | 71 |  |  | $ | 215 |
As of June 30, 2021, the Company has additional operating lease obligations, relating primarily to facilities to support the Company’s manufacturing operations, retail stores, and corporate offices, that have not yet commenced of $37 million. These leases will commence between fiscal 2022 and fiscal 2026 with lease terms of 1 year to 10 years.

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