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Leases | 12 Months Ended
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Dec. 31, 2020
Leases [Abstract] |
Leases | Note 10 Leases Change in Accounting Policy In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases and subsequently amended the standard with several Accounting Standards Updates, collectively referred to as ASC 842. This standard replaces the previous lease accounting standard under ASC 840 - Leases and requires lessees to record a right-of-use (ROU) asset and lease liability for the majority of leases. UScellular adopted the provisions of ASC 842 on January 1, 2019, using a modified retrospective method. Under this method, UScellular elected to apply the new accounting standard only to the most recent period presented, recognizing the cumulative effect of the accounting change as an adjustment to the beginning balance of retained earnings. Accordingly, prior periods have not been recast to reflect the new accounting standard. The cumulative effect of applying the provisions of ASC 842 had no material impact on retained earnings. Lessee Agreements A lease is generally present in a contract if the lessee controls the use of identified property, plant or equipment for a period of time in exchange for consideration. Nearly all of UScellular’s leases are classified as operating leases, although it does have a small number of finance leases. UScellular’s most significant leases are for land and tower spaces, network facilities, retail spaces, and offices. UScellular has agreements with both lease and nonlease components, which are accounted for separately. As part of the present value calculation for the lease liabilities, UScellular uses an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on UScellular's unsecured rates, adjusted to approximate the rates at which UScellular would be required to borrow on a collateralized basis over a term similar to the recognized lease term. UScellular applies the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term. The cost of nonlease components in UScellular’s lease portfolio (e.g., utilities and common area maintenance) are not typically predetermined at lease commencement and are expensed as incurred at their relative standalone price. Variable lease expense occurs when, subsequent to the lease commencement, lease payments are made that were not originally included in the lease liability calculation. UScellular’s variable lease payments are primarily a result of leases with escalations that are tied to an index. The incremental changes due to the index changes are recorded as variable lease expense and are not included in the ROU assets or lease liabilities. The identified lease term determines the periods to which expense is allocated and also has a significant impact on the ROU asset and lease liability calculations. Many of UScellular’s leases include renewal and early termination options. At lease commencement, the lease terms include options to extend the lease when UScellular is reasonably certain that it will exercise the options. The lease terms do not include early termination options unless UScellular is reasonably certain to exercise the options. Certain asset classes have similar lease characteristics; therefore, UScellular has applied the portfolio approach for lease term recognition for its tower space, retail, and certain ground lease asset classes. The following table shows the components of lease cost included in the Consolidated Statement of Operations:
Year Ended December 31, | 2020 |  | 2019
(Dollars in millions) |  |  |
Operating lease cost | $ | 171 |  |  | $ | 163 |
Financing lease cost: |  |  |
Amortization of ROU assets | 1 |  |  | 1 |
Variable lease cost | 10 |  |  | 7 |
Total lease cost | $ | 182 |  |  | $ | 171 |
The following table shows supplemental cash flow information related to lease activities:
Year Ended December 31, | 2020 |  | 2019
(Dollars in millions) |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 169 |  |  | $ | 156 |
Operating cash flows from finance leases | 1 |  |  | 1 |
ROU assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | 155 |  |  | $ | 125 |
The following table shows the classification of UScellular’s finance leases in its Consolidated Balance Sheet:
December 31, | 2020 |  | 2019
(Dollars in millions) |  |  |
Finance Leases |  |  |
Property, plant and equipment | $ | 8 |  |  | $ | 7 |
Less: Accumulated depreciation and amortization | 5 |  |  | 4 |
Property, plant and equipment, net | $ | 3 |  |  | $ | 3 |
Current portion of long-term debt | — |  |  | 1 |
Long-term debt, net | $ | 3 |  |  | $ | 3 |
Total finance lease liabilities | $ | 3 |  |  | $ | 4 |
The table below shows a weighted-average analysis for lease terms and discount rates for all leases:
December 31, | 2020 |  | 2019
Weighted Average Remaining Lease Term |  |  |
Operating leases | 12 years |  | 13 years
Finance leases | 30 years |  | 25 years
Weighted Average Discount Rate |  |  |
Operating leases | 4.1 | % |  | 4.4 | %
Finance leases | 6.8 | % |  | 7.0 | %
The maturities of lease liabilities are as follows:
| Operating Leases |  | Finance Leases |
(Dollars in millions) |  |  |  |
2021 | $ | 152 |  |  | $ | — |  |
2022 | 152 |  |  | — |  |
2023 | 135 |  |  | 1 |  |
2024 | 116 |  |  | 1 |  |
2025 | 94 |  |  | — |  |
Thereafter | 690 |  |  | 11 |  |
Total lease payments 1 | $ | 1,339 |  |  | $ | 13 |  |
Less: Imputed interest | 348 |  |  | 10 |  |
Present value of lease liabilities | $ | 991 |  |  | $ | 3 |  |
1 Lease payments exclude $51 million of legally binding lease payments for leases signed but not yet commenced. Lessor Agreements UScellular's most significant lessor leases are for tower space. All of UScellular’s lessor leases are classified as operating leases. A lease is generally present in a contract if the lessee controls the use of identified property, plant, or equipment for a period of time in exchange for consideration. UScellular’s lessor agreements with lease and nonlease components are generally accounted for separately. The identified lease term determines the periods to which revenue is allocated over the term of the lease. Many of UScellular’s leases include renewal and early termination options. At lease commencement, lease terms include options to extend the lease when UScellular is reasonably certain that lessees will exercise the options. Lease terms would not include periods after the date of a termination option that lessees are reasonably certain to exercise. Variable lease income occurs when, subsequent to the lease commencement, lease payments are received that were not originally included in the lease receivable calculation. UScellular’s variable lease income is primarily a result of leases with escalations that are tied to an index. The incremental increases due to the index changes are recorded as variable lease income. The following table shows the components of lease income which are included in Service revenues in the Consolidated Statement of Operations:
Year Ended December 31, | 2020 |  | 2019
(Dollars in millions) |  |  |
Operating lease income 1 | $ | 77 |  |  | $ | 74 |
1 During the third quarter of 2019, UScellular recorded an out-of-period adjustment attributable to 2009 through the second quarter of 2019 due to errors in the timing of recognition of revenue for certain tower leases. This out-of-period adjustment had the impact of increasing operating lease income by $5 million for the year ended December 31, 2019. UScellular determined that this adjustment was not material to any of the periods impacted. The maturities of expected lease payments to be received are as follows:
| Operating Leases
(Dollars in millions) |
2021 | $ | 65 |
2022 | 60 |
2023 | 48 |
2024 | 33 |
2025 | 14 |
Thereafter | 2 |
Total future lease maturities | $ | 222 |

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- Definition The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 + Details
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