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Leases
 3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases Leases

Lessee
The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.
The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12
months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).
When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet.
 
 
 
As of
in millions, except weighted average calculations
Classification on the Balance Sheet
 
March 31, 2019
Assets
 
 
 
Operating lease assets
Right of use assets - operating lease, net
 
$
60

Finance lease assets
Property and equipment, net
 
67

Total lease assets
 
 
$
127

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
Operating
Current portion of operating lease liability
 
$
17

Finance
Current portion of finance lease liability
 
21

Noncurrent
 
 
 
Operating
Operating lease liability
 
48

Finance
Finance lease liability
 
38

Total lease liabilities
 
 
$
124

 
 
 
 
Weighted-average remaining lease term
 
 
 
Operating leases
 
 
4.18 years

Finance leases
 
 
2.61 years

Weighted-average discount rate
 
 
 
Operating leases(1)
 
 
5.00
%
Finance leases
 
 
4.90
%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three months ended March 31, 2019:

 
 
Three Months Ended
in millions
 
March 31, 2019
Finance lease cost
 
 
Depreciation of leased assets
 
4

Interest of lease liabilities
 
1

Operating lease cost
 
12

Sub-lease income from real estate properties owned and leased
 
(2
)
Total lease cost
 
$
15



Other Information

The table below presents supplemental cash flow information related to cash paid for amount included in the measurement of lease liabilities:

 
 
Three Months Ended
in millions
 
March 31, 2019
Operating cash flows for operating leases
 
$
6

Operating cash flows for finance leases
 
$
—

Financing cash flows for finance leases
 
$
3




Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of March 31, 2019.
in millions
 
Operating Leases
 
Finance Leases
2019 (balance of year)
 
$
18

 
$
20

2020
 
21

 
24

2021
 
15

 
19

2022
 
11

 
—

2023
 
7

 
—

Thereafter
 
7

 
—

Total minimum lease payments
 
79

 
63

Less: amount of lease payments representing interest
 
(14
)
 
(4
)
Present value of future minimum lease payments
 
65

 
59

Less: current obligations under leases
 
(17
)
 
(21
)
Long-term lease obligations
 
$
48

 
$
38



The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions
 
Operating Leases
 
Finance Leases
2019
 
$
24

 
$
19

2020
 
20

 
31

2021
 
12

 
—

2022
 
11

 
—

2023
 
6

 
—

Thereafter
 
2

 
—

Total minimum lease payments
 
75

 
50



Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at March 31, 2019:

in millions
Rental Revenue
2019 (balance of year)
$
43

2020
45

2021
20

2022
4

2023
—

Total
$
112



Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of loss, was $14 million for the three months ended March 31, 2019, and $10 million for the three months ended March 31, 2018.
Leases Leases

Lessee
The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.
The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12
months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).
When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet.
 
 
 
As of
in millions, except weighted average calculations
Classification on the Balance Sheet
 
March 31, 2019
Assets
 
 
 
Operating lease assets
Right of use assets - operating lease, net
 
$
60

Finance lease assets
Property and equipment, net
 
67

Total lease assets
 
 
$
127

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
Operating
Current portion of operating lease liability
 
$
17

Finance
Current portion of finance lease liability
 
21

Noncurrent
 
 
 
Operating
Operating lease liability
 
48

Finance
Finance lease liability
 
38

Total lease liabilities
 
 
$
124

 
 
 
 
Weighted-average remaining lease term
 
 
 
Operating leases
 
 
4.18 years

Finance leases
 
 
2.61 years

Weighted-average discount rate
 
 
 
Operating leases(1)
 
 
5.00
%
Finance leases
 
 
4.90
%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three months ended March 31, 2019:

 
 
Three Months Ended
in millions
 
March 31, 2019
Finance lease cost
 
 
Depreciation of leased assets
 
4

Interest of lease liabilities
 
1

Operating lease cost
 
12

Sub-lease income from real estate properties owned and leased
 
(2
)
Total lease cost
 
$
15



Other Information

The table below presents supplemental cash flow information related to cash paid for amount included in the measurement of lease liabilities:

 
 
Three Months Ended
in millions
 
March 31, 2019
Operating cash flows for operating leases
 
$
6

Operating cash flows for finance leases
 
$
—

Financing cash flows for finance leases
 
$
3




Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of March 31, 2019.
in millions
 
Operating Leases
 
Finance Leases
2019 (balance of year)
 
$
18

 
$
20

2020
 
21

 
24

2021
 
15

 
19

2022
 
11

 
—

2023
 
7

 
—

Thereafter
 
7

 
—

Total minimum lease payments
 
79

 
63

Less: amount of lease payments representing interest
 
(14
)
 
(4
)
Present value of future minimum lease payments
 
65

 
59

Less: current obligations under leases
 
(17
)
 
(21
)
Long-term lease obligations
 
$
48

 
$
38



The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions
 
Operating Leases
 
Finance Leases
2019
 
$
24

 
$
19

2020
 
20

 
31

2021
 
12

 
—

2022
 
11

 
—

2023
 
6

 
—

Thereafter
 
2

 
—

Total minimum lease payments
 
75

 
50



Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at March 31, 2019:

in millions
Rental Revenue
2019 (balance of year)
$
43

2020
45

2021
20

2022
4

2023
—

Total
$
112



Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of loss, was $14 million for the three months ended March 31, 2019, and $10 million for the three months ended March 31, 2018.
Leases Leases

Lessee
The Company adopted ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach utilizing the optional transition method. Prior year financial statements were not recast using this approach. The Company elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $68 million and $66 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings or cash flows.
The Company leases property and equipment under finance and operating leases. The Company's operating leases consist of automobiles in certain countries and real estate, including office, storage and parking spaces. The duration of these leases range from 2 to 10 years. The Company's finance leases primarily consist of equipment financed for the purpose of delivering services to our customers. For leases with terms greater than 12 months, the Company recorded the related asset and obligation at the present value of lease payments over the term. Many of our leases include variable rental escalation clauses which are recognized when incurred. Some of our leases also include renewal options and/or termination options that are factored into the determination of lease payments and lease terms when it is reasonably certain that the Company will exercise these options. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12
months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components (e.g., common-area maintenance costs).
When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, real estate leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate the incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate used in the calculation of the lease liability is based on the secured rate associated with financed lease obligations for each location of leased property.

The table below presents the lease-related assets and liabilities recorded on the balance sheet.
 
 
 
As of
in millions, except weighted average calculations
Classification on the Balance Sheet
 
March 31, 2019
Assets
 
 
 
Operating lease assets
Right of use assets - operating lease, net
 
$
60

Finance lease assets
Property and equipment, net
 
67

Total lease assets
 
 
$
127

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
Operating
Current portion of operating lease liability
 
$
17

Finance
Current portion of finance lease liability
 
21

Noncurrent
 
 
 
Operating
Operating lease liability
 
48

Finance
Finance lease liability
 
38

Total lease liabilities
 
 
$
124

 
 
 
 
Weighted-average remaining lease term
 
 
 
Operating leases
 
 
4.18 years

Finance leases
 
 
2.61 years

Weighted-average discount rate
 
 
 
Operating leases(1)
 
 
5.00
%
Finance leases
 
 
4.90
%

(1) Upon adoption of the new lease standard, discount rates used for existing leases were established based on the Company's incremental borrowing rate at January 1, 2019. For new leases entered after January 1, 2019, the discount rate was determined based on the Company's incremental borrowing rate at lease commencement.

Lessee Costs

The table below presents certain information related to the lease costs for finance and operating leases recognized in the Company's condensed consolidated statements of loss for the three months ended March 31, 2019:

 
 
Three Months Ended
in millions
 
March 31, 2019
Finance lease cost
 
 
Depreciation of leased assets
 
4

Interest of lease liabilities
 
1

Operating lease cost
 
12

Sub-lease income from real estate properties owned and leased
 
(2
)
Total lease cost
 
$
15



Other Information

The table below presents supplemental cash flow information related to cash paid for amount included in the measurement of lease liabilities:

 
 
Three Months Ended
in millions
 
March 31, 2019
Operating cash flows for operating leases
 
$
6

Operating cash flows for finance leases
 
$
—

Financing cash flows for finance leases
 
$
3




Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of March 31, 2019.
in millions
 
Operating Leases
 
Finance Leases
2019 (balance of year)
 
$
18

 
$
20

2020
 
21

 
24

2021
 
15

 
19

2022
 
11

 
—

2023
 
7

 
—

Thereafter
 
7

 
—

Total minimum lease payments
 
79

 
63

Less: amount of lease payments representing interest
 
(14
)
 
(4
)
Present value of future minimum lease payments
 
65

 
59

Less: current obligations under leases
 
(17
)
 
(21
)
Long-term lease obligations
 
$
48

 
$
38



The table below provides the undiscounted cash flows for the Company's finance lease liabilities and operating lease obligations as of December 31, 2018.

in millions
 
Operating Leases
 
Finance Leases
2019
 
$
24

 
$
19

2020
 
20

 
31

2021
 
12

 
—

2022
 
11

 
—

2023
 
6

 
—

Thereafter
 
2

 
—

Total minimum lease payments
 
75

 
50



Lessor

The Company receives rental revenue for leasing hardware offerings to its customers. For our hardware rental offering, the Company owns or leases the hardware and may or may not provide managed services. Leases sometimes include options to renew but typically do not include lessee purchase options. The revenue for these operating leases is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Equipment used for this revenue is reported within Property and equipment, net on the condensed consolidated balance sheet.

The following table includes estimated rental revenue expected to be recognized in the future based on executed contracts at March 31, 2019:

in millions
Rental Revenue
2019 (balance of year)
$
43

2020
45

2021
20

2022
4

2023
—

Total
$
112



Rental revenue for these operating leases, reported within recurring revenue on the condensed consolidated statements of loss, was $14 million for the three months ended March 31, 2019, and $10 million for the three months ended March 31, 2018.