|3 Months Ended|
May 04, 2019
|Lessee, Operating and Financing Leases [Text Block]||
The Company leases a portion of the real estate and personal property used in its operations. Most leases require the Company to pay real estate taxes, maintenance, insurance and other similar costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company’s real estate leases have terms that extend for a significant number of years and provide for rental rates that increase or decrease over time. Lease terms include the noncancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods, termination options and purchase options.
Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases. ROU assets are tested for impairment in the same manner as long-lived assets.
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. Variable lease payments are recognized as lease expense as they are incurred.
Certain of the Company's leases contain covenants that restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.
ROU assets and lease liabilities consist of:
(a) Finance lease assets are recorded net of accumulated amortization of $12 million as of May 4, 2019.
The components of net lease expense are disclosed below. Operating lease expense includes variable lease expense of $28 million.
(b) Certain supply chain operating lease expense amounts are included in cost of sales.
As of May 4, 2019, the maturity of lease liabilities is as follows:
(c) Finance lease payments include $12 million related to options to extend lease terms that are reasonably certain of being exercised.
(d) Operating lease payments include $3,163 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $942 million of legally binding minimum lease payments for leases signed but not yet commenced.
Additional supplemental information regarding assumptions and cash flows for operating and finance leases are as follows:
As of February 2, 2019, as disclosed in the 2018 10-K, minimum rental commitments for noncancellable leases, including executed leases not yet commenced, were as follows:
(e) For purposes of the disclosure, capitalized lease is used interchangeably with finance lease.