| Leases | 6 Months Ended |
| Jun. 30, 2019 |
| Leases [Abstract] | |
| Leases | Leases As of June 30, 2019 , we leased or subleased 5,331 restaurant properties to franchisees and 168 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes. We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes. We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard. In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases. Financial Statement Impact of Transition to ASC 842 Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital. Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions): As Reported Total Adjusted December 31, 2018 Adjustments January 1, 2019 ASSETS Current assets: Cash and cash equivalents $ 913 $ — $ 913 Accounts and notes receivable, net 452 — 452 Inventories, net 75 — 75 Prepaids and other current assets 60 — 60 Total current assets 1,500 — 1,500 Property and equipment, net 1,996 26 (a) 2,022 Operating lease assets, net — 1,143 (b) 1,143 Intangible assets, net 10,463 (133 ) (c) 10,330 Goodwill 5,486 — 5,486 Net investment in property leased to franchisees 54 — 54 Other assets, net 642 — 642 Total assets $ 20,141 $ 1,036 $ 21,177 LIABILITIES AND EQUITY Current liabilities: Accounts and drafts payable $ 513 $ — $ 513 Other accrued liabilities 637 114 (d) 751 Gift card liability 167 — 167 Current portion of long term debt and finance leases 91 — 91 Total current liabilities 1,408 114 1,522 Term debt, net of current portion 11,823 (65 ) (e) 11,758 Finance leases, net of current portion 226 62 (e) 288 Operating lease liabilities, net of current portion — 1,028 (f) 1,028 Other liabilities, net 1,547 (132 ) (g) 1,415 Deferred income taxes, net 1,519 8 (h) 1,527 Total liabilities 16,523 1,015 17,538 Partners' capital: Class A common units 4,323 12 (i) 4,335 Partnership exchangeable units 730 9 (i) 739 Accumulated other comprehensive income (loss) (1,437 ) — (1,437 ) Total Partners' capital 3,616 21 3,637 Noncontrolling interests 2 — 2 Total equity 3,618 21 3,639 Total liabilities and equity $ 20,141 $ 1,036 $ 21,177 (a) Represents the net change in assets recorded in connection with build-to-suit leases. (b) Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets. (c) Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets. (d) Represents the current portion of operating lease liabilities. (e) Represents the net change in liabilities recorded in connection with build-to-suit leases. (f) Represents the recognition of operating lease liabilities, net of current portion. (g) Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets. (h) Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to Partners' capital. (i) Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above. Changes to Lease Accounting Significant Accounting Policies Under ASC 842 In all leases, whether we are the lessor or lessee, we define lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant to the lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract. Lessor Accounting We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue. We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract. We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Lessee Accounting In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability is included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Partnership as Lessor Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions): As of June 30, 2019 Land $ 920 Buildings and improvements 1,139 Restaurant equipment 21 2,080 Accumulated depreciation and amortization (441 ) Property and equipment leased, net $ 1,639 Our net investment in direct financing leases is as follows (in millions): As of June 30, 2019 Future rents to be received: Future minimum lease receipts $ 53 Contingent rents (a) 23 Estimated unguaranteed residual value 15 Unearned income (30 ) 61 Current portion included within accounts receivables (14 ) Net investment in property leased to franchisees $ 47 (a) Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting. Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions): Three months ended June 30, 2019 Six months ended June 30, 2019 Lease income - operating leases Minimum lease payments $ 112 $ 223 Variable lease payments 97 181 Amortization of favorable and unfavorable income lease contracts, net 2 4 Subtotal - lease income from operating leases 211 408 Earned income on direct financing leases 3 5 Total property revenues $ 214 $ 413 Partnership as Lessee Lease cost and other information associated with these lease commitments is as follows (in millions): Lease Cost (Income) Three months ended June 30, 2019 Six months ended June 30, 2019 Operating lease cost $ 53 $ 106 Operating lease variable lease cost 50 100 Finance lease cost: Amortization of right-of-use assets 6 13 Interest on lease liabilities 6 11 Sublease income (164 ) (319 ) Total lease cost (income) $ (49 ) $ (89 ) Lease Term and Discount Rate as of June 30, 2019 Weighted-average remaining lease term (in years): Operating leases 11.1 years Finance leases 11.2 years Weighted-average discount rate: Operating leases 6.5 % Finance leases 7.6 % Other Information for the six months ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 96 Operating cash flows from finance leases $ 11 Financing cash flows from finance leases $ 13 Right-of-use assets obtained in exchange for new finance lease obligations $ 1 Right-of-use assets obtained in exchange for new operating lease obligations $ 65 Maturity Analysis As of June 30, 2019 , future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating Remainder of 2019 $ 7 $ 213 $ 24 $ 97 2020 10 406 46 187 2021 7 382 44 175 2022 5 357 43 163 2023 5 335 39 149 Thereafter 19 1,876 268 941 Total minimum receipts / payments $ 53 $ 3,569 464 1,712 Less amount representing interest (b) (153 ) (535 ) Present value of minimum lease payments 311 1,177 Current portion of lease obligations (27 ) (121 ) Long-term portion of lease obligations $ 284 $ 1,056 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,351 million due in the future under non-cancelable subleases. (b) Calculated using the interest rate for each lease. As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating 2019 $ 14 $ 416 $ 38 $ 183 2020 10 388 36 172 2021 7 360 34 158 2022 5 331 33 145 2023 5 306 30 130 Thereafter 19 1,704 201 831 Total minimum receipts / payments $ 60 $ 3,505 372 $ 1,619 Less amount representing interest (125 ) Present value of minimum finance lease payments 247 Current portion of finance lease obligation (21 ) Long-term portion of finance lease obligation $ 226 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases. |
| Leases | Leases As of June 30, 2019 , we leased or subleased 5,331 restaurant properties to franchisees and 168 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes. We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes. We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard. In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases. Financial Statement Impact of Transition to ASC 842 Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital. Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions): As Reported Total Adjusted December 31, 2018 Adjustments January 1, 2019 ASSETS Current assets: Cash and cash equivalents $ 913 $ — $ 913 Accounts and notes receivable, net 452 — 452 Inventories, net 75 — 75 Prepaids and other current assets 60 — 60 Total current assets 1,500 — 1,500 Property and equipment, net 1,996 26 (a) 2,022 Operating lease assets, net — 1,143 (b) 1,143 Intangible assets, net 10,463 (133 ) (c) 10,330 Goodwill 5,486 — 5,486 Net investment in property leased to franchisees 54 — 54 Other assets, net 642 — 642 Total assets $ 20,141 $ 1,036 $ 21,177 LIABILITIES AND EQUITY Current liabilities: Accounts and drafts payable $ 513 $ — $ 513 Other accrued liabilities 637 114 (d) 751 Gift card liability 167 — 167 Current portion of long term debt and finance leases 91 — 91 Total current liabilities 1,408 114 1,522 Term debt, net of current portion 11,823 (65 ) (e) 11,758 Finance leases, net of current portion 226 62 (e) 288 Operating lease liabilities, net of current portion — 1,028 (f) 1,028 Other liabilities, net 1,547 (132 ) (g) 1,415 Deferred income taxes, net 1,519 8 (h) 1,527 Total liabilities 16,523 1,015 17,538 Partners' capital: Class A common units 4,323 12 (i) 4,335 Partnership exchangeable units 730 9 (i) 739 Accumulated other comprehensive income (loss) (1,437 ) — (1,437 ) Total Partners' capital 3,616 21 3,637 Noncontrolling interests 2 — 2 Total equity 3,618 21 3,639 Total liabilities and equity $ 20,141 $ 1,036 $ 21,177 (a) Represents the net change in assets recorded in connection with build-to-suit leases. (b) Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets. (c) Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets. (d) Represents the current portion of operating lease liabilities. (e) Represents the net change in liabilities recorded in connection with build-to-suit leases. (f) Represents the recognition of operating lease liabilities, net of current portion. (g) Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets. (h) Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to Partners' capital. (i) Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above. Changes to Lease Accounting Significant Accounting Policies Under ASC 842 In all leases, whether we are the lessor or lessee, we define lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant to the lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract. Lessor Accounting We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue. We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract. We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Lessee Accounting In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability is included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Partnership as Lessor Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions): As of June 30, 2019 Land $ 920 Buildings and improvements 1,139 Restaurant equipment 21 2,080 Accumulated depreciation and amortization (441 ) Property and equipment leased, net $ 1,639 Our net investment in direct financing leases is as follows (in millions): As of June 30, 2019 Future rents to be received: Future minimum lease receipts $ 53 Contingent rents (a) 23 Estimated unguaranteed residual value 15 Unearned income (30 ) 61 Current portion included within accounts receivables (14 ) Net investment in property leased to franchisees $ 47 (a) Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting. Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions): Three months ended June 30, 2019 Six months ended June 30, 2019 Lease income - operating leases Minimum lease payments $ 112 $ 223 Variable lease payments 97 181 Amortization of favorable and unfavorable income lease contracts, net 2 4 Subtotal - lease income from operating leases 211 408 Earned income on direct financing leases 3 5 Total property revenues $ 214 $ 413 Partnership as Lessee Lease cost and other information associated with these lease commitments is as follows (in millions): Lease Cost (Income) Three months ended June 30, 2019 Six months ended June 30, 2019 Operating lease cost $ 53 $ 106 Operating lease variable lease cost 50 100 Finance lease cost: Amortization of right-of-use assets 6 13 Interest on lease liabilities 6 11 Sublease income (164 ) (319 ) Total lease cost (income) $ (49 ) $ (89 ) Lease Term and Discount Rate as of June 30, 2019 Weighted-average remaining lease term (in years): Operating leases 11.1 years Finance leases 11.2 years Weighted-average discount rate: Operating leases 6.5 % Finance leases 7.6 % Other Information for the six months ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 96 Operating cash flows from finance leases $ 11 Financing cash flows from finance leases $ 13 Right-of-use assets obtained in exchange for new finance lease obligations $ 1 Right-of-use assets obtained in exchange for new operating lease obligations $ 65 Maturity Analysis As of June 30, 2019 , future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating Remainder of 2019 $ 7 $ 213 $ 24 $ 97 2020 10 406 46 187 2021 7 382 44 175 2022 5 357 43 163 2023 5 335 39 149 Thereafter 19 1,876 268 941 Total minimum receipts / payments $ 53 $ 3,569 464 1,712 Less amount representing interest (b) (153 ) (535 ) Present value of minimum lease payments 311 1,177 Current portion of lease obligations (27 ) (121 ) Long-term portion of lease obligations $ 284 $ 1,056 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,351 million due in the future under non-cancelable subleases. (b) Calculated using the interest rate for each lease. As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating 2019 $ 14 $ 416 $ 38 $ 183 2020 10 388 36 172 2021 7 360 34 158 2022 5 331 33 145 2023 5 306 30 130 Thereafter 19 1,704 201 831 Total minimum receipts / payments $ 60 $ 3,505 372 $ 1,619 Less amount representing interest (125 ) Present value of minimum finance lease payments 247 Current portion of finance lease obligation (21 ) Long-term portion of finance lease obligation $ 226 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases. |
| Leases | Leases As of June 30, 2019 , we leased or subleased 5,331 restaurant properties to franchisees and 168 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes. We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes. We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard. In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases. Financial Statement Impact of Transition to ASC 842 Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital. Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions): As Reported Total Adjusted December 31, 2018 Adjustments January 1, 2019 ASSETS Current assets: Cash and cash equivalents $ 913 $ — $ 913 Accounts and notes receivable, net 452 — 452 Inventories, net 75 — 75 Prepaids and other current assets 60 — 60 Total current assets 1,500 — 1,500 Property and equipment, net 1,996 26 (a) 2,022 Operating lease assets, net — 1,143 (b) 1,143 Intangible assets, net 10,463 (133 ) (c) 10,330 Goodwill 5,486 — 5,486 Net investment in property leased to franchisees 54 — 54 Other assets, net 642 — 642 Total assets $ 20,141 $ 1,036 $ 21,177 LIABILITIES AND EQUITY Current liabilities: Accounts and drafts payable $ 513 $ — $ 513 Other accrued liabilities 637 114 (d) 751 Gift card liability 167 — 167 Current portion of long term debt and finance leases 91 — 91 Total current liabilities 1,408 114 1,522 Term debt, net of current portion 11,823 (65 ) (e) 11,758 Finance leases, net of current portion 226 62 (e) 288 Operating lease liabilities, net of current portion — 1,028 (f) 1,028 Other liabilities, net 1,547 (132 ) (g) 1,415 Deferred income taxes, net 1,519 8 (h) 1,527 Total liabilities 16,523 1,015 17,538 Partners' capital: Class A common units 4,323 12 (i) 4,335 Partnership exchangeable units 730 9 (i) 739 Accumulated other comprehensive income (loss) (1,437 ) — (1,437 ) Total Partners' capital 3,616 21 3,637 Noncontrolling interests 2 — 2 Total equity 3,618 21 3,639 Total liabilities and equity $ 20,141 $ 1,036 $ 21,177 (a) Represents the net change in assets recorded in connection with build-to-suit leases. (b) Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets. (c) Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets. (d) Represents the current portion of operating lease liabilities. (e) Represents the net change in liabilities recorded in connection with build-to-suit leases. (f) Represents the recognition of operating lease liabilities, net of current portion. (g) Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets. (h) Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to Partners' capital. (i) Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above. Changes to Lease Accounting Significant Accounting Policies Under ASC 842 In all leases, whether we are the lessor or lessee, we define lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant to the lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract. Lessor Accounting We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue. We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract. We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Lessee Accounting In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability is included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Partnership as Lessor Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions): As of June 30, 2019 Land $ 920 Buildings and improvements 1,139 Restaurant equipment 21 2,080 Accumulated depreciation and amortization (441 ) Property and equipment leased, net $ 1,639 Our net investment in direct financing leases is as follows (in millions): As of June 30, 2019 Future rents to be received: Future minimum lease receipts $ 53 Contingent rents (a) 23 Estimated unguaranteed residual value 15 Unearned income (30 ) 61 Current portion included within accounts receivables (14 ) Net investment in property leased to franchisees $ 47 (a) Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting. Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions): Three months ended June 30, 2019 Six months ended June 30, 2019 Lease income - operating leases Minimum lease payments $ 112 $ 223 Variable lease payments 97 181 Amortization of favorable and unfavorable income lease contracts, net 2 4 Subtotal - lease income from operating leases 211 408 Earned income on direct financing leases 3 5 Total property revenues $ 214 $ 413 Partnership as Lessee Lease cost and other information associated with these lease commitments is as follows (in millions): Lease Cost (Income) Three months ended June 30, 2019 Six months ended June 30, 2019 Operating lease cost $ 53 $ 106 Operating lease variable lease cost 50 100 Finance lease cost: Amortization of right-of-use assets 6 13 Interest on lease liabilities 6 11 Sublease income (164 ) (319 ) Total lease cost (income) $ (49 ) $ (89 ) Lease Term and Discount Rate as of June 30, 2019 Weighted-average remaining lease term (in years): Operating leases 11.1 years Finance leases 11.2 years Weighted-average discount rate: Operating leases 6.5 % Finance leases 7.6 % Other Information for the six months ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 96 Operating cash flows from finance leases $ 11 Financing cash flows from finance leases $ 13 Right-of-use assets obtained in exchange for new finance lease obligations $ 1 Right-of-use assets obtained in exchange for new operating lease obligations $ 65 Maturity Analysis As of June 30, 2019 , future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating Remainder of 2019 $ 7 $ 213 $ 24 $ 97 2020 10 406 46 187 2021 7 382 44 175 2022 5 357 43 163 2023 5 335 39 149 Thereafter 19 1,876 268 941 Total minimum receipts / payments $ 53 $ 3,569 464 1,712 Less amount representing interest (b) (153 ) (535 ) Present value of minimum lease payments 311 1,177 Current portion of lease obligations (27 ) (121 ) Long-term portion of lease obligations $ 284 $ 1,056 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,351 million due in the future under non-cancelable subleases. (b) Calculated using the interest rate for each lease. As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating 2019 $ 14 $ 416 $ 38 $ 183 2020 10 388 36 172 2021 7 360 34 158 2022 5 331 33 145 2023 5 306 30 130 Thereafter 19 1,704 201 831 Total minimum receipts / payments $ 60 $ 3,505 372 $ 1,619 Less amount representing interest (125 ) Present value of minimum finance lease payments 247 Current portion of finance lease obligation (21 ) Long-term portion of finance lease obligation $ 226 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases. |
| Leases | Leases As of June 30, 2019 , we leased or subleased 5,331 restaurant properties to franchisees and 168 non-restaurant properties to third parties under operating leases and direct financing leases where we are the lessor. Initial lease terms generally range from 10 to 20 years. Most leases to franchisees provide for fixed monthly payments and many provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent, determined as a percentage of sales, generally when annual sales exceed specified levels. Lessees typically bear the cost of maintenance, insurance and property taxes. We lease land, buildings, equipment, office space and warehouse space. Land and building leases generally have an initial term of 10 to 30 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include provisions for variable rent payments, determined as a percentage of sales, generally when annual sales exceed specified levels. Most leases also obligate us to pay, as lessee, the cost of maintenance, insurance and property taxes. We transitioned to FASB Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), from ASC Topic 840, Leases (the “Previous Standard”) on January 1, 2019 on a modified retrospective basis using the effective date transition method. Our Financial Statements reflect the application of ASC 842 guidance beginning in 2019, while our consolidated financial statements for prior periods were prepared under the guidance of the Previous Standard. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Our transition to ASC 842 resulted in the gross presentation of property tax and maintenance expenses and related lessee reimbursements as franchise and property expenses and franchise and property revenues, respectively. These expenses and reimbursements were presented on a net basis under the Previous Standard. In connection with our transition to ASC 842, we elected the package of practical expedients under which we did not reassess the classification of our existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. We also elected lessee and lessor practical expedients to not separate non-lease components comprised of maintenance from lease components for real estate leases that commenced prior to our transition to ASC 842, as well as for leases that commence or that are modified subsequent to our transition to ASC 842. We did not elect the practical expedient that permitted a reassessment of lease terms for existing leases. Financial Statement Impact of Transition to ASC 842 Transition Impact on January 1, 2019 Condensed Consolidated Balance Sheet Our transition to ASC 842 represents a change in accounting principle. The $21 million cumulative effect of our transition to ASC 842 is reflected as an adjustment to January 1, 2019 Partners' capital. Our transition to ASC 842 resulted in the following adjustments to our condensed consolidated balance sheet as of January 1, 2019 (in millions): As Reported Total Adjusted December 31, 2018 Adjustments January 1, 2019 ASSETS Current assets: Cash and cash equivalents $ 913 $ — $ 913 Accounts and notes receivable, net 452 — 452 Inventories, net 75 — 75 Prepaids and other current assets 60 — 60 Total current assets 1,500 — 1,500 Property and equipment, net 1,996 26 (a) 2,022 Operating lease assets, net — 1,143 (b) 1,143 Intangible assets, net 10,463 (133 ) (c) 10,330 Goodwill 5,486 — 5,486 Net investment in property leased to franchisees 54 — 54 Other assets, net 642 — 642 Total assets $ 20,141 $ 1,036 $ 21,177 LIABILITIES AND EQUITY Current liabilities: Accounts and drafts payable $ 513 $ — $ 513 Other accrued liabilities 637 114 (d) 751 Gift card liability 167 — 167 Current portion of long term debt and finance leases 91 — 91 Total current liabilities 1,408 114 1,522 Term debt, net of current portion 11,823 (65 ) (e) 11,758 Finance leases, net of current portion 226 62 (e) 288 Operating lease liabilities, net of current portion — 1,028 (f) 1,028 Other liabilities, net 1,547 (132 ) (g) 1,415 Deferred income taxes, net 1,519 8 (h) 1,527 Total liabilities 16,523 1,015 17,538 Partners' capital: Class A common units 4,323 12 (i) 4,335 Partnership exchangeable units 730 9 (i) 739 Accumulated other comprehensive income (loss) (1,437 ) — (1,437 ) Total Partners' capital 3,616 21 3,637 Noncontrolling interests 2 — 2 Total equity 3,618 21 3,639 Total liabilities and equity $ 20,141 $ 1,036 $ 21,177 (a) Represents the net change in assets recorded in connection with build-to-suit leases. (b) Represents the capitalization of operating lease right-of-use (“ROU”) assets equal to the amount of recognized operating lease liability, adjusted by the net carrying amounts of related favorable lease assets and unfavorable lease liabilities in which we are the lessee and straight-line rent accruals, which were reclassified to operating lease ROU assets. (c) Represents the net carrying amount of favorable lease assets associated with leases in which we are the lessee, which have been reclassified to operating lease ROU assets. (d) Represents the current portion of operating lease liabilities. (e) Represents the net change in liabilities recorded in connection with build-to-suit leases. (f) Represents the recognition of operating lease liabilities, net of current portion. (g) Represents the net carrying amount of unfavorable lease liabilities associated with leases in which we are the lessee and $64 million of straight-line rent accruals which have been reclassified to operating lease ROU assets. (h) Represents the net tax effects of the adjustments noted above, with a corresponding adjustment to Partners' capital. (i) Represents net change in assets and liabilities recorded in connection with built-to-suit leases and the tax effects of adjustments noted above. Changes to Lease Accounting Significant Accounting Policies Under ASC 842 In all leases, whether we are the lessor or lessee, we define lease term as the noncancellable term of the lease plus any renewals covered by renewal options that are reasonably certain of exercise based on our assessment of the economic factors relevant to the lessee. The noncancellable term of the lease commences on the date the lessor makes the underlying property in the lease available to the lessee, irrespective of when lease payments begin under the contract. Lessor Accounting We recognize lease payments for operating leases as property revenue on a straight-line basis over the lease term and property revenue is presented net of any related sales tax. Lease incentive payments we make to lessees are amortized as a reduction in property revenue over the lease term. We account for reimbursements of maintenance and property tax costs paid to us by lessees as variable lease payment property revenue. We also have net investments in properties leased to franchisees, which met the criteria of direct financing leases under the Previous Standard. Investments in direct financing leases are recorded on a net basis, consisting of the gross investment and estimated residual value in the lease, less unearned income. Unearned income on direct financing leases is recognized over the lease term yielding a constant periodic rate of return on the net investment in the lease. We do not remeasure the net investment in a direct financing lease unless the lease is modified and that modification is not accounted for as a separate contract. We recognize variable lease payment income for operating and direct financing leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Lessee Accounting In leases where we are the lessee, we recognize an ROU asset and lease liability at lease commencement, which is measured by discounting lease payments using our incremental borrowing rate applicable to the lease term and currency of the lease as the discount rate. Subsequent amortization of the ROU asset and accretion of the lease liability for an operating lease is recognized as a single lease cost, on a straight-line basis, over the lease term. Amortization of the ROU asset and the change in the lease liability is included in changes in Other long-term assets and liabilities in the Condensed Consolidated Statement of Cash Flows. A finance lease ROU asset is depreciated on a straight-line basis over the lesser of the useful life of the leased asset or lease term. Interest on each finance lease liability is determined as the amount that results in a constant periodic discount rate on the remaining balance of the liability. ROU assets are assessed for impairment in accordance with our long-lived asset impairment policy. We reassess lease classification and remeasure ROU assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate contract or upon certain other events that require reassessment in accordance with ASC 842. Maintenance and property tax expenses are accounted for on an accrual basis as variable lease cost. We recognize variable lease cost for operating and finance leases in the period when changes in facts and circumstances on which the variable lease payments are based occur. Partnership as Lessor Assets leased to franchisees and others under operating leases where we are the lessor and which are included within our property and equipment, net are as follows (in millions): As of June 30, 2019 Land $ 920 Buildings and improvements 1,139 Restaurant equipment 21 2,080 Accumulated depreciation and amortization (441 ) Property and equipment leased, net $ 1,639 Our net investment in direct financing leases is as follows (in millions): As of June 30, 2019 Future rents to be received: Future minimum lease receipts $ 53 Contingent rents (a) 23 Estimated unguaranteed residual value 15 Unearned income (30 ) 61 Current portion included within accounts receivables (14 ) Net investment in property leased to franchisees $ 47 (a) Amounts represent estimated contingent rents recorded in connection with the acquisition method of accounting. Property revenues are comprised primarily of lease income from operating leases and earned income on direct financing leases with franchisees as follows (in millions): Three months ended June 30, 2019 Six months ended June 30, 2019 Lease income - operating leases Minimum lease payments $ 112 $ 223 Variable lease payments 97 181 Amortization of favorable and unfavorable income lease contracts, net 2 4 Subtotal - lease income from operating leases 211 408 Earned income on direct financing leases 3 5 Total property revenues $ 214 $ 413 Partnership as Lessee Lease cost and other information associated with these lease commitments is as follows (in millions): Lease Cost (Income) Three months ended June 30, 2019 Six months ended June 30, 2019 Operating lease cost $ 53 $ 106 Operating lease variable lease cost 50 100 Finance lease cost: Amortization of right-of-use assets 6 13 Interest on lease liabilities 6 11 Sublease income (164 ) (319 ) Total lease cost (income) $ (49 ) $ (89 ) Lease Term and Discount Rate as of June 30, 2019 Weighted-average remaining lease term (in years): Operating leases 11.1 years Finance leases 11.2 years Weighted-average discount rate: Operating leases 6.5 % Finance leases 7.6 % Other Information for the six months ended June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 96 Operating cash flows from finance leases $ 11 Financing cash flows from finance leases $ 13 Right-of-use assets obtained in exchange for new finance lease obligations $ 1 Right-of-use assets obtained in exchange for new operating lease obligations $ 65 Maturity Analysis As of June 30, 2019 , future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating Remainder of 2019 $ 7 $ 213 $ 24 $ 97 2020 10 406 46 187 2021 7 382 44 175 2022 5 357 43 163 2023 5 335 39 149 Thereafter 19 1,876 268 941 Total minimum receipts / payments $ 53 $ 3,569 464 1,712 Less amount representing interest (b) (153 ) (535 ) Present value of minimum lease payments 311 1,177 Current portion of lease obligations (27 ) (121 ) Long-term portion of lease obligations $ 284 $ 1,056 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,351 million due in the future under non-cancelable subleases. (b) Calculated using the interest rate for each lease. As of December 31, 2018, future minimum lease receipts and commitments are as follows (in millions): Lease Receipts Lease Commitments (a) Direct Operating Finance Operating 2019 $ 14 $ 416 $ 38 $ 183 2020 10 388 36 172 2021 7 360 34 158 2022 5 331 33 145 2023 5 306 30 130 Thereafter 19 1,704 201 831 Total minimum receipts / payments $ 60 $ 3,505 372 $ 1,619 Less amount representing interest (125 ) Present value of minimum finance lease payments 247 Current portion of finance lease obligation (21 ) Long-term portion of finance lease obligation $ 226 (a) Minimum lease commitments have not been reduced by minimum sublease rentals of $2,290 million due in the future under non-cancelable subleases. |
