Note 15. Leases

Capital Leases:

The HHS has entered into various capital leases with Native American and Alaskan Native tribes and with the General Services Administration (GSA) for office and warehouse space. Lease terms vary from 1 to 20 years. Capitalized assets acquired under capital lease agreements and the related liabilities are reported at the present value of the minimum lease payments. Assets under Capital Lease amounts are reported in Note 8, General Property, Plant and Equipment.

Operating Leases:

The HHS has commitments under various operating leases with private entities and GSA for offices, laboratory space, and land. Leases with private entities have initial or remaining noncancelable lease terms from 1 to 20 years. The GSA leases in general are cancelable with 120 days notice. Under an operating lease, the cost of the lease is expensed as incurred.

A Summary of Net Assets under Capital Lease and Future Minimum Lease Payments at September 30, 2007 and 2006, is presented in the schedules that follow:

(In Millions)	2007	2006
Summary of Net Assets Under Capital Lease
Land and Building	$ 139	$ 140
Machinery and Equipment	1	1
Subtotal	$ 140	$ 141
Accumulated Amortization	(42)	(38)
Assets Under Capital Lease	$ 98	$ 103

	2007		2006
(In Millions) Future Minimum Lease Payments
(In Millions) Future Minimum Lease Payments	Capital Leases	Operating Lease	Capital Leases	Operating Lease
Year 1	$ 13	$ 341	$ 12	$ 319
Year 2	13	349	12	333
Year 3	13	325	13	333
Year 4	11	313	13	285
Year 5	11	290	11	253
Later Years	127	1,069	137	859
Total Minimum Lease Payments	$ 188	$ 2,687	$ 198	$ 2,382
Imputed Interest	(76)		(79)
Total Capital Lease Liability	$ 112		$ 119

Report Date: November 15, 2007

Note 15. Leases

AFR Section II Links: