NOTE 9. LEASES

The Company as a Lessee

The following table presents the various components of lease costs:

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During the fiscal years of 2025 and 2024, we identified and ceased use of certain operating right-of-use assets that were inherited from the former Parent at Separation. We determined that we will no longer receive economic benefits from these leased properties and do not have the intent or practical ability to sublease or sell them. Accordingly, we recorded accelerated depreciation in the amount of $39 million and $14 million (representing the remaining carrying value of the identified right-of-use assets, not included in the operating lease costs in the table above) for the years ended March 31, 2025 and 2024, respectively. Refer to Note 18 – Workforce Rebalancing and Site-Rationalization Charges for details of this program.

The Company had no sale and leaseback transactions for the years ended March 31, 2026, 2025 and 2024.

The following table presents supplemental information relating to the cash flows arising from lease transactions. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating and finance lease liabilities and, as such, are excluded from the amounts below.

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The following table presents the weighted-average lease term and discount rate for finance and operating leases:

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The following table presents a maturity analysis of expected undiscounted cash flows for operating and finance leases on an annual basis for the next five years and thereafter.

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*      Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

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The following table presents the total amount of finance leases recognized in the Consolidated Balance Sheet:

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The Company as a Lessor

During the year ended March 31, 2026, the Company entered into arrangements where the Company acts as lessor in certain sales-type leases. Revenue and cost for these sales-type leases was recorded in the amount of $175 million and $149 million, respectively, for the year ended March 31, 2026. Revenue and costs for sales-type leases were not material for the years ended March 31, 2025 and 2024. The related interest income arising from these leases was not material for any of the periods presented. Income from operating leases was not material for any of the periods presented.

At March 31, 2026 the Company had $156 million in leases receivable from sales-type leases, of which $25 million was current and $131 million was noncurrent, which are included within Prepaid expenses and other current assets and Other noncurrent assets in the Consolidated Balance Sheet, respectively. The balance of leases receivable from sales-type leases was not material at March 31, 2025. The allowance for expected credit losses for these leases receivable was not material in any of the periods presented. There were no material uncollectable or past due leases receivable in any of the periods presented.

The Company’s sales-type leases receivable have terms ranging from five to six years and are usually collateralized by a security interest in the underlying assets, culminating with a sale of the asset at the end of the term. The Company assigns an internal risk ratings to each lease based on the creditworthiness of the obligor at inception, and monitors credit quality over the term of the arrangement. The Company’s internal risk ratings are based on a variety of sources including agency and market implied ratings, performing a current financial analysis, internal data such as payment history, relevant news and country and industry risk. Accounts rated low risk typically have the equivalent of a Moody's rating of Baa3 or better. Based on the Company’s internal risk ratings assigned as of March 31, 2026, the credit risk profile of the Company’s gross sales-type leases receivable balance of $156 million was low, and was all originated during the current fiscal year.

The following table provides the scheduled maturities of the Company’s minimum lease payments receivable from sales-type leases and minimum future rentals on non-cancelable operating leases from contracts with customers as of March 31, 2026:

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