Property, Plant and Equipment Accounting Policy
Properties, plants, and equipment are recorded at cost. Depreciation is recorded principally on the straight-line method at rates based on the estimated useful lives of the assets. For greenfield assets, the units of production method is used to record depreciation. Depreciation is recorded on temporarily idled facilities until such time management approves a permanent shutdown. The following table details the weighted-average useful lives of structures and machinery and equipment by reporting segment (numbers in years):
| Segment | Structures | Machinery and equipment |
|---|
| Alumina |
29 |
25 |
| Primary Metals |
34 |
21 |
| Flat-Rolled Products |
31 |
21 |
| Engineered Products and Solutions |
27 |
18 |
Gains or losses from the sale of assets are generally recorded in other income or expenses (see policy that follows for assets classified as held for sale and discontinued operations). Repairs and maintenance are charged to expense as incurred. Interest related to the construction of qualifying assets is capitalized as part of the construction costs. Depletion related to mineral reserves is recorded using the units of production method.
Properties, plants, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset group) to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the excess of the carrying value of the assets (asset group) over their fair value, with fair value determined using the best information available, which generally is a discounted cash flow model (DCF model). The determination of what constitutes an asset group, the associated estimated undiscounted net cash flows, and the estimated useful lives of assets also require significant judgments.
Source: Alcoa Inc., Annual Report
Property, Plant and Equipment Disclosure
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Alcoa Inc., Statement of Financial Position, Property, Plant and Equipment
Source: Based on data from Alcoa Inc. Annual Reports
| Item |
Description |
The company |
| Machinery and equipment |
Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. |
Alcoa Inc.'s machinery and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
| Construction work-in-progress |
Carrying amount at the balance sheet date of long-lived asset under construction that include construction costs to date on capital projects that have not been completed and assets being constructed that are not ready to be placed into service. |
Alcoa Inc.'s construction work-in-progress declined from 2009 to 2010 and from 2010 to 2011.
|
| Properties, plants, and equipment, gross |
Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation. |
Alcoa Inc.'s properties, plants, and equipment, gross increased from 2009 to 2010 and from 2010 to 2011.
|
| Properties, plants, and equipment, net |
Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment. |
Alcoa Inc.'s properties, plants, and equipment, net increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
Property, Plant and Equipment Ratios (Summary)
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Alcoa Inc., Property, Plant and Equipment Ratios
| Ratio |
Description |
The company |
| Average age |
As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. |
Alcoa Inc.'s average age of depreciable property, plant and equipment deteriorated from 2009 to 2010 and from 2010 to 2011.
|
Average Age
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2011 Calculations
| Ratio |
Description |
The company |
| Average age |
As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. |
Alcoa Inc.'s average age of depreciable property, plant and equipment deteriorated from 2009 to 2010 and from 2010 to 2011.
|
