Property, Plant and Equipment Accounting Policy
Property, plant and equipment are recorded at cost less accumulated depreciation and impairment. Cost includes professional fees and, for assets constructed by ArcelorMittal, any related works to the extent that these are directly attributable to the acquisition or construction of the asset. Property, plant and equipment except land are depreciated using the straight-line method over the useful lives of the related assets, which are presented in the table below.
|
Asset Category |
|
Useful Life Range |
|
Land |
|
|
Not depreciated |
|
Buildings |
|
|
10 to 50 years |
|
Steel plant equipment |
|
|
15 to 30 years |
|
Auxiliary facilities |
|
|
15 to 30 years |
|
Other facilities |
|
|
5 to 20 years |
Major improvements, which add to productive capacity or extend the life of an asset, are capitalized, while repairs and maintenance are charged to expense as incurred. Where a tangible fixed asset comprises major components having different useful lives, these components are accounted for as separate items.
Property, plant and equipment used in mining activities are depreciated over its useful life or over the remaining life of the mine if shorter and if there is no alternative use possible. For the majority of assets used in mining activities, the economic benefits from the asset are consumed in a pattern which is linked to the production level and accordingly, assets used in mining activities are depreciated on a unit of production basis. Unit of production is based on the available estimate of proven and probable reserves.
Pre-production expenditure such as exploration and evaluation assets are capitalized only when the mining entity’s management has a high degree of confidence in the project’s economic viability and it is probable that future economic benefits will flow to ArcelorMittal.
The capitalization can be justified through feasibility study, valuation report or similar positive assessment done by an external expert; through business plan, project plan, business forecast or other assessment prepared and validated by the management or; through management’s knowledge and expertise derived from similar projects.
Capitalization of pre-production expenditure ceases when the mining property is capable of commercial production as it is intended by the management. General administration costs that are not directly attributable to a specific exploration area are charged to the statement of operations.
Property, plant and equipment under construction are recorded as construction in progress until they are ready for their intended use; thereafter they are transferred to the related category of property, plant and equipment and depreciated over their estimated useful lives. Interest incurred during construction is capitalized. Gains and losses on retirement or disposal of assets are reflected in the statement of operations.
Property, plant and equipment acquired by way of finance leases is stated at an amount equal to the lower of the fair value and the present value of the minimum lease payments at the inception of the lease. Each lease payment is allocated between the finance charges and a reduction of the lease liability. The interest element of the finance cost is charged to the statement of operations over the lease period so as to achieve a constant rate of interest on the remaining balance of the liability.
The residual values and useful lives of property, plant and equipment are reviewed at each reporting date and adjusted if expectations differ from previous estimates. Depreciation methods applied to property, plant and equipment are reviewed at each reporting date and changed if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset.
Source: ArcelorMittal, Annual Report
Property, Plant and Equipment Disclosure
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ArcelorMittal, Statement of Financial Position, Property, Plant and Equipment
Source: Based on data from ArcelorMittal 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. |
ArcelorMittal's machinery and equipment increased from 2008 to 2009 but then slightly declined from 2009 to 2010 not reaching 2008 level.
|
| Construction 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. |
ArcelorMittal's construction in progress declined from 2008 to 2009 but then increased from 2009 to 2010 not reaching 2008 level.
|
| Property, plant and equipment, cost |
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. |
ArcelorMittal's property, plant and equipment, cost increased from 2008 to 2009 but then slightly declined from 2009 to 2010 not reaching 2008 level.
|
| Property, plant and equipment, carrying amount |
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. |
ArcelorMittal's property, plant and equipment, carrying amount declined from 2008 to 2009 and from 2009 to 2010.
|
Property, Plant and Equipment Ratios (Summary)
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ArcelorMittal, 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. |
ArcelorMittal's average age of depreciable property, plant and equipment deteriorated from 2008 to 2009 and from 2009 to 2010.
|
| Estimated total useful life |
Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. |
ArcelorMittal's estimated total useful life of depreciable property, plant and equipment increased from 2008 to 2009 and from 2009 to 2010.
|
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
ArcelorMittal's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2008 to 2009 and from 2009 to 2010.
|
| Estimated remaining life |
|
ArcelorMittal's estimated remaining life of depreciable property, plant and equipment increased from 2008 to 2009 but then declined significantly from 2009 to 2010.
|
Average Age
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2010 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. |
ArcelorMittal's average age of depreciable property, plant and equipment deteriorated from 2008 to 2009 and from 2009 to 2010.
|
Estimated Total Useful Life
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2010 Calculations
| Ratio |
Description |
The company |
| Estimated total useful life |
Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. |
ArcelorMittal's estimated total useful life of depreciable property, plant and equipment increased from 2008 to 2009 and from 2009 to 2010.
|
Estimated Age, Time Elapsed Since Purchase
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2010 Calculations
| Ratio |
Description |
The company |
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
ArcelorMittal's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2008 to 2009 and from 2009 to 2010.
|
Estimated Remaining Life
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2010 Calculations
| Ratio |
Description |
The company |
| Estimated remaining life |
|
ArcelorMittal's estimated remaining life of depreciable property, plant and equipment increased from 2008 to 2009 but then declined significantly from 2009 to 2010.
|
