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AstraZeneca PLC (AZN) | Analysis of Property, Plant and Equipment

Property, Plant and Equipment Accounting Policy

AstraZeneca's policy is to write off the difference between the cost of each item of property, plant and equipment and its residual value over its estimated useful life on a straight-line basis. Assets under construction are not depreciated.

Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear. Under this policy it becomes impractical to calculate average asset lives exactly. However, the total lives range from approximately 10 to 50 years for buildings, and three to 13 years for plant and equipment. All items of property, plant and equipment are tested for impairment when there are indications that the carrying value may not be recoverable. Any impairment losses are recognised immediately in profit.

Source: AstraZeneca PLC, Annual Report

Property, Plant and Equipment Disclosure

AstraZeneca PLC, Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Land and buildings 5,850  5,911  5,699  5,336  5,217 
Plant and equipment 8,645  8,779  9,293  8,803  8,534 
Assets in course of construction 576  620  591  1,029  863 
Property, plant and equipment, cost 15,071  15,310  15,583  15,168  14,614 
Accumulated depreciation (8,982) (8,885) (8,626) (7,861) (7,571)
Property, plant and equipment, net book value 6,089  6,425  6,957  7,307  7,043 

Source: Based on data from AstraZeneca PLC Annual Reports

Item Description The company
Plant and equipment Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. AstraZeneca PLC's plant and equipment declined from 2010 to 2011 and from 2011 to 2012.
Assets in course of construction 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. AstraZeneca PLC's assets in course of construction increased from 2010 to 2011 but then declined significantly from 2011 to 2012.
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. AstraZeneca PLC's property, plant and equipment, cost declined from 2010 to 2011 and from 2011 to 2012.
Property, plant and equipment, net book value 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. AstraZeneca PLC's property, plant and equipment, net book value declined from 2010 to 2011 and from 2011 to 2012.

Property, Plant and Equipment Ratios (Summary)

AstraZeneca PLC, Property, Plant and Equipment Ratios

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Average age 59.60% 58.03% 55.36% 51.83% 51.81%
Estimated total useful life (years) 15 14 14 16 12
Estimated age, time elapsed since purchase (years) 9 8 8 8 6
Estimated remaining life (years) 6 6 6 8 6
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. AstraZeneca PLC's average age of depreciable property, plant and equipment deteriorated from 2010 to 2011 and from 2011 to 2012.
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. AstraZeneca PLC's estimated total useful life of depreciable property, plant and equipment declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.
Estimated time elapsed since purchase The approximate age in years of a company's fixed assets. Useful for comparison purposes. AstraZeneca PLC's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2010 to 2011 and from 2011 to 2012.
Estimated remaining life   AstraZeneca PLC's estimated remaining life of depreciable property, plant and equipment declined from 2010 to 2011 but then slightly increased from 2011 to 2012.

Average Age

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Selected Financial Data (USD $ in millions)
Accumulated depreciation 8,982  8,885  8,626  7,861  7,571 
Property, plant and equipment, cost 15,071  15,310  15,583  15,168  14,614 
  Ratio
Average age1 59.60% 58.03% 55.36% 51.83% 51.81%

2012 Calculations

1 Average age = 100 × Accumulated depreciation ÷ Property, plant and equipment, cost
= 100 × 8,982 ÷ 15,071 = 59.60%

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. AstraZeneca PLC's average age of depreciable property, plant and equipment deteriorated from 2010 to 2011 and from 2011 to 2012.

Estimated Total Useful Life

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Selected Financial Data (USD $ in millions)
Property, plant and equipment, cost 15,071  15,310  15,583  15,168  14,614 
Depreciation, charge for year and impairment 1,023  1,086  1,098  943  1,182 
  Ratio
Estimated total useful life (years)1 15 14 14 16 12

2012 Calculations

1 Estimated total useful life (years) = Property, plant and equipment, cost ÷ Depreciation, charge for year and impairment
= 15,071 ÷ 1,023 = 15

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. AstraZeneca PLC's estimated total useful life of depreciable property, plant and equipment declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.

Estimated Age, Time Elapsed Since Purchase

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Selected Financial Data (USD $ in millions)
Accumulated depreciation 8,982  8,885  8,626  7,861  7,571 
Depreciation, charge for year and impairment 1,023  1,086  1,098  943  1,182 
  Ratio
Time elapsed since purchase (years)1 9 8 8 8 6

2012 Calculations

1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation, charge for year and impairment
= 8,982 ÷ 1,023 = 9

Ratio Description The company
Estimated time elapsed since purchase The approximate age in years of a company's fixed assets. Useful for comparison purposes. AstraZeneca PLC's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2010 to 2011 and from 2011 to 2012.

Estimated Remaining Life

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Selected Financial Data (USD $ in millions)
Property, plant and equipment, net book value 6,089  6,425  6,957  7,307  7,043 
Depreciation, charge for year and impairment 1,023  1,086  1,098  943  1,182 
  Ratio
Estimated remaining life (years)1 6 6 6 8 6

2012 Calculations

1 Estimated remaining life (years) = Property, plant and equipment, net book value ÷ Depreciation, charge for year and impairment
= 6,089 ÷ 1,023 = 6

Ratio Description The company
Estimated remaining life   AstraZeneca PLC's estimated remaining life of depreciable property, plant and equipment declined from 2010 to 2011 but then slightly increased from 2011 to 2012.