Property, Plant and Equipment Accounting Policy

Depreciation

Depreciation of plant and equipment is computed principally using accelerated methods. Depreciation on equipment leased to others, primarily for Financial Products, is computed using the straight-line method over the term of the lease. The depreciable basis is the original cost of the equipment less the estimated residual value of the equipment at the end of the lease term. In 2013, 2012 and 2011, Cat Financial depreciation on equipment leased to others was $768 million, $688 million and $690 million, respectively, and was included in Other operating (income) expenses in Statement 1. In 2013, 2012 and 2011, consolidated depreciation expense was $2,710 million, $2,421 million and $2,240 million, respectively.

Source: Caterpillar Inc., Annual Report

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Property, Plant and Equipment Disclosure

Caterpillar Inc., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Land 688  723  753  682  639 
Buildings and land improvements 6,928  6,214  5,857  5,174  4,914 
Machinery, equipment and other 16,793  16,073  14,435  13,414  12,917 
Equipment leased to others 5,365  4,658  4,285  4,444  4,717 
Construction-in-process 1,542  2,264  1,996  1,192  1,034 
Property, plant and equipment, at cost 31,316  29,932  27,326  24,906  24,221 
Accumulated depreciation (14,241) (13,471) (12,931) (12,367) (11,835)
Property, plant and equipment, net 17,075  16,461  14,395  12,539  12,386 

Source: Based on data from Caterpillar Inc. Annual Reports

Item Description The company
Land Carrying amount as of the balance sheet date of real estate held for productive use. This excludes land held for sale. Caterpillar Inc.'s land declined from 2011 to 2012 and from 2012 to 2013.
Buildings and land improvements Carrying amount as of the balance sheet date of long-lived, depreciable assets that include building structures held for productive use including any addition, improvement, or renovation to the structure, such as interior masonry, interior flooring, electrical, and plumbing. Caterpillar Inc.'s buildings and land improvements increased from 2011 to 2012 and from 2012 to 2013.
Machinery, equipment and other Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. Caterpillar Inc.'s machinery, equipment and other increased from 2011 to 2012 and from 2012 to 2013.
Equipment leased to others The amount of lessor property subject to or available for lease, at cost adjusted for any previously recognized impairment charges, by major property class, as of the balance sheet date. Caterpillar Inc.'s equipment leased to others increased from 2011 to 2012 and from 2012 to 2013.
Construction-in-process 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. Caterpillar Inc.'s construction-in-process increased from 2011 to 2012 but then declined significantly from 2012 to 2013.
Property, plant and equipment, at 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. Caterpillar Inc.'s property, plant and equipment, at cost increased from 2011 to 2012 and from 2012 to 2013.
Property, plant 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. Caterpillar Inc.'s property, plant and equipment, net increased from 2011 to 2012 and from 2012 to 2013.

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Property, Plant and Equipment Ratios (Summary)

Caterpillar Inc., Property, Plant and Equipment Ratios

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Average age 46.50% 46.12% 48.66% 51.05% 50.19%
Estimated total useful life (years) 11 12 12 11 10
Estimated age, time elapsed since purchase (years) 5 6 6 6 5
Estimated remaining life (years) 6 7 6 5 5
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. Caterpillar Inc.'s average age of depreciable property, plant and equipment improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.
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. Caterpillar Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2011 to 2012 but then declined significantly from 2012 to 2013.
Estimated time elapsed since purchase The approximate age in years of a company's fixed assets. Useful for comparison purposes. Caterpillar Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2011 to 2012 and from 2012 to 2013.
Estimated remaining life Caterpillar Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2011 to 2012 but then declined significantly from 2012 to 2013.

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Average Age

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Accumulated depreciation 14,241  13,471  12,931  12,367  11,835 
Property, plant and equipment, at cost 31,316  29,932  27,326  24,906  24,221 
Land 688  723  753  682  639 
Ratio
Average age1 46.50% 46.12% 48.66% 51.05% 50.19%

2013 Calculations

1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, at cost – Land)
= 100 × 14,241 ÷ (31,316 – 688) = 46.50%

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. Caterpillar Inc.'s average age of depreciable property, plant and equipment improved from 2011 to 2012 but then slightly deteriorated from 2012 to 2013.

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Estimated Total Useful Life

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Property, plant and equipment, at cost 31,316  29,932  27,326  24,906  24,221 
Land 688  723  753  682  639 
Consolidated depreciation expense 2,710  2,421  2,211  2,202  2,254 
Ratio
Estimated total useful life (years)1 11 12 12 11 10

2013 Calculations

1 Estimated total useful life (years) = (Property, plant and equipment, at cost – Land) ÷ Consolidated depreciation expense
= (31,316 – 688) ÷ 2,710 = 11

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. Caterpillar Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2011 to 2012 but then declined significantly from 2012 to 2013.

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Estimated Age, Time Elapsed Since Purchase

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Accumulated depreciation 14,241  13,471  12,931  12,367  11,835 
Consolidated depreciation expense 2,710  2,421  2,211  2,202  2,254 
Ratio
Time elapsed since purchase (years)1 5 6 6 6 5

2013 Calculations

1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Consolidated depreciation expense
= 14,241 ÷ 2,710 = 5

Ratio Description The company
Estimated time elapsed since purchase The approximate age in years of a company's fixed assets. Useful for comparison purposes. Caterpillar Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2011 to 2012 and from 2012 to 2013.

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Estimated Remaining Life

 
Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009
Selected Financial Data (USD $ in millions)
Property, plant and equipment, net 17,075  16,461  14,395  12,539  12,386 
Land 688  723  753  682  639 
Consolidated depreciation expense 2,710  2,421  2,211  2,202  2,254 
Ratio
Estimated remaining life (years)1 6 7 6 5 5

2013 Calculations

1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Consolidated depreciation expense
= (17,075 – 688) ÷ 2,710 = 6

Ratio Description The company
Estimated remaining life Caterpillar Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2011 to 2012 but then declined significantly from 2012 to 2013.

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