Property, Plant and Equipment Accounting Policy
Land is recorded at acquisition cost less accumulated impairment, if any. Prepayments for long-term leasehold land agreements are amortized over the life of the lease.
Other items of property, plant & equipment are recorded at acquisition cost or production cost and are depreciated on a straight-line basis to the consolidated income statement over the following estimated useful lives:
| Buildings |
20 to 40 years |
| Other property, plant & equipment: |
|
| —Machinery and equipment |
7 to 20 years |
| —Furniture and vehicles |
5 to 10 years |
| —Computer hardware |
3 to 7 years |
Additional costs that enhance the future economic benefit of property, plant & equipment are capitalized. Government grants for construction activities and equipment are deducted from the carrying value of the assets. Borrowing costs associated with the construction of new property, plant and equipment projects are capitalized. Property, plant & equipment is reviewed for impairment whenever events or changes in circumstances indicate that the balance sheet carrying amount may not be recoverable.
Property, plant & equipment that are financed by leases giving Novartis substantially all risks and rewards of ownership are capitalized at the lower of the fair value of the leased asset or the present value of minimum lease payments at the inception of the lease. These are depreciated in the same manner as other assets over the shorter of the lease term or their useful life. Leases in which a significant portion of the ownership risks and rewards are retained by the lessor are classified as operating leases. These are charged to the consolidated income statement over the life of the lease, generally, on a straight-line basis.
Source: Novartis AG, Annual Report
Property, Plant and Equipment Disclosure
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Novartis AG, Statement of Financial Position, Property, Plant and Equipment
Source: Based on data from Novartis AG 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. |
Novartis AG's land increased from 2009 to 2010 and from 2010 to 2011.
|
| Buildings |
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. |
Novartis AG's buildings increased from 2009 to 2010 and from 2010 to 2011.
|
| 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. |
Novartis AG's construction in progress increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
| Machinery & other equipment |
Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. |
Novartis AG's machinery & other equipment increased from 2009 to 2010 and from 2010 to 2011.
|
| Property, plant & 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. |
Novartis AG's property, plant & equipment, cost increased from 2009 to 2010 and from 2010 to 2011.
|
| Property, plant & 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. |
Novartis AG's property, plant & equipment, net book value increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
|
Property, Plant and Equipment Ratios (Summary)
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Novartis AG, 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. |
Novartis AG's average age of depreciable property, plant and equipment improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
| 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. |
Novartis AG's estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
Novartis AG's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.
|
| Estimated remaining life |
|
Novartis AG's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 but then declined significantly 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. |
Novartis AG's average age of depreciable property, plant and equipment improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
Estimated Total Useful Life
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2011 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. |
Novartis AG's estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
Estimated Age, Time Elapsed Since Purchase
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2011 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. |
Novartis AG's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.
|
Estimated Remaining Life
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2011 Calculations
| Ratio |
Description |
The company |
| Estimated remaining life |
|
Novartis AG's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
