Philip Morris International Inc. (PM) | Property, Plant and Equipment

Property, Plant and Equipment Accounting Policy

Depreciation

Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 15 years, and buildings and building improvements over periods up to 40 years. Depreciation expense for 2012, 2011 and 2010 was $801 million, $895 million and $844 million, respectively.

Source: Philip Morris International Inc., Annual Report

Property, Plant and Equipment Disclosure

Philip Morris International Inc., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Land and land improvements	708	692	703	579	547
Buildings and building equipment	3,948	3,738	3,720	3,593	3,351
Machinery and equipment	8,380	7,880	7,857	7,591	7,170
Construction in progress	843	603	479	495	632
Property, plant and equipment, at cost	13,879	12,913	12,759	12,258	11,700
Accumulated depreciation	(7,234)	(6,663)	(6,260)	(5,868)	(5,352)
Property, plant and equipment, less accumulated depreciation	6,645	6,250	6,499	6,390	6,348

Source: Based on data from Philip Morris International Inc. Annual Reports

Item	Description	The company
Land and land improvements	Real estate assets held for productive use and depreciable assets that are an addition or improvement to real estate held for productive use.	Philip Morris International Inc.'s land and land improvements declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.
Buildings and building equipment	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.	Philip Morris International Inc.'s buildings and building equipment increased from 2010 to 2011 and from 2011 to 2012.
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.	Philip Morris International Inc.'s machinery and equipment increased from 2010 to 2011 and from 2011 to 2012.
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.	Philip Morris International Inc.'s construction in progress increased from 2010 to 2011 and from 2011 to 2012.
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.	Philip Morris International Inc.'s property, plant and equipment, at cost increased from 2010 to 2011 and from 2011 to 2012.
Property, plant and equipment, less accumulated depreciation	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.	Philip Morris International Inc.'s property, plant and equipment, less accumulated depreciation declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.

Property, Plant and Equipment Ratios (Summary)

Philip Morris International Inc., Property, Plant and Equipment Ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Average age	54.92%	54.52%	51.92%	50.24%	47.99%
Estimated total useful life (years)	16	14	14	15	14
Estimated age, time elapsed since purchase (years)	9	7	7	8	7
Estimated remaining life (years)	7	6	7	7	7

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.	Philip Morris International Inc.'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.	Philip Morris International Inc.'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.	Philip Morris International Inc.'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		Philip Morris International Inc.'s estimated remaining life of depreciable property, plant and equipment declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.

Average Age

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Selected Financial Data (USD $ in millions)
Accumulated depreciation	7,234	6,663	6,260	5,868	5,352
Property, plant and equipment, at cost	13,879	12,913	12,759	12,258	11,700
Land and land improvements	708	692	703	579	547
Ratio
Average age¹	54.92%	54.52%	51.92%	50.24%	47.99%

2012 Calculations

¹ Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, at cost – Land and land improvements)
= 100 × 7,234 ÷ (13,879 – 708) = 54.92%

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.	Philip Morris International Inc.'s average age of depreciable property, plant and equipment deteriorated from 2010 to 2011 and from 2011 to 2012.

Estimated Total Useful Life

	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, at cost	13,879	12,913	12,759	12,258	11,700
Land and land improvements	708	692	703	579	547
Depreciation expense	801	895	844	779	798
Ratio
Estimated total useful life (years)¹	16	14	14	15	14

2012 Calculations

¹ Estimated total useful life (years) = (Property, plant and equipment, at cost – Land and land improvements) ÷ Depreciation expense
= (13,879 – 708) ÷ 801 = 16

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.	Philip Morris International Inc.'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

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Selected Financial Data (USD $ in millions)
Accumulated depreciation	7,234	6,663	6,260	5,868	5,352
Depreciation expense	801	895	844	779	798
Ratio
Time elapsed since purchase (years)¹	9	7	7	8	7

2012 Calculations

¹ Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= 7,234 ÷ 801 = 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.	Philip Morris International Inc.'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

	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, less accumulated depreciation	6,645	6,250	6,499	6,390	6,348
Land and land improvements	708	692	703	579	547
Depreciation expense	801	895	844	779	798
Ratio
Estimated remaining life (years)¹	7	6	7	7	7

2012 Calculations

¹ Estimated remaining life (years) = (Property, plant and equipment, less accumulated depreciation – Land and land improvements) ÷ Depreciation expense
= (6,645 – 708) ÷ 801 = 7

Ratio	Description	The company
Estimated remaining life		Philip Morris International Inc.'s estimated remaining life of depreciable property, plant and equipment declined from 2010 to 2011 but then increased from 2011 to 2012 exceeding 2010 level.