Property, Plant and Equipment Accounting Policy
Recognition
Property, plant and equipment comprise assets owned by Shell, assets held by Shell under finance leases and assets operated by Shell as contractor in production-sharing contracts. Property, plant and equipment, including expenditure on major inspections, and intangible assets are initially recognised in the Consolidated Balance Sheet at cost where it is probable that they will generate future economic benefits. This includes capitalisation of decommissioning and restoration costs associated with provisions for asset retirement, certain development costs and the effects of associated cash flow hedges as applicable. The accounting for exploration costs is described separately below. Intangible assets include goodwill, capitalised software costs and trademarks. Interest is capitalised, as an increase in property, plant and equipment, on major capital projects during construction.
Property, plant and equipment and intangible assets are subsequently carried at cost less accumulated depreciation, depletion and amortisation (including any impairment). Gains and losses on disposals are determined by comparing the proceeds with the carrying amounts of assets sold and are recognised in income, within interest and other income.
Depreciation, depletion and amortization
Property, plant and equipment related to hydrocarbon production activities are depreciated on a unit-of-production basis over the proved developed reserves of the field concerned, except in the case of assets whose useful lives differ from the lifetime of the field, in which case the straight-line method is applied. Rights and concessions are depleted on the unit-of-production basis over the total proved reserves of the relevant area. Where individually insignificant, unproved properties may be grouped and depreciated based on factors such as the average concession term and past experience of recognising proved reserves.
Other property, plant and equipment and intangible assets are depreciated and amortised on a straight-line basis over their estimated useful lives, except for goodwill, which is not amortised. They include major inspection costs, which are depreciated over the estimated period before the next planned major inspection (three to five years), and the following:
| Asset type | Useful life |
|---|
| Upgraders |
30 years |
| Refineries and chemical plants |
20 years |
| Retail service stations |
15 years |
| Property, plant and equipment held under finance leases |
lease term |
| Software |
5 years |
| Trademarks |
40 years |
Estimates of the useful lives and residual values of property, plant and equipment and intangible assets are reviewed annually and adjusted if appropriate.
Impairment
Other than properties with no proved reserves (where the basis for carrying costs in the Consolidated Balance Sheet is explained under "Exploration costs"), the carrying amounts of goodwill are tested for impairment annually, while all assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts for those assets may not be recoverable. If assets are determined to be impaired, the carrying amounts of those assets are written down to their recoverable amount, which is the higher of fair value less costs to sell and value-in-use.
Value-in-use is determined as the amount of estimated risk-adjusted discounted future cash flows. For this purpose, assets are grouped into cash-generating units based on separately identifiable and largely independent cash inflows. Estimates of future cash flows used in the evaluation of impairment of assets are made using management's forecasts of commodity prices, market supply and demand, product margins and, in the case of exploration and production assets, expected production volumes. The latter takes into account assessments of field and reservoir performance and includes expectations about both proved reserves and volumes that are expected to constitute proved reserves in the future (unproved volumes), which are risk-weighted utilising geological, production, recovery and economic projections. Cash flow estimates are risk-adjusted to reflect local conditions as appropriate and discounted at a rate based on Shell's marginal cost of debt.
Impairments, except those related to goodwill, are reversed as applicable to the extent that the events or circumstances that triggered the original impairment have changed.
Impairment charges and reversals are reported within depreciation, depletion and amortisation.
On reclassification as held for sale, the carrying amounts of intangible assets and property, plant and equipment are also reviewed and, where appropriate, written down to their fair value less costs to sell. No further provision for depreciation, depletion or amortisation is charged.
Source: Royal Dutch Shell PLC, Annual Report
Property, Plant and Equipment Disclosure
You have visited 10 password protected pages for free. Others contain data covered by 
.
Sign Up Now to get full access to whole website and cut out all advertisements.
Royal Dutch Shell PLC, Statement of Financial Position, Property, Plant and Equipment
Source: Based on data from Royal Dutch Shell PLC Annual Reports
| Item |
Description |
The company |
| 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. |
Royal Dutch Shell PLC's property, plant and equipment, cost increased from 2009 to 2010 and from 2010 to 2011.
|
| Property, plant and equipment, net book 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. |
Royal Dutch Shell PLC's property, plant and equipment, net book amount increased from 2009 to 2010 and from 2010 to 2011.
|
Property, Plant and Equipment Ratios (Summary)
You have visited 10 password protected pages for free. Others contain data covered by .
Sign Up Now to get full access to whole website and cut out all advertisements.
Royal Dutch Shell PLC, 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. |
Royal Dutch Shell PLC's average age of depreciable property, plant and equipment improved from 2009 to 2010 and 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. |
Royal Dutch Shell PLC's estimated total useful life of depreciable property, plant and equipment declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
Royal Dutch Shell PLC's estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
| Estimated remaining life |
|
Royal Dutch Shell PLC's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
Average Age
You have visited 10 password protected pages for free. Others contain data covered by .
Sign Up Now to get full access to whole website and cut out all advertisements.
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. |
Royal Dutch Shell PLC's average age of depreciable property, plant and equipment improved from 2009 to 2010 and from 2010 to 2011.
|
Estimated Total Useful Life
You have visited 10 password protected pages for free. Others contain data covered by .
Sign Up Now to get full access to whole website and cut out all advertisements.
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. |
Royal Dutch Shell PLC's estimated total useful life of depreciable property, plant and equipment declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
Estimated Age, Time Elapsed Since Purchase
You have visited 10 password protected pages for free. Others contain data covered by .
Sign Up Now to get full access to whole website and cut out all advertisements.
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. |
Royal Dutch Shell PLC's estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
|
Estimated Remaining Life
You have visited 10 password protected pages for free. Others contain data covered by .
Sign Up Now to get full access to whole website and cut out all advertisements.
2011 Calculations
| Ratio |
Description |
The company |
| Estimated remaining life |
|
Royal Dutch Shell PLC's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
