Property, Plant and Equipment Accounting Policy
Property, plant and equipment is stated at cost less any accumulated depreciation and any accumulated impairment in value. Land is not depreciated.
Cost includes external and internal costs comprising warehouse materials used, direct labor used in installation work and the allocable portion of the indirect costs required for the related investment. The latter two items are recorded as revenues under "Other income - Own work capitalized." Cost includes, where appropriate, the initial estimate of decommissioning, retirement and site reconditioning costs when Telefónica Group is under obligation to incur such costs due to the use of the asset.
Interest and other financial expenses incurred and directly attributable to the acquisition or construction of qualifying assets are capitalized. Qualifying assets at the Telefónica Group are those assets that require a period of at least 18 months to bring the assets to their intended use or sale.
The costs of expansion, modernization or improvement leading to increased productivity, capacity or efficiency or to a lengthening of the useful lives of assets are capitalized when recognition requirements are met.
Upkeep and maintenance expenses are expensed as incurred.
The Telefónica Group assesses the need to write down, if appropriate, the carrying amount of each item of property, plant and equipment to its recoverable amount, whenever there are indications that the asset's carrying amount exceeds the higher of its fair value less costs to sell or its value in use. The impairment provision is not maintained if the factors giving rise to the impairment disappear.
Telefónica Group's subsidiaries depreciate their property, plant and equipment, net of their residual values, once they are in full working condition using the straight-line method based on the assets' estimated useful lives, calculated in accordance with technical studies which are revised periodically based on technological advances and the rate of dismantling, as follows:
| | Years of estimated useful life |
|---|
| Buildings |
25 – 40 |
| Plant and machinery |
10 – 15 |
| Telephone installations, networks and subscriber equipment |
5 – 20 |
| Furniture, tools and other items |
2 – 10 |
Assets' estimated residual values and methods and depreciation periods are reviewed, and adjusted if appropriate, prospectively at each financial year end.
Source: Telefonica S.A., Annual Report
Property, Plant and Equipment Disclosure
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Telefonica S.A., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions, translated from EUR €
Source: Based on data from Telefonica S.A. Annual Reports
| Item |
Description |
The company |
| Plant and machinery |
Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. |
Telefonica S.A.'s plant and machinery increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
|
| Furniture, tools and other items |
Carrying amount at the balance sheet date for long-lived, depreciable asset commonly used in offices and stores. Examples include desks, chairs, and store fixtures. |
Telefonica S.A.'s furniture, tools and other items increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
|
| PP&E 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. |
Telefonica S.A.'s pP&E in progress increased from 2009 to 2010 and from 2010 to 2011.
|
| PP&E, gross 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. |
Telefonica S.A.'s pP&E, gross cost increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
|
| Net PP&E |
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. |
Telefonica S.A.'s net PP&E increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
Property, Plant and Equipment Ratios (Summary)
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Telefonica S.A., 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. |
Telefonica S.A.'s average age of depreciable property, plant and equipment deteriorated 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. |
Telefonica S.A.'s estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
Telefonica S.A.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
| Estimated remaining life |
|
Telefonica S.A.'s estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
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. |
Telefonica S.A.'s average age of depreciable property, plant and equipment deteriorated from 2009 to 2010 and 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. |
Telefonica S.A.'s estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
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. |
Telefonica S.A.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
Estimated Remaining Life
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2011 Calculations
| Ratio |
Description |
The company |
| Estimated remaining life |
|
Telefonica S.A.'s estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 but then slightly declined from 2010 to 2011 not reaching 2009 level.
|
