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Applied Materials Inc. (AMAT)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment is stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Estimated useful lives for financial reporting purposes are as follows: buildings and improvements, 3 to 30 years; demonstration and manufacturing equipment, 3 to 5 years; software, 3 to 5 years; and furniture, fixtures and other equipment, 3 to 5 years. Land improvements are amortized over the shorter of 15 years or the estimated useful life. Leasehold improvements are amortized over the shorter of five years or the lease term.
Source: 10-K (filing date: 2018-12-13).
Property, Plant and Equipment Disclosure
Applied Materials Inc., balance sheet: property, plant and equipment
US$ in millions
| Oct 28, 2018 | Oct 29, 2017 | Oct 30, 2016 | Oct 25, 2015 | Oct 26, 2014 | Oct 27, 2013 | ||||||||
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| Furniture, fixtures and other equipment | |
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| Construction in progress | |
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| Gross property, plant and equipment | |
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| Accumulated depreciation | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
| Item | Description | The company |
|---|---|---|
| Gross property, plant and equipment | Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Applied Materials Inc.’s gross property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
| Property, plant and equipment, net | Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Applied Materials Inc.’s property, plant and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Applied Materials Inc., Property, Plant and Equipment Ratios
Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
| 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. | Applied Materials Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
| 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. | Applied Materials Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Applied Materials Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
| Estimated remaining life | Applied Materials Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Gross property, plant and equipment – Land and improvements)
= 100 × ÷ ( – ) =
| 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. | Applied Materials Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
2018 Calculations
1 Estimated total useful life (years) = (Gross property, plant and equipment – Land and improvements) ÷ Depreciation expense
= ( – ) ÷ =
| 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. | Applied Materials Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Applied Materials Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
Estimated Remaining Life
Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land and improvements) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Applied Materials Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |