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Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment, net is stated at cost less accumulated depreciation. Depreciation of plant and equipment is recorded using the straight-line method. Building improvements are depreciated over the remaining useful life of the building. Leasehold improvements are depreciated over the lesser of the economic useful life of the asset or the remaining term of the lease, including anticipated renewal options. Capitalized software costs incurred in connection with developing or obtaining software are amortized over their estimated useful life from the date the systems are ready for their intended use. The estimated useful lives of capitalized assets are as follows:
| Buildings | 40 years |
| Building and operating equipment | 15 years |
| Manufacturing machinery and equipment | 10 years |
| Other machinery and equipment | 5 years |
| Furniture and fixtures | 5 years |
| Computer equipment and software | 3-7 years |
Maintenance and repairs are charged to operations as incurred, while expenditures for improvements which extend the life of an asset are capitalized.
Source: 10-K (filing date: 2019-02-26).
Property, Plant and Equipment Disclosure
Celgene Corp., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
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| Machinery and equipment | |
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| Computer equipment and software | |
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| Property, plant and equipment, gross | |
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| Accumulated depreciation and amortization | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
| Item | Description | The company |
|---|---|---|
| Property, plant and equipment, gross | 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. | Celgene Corp.’s property, plant and equipment, gross 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. | Celgene Corp.’s property, plant and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Celgene Corp., Property, Plant and Equipment Ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Estimated total useful life (years) | |
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| Estimated age, time elapsed since purchase (years) | |
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| Estimated remaining life (years) | |
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Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
| 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. | Celgene Corp.’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. | Celgene Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Celgene Corp.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| Estimated remaining life | Celgene Corp.’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: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property, plant and equipment, gross – Land)
= 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. | Celgene Corp.’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: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, gross – Land) ÷ 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. | Celgene Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and amortization ÷ 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. | Celgene Corp.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-07), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Celgene Corp.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |