.Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are 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. 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: Celgene Corp., Annual Report
Property, Plant and Equipment Disclosure
Celgene Corp., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Land | |||||
| | Buildings | |||||
| | Building and operating equipment | |||||
| | Leasehold improvements | |||||
| | Machinery and equipment | |||||
| | Furniture and fixtures | |||||
| | Computer equipment and software | |||||
| | Construction in progress | |||||
| | Property, plant and equipment, gross | |||||
| | Accumulated depreciation and amortization | |||||
| | Property, plant and equipment, net |
Source: Based on data from Celgene Corp. Annual Reports
| Item | Description | The company |
|---|---|---|
| Land | Carrying amount as of the balance sheet date of real estate held for productive use. This excludes land held for sale. | Celgene Corp.'s land increased from 2015 to 2016 and from 2016 to 2017. |
| Buildings | 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. | Celgene Corp.'s buildings increased from 2015 to 2016 and from 2016 to 2017. |
| Leasehold improvements | Carrying amount at the balance sheet date of long-lived, depreciable asset that is an addition or improvement to assets held under lease arrangement. | Celgene Corp.'s leasehold improvements declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| 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. | Celgene Corp.'s machinery and equipment increased from 2015 to 2016 and from 2016 to 2017. |
| Furniture and fixtures | 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. | Celgene Corp.'s furniture and fixtures increased from 2015 to 2016 and from 2016 to 2017. |
| 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. | Celgene Corp.'s construction in progress declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Property, plant and equipment, gross | 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. | Celgene Corp.'s property, plant and equipment, gross increased from 2015 to 2016 and from 2016 to 2017. |
| Property, plant and equipment, net | 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. | Celgene Corp.'s property, plant and equipment, net increased from 2015 to 2016 and from 2016 to 2017. |
Property, Plant and Equipment Ratios (Summary)
Celgene Corp., Property, Plant and Equipment Ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Average age | % | % | % | % | % |
| | Estimated total useful life (years) | |||||
| | Estimated age, time elapsed since purchase (years) | |||||
| | Estimated remaining life (years) |
| 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 2015 to 2016 and from 2016 to 2017. |
| 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 2015 to 2016 and from 2016 to 2017. |
| 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 2015 to 2016 and from 2016 to 2017. |
| Estimated remaining life | Celgene Corp.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017. |
Average Age
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Accumulated depreciation and amortization | |||||
| | Property, plant and equipment, gross | |||||
| | Land | |||||
| Ratio | ||||||
| | Average age1 | % | % | % | % | % |
2017 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 2015 to 2016 and from 2016 to 2017. |
Estimated Total Useful Life
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Property, plant and equipment, gross | |||||
| | Land | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Estimated total useful life (years)1 | |||||
2017 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 2015 to 2016 and from 2016 to 2017. |
Estimated Age, Time Elapsed Since Purchase
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Accumulated depreciation and amortization | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Time elapsed since purchase (years)1 | |||||
2017 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 2015 to 2016 and from 2016 to 2017. |
Estimated Remaining Life
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Property, plant and equipment, net | |||||
| | Land | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Estimated remaining life (years)1 | |||||
2017 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 2015 to 2016 and from 2016 to 2017. |
