Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property and equipment are stated at cost, less accumulated depreciation or amortization, whenever applicable. Depreciation and amortization expenses for property and equipment were approximately $1.1 billion, $1.1 billion, and $1.0 billion for fiscal 2018, 2017, and 2016, respectively. Depreciation and amortization are computed using the straight-line method, generally over the following periods:
| Asset Category | Period |
| Buildings | 25 years |
| Building improvements | 10 years |
| Leasehold improvements | Shorter of remaining lease term or up to 10 years |
| Computer equipment and related software | 30 to 36 months |
| Production, engineering, and other equipment | Up to 5 years |
| Operating lease assets | Based on lease term |
| Furniture and fixtures | 5 years |
Source: 10-K (filing date: 2018-09-06).
Property, Plant and Equipment Disclosure
Cisco Systems Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Jul 28, 2018 | Jul 29, 2017 | Jul 30, 2016 | Jul 25, 2015 | Jul 26, 2014 | Jul 27, 2013 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Land, buildings, and building and leasehold improvements | 4,710 | 4,926 | 4,778 | 4,495 | 4,468 | 4,426 | |||||||
| Computer equipment and related software | 1,085 | 1,258 | 1,288 | 1,310 | 1,425 | 1,416 | |||||||
| Production, engineering, and other equipment | 5,734 | 5,707 | 5,658 | 5,753 | 5,756 | 5,721 | |||||||
| Operating lease assets | 356 | 356 | 296 | 372 | 362 | 326 | |||||||
| Furniture and fixtures | 358 | 572 | 543 | 497 | 509 | 497 | |||||||
| Gross property and equipment | 12,243 | 12,819 | 12,563 | 12,427 | 12,520 | 12,386 | |||||||
| Accumulated depreciation and amortization | (9,237) | (9,497) | (9,057) | (9,095) | (9,268) | (9,064) | |||||||
| Property and equipment, net | 3,006 | 3,322 | 3,506 | 3,332 | 3,252 | 3,322 |
Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
| Item | Description | The company |
|---|---|---|
| Gross property 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. | Cisco Systems Inc.'s gross property and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Property 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. | Cisco Systems Inc.'s property and equipment, net declined from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Cisco Systems Inc., Property, Plant and Equipment Ratios
Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
| 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. | Cisco Systems Inc.'s average age of depreciable property, plant and equipment deteriorated 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. | Cisco Systems Inc.'s estimated total useful life of depreciable property, plant and equipment declined 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. | Cisco Systems 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 | Cisco Systems Inc.'s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 and from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
2018 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ Gross property and equipment
= 100 × 9,237 ÷ 12,243 = 75.45%
| 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. | Cisco Systems Inc.'s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
2018 Calculations
1 Estimated total useful life (years) = Gross property and equipment ÷ Depreciation and amortization expenses for property and equipment
= 12,243 ÷ 1,100 = 11
| 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. | Cisco Systems Inc.'s estimated total useful life of depreciable property, plant and equipment declined from 2016 to 2017 and from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and amortization ÷ Depreciation and amortization expenses for property and equipment
= 9,237 ÷ 1,100 = 8
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | Cisco Systems 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: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).
2018 Calculations
1 Estimated remaining life (years) = Property and equipment, net ÷ Depreciation and amortization expenses for property and equipment
= 3,006 ÷ 1,100 = 3
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Cisco Systems Inc.'s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 and from 2017 to 2018. |