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Property, Plant and Equipment Accounting Policy

Property and equipment are stated at cost. In general, new building additions are classified into components, each with its own estimated useful life, generally five to fifty years for buildings and improvements and three to twenty years for equipment and fixtures. Depreciation and amortization expense is computed using the straight-line method over estimated useful lives or the lease term, if shorter. Leasehold improvements made after the beginning of the initial lease term are depreciated over the shorter of the estimated useful life of the asset or the remaining term of the initial lease plus any renewals that are reasonably assured at the date the leasehold improvements are made.

Costco capitalizes certain computer software and software development costs incurred in developing or obtaining computer software for internal use. These costs are included in equipment and fixtures and amortized on a straight-line basis over the estimated useful lives of the software, generally three to seven years.

Repair and maintenance costs are expensed when incurred. Expenditures for remodels, refurbishments and improvements that add to or change the way an asset functions or that extend the useful life are capitalized. Assets that were removed during the remodel, refurbishment or improvement are retired. Assets classified as held-for-sale at the end of 2017 and 2016 were immaterial.

Costco evaluates long-lived assets for impairment on an annual basis, when relocating or closing a facility, or when events or changes in circumstances may indicate the carrying amount of the asset group, generally an individual warehouse, may not be fully recoverable. For asset groups held and used, including warehouses to be relocated, the carrying value of the asset group is considered recoverable when the estimated future undiscounted cash flows generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event that the carrying value is not considered recoverable, an impairment loss would be recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. For asset groups classified as held-for-sale (disposal group), the carrying value is compared to the disposal group's fair value less costs to sell. Costco estimates fair value by obtaining market appraisals from third party brokers or using other valuation techniques. There were no impairment charges recognized in 2017 and 2016, and charges were immaterial in 2015 and included in selling, general and administrative expenses in the consolidated statements of income.

Source: Costco Wholesale Corp., Annual Report

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Property, Plant and Equipment Disclosure

Costco Wholesale Corp., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

 

Source: Based on data from Costco Wholesale 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. Costco Wholesale Corp.'s land increased from 2015 to 2016 and from 2016 to 2017.
Buildings and improvements 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. Costco Wholesale Corp.'s buildings and improvements 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. Costco Wholesale Corp.'s construction in progress declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Property 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. Costco Wholesale Corp.'s property and equipment, gross increased from 2015 to 2016 and from 2016 to 2017.
Net property and equipment 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. Costco Wholesale Corp.'s net property and equipment increased from 2015 to 2016 and from 2016 to 2017.

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Property, Plant and Equipment Ratios (Summary)

Costco Wholesale Corp., Property, Plant and Equipment Ratios

 
Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013 Sep 2, 2012
Average age % % % % % %
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. Costco Wholesale Corp.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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Average Age

 
Sep 3, 2017 Aug 28, 2016 Aug 30, 2015 Aug 31, 2014 Sep 1, 2013 Sep 2, 2012
Selected Financial Data (USD $ in millions)
Accumulated depreciation and amortization
Property and equipment, gross
Land
Ratio
Average age1 % % % % % %

2017 Calculations

1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property 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. Costco Wholesale Corp.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

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