.Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method. Repairs and maintenance costs are expensed as incurred. Estimated useful lives in years are generally as follows:
| Description | Estimated Useful Life |
| Buildings and improvements | 20-35 |
| Laboratory and manufacturing equipment | 4-10 |
| Office and computer equipment | 3-7 |
| Leasehold improvements | Shorter of useful life or lease term |
Office and computer equipment includes capitalized software. Gilead had unamortized capitalized software costs on the Consolidated Balance Sheets of $129 million as of December 31, 2017 and $141 million as of December 31, 2016. Capitalized interest on construction in-progress is included in property, plant and equipment. Interest capitalized in 2017, 2016 and 2015 was not significant.
Source: Gilead Sciences Inc., Annual Report
Property, Plant and Equipment Disclosure
Gilead Sciences Inc., 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 and improvements, including leasehold improvements | |||||
| | Laboratory and manufacturing equipment | |||||
| | Office and computer equipment | |||||
| | Construction in progress | |||||
| | Property, plant and equipment, gross | |||||
| | Accumulated depreciation and amortization | |||||
| | Property, plant and equipment, net |
Source: Based on data from Gilead Sciences Inc. 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. | Gilead Sciences Inc.'s land increased from 2015 to 2016 and from 2016 to 2017. |
| Buildings and improvements, including leasehold 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. | Gilead Sciences Inc.'s buildings and improvements, including leasehold 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. | Gilead Sciences Inc.'s construction in progress increased from 2015 to 2016 and from 2016 to 2017. |
| 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. | Gilead Sciences Inc.'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. | Gilead Sciences Inc.'s property, plant and equipment, net increased from 2015 to 2016 and from 2016 to 2017. |
Property, Plant and Equipment Ratios (Summary)
Gilead Sciences Inc., 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. | Gilead Sciences Inc.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then slightly deteriorated 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. | Gilead Sciences Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | Gilead Sciences Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2015 to 2016 and from 2016 to 2017. |
| Estimated remaining life | Gilead Sciences Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
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. | Gilead Sciences Inc.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then slightly deteriorated 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. | Gilead Sciences Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
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. | Gilead Sciences Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved 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 | Gilead Sciences Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
