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Kraft Heinz Co. (KHC)


Analysis of Property, Plant and Equipment

Advanced level


Accounting Policy on Property, Plant and Equipment

Property, plant and equipment are stated at historical cost and depreciated on the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from three to 20 years and buildings and improvements over periods up to 40 years. Capitalized software costs are included in property, plant and equipment and amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed seven years. Kraft Heinz reviews long-lived assets for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. Kraft Heinz performs undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of assets held for use, Kraft Heinz groups assets at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Source: 10-K (filing date: 2019-06-07).


Property, Plant and Equipment Disclosure

Kraft Heinz Co., balance sheet: property, plant and equipment

US$ in millions

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Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Land 218  250  264  297 
Buildings and improvements 2,375  2,232  1,884  1,700 
Equipment and other 5,904  5,364  4,770  4,432 
Construction in progress 1,165  1,368  1,600  1,001 
Property, plant and equipment, gross 9,662  9,214  8,518  7,430 
Accumulated depreciation (2,584) (2,094) (1,830) (906)
Property, plant and equipment, net 7,078  7,120  6,688  6,524 

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

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. Kraft Heinz Co.’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. Kraft Heinz Co.’s property, plant and equipment, net increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Asset Age Ratios (Summary)

Kraft Heinz Co., asset age ratios

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Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Average age ratio 27.36% 23.36% 22.17% 12.70%

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Asset age ratio Description The company
Average age ratio 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. Kraft Heinz Co.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018.

Average Age

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Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Accumulated depreciation 2,584  2,094  1,830  906 
Property, plant and equipment, gross 9,662  9,214  8,518  7,430 
Land 218  250  264  297 
Asset Age Ratio
Average age1 27.36% 23.36% 22.17% 12.70%

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land)
= 100 × 2,584 ÷ (9,662218) = 27.36%

Asset 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. Kraft Heinz Co.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018.