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Mondelēz International Inc. (MDLZ)

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 by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 20 years and buildings and building improvements over periods up to 40 years.

Software Costs

Mondelēz International capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. 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.

Source: 10-K (filing date: 2019-02-08).

Property, Plant and Equipment Disclosure

Mondelēz International Inc., balance sheet: property, plant and equipment

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Land and land improvements 424  458  471  495  574 
Buildings and building improvements 2,984  2,979  2,801  2,753  3,117 
Machinery and equipment 10,943  11,195  10,302  10,044  11,737 
Construction in progress 894  1,048  1,113  1,262  1,484 
Property, plant and equipment, gross 15,245  15,680  14,687  14,554  16,912 
Accumulated depreciation (6,763) (7,003) (6,458) (6,192) (7,085)
Property, plant and equipment, net 8,482  8,677  8,229  8,362  9,827 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

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. Mondelēz International Inc.’s property, plant and equipment, gross increased from 2016 to 2017 but then slightly decreased 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. Mondelēz International Inc.’s property, plant and equipment, net increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Asset Age Ratios (Summary)

Mondelēz International Inc., asset age ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Average age ratio 45.63% 46.01% 45.43% 44.04% 43.37%
Estimated total useful life (years) 23 24 22 20 19
Estimated age, time elapsed since purchase (years) 11 11 10 9 8
Estimated remaining life (years) 13 13 12 11 11

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

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. Mondelēz International Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
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. Mondelēz International Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.
Estimated time elapsed since purchase The approximate age in years of a company’s fixed assets. Useful for comparison purposes. Mondelēz International Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Estimated remaining life Mondelēz International Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Average Age

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Accumulated depreciation 6,763  7,003  6,458  6,192  7,085 
Property, plant and equipment, gross 15,245  15,680  14,687  14,554  16,912 
Land and land improvements 424  458  471  495  574 
Asset Age Ratio
Average age1 45.63% 46.01% 45.43% 44.04% 43.37%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land and land improvements)
= 100 × 6,763 ÷ (15,245 – 424) = 45.63%

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. Mondelēz International Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Estimated Total Useful Life

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Property, plant and equipment, gross 15,245  15,680  14,687  14,554  16,912 
Land and land improvements 424  458  471  495  574 
Depreciation expense 635  638  647  713  853 
Asset Age Ratio (Years)
Estimated total useful life1 23 24 22 20 19

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Estimated total useful life = (Property, plant and equipment, gross – Land and land improvements) ÷ Depreciation expense
= (15,245 – 424) ÷ 635 = 23

Asset age 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. Mondelēz International Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Estimated Age, Time Elapsed since Purchase

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Accumulated depreciation 6,763  7,003  6,458  6,192  7,085 
Depreciation expense 635  638  647  713  853 
Asset Age Ratio (Years)
Time elapsed since purchase1 11 11 10 9 8

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= 6,763 ÷ 635 = 11

Asset age ratio Description The company
Estimated time elapsed since purchase The approximate age in years of a company’s fixed assets. Useful for comparison purposes. Mondelēz International Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Estimated Remaining Life

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Property, plant and equipment, net 8,482  8,677  8,229  8,362  9,827 
Land and land improvements 424  458  471  495  574 
Depreciation expense 635  638  647  713  853 
Asset Age Ratio (Years)
Estimated remaining life1 13 13 12 11 11

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Estimated remaining life = (Property, plant and equipment, net – Land and land improvements) ÷ Depreciation expense
= (8,482 – 424) ÷ 635 = 13

Asset age ratio Description The company
Estimated remaining life Mondelēz International Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.