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Analysis of Property, Plant and Equipment
Advanced level
Accounting Policy on Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Major repairs, which extend the useful life of an asset, are capitalized; routine maintenance and repairs are charged against earnings. Depreciation is provided on a straight-line basis over the estimated useful lives of owned assets. Leasehold improvements, equipment under capital lease and capital lease properties are amortized over their respective estimate of useful life or over the term of the lease, whichever is shorter. The majority of Walgreens Boots Alliance’s fixtures and equipment uses the composite method of depreciation. Therefore, gains and losses on retirement or other disposition of such assets are included in earnings only when an operating location is closed, substantially remodeled or impaired. The following table summarizes Walgreens Boots Alliance’s estimated useful lives (in years):
| Estimated useful life | |
| Land and land improvements | 20 |
| Buildings and building improvements | 3 to 50 |
| Fixtures and equipment | 3 to 20 |
| Capitalized system development costs and software | 3 to 8 |
Walgreens Boots Alliance capitalizes application development stage costs for internally developed software. These costs are amortized over a three to eight year period. Amortization expense for capitalized system development costs and software was $273 million in fiscal 2019, $254 million in fiscal 2018 and $245 million in fiscal 2017. Unamortized costs were $1.5 billion at August 31, 2019 and 2018.
Depreciation and amortization expense for property, plant and equipment including capitalized system development costs and software was $1.5 billion in fiscal 2019, $1.4 billion in fiscal 2018 and $1.3 billion in fiscal 2017.
Source: 10-K (filing date: 2019-10-28).
Property, Plant and Equipment Disclosure
Walgreens Boots Alliance Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
| Item | Description | The company |
|---|---|---|
| Property, plant and equipment, at cost | 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. | Walgreens Boots Alliance Inc.’s property, plant and equipment, at cost increased from 2017 to 2018 and from 2018 to 2019. |
| 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. | Walgreens Boots Alliance Inc.’s property, plant and equipment, net increased from 2017 to 2018 but then decreased significantly from 2018 to 2019. |
Asset Age Ratios (Summary)
Walgreens Boots Alliance Inc., asset age ratios
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
| 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. | Walgreens Boots Alliance Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
| 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. | Walgreens Boots Alliance Inc.’s estimated total useful life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Walgreens Boots Alliance Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
| Estimated remaining life | Walgreens Boots Alliance Inc.’s estimated remaining life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |
Average Age
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
2019 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property, plant and equipment, at cost – Land and land improvements)
= 100 × ÷ ( – ) =
| 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. | Walgreens Boots Alliance Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
2019 Calculations
1 Estimated total useful life = (Property, plant and equipment, at cost – Land and land improvements) ÷ Depreciation and amortization expense for property, plant and equipment including capitalized system development costs and software
= ( – ) ÷ =
| 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. | Walgreens Boots Alliance Inc.’s estimated total useful life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
2019 Calculations
1 Time elapsed since purchase = Accumulated depreciation and amortization ÷ Depreciation and amortization expense for property, plant and equipment including capitalized system development costs and software
= ÷ =
| 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. | Walgreens Boots Alliance Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).
2019 Calculations
1 Estimated remaining life = (Property, plant and equipment, net – Land and land improvements) ÷ Depreciation and amortization expense for property, plant and equipment including capitalized system development costs and software
= ( – ) ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Walgreens Boots Alliance Inc.’s estimated remaining life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |