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AbbVie Inc. (ABBV)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Depreciation for property and equipment is recorded on a straight-line basis over the estimated useful lives of the assets. The estimated useful life for buildings ranges from 10 to 50 years. Buildings include leasehold improvements which are amortized over the life of the related facility lease (including any renewal periods, if appropriate) or the asset, whichever is shorter. The estimated useful life for equipment ranges from 2 to 25 years. Equipment includes certain computer software and software development costs incurred in connection with developing or obtaining software for internal use and is amortized over 3 to 10 years. Depreciation expense was $471 million in 2018, $425 million in 2017 and $425 million in 2016. Assets related to capital leases were insignificant at December 31, 2018 and 2017.
Source: 10-K (filing date: 2019-02-27).
Property, Plant and Equipment Disclosure
AbbVie Inc., balance sheet: property, plant and equipment
US$ in millions
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| Property and equipment, gross | |
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| Accumulated depreciation | |
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| Property and equipment, net | |
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Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
| Item | Description | The company |
|---|---|---|
| Property 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. | AbbVie Inc.’s property and equipment, gross increased from 2016 to 2017 and from 2017 to 2018. |
| Property 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. | AbbVie Inc.’s property and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
AbbVie Inc., Property, Plant and Equipment Ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Estimated total useful life (years) | |
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| Estimated age, time elapsed since purchase (years) | |
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Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
| 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. | AbbVie Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
| 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. | AbbVie Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | AbbVie Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| Estimated remaining life | AbbVie Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Average Age
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Selected Financial Data (US$ in millions) | ||||||
| Accumulated depreciation | |
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| Property and equipment, gross | |
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| Average age1 | |
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Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (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. | AbbVie Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Estimated total useful life (years) = (Property 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. | AbbVie Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level. |
Estimated Age, Time Elapsed since Purchase
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Selected Financial Data (US$ in millions) | ||||||
| Accumulated depreciation | |
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| Depreciation expense | |
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| Time elapsed since purchase (years)1 | |
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Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ 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. | AbbVie Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Estimated remaining life (years) = (Property and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | AbbVie Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |