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Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment:
| Classification | Estimated Useful Lives |
|---|---|
| Buildings | 10 to 50 years (average 27 years) |
| Equipment | 3 to 20 years (average 11 years) |
Source: 10-K (filing date: 2018-02-16).
Property, Plant and Equipment Disclosure
Abbott Laboratories, 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 | |||||||
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| Property and equipment, at cost | |
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| Accumulated depreciation and amortization | |
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| Net property and equipment | |
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Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
| Item | Description | The company |
|---|---|---|
| Property 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. | Abbott Laboratories’s property and equipment, at cost declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Net property and equipment | 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. | Abbott Laboratories’s net property and equipment declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Property, Plant and Equipment Ratios (Summary)
Abbott Laboratories, Property, Plant and Equipment Ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Estimated total useful life (years) | |
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| Estimated age, time elapsed since purchase (years) | |
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| Estimated remaining life (years) | |
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Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
| 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. | Abbott Laboratories’s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 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. | Abbott Laboratories’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. | Abbott Laboratories’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Estimated remaining life | Abbott Laboratories’s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017. |
Average Age
Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property and equipment, at cost – 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. | Abbott Laboratories’s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Estimated Total Useful Life
Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Estimated total useful life (years) = (Property and equipment, at cost – 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. | Abbott Laboratories’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
Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
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. | Abbott Laboratories’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Estimated Remaining Life
Based on: 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: 2015-02-27), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Estimated remaining life (years) = (Net property and equipment – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Abbott Laboratories’s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017. |