Analysis of Property, Plant and Equipment
Property, Plant and Equipment Disclosure
Best Buy Co. Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
- Land and buildings
- The value of land and buildings shows a steady increase over the analyzed periods, rising from 618 million US dollars in early 2017 to 671 million US dollars by early 2022. This indicates consistent investment or appreciation in this asset category.
- Leasehold improvements
- Leasehold improvements experienced fluctuations, initially increasing from 2227 million US dollars in 2017 to 2327 million in 2018, followed by a decline to 2119 million in 2019. The values then stabilized somewhat, with minor decreases leading to 2160 million in 2022.
- Fixtures and equipment
- Fixtures and equipment rose significantly from 4998 million US dollars in 2017 to a peak of 6333 million in 2021, showing robust acquisition or enhancement within these years. However, a noticeable drop occurred in 2022, falling back to 5419 million, which may reflect disposals, impairments, or reduced capital expenditures.
- Property under finance leases
- The reported figures for property under finance leases are irregular, with a sharp increase from 300 million US dollars in 2017 to 579 million in 2019, then a steep decline to 89 million in 2020. The values remained low in 2021 and 2022, suggesting a strategic shift away from this category or reclassification.
- Gross property and equipment
- Gross property and equipment totals rose steadily from 8143 million US dollars in 2017 to a peak of 9256 million in early 2021. However, a significant decrease to 8341 million occurred in 2022, indicating a reduction in the overall property, plant, and equipment base, possibly due to asset disposals or impairments.
- Accumulated depreciation
- Accumulated depreciation increased in absolute terms from -5850 million US dollars in 2017 to a peak of -6996 million in 2021, reflecting ongoing depreciation charges over the asset base. A notable reversal occurred in 2022, with accumulated depreciation decreasing substantially to -6091 million, which may be due to asset write-offs, disposals, or changes in depreciation policies.
- Net property and equipment
- The net property and equipment value displayed a modest upward trend from 2293 million US dollars in 2017 to 2510 million in 2019, followed by a decline to around 2250 million in 2022. This suggests a gradual reduction in the net asset base in recent years, likely driven by increased depreciation and decreases in gross asset values.
Asset Age Ratios (Summary)
Best Buy Co. Inc., asset age ratios
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
- Average Age Ratio
- The average age ratio shows a gradual increase from 71.84% in early 2017 to a peak of 75.58% in early 2021, indicating that the asset base has been getting older over this period. In 2022, there is a slight decrease to 73.02%, suggesting some renewal or replacement activity occurred reducing the average asset age marginally.
- Estimated Total Useful Life
- The estimated total useful life of the assets remains relatively stable around 12 years from 2017 through 2021. However, in 2018, an increase to 13 years is observed, followed by a decrease to 11 years in 2022. This fluctuation may reflect changes in asset categories or revised depreciation policies.
- Estimated Age, Time Elapsed Since Purchase
- The estimated age of the assets remains consistently at approximately 9 years from 2017 through 2021. In 2022, this value decreases to 8 years, which could indicate the acquisition of newer assets or a reassessment of asset ages.
- Estimated Remaining Life
- The estimated remaining useful life decreases from 4 years in 2017 and 2018 to 3 years from 2019 onward, maintaining this level through 2022. This trend aligns with the aging asset base and reduced useful life estimates, indicating a maturing asset portfolio that is likely approaching replacement cycles.
Average Age
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2022 Calculations
1 Average age = 100 × Accumulated depreciation ÷ Gross property and equipment
= 100 × 6,091 ÷ 8,341 = 73.02%
- Accumulated Depreciation
- The accumulated depreciation increased steadily from 5,850 million US dollars in 2017 to a peak of 6,996 million US dollars in 2021, indicating ongoing depreciation of property, plant, and equipment. However, in 2022, there was a notable decline to 6,091 million US dollars, which may suggest asset disposals, revaluations, or changes in depreciation policies.
- Gross Property and Equipment
- Gross property and equipment values showed consistent growth from 8,143 million US dollars in 2017 to 9,256 million US dollars in 2021, reflecting incremental capital investments. In 2022, a decrease to 8,341 million US dollars occurred, which might be related to asset sales, impairments, or reduced capital expenditures.
- Average Age Ratio
- The average age ratio, representing the proportion of accumulated depreciation relative to gross property and equipment, displayed a general increasing trend from 71.84% in 2017 to 75.58% in 2021. This suggests that the asset base was aging progressively during this period. A decline to 73.02% in 2022 aligns with the observed decrease in accumulated depreciation and gross property values, indicating a possible refresh or renewal of the asset base.
- Overall Observations
- Across the analyzed period, the property, plant, and equipment assets initially expanded with an aging profile. The reductions observed in both accumulated depreciation and gross property in the final year point to a strategic shift in asset management, potentially involving disposals, renewals, or revaluation adjustments, leading to a relatively younger asset age profile as reflected in the average age ratio.
Estimated Total Useful Life
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2022 Calculations
1 Estimated total useful life = Gross property and equipment ÷ Depreciation expense
= 8,341 ÷ 787 = 11
- Gross Property and Equipment
- Over the six-year period, the gross property and equipment value initially increased from $8,143 million in 2017 to a peak of $9,256 million in 2021, indicating ongoing investment or acquisition of property and equipment. However, in 2022, there was a noticeable decline to $8,341 million, suggesting a reduction possibly due to asset disposals, impairments, or shifts in capital expenditure strategies.
- Depreciation Expense
- The depreciation expense demonstrated a consistent upward trend throughout the period, rising from $654 million in 2017 to $787 million in 2022. This gradual increase reflects expanding asset bases over previous years and possibly changes in depreciation methods or asset mix, contributing to higher annual depreciation charges.
- Estimated Total Useful Life
- The estimated total useful life of assets remained relatively stable, predominantly around 12 years, with a slight increase to 13 years in 2018 and a reduction to 11 years in 2022. These minor fluctuations could indicate adjustments in asset valuation techniques or revisions in the expected longevity of the property and equipment portfolio.
- Overall Analysis
- The data depicts a period of growth in property and equipment with increasing depreciation charges, consistent with asset expansion and usage. The reversal in gross asset value in the final year, combined with continued depreciation growth and a shorter estimated asset life, may imply a strategic shift in asset management or a reassessment of asset value and longevity. These dynamics warrant further examination to understand the underlying causes and potential impacts on future financial performance.
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2022 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= 6,091 ÷ 787 = 8
The analysis of the property, plant, and equipment financial data reveals several noteworthy trends over the period from January 2017 to January 2022.
- Accumulated Depreciation
- Accumulated depreciation shows a generally increasing trend from 2017 through 2021, rising from 5,850 million USD in January 2017 to a peak of 6,996 million USD in January 2021. This growth indicates continued wear and usage of property, plant, and equipment assets over time, consistent with ongoing asset aging and depreciation schedules. However, in January 2022, there is a noticeable decline to 6,091 million USD, which may suggest asset disposals, impairments, or changes in depreciation accounting policies during that period.
- Depreciation Expense
- The annual depreciation expense increases steadily throughout the period, starting at 654 million USD in 2017 and rising to 787 million USD in 2022. This indicates either an increase in the asset base subject to depreciation or changes in depreciation methods or asset lives. The consistent upward pattern of depreciation expense, despite the decrease in accumulated depreciation in the final year, suggests continued investment in depreciable assets or increased operational use intensity.
- Time Elapsed Since Purchase (in years)
- The time elapsed since purchase remains relatively constant at 9 years from 2017 through 2021, with a decrease to 8 years in 2022. This decline may reflect the acquisition of newer assets or revaluation of asset life assumptions. The constancy of this metric over most years suggests stable asset age, with the reduction in 2022 potentially influencing the observed drop in accumulated depreciation.
In summary, the data indicates ongoing asset usage and wear as evidenced by rising depreciation expense and accumulated depreciation until 2021. The dip in accumulated depreciation and elapsed time since purchase in 2022 could reflect recent changes in the asset portfolio, such as disposals or additions of newer assets, impacting overall depreciation patterns.
Estimated Remaining Life
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
2022 Calculations
1 Estimated remaining life = Net property and equipment ÷ Depreciation expense
= 2,250 ÷ 787 = 3
- Net Property and Equipment
- The net property and equipment value exhibited an overall increasing trend from 2017 through 2019, rising from $2,293 million to $2,510 million. However, this was followed by a decline spanning the next three years, reaching $2,250 million by 2022. This pattern suggests an initial phase of investment or acquisition of property and equipment, succeeded by a period of reduction or limited reinvestment.
- Depreciation Expense
- The depreciation expense showed a consistent upward trajectory throughout the entire period, increasing from $654 million in 2017 to $787 million in 2022. The steady rise in depreciation expense indicates increasing wear and amortization of the company’s fixed assets, which could be reflective of aging equipment or changes in accounting practices regarding asset depreciation.
- Estimated Remaining Life
- The estimated remaining life of the property and equipment remained stable at 4 years during 2017 and 2018 but decreased to 3 years from 2019 onwards and maintained that level through 2022. This decrease in the estimated remaining life suggests a reassessment of the useful life expectancy of fixed assets, likely reflecting accelerated depreciation or a shift toward assets with shorter useful lives.