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Caterpillar Inc. (CAT)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Depreciation of plant and equipment is computed principally using accelerated methods. Depreciation on equipment leased to others, primarily for Financial Products, is computed using the straight-line method over the term of the lease. The depreciable basis is the original cost of the equipment less the estimated residual value of the equipment at the end of the lease term. In 2018, 2017 and 2016, Cat Financial depreciation on equipment leased to others was $819 million, $810 million and $841 million, respectively, and was included in Other operating (income) expenses in Statement 1. In 2018, 2017 and 2016, consolidated depreciation expense was $2,435 million, $2,555 million and $2,707 million, respectively.
Source: 10-K (filing date: 2019-02-14).
Property, Plant and Equipment Disclosure
Caterpillar Inc., balance sheet: property, plant and equipment
US$ in millions
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| Equipment leased to others | |
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| Property, plant and equipment, at cost | |
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| Accumulated depreciation | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
| 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. | Caterpillar Inc.’s property, plant and equipment, at cost declined from 2016 to 2017 and 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. | Caterpillar Inc.’s property, plant and equipment, net declined from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Caterpillar 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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| Estimated remaining life (years) | |
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Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
| 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. | Caterpillar Inc.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved 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. | Caterpillar 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. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Caterpillar 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 | Caterpillar Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 but then slightly increased 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) | ||||||
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| Property, plant and equipment, at cost | |
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| Average age1 | |
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Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant 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. | Caterpillar Inc.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
2018 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, at cost – Land) ÷ Consolidated 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. | Caterpillar 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. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Consolidated 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. | Caterpillar 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
Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Consolidated depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Caterpillar Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 but then slightly increased from 2017 to 2018. |