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Coca-Cola Co. (KO)
Analysis of Property, Plant and Equipment
High level of difficulty
Accounting Policy on Property, Plant and Equipment
Property, plant and equipment are stated at cost. Repair and maintenance costs that do not improve service potential or extend economic life are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of Coca-Cola’s assets, which are reviewed periodically and generally have the following ranges: buildings and improvements: 40 years or less; and machinery, equipment and vehicle fleet: 20 years or less. Land is not depreciated, and construction in progress is not depreciated until ready for service. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term, including renewals that are deemed to be reasonably assured, or the estimated useful life of the improvement. Depreciation is not recorded during the period in which a long-lived asset or disposal group is classified as held for sale, even if the asset or disposal group continues to generate revenue during the period. Depreciation expense, including the depreciation expense of assets under capital lease, totaled $999 million, $1,131 million and $1,575 million in 2018, 2017 and 2016, respectively. Amortization expense for leasehold improvements totaled $18 million, $19 million and $22 million in 2018, 2017 and 2016, respectively.
Certain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant and equipment should be assessed, including, among others, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or projected future losses. When such events or changes in circumstances are present and an impairment test is performed, Coca-Cola estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. These estimated future cash flows are consistent with those Coca-Cola use in the internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, Coca-Cola recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Coca-Cola uses a variety of methodologies to determine the fair value of property, plant and equipment, including appraisals and discounted cash flow models, which are consistent with the assumptions Coca-Cola believes hypothetical marketplace participants would use.
Source: 10-K (filing date: 2019-02-21).
Property, Plant and Equipment Disclosure
Coca-Cola Co., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
| Item | Description | The company |
|---|---|---|
| Property, plant and equipment, 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. | Coca-Cola Co.’s property, plant and equipment, 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. | Coca-Cola Co.’s property, plant and equipment, net declined from 2016 to 2017 but then slightly increased from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Coca-Cola Co., 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 age, time elapsed since purchase (years) | |
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Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
| Financial 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. | Coca-Cola Co.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and 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. | Coca-Cola Co.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Coca-Cola Co.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
| Estimated remaining life | Coca-Cola Co.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and 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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| Average age1 | |
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Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, cost – Land)
= 100 × ÷ ( – ) =
| Financial 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. | Coca-Cola Co.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, cost – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Financial 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. | Coca-Cola Co.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |
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: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Coca-Cola Co.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Financial ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Coca-Cola Co.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018. |