Analysis of Property, Plant and Equipment
Difficulty level: Advanced
Property, Plant and Equipment Accounting Policy
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 The Coca-Cola Company'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 (disposal group) is classified as held for sale, even if the asset (disposal group) continues to generate revenue during the period. Depreciation expense, including the depreciation expense of assets under capital lease, totaled $1,727 million, $1,704 million and $1,654 million in 2013, 2012 and 2011, respectively. Amortization expense for leasehold improvements totaled $16 million, $19 million and $18 million in 2013, 2012 and 2011, 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, The Coca-Cola Company 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 The Coca-Cola Company uses in internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, The Coca-Cola Company recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. The Coca-Cola Company 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 The Coca-Cola Company believes hypothetical marketplace participants would use.
Source: Coca-Cola Co., Annual Report
Property, Plant and Equipment Disclosure
Coca-Cola Co., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Land | 1,011 | 997 | 1,141 | 1,122 | 699 | |
| Buildings and improvements | 5,605 | 5,307 | 5,240 | 4,883 | 3,816 | |
| Machinery, equipment and vehicle fleet | 17,551 | 16,203 | 15,504 | 14,247 | 11,190 | |
| Construction in progress | 865 | 979 | 1,266 | 1,454 | 762 | |
| Property, plant and equipment, gross | 25,032 | 23,486 | 23,151 | 21,706 | 16,467 | |
| Accumulated depreciation | (10,065) | (9,010) | (8,212) | (6,979) | (6,906) | |
| Property, plant and equipment, net | 14,967 | 14,476 | 14,939 | 14,727 | 9,561 |
Source: Based on data from Coca-Cola Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Land | Carrying amount as of the balance sheet date of real estate held for productive use. This excludes land held for sale. | Coca-Cola Co.'s land declined from 2011 to 2012 but then slightly increased from 2012 to 2013. |
| Buildings and improvements | Carrying amount as of the balance sheet date of long-lived, depreciable assets that include building structures held for productive use including any addition, improvement, or renovation to the structure, such as interior masonry, interior flooring, electrical, and plumbing. | Coca-Cola Co.'s buildings and improvements increased from 2011 to 2012 and from 2012 to 2013. |
| Machinery, equipment and vehicle fleet | Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. | Coca-Cola Co.'s machinery, equipment and vehicle fleet increased from 2011 to 2012 and from 2012 to 2013. |
| Construction in progress | Carrying amount at the balance sheet date of long-lived asset under construction that include construction costs to date on capital projects that have not been completed and assets being constructed that are not ready to be placed into service. | Coca-Cola Co.'s construction in progress declined from 2011 to 2012 and from 2012 to 2013. |
| Property, plant and equipment, gross | Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation. | Coca-Cola Co.'s property, plant and equipment, gross increased from 2011 to 2012 and from 2012 to 2013. |
| Property, plant and equipment, net | Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment. | Coca-Cola Co.'s property, plant and equipment, net declined from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level. |
Property, Plant and Equipment Ratios (Summary)
Coca-Cola Co., Property, Plant and Equipment Ratios
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Average age | 41.90% | 40.06% | 37.31% | 33.90% | 43.80% | |
| Estimated total useful life (years) | 14 | 13 | 13 | 17 | 15 | |
| Estimated age, time elapsed since purchase (years) | 6 | 5 | 5 | 6 | 7 | |
| Estimated remaining life (years) | 8 | 8 | 8 | 11 | 9 |
| 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 deteriorated from 2011 to 2012 and from 2012 to 2013. |
| 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 declined from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level. |
| 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 2011 to 2012 and from 2012 to 2013. |
| Estimated remaining life | Coca-Cola Co.'s estimated remaining life of depreciable property, plant and equipment declined from 2011 to 2012 but then slightly increased from 2012 to 2013. |
Average Age
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Accumulated depreciation | 10,065 | 9,010 | 8,212 | 6,979 | 6,906 | |
| Property, plant and equipment, gross | 25,032 | 23,486 | 23,151 | 21,706 | 16,467 | |
| Land | 1,011 | 997 | 1,141 | 1,122 | 699 | |
| Ratio | ||||||
| Average age1 | 41.90% | 40.06% | 37.31% | 33.90% | 43.80% | |
2013 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land)
= 100 × 10,065 ÷ (25,032 – 1,011) = 41.90%
| 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 deteriorated from 2011 to 2012 and from 2012 to 2013. |
Estimated Total Useful Life
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Property, plant and equipment, gross | 25,032 | 23,486 | 23,151 | 21,706 | 16,467 | |
| Land | 1,011 | 997 | 1,141 | 1,122 | 699 | |
| Depreciation expense | 1,743 | 1,723 | 1,672 | 1,204 | 1,023 | |
| Ratio | ||||||
| Estimated total useful life (years)1 | 14 | 13 | 13 | 17 | 15 | |
2013 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, gross – Land) ÷ Depreciation expense
= (25,032 – 1,011) ÷ 1,743 = 14
| 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 declined from 2011 to 2012 but then increased from 2012 to 2013 exceeding 2011 level. |
Estimated Age, Time Elapsed Since Purchase
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Accumulated depreciation | 10,065 | 9,010 | 8,212 | 6,979 | 6,906 | |
| Depreciation expense | 1,743 | 1,723 | 1,672 | 1,204 | 1,023 | |
| Ratio | ||||||
| Time elapsed since purchase (years)1 | 6 | 5 | 5 | 6 | 7 | |
2013 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= 10,065 ÷ 1,743 = 6
| 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 2011 to 2012 and from 2012 to 2013. |
Estimated Remaining Life
| Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | Dec 31, 2009 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| Property, plant and equipment, net | 14,967 | 14,476 | 14,939 | 14,727 | 9,561 | |
| Land | 1,011 | 997 | 1,141 | 1,122 | 699 | |
| Depreciation expense | 1,743 | 1,723 | 1,672 | 1,204 | 1,023 | |
| Ratio | ||||||
| Estimated remaining life (years)1 | 8 | 8 | 8 | 11 | 9 | |
2013 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Depreciation expense
= (14,967 – 1,011) ÷ 1,743 = 8
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Coca-Cola Co.'s estimated remaining life of depreciable property, plant and equipment declined from 2011 to 2012 but then slightly increased from 2012 to 2013. |