.Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:
| Category | Useful Life |
| Buildings | 30 years |
| Leased assets and leasehold improvements | Amortized over the lesser of the economic life of the asset or the term of the lease |
| Machinery and equipment | 3 – 10 years |
| Customer-leased instruments | 5 – 7 years |
Estimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively.
Source: Danaher Corp., Annual Report
Property, Plant and Equipment Disclosure
Danaher Corp., Statement of Financial Position, Property, Plant and Equipment
USD $ in thousands
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Land and improvements | |||||
| | Buildings | |||||
| | Machinery and equipment | |||||
| | Customer-leased instruments | |||||
| | Gross property, plant and equipment | |||||
| | Accumulated depreciation | |||||
| | Property, plant and equipment, net |
Source: Based on data from Danaher Corp. Annual Reports
| Item | Description | The company |
|---|---|---|
| Land and improvements | Real estate assets held for productive use and depreciable assets that are an addition or improvement to real estate held for productive use. | Danaher Corp.'s land and improvements declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Buildings | 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. | Danaher Corp.'s buildings declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Machinery and equipment | Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. | Danaher Corp.'s machinery and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Customer-leased instruments | The amount of lessor property subject to or available for lease, at cost adjusted for any previously recognized impairment charges, by major property class, as of the balance sheet date. | Danaher Corp.'s customer-leased instruments increased from 2015 to 2016 and from 2016 to 2017. |
| Gross property, plant and equipment | 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. | Danaher Corp.'s gross property, plant and equipment declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
| 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. | Danaher Corp.'s property, plant and equipment, net declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Property, Plant and Equipment Ratios (Summary)
Danaher Corp., Property, Plant and Equipment Ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Average age | % | % | % | % | % |
| | Estimated total useful life (years) | |||||
| | Estimated age, time elapsed since purchase (years) | |||||
| | Estimated remaining life (years) |
| 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. | Danaher Corp.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| 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. | Danaher Corp.'s estimated total useful life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | Danaher Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
| Estimated remaining life | Danaher Corp.'s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 and from 2016 to 2017. |
Average Age
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in thousands) | ||||||
| | Accumulated depreciation | |||||
| | Gross property, plant and equipment | |||||
| | Land and improvements | |||||
| Ratio | ||||||
| | Average age1 | % | % | % | % | % |
2017 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Gross property, plant and equipment – Land and improvements)
= 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. | Danaher Corp.'s average age of depreciable property, plant and equipment improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Estimated Total Useful Life
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in thousands) | ||||||
| | Gross property, plant and equipment | |||||
| | Land and improvements | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Estimated total useful life (years)1 | |||||
2017 Calculations
1 Estimated total useful life (years) = (Gross property, plant and equipment – Land and improvements) ÷ 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. | Danaher Corp.'s estimated total useful life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Estimated Age, Time Elapsed Since Purchase
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in thousands) | ||||||
| | Accumulated depreciation | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Time elapsed since purchase (years)1 | |||||
2017 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ 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. | Danaher Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
Estimated Remaining Life
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in thousands) | ||||||
| | Property, plant and equipment, net | |||||
| | Land and improvements | |||||
| | Depreciation expense | |||||
| Ratio | ||||||
| | Estimated remaining life (years)1 | |||||
2017 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land and improvements) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Danaher Corp.'s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 and from 2016 to 2017. |
