.Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
The following table summarizes Delta's property and equipment:
| Estimated Useful Life | |
| Flight equipment | 20-32 years |
| Ground property and equipment | 3-40 years |
| Flight and ground equipment under capital leases | Shorter of lease term or estimated useful life |
Delta records property and equipment at cost and depreciates or amortizes these assets on a straight-line basis to their estimated residual values over their estimated useful lives. The estimated useful life for leasehold improvements is the shorter of lease term or estimated useful life. Depreciation and amortization expense related to Delta's property and equipment was $2.2 billion, $1.9 billion and $1.8 billion for each of the years ended December 31, 2017, 2016 and 2015, respectively. Residual values for owned aircraft, engines, spare parts and simulators are generally 5% to 10% of cost.
Source: Delta Air Lines Inc., Annual Report
Property, Plant and Equipment Disclosure
Delta Air Lines Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Flight equipment | |||||
| | Ground property and equipment | |||||
| | Flight and ground equipment under capital leases | |||||
| | Advance payments for equipment | |||||
| | Property and equipment, gross | |||||
| | Accumulated depreciation and amortization | |||||
| | Property and equipment, net |
Source: Based on data from Delta Air Lines Inc. Annual Reports
| Item | Description | The company |
|---|---|---|
| Flight and ground equipment under capital leases | The total gross amount of assets subject to a lease meeting the criteria for capitalization. | Delta Air Lines Inc.'s flight and ground equipment under capital leases declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Property 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. | Delta Air Lines Inc.'s property and equipment, gross increased from 2015 to 2016 and from 2016 to 2017. |
| Property 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. | Delta Air Lines Inc.'s property and equipment, net increased from 2015 to 2016 and from 2016 to 2017. |
Property, Plant and Equipment Ratios (Summary)
Delta Air Lines Inc., 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. | Delta Air Lines Inc.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 and 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. | Delta Air Lines Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | Delta Air Lines Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
| Estimated remaining life | Delta Air Lines Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then declined significantly 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 millions) | ||||||
| | Accumulated depreciation and amortization | |||||
| | Property and equipment, gross | |||||
| Ratio | ||||||
| | Average age1 | % | % | % | % | % |
2017 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ Property and equipment, gross
= 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. | Delta Air Lines Inc.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 and 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 millions) | ||||||
| | Property and equipment, gross | |||||
| | Depreciation and amortization expense related to property and equipment | |||||
| Ratio | ||||||
| | Estimated total useful life (years)1 | |||||
2017 Calculations
1 Estimated total useful life (years) = Property and equipment, gross ÷ Depreciation and amortization expense related to property and equipment
= ÷ =
| 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. | Delta Air Lines Inc.'s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 but then declined significantly 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 millions) | ||||||
| | Accumulated depreciation and amortization | |||||
| | Depreciation and amortization expense related to property and equipment | |||||
| Ratio | ||||||
| | Time elapsed since purchase (years)1 | |||||
2017 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and amortization ÷ Depreciation and amortization expense related to property and equipment
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | Delta Air Lines Inc.'s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
Estimated Remaining Life
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Property and equipment, net | |||||
| | Depreciation and amortization expense related to property and equipment | |||||
| Ratio | ||||||
| | Estimated remaining life (years)1 | |||||
2017 Calculations
1 Estimated remaining life (years) = Property and equipment, net ÷ Depreciation and amortization expense related to property and equipment
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Delta Air Lines Inc.'s estimated remaining life of depreciable property, plant and equipment increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
