FedEx Corp. (FDX)

Expenditures for major additions, improvements and flight equipment modifications are capitalized when such costs are determined to extend the useful life of the asset or are part of the cost of acquiring the asset. Expenditures for equipment overhaul costs of engines or airframes prior to their operational use are capitalized as part of the cost of such assets as they are costs required to ready the asset for its intended use. Maintenance and repairs costs are charged to expense as incurred, except for certain aircraft engine maintenance costs incurred under third-party service agreements. These agreements result in costs being expensed based on cycles or hours flown and are subject to annual escalation. These service contracts transfer risk to third-party service providers and generally fix the amount FedEx pays for maintenance to the service provider as a rate per cycle or flight hour, in exchange for maintenance and repairs under a predefined maintenance program. FedEx capitalizes certain direct internal and external costs associated with the development of internal-use software. Gains and losses on sales of property used in operations are classified within operating expenses and historically have been nominal.

For financial reporting purposes, FedEx records depreciation and amortization of property and equipment on a straight-line basis over the asset's service life or related lease term, if shorter. For income tax purposes, depreciation is computed using accelerated methods when applicable.

The depreciable lives and net book value of FedEx's property and equipment are as follows (dollars in millions):

	Range
Wide-body aircraft and related equipment	15 to 30 years
Narrow-body and feeder aircraft and related equipment	5 to 18 years
Package handling and ground support equipmen	3 to 30 years
Information technology	2 to 10 years
Vehicle	3 to 15 years
Facilities and othe	2 to 40 years

Substantially all property and equipment have no material residual values. The majority of aircraft costs are depreciated on a straight-line basis over 15 to 30 years. FedEx periodically evaluates the estimated service lives and residual values used to depreciate the property and equipment.

Depreciation and amortization expense, excluding gains and losses on sales of property and equipment used in operations, was $3.1 billion in 2018, $2.9 billion in 2017 and $2.6 billion in 2016. Depreciation and amortization expense includes amortization of assets under capital lease.

Source: FedEx Corp., Annual Report

FedEx Corp., Statement of Financial Position, Property, Plant and Equipment

USD $ in millions

Source: Based on data from FedEx Corp. Annual Reports

Item	Description	The company
Property and equipment, at cost	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.	FedEx Corp.'s property and equipment, at cost increased from 2016 to 2017 and from 2017 to 2018.
Net property and equipment	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.	FedEx Corp.'s net property and equipment increased from 2016 to 2017 and from 2017 to 2018.

FedEx Corp., Property, Plant and Equipment Ratios

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.	FedEx Corp.'s average age of depreciable property, plant and equipment deteriorated 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.	FedEx Corp.'s estimated total useful life of depreciable property, plant and equipment declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	FedEx Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Estimated remaining life		FedEx Corp.'s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 but then slightly increased from 2017 to 2018.

2018 Calculations

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.	FedEx Corp.'s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018.

2018 Calculations

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.	FedEx Corp.'s estimated total useful life of depreciable property, plant and equipment declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

2018 Calculations

Ratio	Description	The company
Estimated time elapsed since purchase	The approximate age in years of a company's fixed assets. Useful for comparison purposes.	FedEx Corp.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

2018 Calculations

Ratio	Description	The company
Estimated remaining life		FedEx Corp.'s estimated remaining life of depreciable property, plant and equipment declined from 2016 to 2017 but then slightly increased from 2017 to 2018.